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City Council/Financing Authority Staff Report
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DATE: June 18, 2014 UNFINISHED BUSINESS
SUBJECT: APPROVAL OF REFINANCING OF CERTAIN OBLIGATIONS
RELATING TO CONVENTION CENTER
FROM: David H. Ready, City Manager/Executive Director
BY: Suzanne Harrell, City Financial Advisor
SUMMARY
The City has financed a series of improvements to the Convention Center over the last
25 years, using Lease Revenue Bonds issued by the City of Palm Springs Financing
Authority (Authority). There are currently 2 outstanding series of bonds for this purpose:
the 2004 Lease Revenue Bonds and the 2012 Lease Revenue Bonds. The City and the
Authority have the opportunity to refinance the 2004 Bonds at this time and save
approximately $6.5 million over the next 22 years.
If approved, the resolutions would authorize (1) distribution of a preliminary official
statement in connection with the bond sale, (2) sale of the refunding bonds on certain
terms and conditions and (3) execution of various documents in connection with the
bond sale by the City Manager.
RECOMMENDATION:
As the City Council:
Adopt Resolution No. "A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF PALM SPRINGS APPROVING AND AUTHORIZING THE EXECUTION AND
DELIVERY OF SUPPLEMENTAL LEASE AGREEMENT NO. 6, SUPPLEMENTAL SITE
LEASE NO. 4, SUPPLEMENTAL TRUST AGREEMENT NO. 5, ESCROW
AGREEMENT, BOND PURCHASE AGREEMENT AND OFFICIAL STATEMENT AND
APPROVING OTHER MATTERS RELATING TO THE CITY OF PALM SPRINGS
FINANCING AUTHORITY LEASE REVENUE REFUNDING BONDS, 2014 SERIES A
(CONVENTION CENTER PROJECT) INCLUDING AUTHORIZING AND DIRECTING A
SUBSTITUTION WITH RESPECT TO THE SITE OF THE CONVENTION CENTER"
As the Financing Authority Board:
Adopt Resolution No. "A RESOLUTION OF THE CITY OF PALM SPRINGS
FINANCING AUTHORITY AUTHORIZING AND DIRECTING THE ISSUANCE AND
ITEM NO. —
City Council/Financing Authority
June 18, 2014
Page 2 - Refinancing Lease Revenue Bonds
SALE OF ITS LEASE REVENUE REFUNDING BONDS, 2014 SERIES A
(CONVENTION CENTER PROJECT), APPROVING AND AUTHORIZING THE
EXECUTION AND DELIVERY OF SUPPLEMENTAL LEASE AGREEMENT NO. 6,
SUPPLEMENTAL SITE LEASE NO. 4, SUPPLEMENTAL TRUST AGREEMENT NO. 5,
ESCROW AGREEMENT, BOND PURCHASE AGREEMENT AND OFFICIAL
STATEMENT AND APPROVING OTHER MATTERS RELATING TO SUCH BONDS"
STAFF ANALYSIS:
The City has financed a series of improvements to the Convention Center over the last
25 years, using Lease Revenue Bonds issued by the City of Palm Springs Financing
Authority (Authority). There are currently 2 outstanding series of bonds for this purpose:
2004 Lease Revenue Bonds and 2012 Lease Revenue Bonds.
The 2004 Bonds were issued to refinance bonds issued in 1997 and to finance the
expansion of the convention center. The 2004 Bonds mature in November 2035 and
have a principal balance of $53,145,000. The average interest rate on the outstanding
2004 Bonds is 5.50%.
The 2012 Bonds were issued to refinance bonds issued in 2001. The 2012 Bonds
mature in November 2025 and have a principal balance of $21,595,000. The average
interest rate on the outstanding 2012 Bonds is 3.6%.
Both series of Bonds carry the City's current "A+" general fund lease rating from S&P.
Beginning on November 1, 2014, the 2004 Bonds became eligible to be called for
redemption on 30 days' notice to existing bondholders. Based on current interest rates
— an average 4.30% based on a 22 year maturity -- the City can save approximately
$6.5 million over the life of the Bonds by refinancing the 2004 Bonds at this time. The
savings are allocated as follows: $1,000,000 in Fiscal Year 2014-15; $400,000 in Fiscal
Years 2015-16 through 2025-26; and $100,000 in Fiscal Years 2026-27 through 2035-
36. The refunding bonds will mature on November 1, 2035, the same maturity date as
the original 2004 Bonds.
Prior to dissolution, the Redevelopment Agency reimbursed the City for $1.6 million of
debt service on the 2004 Bonds. This reimbursement was provided for in accordance
with Section 33445 of the Health & Safety Code. On the most recent Recognized
Obligation Payment Schedule review by the California Department of Finance (DOF),
DOF staff determined they will no longer allow the reimbursement going forward. The
loss of the reimbursement from the Successor Agency will be partially mitigated by the
(1) the City's share of the additional residual tax revenue created when the Successor
Agency's expenditures are reduced by $1.6 million, (2) debt service savings from
refinancing the 2004 Bonds and (3) the City's share of additional residual tax revenue
created from debt service savings on the refinancing of Successor Agency bonded debt.
The 2014-15 and 2015-16 impact on the General Fund is shown below:
02
City Council/Financing Authority
June 18, 2014
Page 3 - Refinancing Lease Revenue Bonds
2014-15 2015-16
Loss of Reimbursement $(1,600,000) $(1,600,000)
Additional Residual Tax to General Fund 432,000 432,000
Additional Residual Tax from Successor
Agency Refunding 68,000 68,000
Debt Service Savings from 2004 Bonds 1,000,000 400,000
Net General Fund Impact $ (100,000) $ (700,000)
The City currently leases the Convention Center facility and the north parking areas
from the Authority pursuant to a lease agreement. The lease payments made by the
City secure the payments on both the 2012 Bonds and the 2004 Bonds to be made by
the Authority to the bondholders under a trust agreement. A refinancing of the bonds
would require supplements to both the existing lease agreement and the existing trust
agreement, as well as approval of other financing documents.
Further, staff is recommending that the north parking areas be released from the lien of
the Bonds at this time. In order to release the property from the lien, other property will
need to substituted with an equivalent or greater value than the 7.8 acre north parking
area. This is necessary to provide sufficient property value to secure the lease
payments and satisfy credit rating criteria. Staff is recommending that the Suitt Block
property east of the Convention Center be used for this purpose.
In order to authorize the issuance of the refunding bonds, the City Council and the
Authority Board have been presented with resolutions for their consideration. The City
Council resolution approves the form of the following documents in connection with the
financing:
• A Supplemental Site Lease between the City and the Authority;
• A Supplemental Lease Agreement between the City and the Authority;
• A Supplemental Trust Agreement between the City, the Authority and the Trustee
(U.S Bank National Association);
• An Escrow Deposit and Trust Agreement between the City, the Authority and the
Trustee;
• A Bond Purchase Agreement between the City, the Authority and Stifel Nicolaus
& Company, Incorporated; and
• A Preliminary Official Statement
With the exception of the Preliminary Official Statement included with this report, all the
forms of the documents are on file with the City Clerk. The City Council resolution also
approves the distribution of the preliminary official statement relating to the Bonds.
The Authority Board resolution approves the form of the following documents, on file
with the City Clerk:
-- 03
City Council/Financing Authority
June 18, 2014
Page 4 - Refinancing Lease Revenue Bonds
• A Supplemental Site Lease between the City and the Authority;
• A Supplemental Lease Agreement between the City and the Authority;
• A Supplemental Trust Agreement between the City, the Authority and the
Trustee;
• An Amended Assignment Agreement between the Authority and the Trustee;
• An Escrow Deposit and Trust Agreement between the City, the Authority and the
Trustee;
• A Bond Purchase Agreement between the City, the Authority and Stifel Nicolaus
& Company, Incorporated; and
• A Preliminary Official Statement
The Authority Board resolution also approves the distribution of the preliminary official
statement.
Both resolutions authorize the execution, of the Bond Purchase Agreement by the City
Manager and Authority Executive Director, within certain parameters. These
parameters are: (1) the par amount of the bonds cannot exceed $57,000,000, (2) the
present value savings must be at least 5%, and (3) the underwriters' discount cannot
exceed 0.6% of the par amount of the Bonds.
The preliminary official statement was prepared by staff and the financial advisor, with
input from the City's bond counsel and disclosure counsel. The City Council's review of
the description of the City and the City's Financial Information contained in the
preliminary official statement is requested prior to printing on or about July 15.
FISCAL IMPACT:
Staff is recommending that the City Council and Authority Board approve a refinancing
that meets a threshold present value savings of 5%. This savings level would reduce
the annual payments on the 2004 Bonds by a total of $4.4 million. Based on current
rates, the savings is expected to be $6.5 million over 22 years, with a present value
savings of 8% of the existing payments. The City's savings in the 2014-15 Fiscal Year
are estimated to be $1,000,000, $400,000 annually for the next 10 years and $100,000
annually thereafter.
The estimated bond size is $55,000,000. The table below shows the estimated use of
bond proceeds:
Redeem 2004 Bonds $54,400,000
Costs of Issuance 275,000
Underwriter Discount 325,000
Total $55,000,000
04
City Council/Financing Authority
June 18, 2014
Page 5 - Refinancing Lease Revenue Bonds
The savings realized are net of all costs to issue the bonds. These costs include bond
counsel, disclosure counsel, financial advisor, trustee, rating fees and other fixed costs.
The estimate of these costs is $275,000, or 1/2% of the bonds to be issued. The
underwriters' discount is 0.6% of the bonds, which the financial advisor has negotiated
number of ars to maturity, the bond size
on the City s behalf and is reasonable for theye ty,
and the City's "A+" credit rating.
If the City Council and Authority Board adopt the resolutions, staff will price the bonds
as soon as it is possible to achieve the maximum savings. This is expected to occur in
mid-July.
Suz a Harrell Geoffr
City Financial Advisor Director of Finance
David H. Ready Doug s C. Holland
City Manager City Attorney
Attachments:
Resolutions
Preliminary Official Statement
05
26088-08 JH:ACH:brf 05/22/14
05/27/14
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS APPROVING
AND AUTHORIZING THE EXECUTION AND DELIVERY OF SUPPLEMENTAL LEASE
AGREEMENT NO. 6, SUPPLEMENTAL SITE LEASE NO. 4, SUPPLEMENTAL TRUST
AGREEMENT NO. 5, ESCROW AGREEMENT, BOND PURCHASE AGREEMENT AND
OFFICIAL STATEMENT AND APPROVING OTHER MATTERS RELATING TO THE CITY OF
PALM SPRINGS FINANCING AUTHORITY LEASE REVENUE REFUNDING BONDS, 2014
SERIES A (CONVENTION CENTER PROJECT) INCLUDING AUTHORIZING AND
DIRECTING A SUBSTITUTION WITH RESPECT TO THE SITE OF THE CONVENTION
CENTER
WHEREAS, the City of Palm Springs Financing Authority (the "Authority") is a Joint
Powers Authority (a public body, corporate and politic) duly created, established and authorized
to transact business and exercise its powers, all under and pursuant to the Joint Powers Law
(Articles 1 through 4 of Chapter 5, Division 7, Title 1 of the California Government Code) (the
"Act") and the powers of the Authority include the power to issue bonds for any of its corporate
purposes, including the financing and refinancing of public capital improvements of benefit to
the City of Palm Springs (the "City"); and
WHEREAS, the Authority and the City entered into a Lease Agreement Relating to
Convention Center Facilities by and between the Authority and the City dated as of April 1, 1991
(the "Lease Agreement'), whereby the Authority agreed to lease to the City; and the City agreed
to lease from the Authority certain real property described in Exhibit A to the Lease Agreement,
(the "Site") and the improvements thereon (the "Facilities") in the manner and on the terms set
forth in the Lease Agreement; and
WHEREAS, the Site was initially leased to the Authority by the City for leaseback to the
City pursuant to a Site Lease and a Supplemental Site Lease No. 1, both dated as of April 1,
1991, and both by and between the City and the Authority (together, the "Site Lease"); and
WHEREAS, concurrently with the execution and delivery of the Lease Agreement, the
Authority issued its City of Palm Springs Financing Authority Lease Revenue Bonds, 1991
Series A (the "1991 Bonds') to provide funds to finance the Facilities pursuant to a Trust
Agreement Relating to Convention Center Facilities (the "1991 Trust Agreement'), dated as of
April 1, 1991, by and among the Authority, the City and First Interstate Bank of California, as
trustee (the "1991 Trustee"); and
WHEREAS, pursuant to an Assignment Agreement, dated as of April 1, 1991, between
the Authority and the 1991 Trustee (the "Assignment Agreement') the Authority assigned and
transferred its rights and interests under the Site Lease and the Lease Agreement to the 1991
Trustee, for the benefit of the owners of the 1991 Bonds and any Additional Bonds (as defined
in the 1991 Trust Agreement); and
WHEREAS, the City determined to advance refund a portion of the 1991 Bonds through
the issuance by the Authority of its City of Palm Springs Financing Authority Lease Revenue
Refunding Bonds, 1997 Series B (Convention Center Project) (the "1997 Bonds") and, for such
purpose, the City and the Authority entered into a Supplemental Lease Agreement No. 2, dated
as of October 1, 1997 (the "Supplemental Lease Agreement No. 2") and the City, the Authority
06
and BNY Western Trust Company (the "1997 Trustee"), as successor trustee to the 1991
Trustee, entered into Supplemental Trust Agreement No. 1, dated as of October 1, 1997; and
WHEREAS, for the purpose of assigning certain of the Authority's interests in the
Supplemental Lease Agreement No. 2 to the Trustee, the Authority and the 1997 Trustee,
amended the Assignment Agreement pursuant to the First Amended Assignment Agreement,
dated as of October 1, 1997; and
WHEREAS, the City determined to currently refund a portion of the outstanding 1991
Bonds through the issuance by the Authority of its City of Palm Springs Financing Authority
Lease Revenue Refunding Bonds, 2001 Series A Bonds (Convention Center Project) (the "2001
Bonds") and, for such purpose, the City and the Authority entered into Supplemental Lease
Agreement No. 3, dated as of August 1, 2001 (the "Supplemental Lease Agreement No. 3") and
the City, the Authority and the 1997 Trustee entered into Supplemental Trust Agreement No. 2,
dated as of August 1, 2001; and
WHEREAS, for the purpose of assigning certain of the Authority's interests in
Supplemental Lease Agreement No. 3 to the Trustee, the Authority and 1997 Trustee entered
into a Second Amended Assignment Agreement, dated as of August 1, 2001; and
WHEREAS, the City determined to currently refund the outstanding 1997 Bonds and to
expand the Convention Center facilities through the issuance by the Authority of its City of Palm
Springs Financing Authority Lease Revenue Bonds, 2004 Series A (Convention Center
Expansion Project) (the "2004 Bonds") and, for such purpose, the City and the Authority entered
into Supplemental Site Lease No. 2, dated as of May 1, 2004 ("Supplemental Site Lease No.
2"), and a Supplemental Lease Agreement No. 4 ("Supplemental Lease Agreement No. 4"),
dated as of May 1, 2004, and the City, the Authority and the 1997 Trustee, entered into
Supplemental Trust Agreement No. 3, dated as of May 1, 2004; and
WHEREAS, for the purpose of assigning to the 1997 Trustee certain of the Authority's
interests in Supplemental Site Lease No. 2 and Supplemental Lease Agreement No. 4, the
Authority and the 1997 Trustee entered into the Third Amended Assignment Agreement, dated
as of May 1, 2004; and
WHEREAS, the City determined to currently refund the outstanding 2001 Bonds
through the issuance by the Authority of its City of Palm Springs Financing Authority Lease
Revenue Refunding Bonds, 2012 Series A (Convention Center Project) (the "2012 Bonds") and,
for such purpose, the City and the Authority entered into Supplemental Site Lease No. 3, dated
as of December 1, 2011 ("Supplemental Site Lease No. 3") and Supplemental Lease
Agreement No. 5 ("Supplemental Lease Agreement No. 5"), dated as of December 1, 2011, and
the City, the Authority and The Bank of New York Mellon Trust Company, N.A. (the "Trustee"),
as successor trustee to BNY Western Trust Company, entered into Supplemental Trust
Agreement No. 4, dated as of December 1, 2011; and
WHEREAS, the Authority and the Trustee also for such purpose amended the Third
Amended Assignment Agreement to assign to the Trustee certain of the Authority's interests in
Supplemental Site Lease No. 3 and Supplemental Lease Agreement No. 5, as provided in the
Fourth Amended Assignment Agreement; and
WHEREAS, the City has now determined to currently refund a portion of the outstanding
2004 Bonds through the issuance by the Authority of its City of Palm Springs Financing
2 07
Authority Lease Revenue Refunding Bonds, 2014 Series A (Convention Center Project) (the
"2014 Bonds") and, for such purpose, the City and the Authority propose to enter into
Supplemental Site Lease No. 4, dated as of June 1, 2014 ("Supplemental Site Lease No. 4"),
and Supplemental Lease Agreement No. 6 ("Supplemental Lease Agreement No. 6"), dated as
of June 1, 2014, and the City, the Authority and the Trustee propose to enter into Supplemental
Trust Agreement No. 5, dated as of June 1, 2014 (the "Supplemental Trust Agreement No. 5");
and
WHEREAS, the Authority and the Trustee will also amend the Fourth Amended
Assignment Agreement to assign certain of the Authority's interests in Supplemental Site Lease
No. 4 and Supplemental Lease Agreement No. 6, as provided in the Fifth Amended Assignment
Agreement; and
WHEREAS, the Lease Agreement, as amended and supplemented, authorizes the City
to substitute other lands, facilities and improvements (a "Substituted Project") for portions of the
Site and Facilities (a "Former Project") upon the satisfaction by the City of certain conditions
precedent and the City has determined to satisfy such conditions precedent in order to make a
substitution with respect to the Site as provided in the Termination Agreement and Notice of
Substitution (Lease Agreement, Site Lease and Assignment Agreement), dated as of June 1,
2014, by and between the City and the Authority (the "Termination Agreement"); and
WHEREAS, the Trustee is successor trustee to BNY Western Trust Company under
Supplemental Trust Agreement No. 3 and the Trustee, as such successor trustee, will act as
escrow bank pursuant to a 2004 Bonds Escrow Deposit and Trust Agreement providing for the
refunding of a portion of the 2004 Bonds; and
WHEREAS, the Authority and the City propose to sell the 2014 Bonds to Stifel, Nicolaus
& Company, Incorporated (the "Underwriter"), in accordance with the bond purchase agreement
in substantially the form on file with the City Clerk (the "Bond Purchase Agreement"); and
WHEREAS, the Authority has caused to be prepared a form of Official Statement
describing the 2014 Bonds and containing material information relating to the 2014 Bonds, the
preliminary form of which is on file with the City Clerk; and
WHEREAS, the City Council finds and determines that it is a public purpose as set forth
in the Act that the City approve and that the Authority issue, sell and deliver the 2014 Bonds for
said purpose and that there are significant public benefits arising from the taking of such action,
including, but not limited to, demonstrable savings in effective interest rate, bond preparation,
bond underwriting and financing costs associated with the issuance of the 2014 Bonds; and
WHEREAS, the City, with the aid of its staff, has reviewed Supplemental Site Lease
No.4, Supplemental Lease Agreement No. 6, Supplemental Trust Agreement No. 5, the Escrow
Agreement, the Bond Purchase Agreement and the Official Statement and wishes at this time to
approve the foregoing in the public interests of the City;
NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Palm Springs
SECTION 1. The above recitals are true and correct.
SECTION 2. Pursuant to the Act, the City hereby approves the issuance of the 2014
Bonds by the Authority in an aggregate principal amount not to exceed $57,000,000.
08
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SECTION 3. The forms of the Supplemental Lease Agreement No. 6 and the
Supplemental Site Lease No. 4, copies of which are on file with the City Clerk, be and are
hereby approved in substantially the forms thereof on file with such changes as may be
approved b the City Manager or City Manager's designee, said execution thereof to constitute
pp Y Y 9
conclusive evidence of the approval of all such changes, and the City Manager or City
Manager's designee be and is hereby authorized, together or alone, to execute and deliver the
Supplemental Lease Agreement No. 6 and the Supplemental Site Lease No. 4 on behalf of the
City. The City Council hereby authorizes the delivery and performance of the Supplemental
Lease Agreement No. 6 and the Supplemental Site Lease No. 4.
SECTION 4. The form of the Supplemental Trust Agreement No. 5, a copy of which is
on file with the City Clerk, be and is hereby approved in substantially the form thereof on file
with such changes as may be approved by the City Manager or City Manager's designee, said
execution thereof to constitute conclusive evidence of the approval of all such changes the
approval of all such changes, and the City Manager or City Manager's designee be and is
hereby authorized, together or alone, to execute and deliver the Supplemental Trust Agreement
No. 5. The City Council hereby authorizes the delivery and performance of Supplemental Trust
Agreement No. 5.
SECTION 5. The City Council hereby approves the substitution of the Substitute
Project for the Former Project with respect to the Site of the Convention Center and directs staff
to take such actions as shall be necessary or appropriate to satisfy the conditions precedent to
such substitution as set forth in the Lease Agreement. The form of the Termination Agreement
providing for such substitution, a copy of which is on file with the City Clerk, be and is hereby
approved in substantially the form thereof on file with such changes as may be approved by the
City Manager or City Manager's designee, said execution thereof to constitute conclusive
evidence of the approval of all such changes, and the City Manager or City Manager's designee
be and is hereby authorized, together or alone, to execute and deliver the Termination
Agreement. Such substitution shall be complete upon satisfaction of such conditions precedent,
as further provided in the Lease Agreement.
SECTION 6. The form of 2004 Bonds Escrow Deposit and Trust Agreement, dated as
of June 1, 2014 (the "Escrow Agreement"), by and between The Bank of New York Mellon Trust
Company, N.A. as Escrow Bank, the Authority and the City, a copy of which is on file with the
City Clerk, be and is hereby approved in substantially the form thereof, or with such changes as
may be approved by the City Manager or City Manager's designee, said officer's execution
thereof to constitute conclusive evidence of said officer's approval of all such changes, and
each of said officers be and is hereby authorized to execute and deliver the Escrow Agreement.
The City Council hereby authorizes the delivery and performance of the Escrow Agreement.
SECTION 7. The form of Bond Purchase Agreement relating to the purchase of the
2014 Bonds is hereby approved in the form thereof on file with the City Clerk, or with such
changes as may be approved by the City Manager or City Manager's designee, the execution
thereof to constitute conclusive evidence of said officer's approval of all such changes, and the
City Manager or City Manager's designee is hereby authorized, together or alone, to execute
and deliver said Agreement and to insert in the Bond Purchase Agreement the dollar amount
which reflects the provisions of the Bond Purchase Agreement; provided, however, that (1) the
aggregate principal amount of the 2014 Bonds shall not exceed $57,000,000; and (2) the
Authority shall have received from the Underwriter, prior to the sale of the 2014 Bonds, its
written confirmation that the sale of the 2014 Bonds will result in a net present value saving of
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not less than 5.00%, with an initial underwriter's discount (excluding original issue discount) of
not more than 0.60%. The City Council hereby authorizes the delivery and performance of the
Bond Purchase Agreement.
SECTION 8. The Preliminary Official Statement relating to the 2014 Bonds (the
"Preliminary Official Statement"), a copy of which is on file with the City Clerk, is approved for
distribution by the Underwriter, to investors who may be interested in purchasing the 2014
Bonds. The City Manager or City Manager's designee is authorized to approve the amendment
of the Preliminary Official Statement, from time to time, pending distribution of the Preliminary
Official Statement as shall be required to cause such Preliminary Official Statement to contain
any further information necessary to accurately describe the 2014 Bonds and the City Manager
or City Manager's designee is authorized to deem final the Preliminary Official Statement as of
its date for the purpose of Rule 15c2-12 under the Securities Exchange Act of 1934, as
amended. The final Official Statement relating to the 2014 Bonds, together with the Continuing
Disclosure Certificate in the form attached to the final Official Statement, shall be submitted to
the City Manager or City Manager's designee for approval and execution and delivery on behalf
of the City.
SECTION 9. The City Manager or City Manager's designee or any other appropriate
officers of City are further authorized and directed to execute such certifications, agreements,
assignments and instruments as are, in the opinion of Bond Counsel, necessary or appropriate
to consummate the transactions contemplated by this Resolution and provided for in the
agreements approved by this Resolution.
SECTION 10. All actions heretofore taken by City or any of its officials, officers or
employees in connection with the sale and delivery of the 2014 Bonds are hereby ratified;
confirmed and approved.
SECTION 11. This Resolution shall take effect and be enforceable immediately upon its
adoption.
ADOPTED THIS 18th day of June, 2014.
AYES: Members
NOES: None
ABSENT: None
ATTEST: CITY OF PALM SPRINGS
By
City Clerk City Manager
REVIEWED AND APPROVED AS TO FORM
5_ 10
26088-08 JH:ACH:brf 05/22/14
05/27/14
RESOLUTION NO. _
A RESOLUTION OF THE CITY OF PALM SPRINGS FINANCING AUTHORITY
AUTHORIZING AND DIRECTING THE ISSUANCE AND SALE OF ITS LEASE REVENUE
REFUNDING BONDS, 2014 SERIES A (CONVENTION CENTER PROJECT), APPROVING
AND AUTHORIZING THE EXECUTION AND DELIVERY OF SUPPLEMENTAL LEASE
AGREEMENT NO. 6, SUPPLEMENTAL SITE LEASE NO. 4, SUPPLEMENTAL TRUST
AGREEMENT NO. 5, ESCROW AGREEMENT, BOND PURCHASE AGREEMENT AND
OFFICIAL STATEMENT AND APPROVING OTHER MATTERS RELATING TO SUCH
BONDS
WHEREAS, the City of Palm Springs Financing Authority (the "Authority') is a Joint
Powers Authority (a public body, corporate and politic) duly created, established and authorized
to transact business and exercise its powers, all under and pursuant to the Joint Powers Law
(Articles 1 through 4 of Chapter 5, Division 7, Title 1 of the California Government Code) (the
"Act") and the powers of the Authority include the power to issue bonds for any of its corporate
purposes, including the financing and refinancing of public capital improvements of benefit to
the City of Palm Springs (the "City"); and
WHEREAS, the Authority and the City entered into a Lease Agreement Relating to
Convention Center Facilities by and between the Authority and the City dated as of April 1, 1991
(the "Lease Agreement'), whereby the Authority agreed to lease to the City; and the City agreed
to lease from the Authority certain real property described in Exhibit A to the Lease Agreement,
(the "Site") and the improvements thereon (the "Facilities") in the manner and on the terms set
forth in the Lease Agreement; and
WHEREAS, the Site was initially leased to the Authority by the City for leaseback to the
City pursuant to a Site Lease and a Supplemental Site Lease No. 1, both dated as of April 1,
1991, and both by and between the City and the Authority (together, the "Site Lease'); and
WHEREAS, concurrently with the execution and delivery of the Lease Agreement, the
Authority issued its City of Palm Springs Financing Authority Lease Revenue Bonds, 1991
Series A (the "1991 Bonds") to provide funds to finance the Facilities pursuant to a Trust
Agreement Relating to Convention Center Facilities (the 1991 Trust Agreement'), dated as of
April 1, 1991, by and among the Authority, the City and First Interstate Bank of California, as
trustee (the "1991 Trustee'); and
WHEREAS, pursuant to an Assignment Agreement, dated as of April 1, 1991, between
the Authority and the 1991 Trustee (the "Assignment Agreement') the Authority assigned and
transferred its rights and interests under the Site Lease and the Lease Agreement to the 1991
Trustee, for the benefit of the owners of the 1991 Bonds and any Additional Bonds (as defined
in the 1991 Trust Agreement); and
WHEREAS, the City determined to advance refund a portion of the 1991 Bonds through
the issuance by the Authority of its City of Palm Springs Financing Authority Lease Revenue
Refunding Bonds, 1997 Series B (Convention Center Project) (the "1997 Bonds") and, for such
purpose, the City and the Authority entered into a Supplemental Lease Agreement No. 2, dated
as of October 1, 1997 (the "Supplemental Lease Agreement No. 2") and the City, the Authority
and BNY Western Trust Company (the "1997 Trustee'), as successor trustee to the 1991
Trustee, entered into Supplemental Trust Agreement No. 1, dated as of October 1, 1997; and
� 1
WHEREAS, for the purpose of assigning certain of the Authority's interests in the
Supplemental Lease Agreement No. 2 to the Trustee, the Authority and the 1997 Trustee,
amended the Assignment Agreement pursuant to the First Amended Assignment Agreement,
dated as of October 1, 1997; and
WHEREAS, the City determined to currently refund a portion of the outstanding 1991
Bonds through the issuance by the Authority of its City of Palm Springs Financing Authority
Lease Revenue Refunding Bonds, 2001 Series A Bonds (Convention Center Project) (the "2001
Bonds") and, for such purpose, the City and the Authority entered into Supplemental Lease
Agreement No. 3, dated as of August 1, 2001 (the "Supplemental Lease Agreement No. 3") and
the City, the Authority and the 1997 Trustee entered into Supplemental Trust Agreement No. 2,
dated as of August 1, 2001; and
WHEREAS, for the purpose of assigning certain of the Authority interests in
Supplemental Lease Agreement No. 3 to the Trustee, the Authority and 1997 Trustee entered
into a Second Amended Assignment Agreement, dated as of August 1, 2001; and
WHEREAS, the City determined to currently refund the outstanding 1997 Bonds and to
expand the Convention Center facilities through the issuance by the Authority of its City of Palm
Springs Financing Authority Lease Revenue Bonds, 2004 Series A (Convention Center
Expansion Project) (the "2004 Bonds") and, for such purpose, the City and the Authority entered
into Supplemental Site Lease No. 2, dated as of May 1, 2004 ("Supplemental Site Lease No.
2"), and a Supplemental Lease Agreement No. 4 ("Supplemental Lease Agreement No. 4"),
dated as of May 1, 2004, and the City, the Authority and the 1997 Trustee, entered into
Supplemental Trust Agreement No. 3, dated as of May 1, 2004; and
WHEREAS, for the purpose of assigning to the 1997 Trustee certain of the Authority's
interests in Supplemental Site Lease No. 2 and Supplemental Lease Agreement No. 4, the
Authority and the 1997 Trustee entered into the Third Amended Assignment Agreement, dated
as of May 1, 2004; and
WHEREAS, the City determined to currently refund the outstanding 2001 Bonds
through the issuance by the Authority of its City of Palm Springs Financing Authority Lease
Revenue Refunding Bonds, 2012 Series A (Convention Center Project) (the "2012 Bonds") and,
for such purpose, the City and the Authority entered into Supplemental Site Lease No. 3, dated
as of December 1, 2011 ("Supplemental Site Lease No. 3") and Supplemental Lease
Agreement No. 5 ("Supplemental Lease Agreement No. 5"), dated as of December 1, 2011, and
the City, the Authority and The Bank of New York Mellon Trust Company, N.A. (the "Trustee'),
as successor trustee to BNY Western Trust Company, entered into Supplemental Trust
Agreement No. 4, dated as of December 1, 2011; and
WHEREAS, the Authority and the Trustee also for such purpose amended the Third
Amended Assignment Agreement to assign to the Trustee certain of the Authority's interests in
Supplemental Site Lease No. 3 and Supplemental Lease Agreement No. 5, as provided in the
Fourth Amended Assignment Agreement; and
WHEREAS, the City has now determined to currently refund a portion of the outstanding
2004 Bonds through the issuance by the Authority of its City of Palm Springs Financing
Authority Lease Revenue Refunding Bonds, 2014 Series A (Convention Center Project) (the
"2014 Bonds") and, for such purpose, the City and the Authority propose to enter into
-2- 12
Supplemental Site Lease No. 4, dated as of June 1, 2014 ("Supplemental Site Lease No. 4"),
and Supplemental Lease Agreement No. 6 ("Supplemental Lease Agreement No. 6"), dated as
of June 1, 2014, and the City, the Authority and the Trustee propose to enter into Supplemental
Trust Agreement No. 5, dated as of June 1, 2014 (the "Supplemental Trust Agreement No. 5");
and
WHEREAS, the Authority and the Trustee will also amend the Fourth Amended
Assignment Agreement to assign certain of the Authority's interests in Supplemental Site Lease
No. 4 and Supplemental Lease Agreement No. 6, as provided in the Fifth Amended Assignment
Agreement (the " Fifth Amended Assignment Agreement"); and
WHEREAS, the Lease Agreement, as amended and supplemented, authorizes the City
to substitute other lands, facilities and improvements (a "Substituted Project") for portions of the
Site and Facilities (a "Former Project") upon the satisfaction by the City of certain conditions
precedent and the City has determined to satisfy such conditions precedent in order to make a
substitution with respect to the Site as provided in the Termination Agreement and Notice of
Substitution (Lease Agreement, Site Lease and Assignment Agreement), dated as of June 1,
2014, by and between the City and the Authority (the "Termination Agreement"); and
WHEREAS, the Trustee is successor trustee to BNY Western Trust Company under
Supplemental Trust Agreement No. 3 and the Trustee, as such successor trustee, will act as
escrow bank pursuant to a 2004 Bonds Escrow Deposit and Trust Agreement providing for the
refunding of a portion of the 2004 Bonds (the "Escrow Agreement"); and
WHEREAS, the Authority and the City propose to sell the 2014 Bonds to Stifel, Nicolaus
& Company, Incorporated (the "Underwriter"), in accordance with the bond purchase agreement
in form on file with the City Clerk (the "Bond Purchase Agreement"); and
WHEREAS, the Authority has caused to be prepared a form of Official Statement
describing the 2014 Bonds and containing material information relating to the 2014 Bonds, the
preliminary form of which is on file with the City Clerk; and
WHEREAS, the Authority, with the aid of its staff, has reviewed Supplemental Site
Lease No.4, Supplemental Lease Agreement No. 6, Supplemental Trust Agreement No. 5, the
Escrow Agreement, the Bond Purchase Agreement and the Official Statement and wishes at
this time to approve the foregoing in the public interests of the Authority and the City;
NOW, THEREFORE, BE IT RESOLVED, by the City of Palm Springs Financing
Authority, as follows:
SECTION 1. The above recitals are true and correct.
SECTION 2. Pursuant to the Act, the Authority hereby approves of the issuance of
the 2014 Bonds in an aggregate principal amount of not to exceed $57,000,000.
SECTION 3. The forms of the Supplemental Lease Agreement No. 6, the
Supplemental Site Lease No. 4 and the Fifth Amended Assignment Agreement, copies of which
are on file with the Secretary of the Authority, be and are hereby approved in substantially the
forms thereof on file with such changes as may be approved by the Executive Director or
Executive Director's designee, said Executive Director or Executive Director's designee's
execution thereof to constitute conclusive evidence of the approval of all such changes, and the
3 13
Executive Director or Executive Director's designee be and is hereby authorized, together or
alone, to execute and deliver the Supplemental Lease Agreement No. 6, the Supplemental Site
Lease No. 4 and the Fifth Amended Assignment Agreement on behalf of the Authority. The
Authority hereby authorizes the delivery and performance of the Supplemental Lease
Agreement No. 6, the Supplemental Site Lease No. 4 and the Fifth Amended Assignment
Agreement.
SECTION 4. The form of the Supplemental Trust Agreement No. 5, a copy of which is
on file with the Secretary of the Authority, be and is hereby approved in substantially the form
thereof on file with such changes as may be approved by the Executive Director or Executive
Director's designee, said Executive Director or Executive Director's designee's execution
thereof to constitute conclusive evidence of the approval of all such changes, and the Executive
Director or Executive Director's designee be and is hereby authorized, together or alone, to
execute and deliver the Supplemental Trust Agreement No. 4. The Authority hereby authorizes
the delivery and performance of Supplemental Trust Agreement No. 5.
SECTION 5. The form of Termination Agreement, a copy of which is on file with the
Secretary of the Authority, be and is hereby approved in substantially the form thereof on file, or
with such changes as may be approved by the Executive Director or Executive Director's
designee, said Executive Director or Executive Director's designee's execution thereof to
constitute conclusive evidence of said officer's approval of all such changes, and the Executive
Director or Executive Director's designee be and is hereby authorized, together or alone, to
execute and deliver the Termination Agreement. The Authority hereby authorizes the delivery
and performance of the Termination Agreement.
SECTION 6. The form of Escrow Agreement, a copy of which is on file with the
Secretary of the Authority, be and is hereby approved in substantially the form thereof on file, or
with such changes as may be approved by the Executive Director or Executive Director's
designee, said Executive Director or Executive Directors designee's execution thereof to
constitute conclusive evidence of said officer's approval of all such changes, and the Executive
Director or Executive Director's designee be and is hereby authorized, together or alone, to
execute and deliver the Escrow Agreement. The Authority hereby authorizes the delivery and
performance of the Escrow Agreement.
SECTION 7. The form of Bond Purchase Agreement relating to the purchase of the
2014 Bonds by the Underwriter, a copy of which is on file with the Secretary of the Authority, be
and is hereby approved in the form thereof on file, with such changes as may be approved by
the Executive Director or Executive Director's designee, said Executive Director's or Executive
Director's designee's execution thereof to constitute conclusive evidence of the approval of all
such changes, and the Executive Director or Executive Director's designee be and is hereby
authorized, together or alone, to execute and deliver Bond Purchase Agreement; provided,
however, that (1) the aggregate principal amount of the 2014 Bonds shall not exceed
$57,000,000; and (2) the Authority shall have received from the Underwriter, prior to the sale of
the 2014 Bonds, its written confirmation that the sale of the 2014 Bonds will result in a net
present value saving of not less than 5.00%, with an initial underwriter's discount (excluding
original issue discount) of no more than 0.60%.
SECTION & The Preliminary Official Statement relating to the 2014 Bonds is approved
for distribution by the Underwriter to investors who may be interested in purchasing the 2014
Bonds. The Executive Director or Executive Director's designee is authorized to approve
revisions of the Preliminary Official Statement as shall be required to cause such Preliminary
-4- 14
Official Statement to contain any further information necessary to accurately describe the 2014
Bonds and the Authority's Executive Director or Executive Director's designee is authorized to
deem final the Preliminary Official Statement as of its date for the purpose of Rule 15c2-12
under the Securities Exchange Act of 1934 as amended. The final Official Statement relating to
the 2014 Bonds shall be submitted to the Executive Director or the Executive Director's
designee of the Authority for approval and execution. The Authority hereby authorizes the
delivery of the final Official Statement.
SECTION 9. The financing consultant firm of Harrell & Company Advisors, LLC,
Orange, California, is hereby appointed as financial advisor to the Authority with respect to the
2014 Bonds, the law firm of Jones Hall, A Professional Law Corporation, San Francisco,
California, is hereby appointed as Bond Counsel, and the law firm of Fulbright & Jaworski LLP,
a member of Norton Rose Fulbright, Los Angeles, California, is hereby appointed as Disclosure
Counsel with respect to the 2014 Bonds, compensation and expenses for the foregoing services
to be as provided in agreements on file with the City Clerk or as approved by the Executive
Director or Treasurer upon delivery of the 2014 Bonds.
SECTION 10.The Executive Director or the Executive Director's designee or any other
appropriate officers of Authority are further authorized and directed to execute such
certifications, agreements, assignments and instruments as are, in the opinion of Bond Counsel,
necessary or appropriate to consummate the transactions contemplated by this Resolution and
provided for in the agreements approved by this Resolution..
SECTION 11. This Resolution shall take effect and be enforceable immediately upon its
adoption.
ADOPTED THIS 18th day of June, 2014.
AYES: Members
NOES: None
ABSENT: None
ATTEST: CITY OF PALM SPRINGS FINANCING
AUTHORITY
By
Secretary Executive Director
REVIEWED AND APPROVED AS TO FORM
P I21L1311NARY OFF ICtAL S 141 f YI F:N i DRAFT D VTI D.R N1 12 2014
:e NEW ISSUE RATING
.�.. .= BOOK-ENTRY-ONLY S&P:
<. r —
.. y
(See"CONCLUDING INFORMATION-Rating on the Bonds"herein)
8 In the opinion of Jones Hall,A Professional Law Corporation, San Francisco, California,Bond Counsel,subject,however to certain
r qualifications described herein, under existing law, the interest on the Bonds is excluded from gross income for federal income tax
vv 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,
G such interest is taken into account in determining certain income and earnings. In the further opinion of Bond Counsel,such interest
is exemptfrom California personal income taxes. See "LEGAL MATTERS-Tax Exemption"herein.
- G
RIVERSIDE COUNTY STATE OF CALIFORNIA
a.
$5590009000*
G G G
q CITY OF PALM SPRINGS FINANCING AUTHORITY
� G -
G L �
LEASE REVENUE REFUNDING BONDS, 2014 SERIES A
E - L
L — - CONVENTION CENTER PROJECT
c Dated: Date of Delivery Due: November 1,as Shown on the inside front cover.
w
a : o The cover page contains certain information for quick reference only. It is not a summary of the issue. Potential investors
must read the entire Official Statement to obtain information essential to the making of an informed investment decision. See
'o "RISK FACTORS"herein for a discussion of special risk factors that should be considered in evaluating the investment quality
Lof the Bonds.
G
7 G .
G .i The City of Palm Springs Financing Authority Lease Revenue Refunding Bonds, 2014 Series A(Convention Center Project)(the
`Bonds')are being issued to(i)refinance a portion of an existing lease,(ii)fund a portion of the reserve account for the Bonds and
z the 2012 Bonds(as defined herein) and (iii)pay the costs incurred in connection with the issuance of the Bonds. The Bonds are
u payable on a parity with the 2012 Bonds from the revenues pledged under the Trust Agreement, as defined herein, consisting
i .. primarily of lease payments to be made by the City of Palm Springs(the"City')to the City of Palm Springs Financing Authority(the
It "Authority")as rental for certain City facilities the"Facilities" pursuant to a Lease Agreement,as defined here' and from certain
G � Y") ty ( )P g h m,
•�; `a 'c funds held under the Trust Agreement and insurance or condemnation awards, if any. The City is required under the Lease
Agreement to make payments(the"Lease Payments")in each fiscal year in consideration of the use and possession of the Facilities
^G � from any source of available funds in an amount sufficient to pay the annual principal and interest due with respect to the Bonds and
5 the 2012 Bonds,subject to abatement,as described herein. See"SOURCES OF PAYMENT FOR THE BONDS"and"RISK FACTORS"
a herein.
t° Lc c
Interest on the Bonds is payable semiannually on November 1 and May I of each year, commencing November 1, 2014, until
r ,a maturity or earlier redemption. See"THE BONDS-General Provisions"and"THE BONDS-Redemption"herein.
G p
0
G THE BONDS DO NOT CONSTITUTE AN OBLIGATION OF THE AUTHORITY FOR WHICH THE AUTHORITY IS
a � o
$ j OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE AUTHORITY HAS LEVIED
OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE CITY TO PAY LEASE PAYMENTS DOES
G NOT CONSTITUTE AN OBLIGATION FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM
• L
Y a OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE
OBLIGATION OF THE CITY TO PAY LEASE PAYMENTS DOES NOT CONSTITUTE A DEBT OR LIABILITY OF THE
r °o % CITY,THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF
r- = ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. THE BONDS ARE LIMITED
G y OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM AND SECURED BY A PLEDGE OF REVENUES AND
w i CERTAIN FUNDS AND ACCOUNTS HELD UNDER THE INDENTURE. THE AUTHORITY HAS NO TAXING POWER
-+ h
The Bonds are offered, when, as and if issued, subject to the approval as to their legality by Jones Hall, A Professional Law
Corporation,San Francisco,California,Bond Counsel. Certain legal matters will be passed on for the City and the Authority by the
' City Attorney, and by Fulbright & Jaworski LLP, a member of Norton Rose Fulbright, Los Angeles, California, as Disclosure^, z Counsel and for the Underwriter by its Counsel, Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach,
" O s California. It is anticipated that the Bonds,in book-entry form,will be available for delivery on or about August 7,2014 through the
facilities of The Depository Trust Company(see"APPENDIX E-THE BOOK-ENTRY SYSTEM"herein).
5 c_
The date of the Official Statement is ,2014.
fi o
CL. L ,G
a. � Stifel_
J
*Preliminary,subject to change. r
$55,000,000
*
CITY OF PALM SPRINGS FINANCING AUTHORITY
LEASE REVENUE REFUNDING BONDS, 2014 SERIES A
(CONVENTION CENTER PROJECT)
MATURITY SCHEDULE
(Base CUSIP®t 69666J)
Maturity Date Principal Interest Reoffering
November 1 Amount Rate Yield CUSIP®t
2014
2015
2016
2017
2018
2019
2020
2021
2021
2022
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
*Preliminary,subject to change.
t Copyright 2014, American Bankers Association. CUSIP® is a registered trademark of the American Bankers
Association. CUSIP data herein is provided by CUSIP Global Services Bureau, operated by Standard & Poor's.
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 have been assigned by an independent company not affiliated with the City and are
included solely for the convenience of the holders of the Bonds. None of the City,the Financial Advisor or the
Underwriter takes any responsibility for the selection or uses of these CUSIP numbers, and no representation is
made as to their correctness on the Bonds or as included herein. The CUSIP number for a specific maturity is
subject to being changed after the issuance of the Bonds as a result of various subsequent actions including, but
not limited to, a refunding in whole or in part or as a result of the procurement of secondary market portfolio
insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of
the Bonds.
1 �
GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT
Use of Official Statement This Official Statement is submitted in connection with the offer and sale of
the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other
purpose. This Official Statement is not to be construed as a contract with the purchasers of the Bonds.
Estimates and Forecasts. When used in this Official Statement and in any continuing disclosure by the
City,any press release and any oral statement made with the approval of an authorized officer of the City
or any other entity described or referenced herein, the words or phrases "will likely result,""are expected
to," "will continue," "is anticipated," "estimate," "project," "forecast," "expect," "intend" and similar
expressions identify"forward-looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results
to differ materially from those contemplated in such forward-looking statements. Any forecast is subject
to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and
unanticipated events and circumstances may occur. Therefore, there are likely to be differences between
forecasts and actual results,and those differences may be material.
Limit of Offering. No dealer,broker, salesperson or other person has been authorized by the Authority or
the City to give any information or to make any representations in connection with the offer or sale of the
Bonds other than those contained herein and if given or made, such other information or representation
must not be relied upon as having been authorized by the Authority,the City,the Financial Advisor or the
Underwriter. 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.
Involvement of Underwriter. 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, and as a part of, 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.
Information Subject to Change. The information and expressions of opinions herein are subject to
change without notice and neither delivery of this Official Statement nor any sale made hereunder shall,
under any circumstances, create any implication that there has been no change in the affairs of the
Authority or the City or any other entity described or referenced herein since the date hereof. All
summaries of the documents referred to in this Official Statement are made subject to the provisions of
such documents, respectively, and do not purport to be complete statements of any or all of such
provisions.
Stabilization of Prices. 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 in 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 others at prices lower than the public
offering prices set forth on the inside front cover page hereof and said public offering prices may be
changed from time to time by the Underwriter.
18
CITY OF PALM SPRINGS FINANCING AUTHORITY
PALM SPRINGS, CALIFORNIA
CITY COUNCIL/AUTHORITY BOARD MEMBERS
Steve Pougnet,Mayor
Rick Hutcheson,Mayor Pro Tem
Ginny Feat,Council Member
Paul Lewin, Council Member
Christopher Mills, Council Member
CITY STAFF
David H. Ready,Esq.,Ph.D., City Manager
James L.Thompson, Chief of StafflCity Clerk
Geoffrey S. Kiehl,Director of Finance and Treasurer
David J. Barakian,Director of Public Works/City Engineer
John S.Raymond,Director of Community&Economic Development
PROFESSIONAL SERVICES
Bond Counsel
Jones Hall
A Professional Law Corporation
San Francisco,California
Disclosure Counsel
Fulbright&Jaworski LLP, a member of Norton Rose Fulbright
Los Angeles,California
City Attorney
Woodruff, Spradlin& Smart
Costa Mesa,California
Financial Advisor
Harrell & Company Advisors,LLC
Orange,California
Trustee and Escrow Bank
U.S. Bank National Association
Los Angeles,California
Verifications
Grant Thornton LLP
Minneapolis,Minnesota
1 ;,
TABLE OF CONTENTS
INTRODUCTION......................................................I Retirement Programs...............................................39
The Authority.............................................................I Other Post Employment Benefits.............................44
The City.....................................................................1 Employee Relations and Collective Bargaining.......45
Purpose.....................................................................2 Risk Management....................................................46
Security and Sources of Repayment..........................2 City Investment Policy and Portfolio.......................46
Tax Exemption...........................................................3 Obligations of the City............................................47
Professional Services.................................................4 Direct and Overlapping Debt...................................48
Offering of the Bonds................................................4 Financial Statements................................................50
Information Concerning this Official Statement........4 RISK FACTORS.......................................................60
THE BONDS...............................................................5 The Lease Payments................................................60
General Provisions.....................................................5 Limited Recourse on Default;No Acceleration.......61
Redemption................................................................6 State Budget;Redevelopment Agency Legislation..62
Scheduled Debt Service on the Bonds.......................7 Possessory Interest Taxes;Bureau of Indian Affairs
Aggregate Debt Service.............................................8 Regulations...........................................................64
THE FINANCING PLAN.................................' 9 Enforcement of Remedies........................................65
The Refunding Program...................... .....................19 Bankruptcy.....................I.,..........I............................66
Estimated Sources and Uses of Funds.......................9 Constitutional Limitation on Taxes and
Expenditures.........................................................67
THE FACILITIES....................................................10 Early Redemption Risk............................................72
SOURCES OF PAYMENT FOR THE BONDS.....12 Loss of Tax Exemption............................................72
General.....................................................................12 IRS Audit of Tax-Exempt Bond Issues....................72
The Ground Lease.......... 12 Seismic Considerations............................................73
Lease Payments;Abatement....................................13 Secondary Market Risk............................................73
Reserve Account......................................................14 LEGAL MATTERS..................................................74
Insurance Relating to the Property...........................14 Enforceability of Remedies......................................74
Abatement................................................................15 Approval of Legal Proceedings................................74
Remedies on Default................................................15 Tax Exemption.........................................................74
CITY OF PALM SPRINGS.....................................16 Absence of Litigation...............................................75
General Information.................................................16 CONCLUDING INFORMATION..........................76
General Organization...............................................16 Rating on the Bonds.................................................76
Governmental Services............................................17 Underwriting............................................................76
Community Information..........................................17 The Financial Advisor..............................................76
Transportation..........................................................18 Continuing Disclosure.............................................76
Population................................................................19 Additional Information............................................77
Per Capita Income....................................................20 References................................................................77
Employment.............................................................21 Execution.................................................................77
Commercial Activity................................................23 APPENDIX A-SUMMARY OF PRINCIPAL
Building Activity.....................................................26 LEGALDOCUMENTS
FINANCIAL INFORMATION...............................27
Economic Conditions and Outlook..........................27 APPENDIX B-CITY AUDITED FINANCIAL
STATEMENTS
Budgetary Process and Administration....................29
General Fund Revenues and Expenditures..............29 APPENDIX C-FORM OF CONTINUING
Ad Valorem Property Taxes.....................................33 DISCLOSURE CERTIFICATE
State Legislative Shift of Property Tax Allocation...36
APPENDIX D-FORM OF BOND COUNSEL'SLocal Taxes..._...................................... ..................37
OPINION
Motor Vehicle License Fees.....................................39
Other Revenue Sources............................................39 APPENDIX E-THE BOOK-ENTRY SYSTEM
OFFICIAL STATEMENT
$55,000,000*
CITY OF PALM SPRINGS FINANCING AUTHORITY
LEASE REVENUE REFUNDING BONDS, 2014 SERIES A
(CONVENTION CENTER PROJECT)
This Official Statement which includes the cover page and appendices (the "Official Statement"), is
provided to furnish certain information concerning the sale of the City of Palm Springs Financing
Authority(the"Authority") Lease Revenue Refunding Bonds,2014 Series A(Convention Center Project)
(the"Bonds"),in the aggregate principal amount of$55,000,000.*
INTRODUCTION
This Introduction contains only a brief description of this issue and does not purport to be complete. The
Introduction is subject in all respects to more complete information in the entire Official Statement and
the offering of the Bonds to potential investors is made only by means of the entire Official Statement and
the documents summarized herein. Potential investors must read the entire Official Statement to obtain
information essential to the making ofan informed investment decision (see "RISK FACTORS"herein).
The Authority
The City of Palm Springs Financing Authority (the "Authority") is a joint exercise of powers authority
organized and existing under and by virtue of the Joint Exercise of Powers Act, constituting Articles 1
through 4 (commencing with Section 6500) of Chapter 5, Division 7,Title 1 of the Government Code of
the State of California (the "Joint Powers Act"). The City of Palm Springs (the "City"), and the
Community Redevelopment Agency of the City of Palm Springs (the "Redevelopment Agency"), as
succeeded by the Successor Agency to the Palm Springs Community Redevelopment Agency (the
"Successor Agency") formed the Authority by the execution of a joint exercise of powers agreement
("JPAAgreement") on February 1, 1991. Pursuant to the Joint Powers Act, the Authority is authorized to
issue lease revenue bonds to provide funds to acquire or construct and to refinance public capital
improvements, such revenue bonds to be repaid from the lease payments for such improvements, such as
the lease payments described herein. The Authority,the City and the Successor Agency are each separate
and distinct legal entities,and the debts and obligations of each such entity are not the debts or obligations
of the other entity.
The Authority is governed by a five-member Board which consists of all members of the City Council.
The Mayor serves as the Chairman of the Authority. The City Manager acts as the Executive Director,the
City Clerk acts as the Secretary, and the City's Director of Finance and Treasurer acts as the Treasurer of
the Authority.
The City
The City was incorporated as a general law city on April 20, 1938. It became a charter city on July 12,
1994. The City encompasses 96.2 square miles in Central Riverside County. The City is located 108
miles east of downtown Los Angeles and 120 miles west of the Arizona border. Neighboring
communities include Palm Desert,Rancho Mirage, Desert Hot Springs and Cathedral City(see "CITY OF
PALM SPRINGS"herein).
*Preliminary,subject to change.
1
21
Purpose
The Bonds are being issued to refinance a portion of an existing lease relating to the Authority's
outstanding Lease Revenue Bonds, 2004 Series A(Convention Center Expansion Project), to satisfy the
Reserve Requirement for the Bonds and to pay the costs of issuance of the Bonds. See"THE FINANCING
PLAN"herein.
Security and Sources of Repayment
The Bonds are secured under a Trust Agreement dated as of April 1, 1991, as amended and supplemented,
including as amended and supplemented by a Supplemental Trust Agreement No. 5, dated as of June 1,
2014 (as amended and supplemented, the "Trust Agreement"), by and among the Authority, the City and
U.S. Bank National Association, Los Angeles, California, as successor trustee (the "Trustee") (see
"APPENDIX A-SUMMARY OF PRINCIPAL LEGAL DOCUMENTS"herein).
The Bonds,together with the City of Palm Springs Financing Authority Lease Revenue Refunding Bonds,
2012 Series A(Convention Center Project) (the"2012 Bonds"),are payable on a parity from the revenues
pledged under the Trust Agreement. The revenues consist primarily of lease payments (the "Lease
Payments") to be made by the City to the Authority as the rental for the City's Convention Center and
other property (the "Facilities") and from certain funds held under the Trust Agreement and investment
earnings thereon, and from net proceeds of insurance or condemnation awards, if any (collectively with
the Lease Payments,the"Revenues").
The Lease Payments are to be made pursuant to a Lease Agreement Relating to Convention Center
Facilities dated as of April 1, 1991 (the "1991 Lease Agreement"), a Supplemental Lease Agreement No.
1 dated as of April 1, 1991, a Supplemental Lease Agreement No. 2, dated as of October 1, 1997, a
Supplemental Lease Agreement No. 3 dated as of August 1,2001,a Supplemental Lease Agreement No. 4
dated as of May 1, 2004, a Supplemental Lease Agreement No. 6 dated as of February 1, 2012 and a
Supplemental Lease Agreement No. 6 to be entered into as of June 1, 2014, each by and between the
Authority, as Lessor, and the City, as Lessee (Supplemental Lease Agreement No. 6 is referred to herein
as the "Supplemental Lease Agreement No. 6" and, together with the 1991 Lease Agreement,
Supplemental Lease Agreement No. 1, Supplemental Lease Agreement No. 2, Supplemental Lease
Agreement No. 3, Supplemental Lease Agreement No. 4 and Supplemental Lease Agreement No. 5, the
"Lease Agreement"). The Site upon which the Facilities are built is leased by the City pursuant to a lease
designated as`Business Lease-315 Agua Caliente(Palm Springs)Reservation,"dated February 28, 1984,
between the several lessors named therein and executed by the United States Department of the Interior,
Bureau of Indian Affairs ("BIA"), as authorized signatory for such lessors (the "Ground Lease") as
amended by Amendment No. 1 to PSL-315 dated August 10, 1995, the First Amendment to PSL-315
dated April 7, 2004 and the Second Amendment to Business Lease— 315 dated as of February 9, 2006,
each between said lessors and the City and approved by the BIA. The covenants, agreements, terms,
provisions and conditions of the Ground Lease are made a part of the Lease Agreement for the benefit of
the lessors under the Ground Lease to assure that the obligations of the City under the Ground Lease are
performed(see"SOURCES OF PAYMENT FOR THE BONDS-The Ground Lease").
The outstanding principal amount of the 2012 Bonds($21,595,000)and the Bonds is$76,595,000*.
*Preliminary,subject to change.
2
22
Under the Lease Agreement and, subject to abatement, the City is required to make lease payments (the
"Lease Payments") from legally available funds in amounts sufficient to pay principal of and interest on
the Bonds when due. The City has covenanted in the Lease Agreement to take such actions as may be
necessary to include all Lease Payments in its annual budgets and to make the necessary annual
appropriations for all such Lease Payments subject to complete or partial abatement of such Lease
Payments resulting from a taking of the Facilities(either in whole or in part)under the powers of eminent
domain or resulting from damage or loss of all or any portion of the Facilities. All of the Authority's
right, title and interest in and to the Lease Agreement (apart from certain rights to receive Additional
Payments, as defined herein, to the extent payable to the Authority and to indemnification), including the
right to receive Lease Payments under the Lease Agreement, are assigned to the Trustee under the Trust
Agreement and the Fifth Amended Assignment Agreement, dated June 1, 2014 (the "Assignment
Agreement"), for the benefit of Bondholders.
For a summary of the Trust Agreement and the Lease Agreement, see "APPENDIX A- SUMMARY OF
PRINCIPAL LEGAL DOCUMENTS" herein. Certain capitalized terms used in this Official Statement and
not otherwise defined have the meanings given them in"APPENDIX A."
In general, the City is required under the Lease Agreement to pay to the Trustee specified amounts for use
and possession of the Facilities which amounts are sufficient in both time and amount to pay, when due,
the principal of and interest on the Bonds and the 2012 Bonds. The City is also required to pay any taxes
and assessments levied on the Facilities and all costs of maintenance and repair of the Facilities. Except
for the Authority's right, title and interest in and to the Lease Agreement which have been assigned to the
Trustee, no funds or properties of the Authority or the City are pledged to or otherwise liable for the
obligations of the Authority(see"RISK FACTORS"herein).
The Lease Agreement is, in the opinion of Bond Counsel, a valid and binding obligation of the City
enforceable against the City in accordance with its terms, except to the extent enforceability thereof may
be limited by bankruptcy, insolvency, moratorium and other similar laws affecting creditors' rights
heretofore or hereinafter enacted,by equitable principles,by the exercise of judicial discretion and by the
limitations on legal remedies against municipalities in the State of California (see "RISK FACTORS -
Limited Recourse on Default" herein). The form of Bond Counsel's opinion is attached hereto as
"APPENDIX D."
THE OBLIGATION OF THE CITY TO PAY LEASE PAYMENTS DOES NOT CONSTITUTE AN
OBLIGATION FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM
OF TAXATION OR FOR WHICH THE CITY HAS PLEDGED ANY FORM OF TAXATION.
THE OBLIGATION OF THE CITY TO PAY LEASE PAYMENTS DOES NOT CONSTITUTE A
DEBT OR LIABILITY OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL
SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR
STATUTORY DEBT LIMITATION OR RESTRICTION.
Tax Exemption
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. In the further opinion of Bond
Counsel, such interest is exempt from California personal income taxes. See "LEGAL MATTERS - Tax
Exemption"herein.
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Professional Services
The legal proceedings relating to the issuance of the Bonds are subject to the approving opinion of Jones
Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel. Certain legal matters
will be passed on for the City and the Authority by Woodruff, Spradlin& Smart, Costa Mesa, California
as City Attorney and Fulbrigbt & Jaworski LLP, a member of Norton Rose Fulbright, Los Angeles,
California as Disclosure Counsel, and for the Underwriter by its Counsel, Stradling Yocca Carlson &
Rauth,a Professional Corporation,Newport Beach,California.
U.S. Bank National Association the Trustee will act on behalf of the Bond Owners for the purpose of
receiving all moneys required to be paid to the Trustee, to allocate, use and apply the same, to hold,
receive and disburse the Lease Payments and other funds held under the Trust Agreement, and otherwise
to hold all the offices and perform all the functions and duties provided in the Trust Agreement to be held
and performed by the Trustee.
Harrell &Company Advisors,LLC (the "Financial Advisor") advised the Authority and the City as to the
financial structure and certain other financial matters relating to the Bonds.
The City's audited general purpose financial statements for the fiscal year ended June 30, 2013, attached
hereto as "APPENDIX B" have been audited by Lance, Soll & Lunghard, LLP, Certified Public
Accountants, Brea, California (the "Auditor"). As stated in their report appearing in Appendix B, the
Auditor was not requested to consent to the inclusion of their report in Appendix B, nor have they
undertaken to update their report or to take any action intended or likely to elicit information concerning
the accuracy,completeness or fairness of the statements made in this Official Statement,and no opinion is
expressed by the Auditor with respect to any event subsequent to the date of their report.
Offering of the Bonds
Authority for Issuance and Delivery. The Bonds are to be issued and delivered pursuant to the Trust
Agreement authorized by a resolution of the Authority adopted on June 18, 2014. The Lease Agreement
will be entered into in accordance with the laws of the State of California (the "State"), and particularly
Section 37350 of the Government Code of the State.
Offering and Delivery of the Bonds. The Bonds are offered, when, as and if issued, subject to the
approval as to their legality by Jones Hall, A Professional Law Corporation, San Francisco, California,
Bond Counsel. It is anticipated that the Bonds, in book-entry form, will be available for delivery in New
York, New York on August 7, 2014 through the facilities of The Depository Trust Company. See
"APPENDIX E-THE BOOK-ENTRY SYSTEM."
Information Concerning this Official Statement
This Official Statement speaks only as of its date. The information set forth herein has been obtained by
the Authority and the City from sources which are believed to be reliable. Statements contained in this
Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so
described herein, are intended as such and are not to be construed as representations of fact. The
information and expressions of opinion herein are subject to change without notice and the delivery of
this Official Statement shall not, under any circumstances, create any implication that there has been no
change in the information or opinions set forth herein or in the affairs of the City or the Authority since
the date hereof.
Availability of Legal Documents. The summaries and references contained herein with respect to the
Trust Agreement, the Lease Agreement, the Site and Facilities Lease, the Bonds and other statutes or
documents do not purport to be comprehensive or definitive and are qualified by reference to each such
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document or statute, and references to the Bonds are qualified in their entirety by reference to the form
thereof included in the Trust Agreement. Copies of the documents described herein are available for
inspection during the period of initial offering of the Bonds at the offices of the Financial Advisor. Copies
of these documents may be obtained after delivery of the Bonds at the trust office of the Trustee, U.S.
Bank National Association, Los Angeles, California or from the City at 3200 E. Tahquitz Canyon Way,
Palm Springs,California 92262.
THE BONDS
General Provisions
The Bonds will be issued in fully registered form without coupons in denominations of$5,000 or any
integral multiple thereof. The Bonds will mature on November 1 in each of the years and in the amounts,
and will bear interest (calculated on the basis of a 360-day year of twelve 30-day months) at the rates set
forth on the inside cover page hereof.
Interest on the Bonds will be payable semiannually on each November 1 and May 1, commencing
November 1, 2014 (each, an "Interest Payment Date"), to the person whose name appears on the
Registration Books as the Owner thereof as of the fifteenth calendar day of the month immediately
preceding each such Interest Payment Date (each, a "Record Date"), such interest to be paid by check of
the Trustee mailed by first-class mail to the Owners at the respective addresses of such Owners as they
appear on the Registration Books; provided, however, that payment of interest may be made by wire
transfer in immediately available funds to an account in the United States of America to any Owner of
Bonds in the aggregate principal amount of$1,000,000 or more who furnishes written wire instructions to
the Trustee at least five days before the applicable Record Date. Principal of any Bond and any premium
upon redemption will be paid by check of the Trustee upon presentation and surrender thereof at the
corporate trust office of the Trustee, except as provided in"APPENDIX E -THE BOOK-ENTRY SYSTEM."
Principal of and interest and premium (if any) on the Bonds will be payable in lawful money of the
United States of America.
Each Bond will be dated as of its date of delivery and will bear interest from the Interest Payment Date
next preceding such date of authentication thereof, unless (i) a Bond is authenticated on or before an
Payment Date and after the close of business on the preceding Record Date, in which event it shall bear
interest from such Payment Date, (ii)a Bond is authenticated on or before the first Record Date, in which
event interest thereon shall be payable from the Closing Date, or(iii) interest on any Bond is in default as
of the date of authentication thereof, in which event interest thereon shall be payable from the date to
which interest has been paid in full,payable on each Payment Date.
Book-Entry-Only System. DTC 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. Interest on and principal
of the Bonds will be payable when due by wire of the Trustee to DTC which will in turn remit such
interest and principal to DTC Participants (as defined herein), which will in turn remit such interest and
principal to Beneficial Owners (as defined herein) of the Bonds (see"APPENDIX E - THE BOOK-ENTRY
SYSTEM"herein). As long as DTC is the registered owner of the Bonds and DTC's book-entry method is
used for the Bonds,the Trustee will send any notices to Bond Owners only to DTC.
DTC may discontinue providing its services as securities depository with respect to the Bonds at any time
by giving reasonable notice to the Authority or the Trustee. Under such circumstances, if a successor
securities depository is not obtained, Bonds are required to be printed and delivered as described in the
Indenture. The Authority may decide to discontinue use of the system of book-entry transfers through
DTC (or a successor securities depository). In that event, the Bonds will be printed and delivered as
described in the Trust Agreement.
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Redemption
Optional Redemption. The Bonds maturing on or after November 1, 2025 are subject to redemption
prior to maturity on any date on or after November 1, 2024,as a whole or in part, in a manner determined
by the Authority, from prepayments of Lease Payments due under Supplemental Lease Agreement No. 6
made at the option of the City pursuant to the Lease Agreement at a redemption price equal to the
principal amount thereof to be redeemed, without premium, together with accrued interest thereon to the
date fixed for redemption.
Special Mandatory Redemption From Net Proceeds. The Bonds and the 2012 Bonds are subject to
mandatory redemption as a whole or in part, pro-rata, on any date, from net hazard or title insurance
proceeds not used to repair or replace any portion of the Facilities which are damaged or destroyed, or
from condemnation proceeds received with respect to any portion of the Facilities and elected by the City
to be used for such purpose, from such maturities as the Authority shall designate, at a redemption price
equal to the principal amount of the Bonds and the 2012 Bonds to be redeemed, plus accrued interest
thereon to the date fixed for redemption, without premium. There can be no assurance that such proceeds
will be adequate to redeem all of the Bonds (see "RISK FACTORS - The Lease Payments - Insurance"
herein).
Notice of Redemption. When redemption is authorized or required, the Trustee is required to give
written notice to the respective Bondholders of any Bonds designated for redemption at their addresses
appearing on the bond registration books, to the Securities Depositories, and to at least one Information
Service, all as provided in the Trust Agreement, by first class mail, postage prepaid, no less than 30 nor
more than 60 days prior to the date fixed for redemption. Neither failure to receive such notice nor any
defect in the notice so mailed will affect the sufficiency of the proceedings for redemption of such Bonds
or the cessation of accrual of interest from and after the redemption date.
So long as the book-entry system is used for the Bonds, the Trustee will give any notice of redemption or
any other notices required to be given to registered Owners of Bonds only to DTC. Any failure of DTC to
advise any Participant, or of any Participant to notify the Beneficial Owner, of any such notice and its
content or effect will not affect the validity of the redemption of the Bonds called for redemption or any
other action premised on such notice. Beneficial Owners may desire to make arrangements with a
Participant so that all notices of redemption or other communications to DTC which affect such
Beneficial Owners, and notification of all interest payments, will be forwarded in writing by such
Participant. See"APPENDIX E-THE BOOK-ENTRY SYSTEM."
Rescission of Notice. The Authority 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 will 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 Authority and the Trustee have no liability to the
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 original notice of redemption was
sent.
Effect of Redemption. Interest on Bonds(or portions thereof)called for redemption will cease to accrue
on the date fixed for redemption and such Bonds (or portions thereof) will cease to be entitled to any
benefit or security under the Trust Agreement and the Owners of such Bonds will have no rights in
respect thereof except to receive payment of the redemption price thereof. The Trust Agreement contains
no provisions requiring any publication of notice of redemption,and Bondholders must maintain a current
address on file with the Trustee to receive any notices of redemption.
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Partial Redemption. In the event only a portion of any Bond is called for redemption, then upon
surrender of such Bond the Trustee will authenticate and deliver to the Owner thereof, at the expense of
the Authority, a new Bond or Bonds of authorized denominations equal in an aggregate principal amount
to the unredeemed portion of the Bond surrendered and of the same interest rate and maturity.
Scheduled Debt Service on the Bonds
The following is an annualized schedule of Lease Payments under Supplemental Lease Agreement No. 6,
and therefore the annual scheduled debt service on the Bonds.
Fiscal
Year Ending
June30 Principal Interest Annual Total
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
Total
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Aggregate Debt Service
The following table summarizes the annual aggregate debt service requirements on the Bonds and the
2012 Bonds,on a fiscal year basis.
Fiscal Year
Ending Debt Service 2012 Bonds Total Annual
June 30 Principal Interest on the Bonds Debt Service Debt Service
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
Total
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THE FINANCING PLAN
The Refunding Program
In 2004, the Authority issued its Lease Revenue Bonds, 2004 Series A (Convention Center Expansion
Project) (the "2004 Bonds"). On the Delivery Date, the City will irrevocably deposit a portion of the
proceeds from the supplemental lease of the Facilities to the Authority pursuant to the Supplemental
Lease Agreement No. 6 with the Trustee as escrow bank (the "Escrow Bank"), pursuant to the 2004
Bonds Escrow Deposit and Trust Agreement,dated as of June 1,2014(the"Escrow Agreement")between
the Authority, the City and the Escrow Bank. The deposit will be in an amount sufficient to pay the
redemption price with respect to all outstanding 2004 Bonds pursuant to an optional redemption of the
2004 Bonds on November 1,2014.
Bond Counsel will deliver an opinion at closing to the effect that,assuming the sufficiency of the amounts
deposited under the Escrow Agreement, the lien of the 2004 Bonds and related lease of the property
securing such 2004 Bonds will be discharged, terminated and of no father force and effect upon the
deposit with the Escrow Bank of the amounts required pursuant to the Escrow Agreement (see
"CONCLUDING INFORMATION - Verifications of Mathematical Computations"). Amounts on deposit
with the Escrow Bank are not available to pay debt service on the Bonds.
Estimated Sources and Uses of Funds
Under the provisions of the Trust Agreement, the Trustee will receive the proceeds from the sale of the
Bonds,together with other available funds, and will apply them as follows:
Sources of Funds
Par Amount of Bonds
Net Original Issue Premium
Funds Held under the Trust Agreement
Available Funds
Uses of Funds
Transfer to Escrow Bank
Underwriter's Discount
Reserve Fund
Costs of Issuance Fund pl
Total Uses
m Expenses include fees and expenses of Bond Counsel, Financial Advisor, Disclosure Counsel and Trustee,
rating fees,costs of printing the Official Statement,and other costs of delivery of the Bonds.
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THE FACILITIES
The Site and Facilities securing the Lease Payments consist of the City's Convention Center and
improvements relating thereto,including the City's leasehold interest in 9.15 acres of land upon which the
Convention Center is located, (see "SOURCES OF PAYMENT FOR THE BONDS - The Ground Lease") as
well as the City's leasehold interest in a 9.6 acre site east of the facility to be used for parking ("Parking
Lot"). The Site and Facilities are not located in a 100-year flood zone.
The Convention Center facilities are located in the center of the City of Palm Springs in close proximity
to the central business district of the City and along a major corridor of transportation between the airport
and the core of the retail shopping areas. The original Convention Center was completed and dedicated
December 31, 1987 and contained approximately I10,000 square feet. In 1992, the City completed a
47,000 square foot expansion to the facilities. In 2006, the City completed a 115,000 square feet
expansion of the Convention Center, for a total building area of 250,000 square feet,with another 35,000
square feet of outdoor function area. The space in the Facility is summarized as follows.
After Expansion
Exhibit/Convention Space 100,000 sf
Meeting/Function Rooms 31,000 sf
Food Service 10,000 sf
Support/Circulation 109,000 sf
Total(excluding outdoor function area) 250,000 sf
There is currently adjacent parking for 900 cars, with overflow parking for 450 additional cars on 5.5
acres of the 7.8-acre site north of the Convention Center. This overflow parking area is intended to be
developed with a hotel in the future. In connection with entering into Supplemental Lease Agreement No.
6, the City released the 7.8-acre site from the Lease Agreement and added the Parking Lot to the property
under the Site and Facilities Leas and Lease Agreement. The Parking Lot will be used for parking once
the 7.8-acre site is developed. The City has complied with the provisions of the Lease Agreement to
effect such release of property and substitution of other property. See "APPENDIX A- SUMMARY OF
PRINCIPAL LEGAL DOCUMENTS-LEASE AGREEMENT- Substitution of Site and Facilities"herein.
The Convention Center is adjacent to a 410 guest room Renaissance Hotel. This hotel originally opened
in November 1987 (as a Wyndham Hotel) and is fully operational offering food and beverage facilities,
meetings and banquet facilities and recreational amenities. It was purchased by Highland Hospitality in
2005, who undertook a major renovation. The renovation was completed in early 2010.
The City's objective in building and expanding the Convention Center was to support and enhance the
tourist and convention business, which is the City's most important industry. The hotel, retail,
entertainment and other businesses which serve the needs of tourist and convention center attendees
generate significant revenues to the City in the form of transient occupancy taxes,sales taxes and property
taxes. See "FINANCIAL INFORMATION" herein for additional information. There are over 160 hotels
and 6,500 hotel rooms in the Palm Springs area.
In 2001, the City commissioned a study to determine what opportunities existed to compete more
effectively for conventions and meetings. The study concluded that if the City could expand certain
aspects of the existing facility (primarily exhibit hall space and meeting rooms), that the Convention
Center could accommodate 73% of all groups that bring their meetings to California, as opposed to the
58% of all groups that the space could accommodate at that time. Based on this study the City
determined that an expansion of the Convention Center was feasible. In November 2001 and again in
November 2003, voters in Palm Springs approved a ballot measure to increase the City's transient
occupancy tax rate for the purpose of generating funds to pay for the expansion. These ballot measures
were supported by the hotel owners.
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The Convention Center is managed by SMQ a professional management and operating company. SMG
specializes in the management of convention centers and currently operates 98% of the publicly owned
exhibition space in North America operated by private companies.
The 61 convention and exhibition facilities currently managed by SMG include more than 10 million
square feet of space and range in size from 30,000 square foot exhibit halls, with adjacent active sports
arenas,to the 2.6 million square foot McCormick Place in Chicago.
A recent history of bookings at the Convention Center are shown below, together with an estimate for
2014.
Fiscal Year Events Attendees
2010 84 154,309
2011 96 182,374
2012 99 187,462
2013 106 203,291
2014(Estimate) 113 221,035
The largest bookings in 2013 included Spirit Sports (10,000), CA Mathematics Council (4,000), Palm
Springs High School Graduation(4,500),White Party(5,000),and Computer Using Educators(4,500).
Actual and tentative bookings for 2014 are estimated to total over 221,000 attendees at 113 events. The
largest bookings for 2014 include Aviation Summit (5,000), Palm Springs High School Graduation
(5,000),Ca. Mathematics Council(5,000),White Party(5,500)and Computer Using Educators(5,000).
There are 61 events already booked for 2015, 43 events for 2016 and 27 events for 2017. Many future
bookings are a result of repeat visitors.
As described above,the City estimates that the value of the Site and Facilities is$71,542,802 based on the
current insured value of the convention center building of$63,366,590 plus land value of $8,176,212
(18.77 acres at$$10 per square foot).
The City has the right under the Lease Agreement, however, to remove or substitute portions of the
Facilities with alternate Facilities subject to the satisfaction of certain requirements (see "APPENDIX A-
SUMMARY OF PRINCIPAL LEGAL DOCUMENTS-LEASE AGREEMENT"herein).
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SOURCES OF PAYMENT FOR THE BONDS
General
As provided in the Trust Agreement,the Bonds are payable from and will be secured by (on a parity with
the 2012 Bonds and all other Additional Bonds issued under the Trust Agreement) a fast pledge of,
security interest in and lien on all of the Lease Payments, including insurance or condemnation Net
Proceeds received with respect to the Facilities to the extent that such Net Proceeds are not used for repair
or replacement, interest or other income derived from the investment of the funds held by the Trustee, or,
in certain instances, from the Reserve Account.
The Authority has, pursuant to the Assignment Agreement, assigned all of its rights under the Lease
Agreement including its rights to receive Lease Payments from the City and its remedies under the Lease
Agreement to the Trustee for the benefit of the Owners of the Bonds and the 2012 Bonds.
THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY
FROM AND SECURED BY A PLEDGE OF REVENUES AND CERTAIN FUNDS AND
ACCOUNTS HELD UNDER THE INDENTURE. THE AUTHORITY HAS NO TAXING
POWER.
The Ground Lease
The site upon which the Convention Center and the Parking Lot are located is leased pursuant to a lease
designated as"Business Lease-315 Agua Caliente (Palm Springs) Reservation," dated February 28, 1984
(the"Ground Lease"), between the several lessors named therein and the City, as assignee of Senca Palm
Springs Inc., and approved by the United States Department of the Interior, Bureau of Indian Affairs, as
authorized signatory for such lessors. The Ground Lease was amended on August 10, 1995 pursuant to
Amendment No. 1 to PSL-315, amended on April 7, 2004 pursuant to a First Amendment to Business
Lease — 315, and amended on February 9, 2006 pursuant to a Second Amendment to Business Lease -
315. The term of the Ground Lease was for a period of 74 years, with an option of the lessee to extend
for an additional 25 years. The option was granted in connection with the Second Amendment, and the
term of the Ground Lease currently expires on December 31, 2083. The Ground Lease was entered into
pursuant to an Option to Lease dated February 28, 1984. Pursuant to an Assignment,dated September 29,
1989, the City became the successor to the interest of Senca Palm Springs Inc., as lessee under the
Ground Lease.
The Lease Agreement provides that covenants, agreements, terms, provisions and conditions of the
Ground Lease are made a part of and incorporated into the Lease Agreement as if recited therein in full
for the benefit of the lessors under the Ground Lease so that the lessor's interests under the Ground Lease
will be preserved and maintained, and to insure that the obligations of the City under the Ground Lease
will be performed. In the event of a conflict, the terms of the Ground Lease shall prevail over the terms
of the Lease Agreement.
The Ground Lease is made a part of the Lease Agreement and, accordingly, the covenants of the City in
the Lease Agreement to faithfully observe and perform all the covenants, conditions and requirements of
the Lease Agreement, and to not suffer or permit any default to occur thereunder and to not do or permit
anything to be done, or omit or refrain from doing anything, in any case where any such act done or
permitted to be done, or any such omission of or refraining from action, would or might be a ground for
cancellation or termination of the Lease Agreement, applies with equal force and effect to the City's
obligations under the Ground Lease. However, all of the rights and remedies in the event of a default by
the City under the Lease Agreement will apply only to the City's interests as lessee under the Lease
Agreement and the Ground Lease, and, in the event of a conflict between the terms of the Lease
Agreement and the Ground Lease,the terms of the Ground Lease shall control.
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One of the provisions of the Ground Lease required the Bureau of Indian Affairs, as the authorized
representative of the Secretary of the Interior,to approve subleases of the premises leased pursuant to the
Ground Lease. The Bureau of Indian Affairs approved the Lease Agreement, upon its initial execution
and all Supplements thereto entered into prior to 2004. In 2004, the Ground Lease was amended to no
longer require consent by the Bureau of Indian Affairs for any assignments, leases,or subleases related to
the leased premises for purposes of financing or refinancing debt for public improvements by issuance of
bonds or otherwise, and the City will not need such approval with respect to the Supplemental Lease
Agreement No. 6.
Lease Payments;Abatement
The Lease Agreement requires the City to make Lease Payments to the Authority on the 15' day of the
month preceding each Payment Date, Lease Payments to be paid by the City are assigned and are to be
transmitted directly to the Trustee. The Trust Agreement provides that the Lease Payments will be
deposited in the Lease Payment Account maintained by the Trustee under the Trust Agreement and
applied to pay the principal and interest on the Bonds and the 2012 Bonds.
The obligation of the City to make Lease Payments is subject to annual appropriations of the City from
funds lawfully available therefor. The obligation of the City to make Lease Payments under the Lease
Agreement does not constitute an obligation of the City for which the City is obligated to levy or pledge
any form of taxation or for which the City has levied or pledged any form of taxation. Neither the full
faith and credit nor the taxing power of the City,the State or any of its political subdivisions is pledged to
make Lease Payments under the Lease Agreement. The Lease Payments are sufficient to pay, when due,
the principal of and interest on the Bonds.
In addition to the Lease Payments, the City is required to pay when due the following Additional
Payments: (a) any fees and expenses incurred by the Authority in connection with or by reason of its
leasehold estate in the Property as and when the same become due and payable; (b)any amount due to the
Trustee pursuant to the terms of the Trust Agreement; (c) any reasonable fees and expenses of such
accountants,consultants,attorneys and other experts as may be engaged by the Authority or the Trustee to
prepare audits, financial statements, reports, opinions or provide such other services required under the
Lease Agreement or the Trust Agreement; and(d)any reasonable out-of-pocket expenses of the Authority
in connection with the execution and delivery of the Lease Agreement or the Trust Agreement or any
other documents contemplated thereby, or incurred by the Authority in connection with the Continuing
Disclosure Certificate, or otherwise incurred in connection with the administration of the Lease
Agreement or the Trust Agreement.
The City has covenanted in the Lease Agreement to take such action as may be necessary to include all
Lease Payments in its annual budgets and to make annual appropriations for all such Lease Payments.
The Lease Agreement provides that the several actions required by such covenants are deemed to be and
shall be construed to be duties imposed by law and that it is the duty of each and every public official of
the City to take such action and do such things as are required by law in the performance of the official
duty of such official to enable the City to carry out and perform the covenants in the Lease Agreement
agreed to be carried out and performed by the City.
California law requires, and the Lease Agreement provides, that Lease Payments are required to be abated
in whole or in part during any period in which there is substantial interference with the use and occupancy
of the Site and Facilities by the City due to damage,destruction or taking in eminent domain proceedings.
Under these circumstances, failure to make any Lease Payment will not be an event of default under the
Lease Agreement. See"Abatement"below.
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The City may enter into other obligations payable from its general fund without the consent of the Bond
Owners. To the extent the City issues such obligations, funds available to pay Lease Payments may be
reduced. See "RISK FACTORS - The Lease Payments - County's Lease Payments and Other Payments"
herein.
Reserve Account
A Reserve Account has been established under the Trust Agreement to be held by the Trustee to further
secure the timely payment of principal and interest on the Bonds and the 2012 Bonds and any Additional
Bonds. The amount to be maintained in the Reserve Account is an amount equal to the least of maximum
annual Lease Payments, including Lease Payments payable pursuant to Supplemental Lease Agreement
No. 6, 10% of the aggregate principal amount of the Bonds and the 2012 Bonds, or 125% of the average
annual Lease Payments (the "Reserve Requirement"). On the Delivery Date, the Reserve Requirement
will be$
If the City fails to deposit with the Trustee the full amount required by the Lease Agreement to pay
principal and interest due on the Bonds and the 2012 Bonds, the Trustee will withdrawfrom the Reserve
Account, the difference between the amount required to be on deposit and the amount available on such
date. Amounts in excess of the Reserve Requirement will be transferred to the Lease Payment Account to
be applied as a credit against the next succeeding Lease Payments.
Insurance Relating to the Property
The Lease Agreement requires the City to maintain comprehensive general public liability and property
damage insurance and fire insurance with extended coverage on the Facilities. The City is also required
to maintain rental interruption insurance covering loss of the use of any part of the Facilities in an amount
equal to the maximum total Lease Payments payable by the City on any four consecutive Lease Payment
Dates. The City is required to maintain earthquake insurance only with respect to structures and only to
the extent available at reasonable cost from reputable insurers, therefore, although the City currently
maintains earthquake insurance with respect to the Convention Center,damage from earthquakes may not
be covered in future years.
See "APPENDIX A - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS - THE LEASE AGREEMENT -
Insurance"and"RISK FACTORS-The Lease Payments-Insurance"herein.
If the Facilities are damaged or destroyed, the City may apply the net proceeds of any insurance award
(except that included for the purposes of rental interruption) to replace,repair,restore,modify or improve
(collectively, "repair") the Facilities, or if repairing the Facilities is not economically feasible, or in the
best interest of the City, to redeem the Bonds and the 2012 Bonds. If the Facilities have been damaged or
destroyed and the City directs the Trustee to apply insurance proceeds arising from such damage or
destruction to the payment or prepayment of Lease Payments, then the Trustee shall apply such proceeds
to the redemption of Bonds and the 2012 Bonds as described under the caption "THE BONDS -
Redemption - Special Mandatory Redemption From Net Proceeds" herein. The amount of the Lease
Payments will be adjusted or abated (but only after all available moneys have been depleted) during any
period in which damage or destruction to the Facilities or condemnation of the Facilities substantially
interferes with the City's use and possession. thereof. See "RISK FACTORS - The Lease Payments -
Abatement"herein.
If there are not sufficient insurance proceeds to complete repair of the Facilities,the Lease Payment
schedule will be proportionally reduced in accordance with the Lease Agreement. Such reduced
Lease Payments may not be sufficient to pay principal and interest with respect to the Bonds and
the 2012 Bonds. Such reduction would not constitute a default under either the Trust Agreement or
the Lease Agreement.
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Abatement
The Lease Agreement provides for the abatement of Lease Payments during any period in which by
reason of damage to or destruction of the Facilities (other than by eminent domain which may cause
abatement of Lease Payments as described below), there is substantial interference with the use and
occupancy by the City of the Facilities or any portion thereof. The amount of such abatement will be an
amount agreed upon by the City and the Authority such that the resulting Lease Payments represent fair
consideration for the use and occupancy of the portions of the Facilities not damaged or destroyed and
available for use and possession by the City. Such abatement will continue for the period commencing
with such damage or destruction and ending with the substantial completion of the work of repair or
reconstruction or the date when the remaining portion of the Facilities are available for use and possession
by the City. In the event of any such damage, destruction or non-completion, the Lease Agreement will
continue in full force and effect and the City waives any right to terminate the Lease Agreement by virtue
of any such damage, destruction or non-completion. There will be no abatement of the Lease Payments
to the extent that moneys derived from any person as a result of such damage or destruction are available
to pay the amount which would otherwise be abated or if there is any money available in the Revenue
Fund or the Reserve Account to pay the amount which would otherwise be abated. See "Insurance
Relating to the Property"above.
If all of the Site and Facilities is taken permanently under the power of eminent domain or sold to a
government threatening to exercise the power of eminent domain, the Lease Agreement will terminate
with respect to the Site and Facilities as of the day possession is so taken. If less than all of the Site and
Facilities is taken permanently, or if all of the Site and Facilities or any part thereof is taken temporarily
under the power of eminent domain, (a) the Lease Agreement will continue in full force and effect, and
(b) there will be a partial abatement of Lease Payments in an amount to be agreed upon by the City and
the Authority such that the resulting Lease Payments for the Site and Facilities represent fair
consideration for the use and occupancy of the remaining usable portion of the Site and Facilities.
Remedies on Default
If the City defaults in performance of its obligations under the Lease Agreement„it shall be lawful for the
Trustee,as assignee of the Authority,to exercise any and all remedies available pursuant to law or granted
pursuant to the Lease Agreement;provided,however, that notwithstanding anything to the contrary in the
Lease Agreement or in the Trust Agreement,there shall be no right under any circumstances to accelerate
the Lease Payments or otherwise declare any Lease Payments not then in default to be immediately due
and payable or to terminate the Lease Agreement or to cause the leasehold interest of the City in the Site
to be sold, assigned or otherwise alienated. The City has consented to the Authority's repossession of the
Site and Facilities if an Event of Default shall occur and consented to the Authority's re-letting of the Site
and Facilities for the account of the City. Notwithstanding any re-entry by the Authority, the City shall
continue to remain liable for the payment of the Lease Payments and/or damages for breach of the Lease
Agreement and the performance of all conditions contained in the Lease Agreement. The City shall
remain liable for the payment of all Lease Payments and shall reimburse the Authority for any deficiency
arising out of the re-leasing of the Site and Facilities, or, in the event the Authority is unable to re-lease
the Site and Facilities, then for the full amount of all Lease Payments to the end of the Term of the Lease
Agreement,but said Lease Payments and/or deficiency shall be payable only at the same time and in the
same manner as provided for the payment of Lease Payments, notwithstanding such entry or re-entry by
the Authority or any suit in unlawful detainer, or otherwise, brought by the Authority for the purpose of
effecting such re-entry or obtaining possession of the Site and Facilities or the exercise of any other
remedy by the Authority. See"APPENDIX A- SUMMARY OF PRINCIPAL LEGAL DOCUMENTS -LEASE
AGREEMENT-Events of Defaults."
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J
CITY OF PALM SPRINGS
General Information
The City of Palm Springs is located at the edge of the Coachella Valley in central Riverside County, sited
at the base of Mt. San Jacinto. The City is located 107 miles east of Los Angeles and 120 miles west of
the Arizona border. Palm Springs covers a geographical area of 96 square miles. Neighboring
communities include Palm Desert,Rancho Mirage,Desert Hot Springs and Cathedral City.
A major Southern California resort destination, Palm Springs attracts both local vacationers, distant
"snowbirds" and permanent retirees. Palm Springs is very much an event-oriented city. The Palm
Springs International Film Festival is an annual event. With premieres, parties, conferences and
celebrations,this festival epitomizes the Palm Springs lifestyle.
The Palm Springs area is well known for its championship golf courses. The Humana Challenge
(formerly the Bob Hope Classic), the Kraft Nabisco Championship and the Frank Sinatra Celebrity
Invitational Golf Tournament are three well-publicized celebrity events. With over 80 golf courses in the
Palm Springs area, the Professional Golf Association holds tournaments in the area several times
throughout its annual tour.
There are over 130 hotels and inns within the Palm Springs area offering approximately 6,500 rooms.
Accommodating vacationers and visitors plays a major role in the City's economy,providing a significant
amount of transient occupancy tax and sales tax.
General Organization
The City of Palm Springs was incorporated as a general law city on April 20, 1938, and, operates under
the council/manager form of government. It became a charter city on July 12, 1994. The City is
governed by a five-member council consisting of four members each elected at large for four-year
alternating terms and a Mayor elected to a four-year tern. Positions of City Manager and City Attorney
are filled by appointments of the Council. The City of Palm Springs currently has 403.5 budgeted full-
time equivalent staff members including swom officers and fire personnel.
The members of the City Council,the expiration dates of their terms and key administrative personnel are
set forth in the charts below.
CITY COUNCIL
Council Member Term Expires
Stephen Pougnet,Mayor December 2015
Rick Hutcheson,Mayor Pro Tem December 2015
Ginny Foat December 2017
Paul Lewin December 2015
Christopher Mills December 2017
CHIEFADMINISTRATIVE PERSONNEL
David H. Ready, Esq.,Ph.D., City Manager
James L.Thompson, ChiefofStafflCity Clerk
Geoffrey S. Kiehl,Director of Finance and Treasurer
David J. Barakian,Director of Public Works/City Engineer
John S. Raymond,Director of Community&Economic Development
Douglas Holland, City Attorney
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Governmental Services
Public Safety and Welfare
The City of Palm Springs Police Department consists of 132 sworn police officers and non-sworn
personnel providing patrol, traffic, animal control and investigations. There are 4 operating fire stations
located in and operated by the City, staffed by 57 fire personnel. The City also provides parking control
in the downtown business district.
Public Services
Water is supplied to Palm Springs by the Desert Water Agency. Sewer service is provided by the City.
Although the City operates two cogeneration facilities which provide electricity to certain municipally
owned facilities, Southern California Edison provides electricity to the citizens of the City of Palm
Springs. The City owns and operates the Palm Springs International Airport, with 5 major airlines and 8
regional airlines serving over 1.7 million passengers in 2013.
Community Services
Other services provided by the City include building permit and inspection, planning and zoning,
landscape and public infrastructure maintenance, street cleaning, traffic signal maintenance, municipal
code compliance and rent control.
Parks and Recreation
The City operates the Palm Springs Public Library, a 33,000 square foot facility with over 100,000 items
available, as well as free wireless internet access and downloadable books for Kindle. The Village Green,
located in the heart of downtown Palm Springs, includes the Historical Society Museum, the Cornelia
White historical site and Ruddy's General Store Museum. The Palm Springs Department of Parks and
Recreation provides citizens with a variety of park and recreational services on a year round basis.
Facilities include two community centers, eight parks, a dog park, an Olympic size community pool,
twelve tennis courts, the 18-hole Tahquitz Creek—Legends golf course and the 18-hole Tahquitz Creek—
Resort golf course, a 30,000 square feet skate park and five playgrounds, as well as biking and hiking
trails. Frances Stevens Park is home to Palm Canyon Theatre, a regional Actors Equity theatre, and an
art/festival center.
Community Information
The City of Pahn Springs is served by the Palm Springs Unified School District, with 16 elementary
schools, 5 middle schools, 3 comprehensive high schools, 1 continuation high school, 2 independent
study programs, and an extensive adult education program serving the Coachella Valley. In addition,
higher education in the Coachella Valley includes the College of the Desert, a local accredited junior
college,with a main campus in Pahn Desert, and East Valley Center in Indio, and a planned West Valley
Campus in Palm Springs. In the nearby City of Palm Desert, a satellite campus of California State
University, San Bernardino (CSUSB) offers curriculum towards a B.A. in various disciplines as well as
Bachelor of vocational education; special B.A. in paralegal administration, and 6 masters degree
programs, including education and public administration. Teaching credentials are also available. In
addition, CSUSB is currently working with local government agencies to select a site for a permanent
independent campus in the Coachella Valley.
Medical services in the Coachella Valley are provided by a number of local and regional facilities. The
Desert Regional Medical Center, located in Palm Springs,is a 367-bed acute care regional medical center
that is home to the Coachella Valley's only designated trauma center. Eisenhower Medical Center, in
nearby Rancho Mirage, is a health care complex comprised of a 542-bed hospital, the Annenberg Center
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for Health Sciences at Eisenhower, the Barbara Sinatra Children's Center at Eisenhower and the Betty
Ford Center on the Eisenhower campus. The 158-bed JFK Memorial Hospital is part of Tenet,California,
and is located in Indio.
Palm Springs has many visitor attractions in addition to the weather and championship golf courses. The
Palm Springs Aerial Tramway,rising 8,516 feet up Mt. San Jacinto, is the world's largest rotating tramcar.
Mt. San Jacinto State Park offers 54 miles of hiking trails located within a 13,000 acre pristine wilderness.
Centuries ago, ancestors of the Agua Caliente Cahuilla Indians settled in the Palm Springs area and
developed extensive and complex communities in Palm, Murray,Andreas,Tahquitz and Chino Canyons.
Many traces of these communities exist in the canyons today, including rock art, house pits and
foundations,irrigation ditches,dams,reservoirs,and trails.
The Palm Springs Art Museum is located in downtown Palm Springs, and the museum's extensive
permanent collection includes significant works by western, contemporary and glass artists, and features
temporary exhibitions from internationally acclaimed artists. Located inside the Palm Springs Art
Museum, the Annenberg Theater presents an eclectic mix of live events including national touring
companies. In addition, the Palm Springs Air Museum offers one of the world's finest collections of
functioning World War II aircraft.
Palm Springs has several special events that attract visitors from near and far: VillageFest, a weekly
street fair held every Thursday along Palm Canyon Drive in the heart of the City's downtown;the Festival
of Lights parade; Palm Springs Modernism Week; and the Palm Springs International Film Festival.
Founded in 1990 by then Mayor Sonny Bono, the Palm Springs International Film Festival celebrated its
25th anniversary in January 2014. The Festival included over 400 screenings of more than 200 films
from approximately 60 countries. The Festival presents a majority of the films submitted for
consideration in the Best Foreign Language category for the Academy Awards, as well as a large number
of American independent and international features and documentaries marking their world, North
American or U.S. debuts. Screenings are held on 15 screens throughout Palm Springs, The Festival's
Awards Gala draws the biggest actors and actresses, celebrity filmmakers, media, industry professionals
and film fans from all over the world to kick off the winter awards season in style.
Mransportation
Interstate 10 runs adjacent to Palm Springs northern City limits. This route provides access to the
Southern California freeway system to the west, as well as Arizona to the east. Rail freight service is
available from Southern Pacific Transportation. Bus services are provided by Continental Trailways,
Greyhound Bus Lines and Sunline System, both local and distant. Palm Springs International Airport is
the only commercial airport in Riverside County and is served by 5 major airlines.
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Population
The following table provides a comparison of population growth for Palm Springs, surrounding cities and
Riverside County between 2010 and 2014. During the winter season, population in Palm Springs
increases to approximately 75,000.
TABLE NO. 1
CHANGE IN POPULATION
PALM SPRINGS,SURROUNDING CITIES AND RIVERSIDE COUNTY
2010-2014
PALM SPRINGS SURROUNDING CITIES RIVERSIDE COUNTY
January 1 Percentage Percentage Percentage
Year Population Change Population Change Population Change
2010 44,480 142,359 2,179,692
2011 44,829 0.8% 144,996 1.9% 2,205,731 1.2%
2012 45,415 1.3% 147,004 1.4% 2,234,209 1.3%
2013 45,724 0.7% 147,790 0.5% 2,255,653 1.0%
2014 46,135 0.9% 148,758 0.7% 2,279,967 1.1%
%Change Between
2010-2014 3.7% 4.5% 4.6%
Surrounding cities include Cathedral City,Desert Hot Springs,Palm Desert and Rancho Mirage.
Source: State of California, Department of Finance, "E-4 Population Estimates for Cities. Counties and the State,
2001-2010, with 2000 & 2010 Census Counts" Sacramento, California, November 2012, and "E-4
Population Estimates for Cities, Counties, and the State, 2011-2014, with 2010 Census Benchmark"
Sacramento,California,May 2014.
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Per Capita Income
Per capita income information for Palm Springs, Riverside County,the State of California and the United
States are summarized in the following table.
TABLE NO.2
PER CAPITA INCOME
CITY OF PALM SPRINGS,RIVERSIDE COUNTY,CALIFORNIA AND UNITED STATES<'
2008—2012
Year Palm Springs Riverside County State of California United States
2008 $29,260 $30,808 $43,609 $40,873
2009 28,883 29,433 41,569 39,357
2010 35,974 29,563 42,297 40,163
2011 36,875 31,074 44,666 42,298
2012 37,498 31,742 46,477 43,735
Source: U.S. Department of Commerce, Bureau of Economic Analysis; and City of Pam Springs Comprehensive
Annual Financial Report.
(0 For Riverside County, State of California and United States, per capita personal income was computed using
Census Bureau midyear population estimates. Estimates for 2010-2012 reflect county population estimates
available as of March 2013,
Note: All state and local area dollar estimates are in current dollars (not adjusted for inflation). Estimates for
2001 forward reflect the results of the comprehensive revision to the national income and product accounts
(NIPAs)released in July 2013. This will create a temporary break in BEA's time series for earlier years.
Last updated: November 21,2013-new estimates for 2012;revised estimates for 2001-2011.
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Employment
As of February 2014, the civilian labor force for the City was approximately 27,800 of whom 25,700
were employed. The unadjusted unemployment rate as of February 2014 was 7.3% for the City as
compared to 9.5% for the County and 8.5% for the State. Civilian labor force, employment and
unemployment statistics for the City, County, the State and the nation, for the years 2009 through 2013
are shown in the following table:
TABLE NO.3
CITY OF PALM SPRINGS
CIVILIAN LABOR FORCE,EMPLOYMENT AND UNEMPLOYMENT
ANNUALAVERAGES
Civilian Unemployment
Year Labor Force Employment Unemployment Rate
2009
City of Palm Springs 26,300 23,600 2,700 10.4%
Riverside County 917,100 794,400 122,800 13.4%
California 18,220,100 16,155,000 2,065,100 11.3%
United States 154,142,000 139,877,000 14,265,000 9.3%
2010
City of Palm Springs 26,900 23,800 3,100 11.3%
Riverside County 939,500 803,300 136,200 14.5%
California 18,336,300 16,068,400 2,267,900 12.4%
United States 153,889,000 139,064,000 14,285,000 9.6%
2011
City of Palm Springs 27,000 24,100 2,900 10.7%
Riverside County 942,200 812,800 129,400 13.7%
California 18,417,900 16,249,600 2,168,300 11.8%
United States 153,617,000 139,869,000 13,747,000 8.9%
2012
City of Palm Springs 27,400 24,800 2,600 9.4%
Riverside County 950,600 835,200 115,400 12.1%
California 18,519,000 16,589,700 1,929,300 10.4%
United States 154,975,000 142,469,000 12,506,000 8.1%
2013
City of Palm Springs 27,600 25,400 2,200 7.9%
Riverside County 953,200 855,300 97,900 10.3%
California 18,596,800 16,933,300 1,663,500 8.9%
United States 155,389,000 143,929,000 11,460,000 7.4%
Source: California State Employment Development Department and United States Bureau of Labor Statistics.
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The City is located in the Riverside-San Bemardino-Ontario Metropolitan Statistical Area (MSA). As of
February 2014, six major job categories constitute 79.7% of the work force. They are government
(18.1%), service producing (17.6%), educational and health services (14.9%), leisure and hospitality
(11.3%),professional and business services(10.8%),and manufacturing(7.0%).
TABLE NO.4
RIVERSIDE-SAN BERNARDINO-ONTARIO MSA
WAGE AND SALARY WORKERS BY INDUSTRY t'
in$thousands
Industry 2009 2010 2011 2012 2013
Government 237.3 231.5 228.1 227.2 228.1
Other Services 37.5 38.5 39.2 40.2 39.2
Leisure and Hospitality 122.8 124.0 127.5 133.8 142.0
Educational and Health Services 153.7 156.7 164.2 178.8 187.5
Professional and Business Services 119.5 125.1 126.6 129.5 135.8
Financial Activities 41.1 40.4 39.8 41.7 42.3
Information 14.2 12.6 11.7 11.3 11.2
Transportation,Warehousing and Utilities 65.3 67.7 70.7 76.6 79.9
Service Producing
Retail Trade 153.0 155.0 158.8 161.1 165.3
Wholesale Trade 48.3 48.7 49.4 54.8 56.8
Manufacturing
Nondurable Goods 29.6 29.0 29.0 29.9 29.6
Durable Goods 54.7 55.0 56.5 56.4 57.5
Goods Producing
Construction 58.5 57.0 58.0 66.3 69.3
Mining and Logging 1.0 1.0 1.2 1.2 1.1
Total Nonfarm 1,136.6 1,142.1 1,160.7 1,208.8 1,245.6
Farm 12.4 13.8 12.8 12.7 12.8
Total(all industries) 1 142 11 $Q 1,173.5
Source: State of California Employment Development Department, Labor Market Information Division, "Industry
Employment&Labor Force-by month March 2013 Benchmark."
Annually,as of February.
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TABLE NO.5
CITY OF PALM SPRINGS
MAJOR EMPLOYERS
The major employers operating within the City and their respective number of employees as of June 30,
2013 are as follows:
Name of Company Employment Type of Business/Service
Western Pacific Roofing Corp. 100-249 Roofing Contractor
Care Fusion 250-499 Medical Equipment—Manufacturing
VIP Motor Cars Ltd. 100-249 Car Dealership
Lowe's Home Improvement 100-249 Home Improvement Products
Stater Brothers Markets 100-249 Grocery Store
Walmart Supercenter 250499 Discount Store
US Post Office 100-249 Government
Desert Sun 250499 Daily Newspaper
Coldwell Banker 100-249 Real Estate
Tarbell Realtors 100-249 Real Estate
Source: City of Palm Springs/California State Employment Development Department.
Commercial Activity
The following table summarizes the volume of retail sales and taxable transactions for the City of Palm
Springs for 2008 through 2012 (the most recent year for which statistics are available from the State
Board of Equalization for the full year). See "FINANCIAL INFORMATION - Local Taxes" herein for a
recent history of sales tax revenue.
TABLE NO.6
CITY OF PALM SPRINGS
TOTAL TAXABLE TRANSACTIONS
(in$thousands)
2008-2012
Retail and Retail and Total Taxable
Food Services Food Services Transactions Issued Sales
Year ($000's) %Change Permits ($000's) %Change Permits
2008 $648,728 1,059 $826,056 2,043
2009 579,183 (10.7%) 1,298 763,354 (7.6%) 1,865
2010 610,488 5.4% 1,320 806,540 5.7% 1,869
2011 662,012 8.4% 1,409 880,426 9.2% 1,973
2012 728,329 10.00/0 1,459 955,731 8.6% 2,036
Source: State Board of Equalization, "Taxable Sales in California."
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The following table compares taxable transactions for the City of Palm Springs and surrounding cities for
the years 2008 through 2012 (the most recent year for which statistics are available from the State Board
of Equalization for the full year).
TABLE NO.7
CHANGE IN TOTAL TAXABLE TRANSACTIONS
PALM SPRINGS AND SURROUNDING CITIES
(in$thousands)
2008-2012
%Change from
City 2008 2009 2010 2011 2012 2008-2012
PALM SPRINGS $ 826,056 $ 763,354 $ 806,540 $ 880,426 $ 955,731 15.7%
Cathedral City 649,612 546,894 559,069 606,771 648,817 (0.1%)
Palm Desert 1,447,663 1,213,935 1,266,834 1,384,208 1,470,982 1.6%
Source: State Board of Equalization, "Taxable Sales in California."
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Taxable transactions by type of business for the City of Palm Springs for 2008 through 2012 (the most
recent year for which statistics are available from the State Board of Equalization for the full year) are
summarized in Table No. 8.
TABLE NO.8
CITY OF PALM SPRINGS
TAXABLE TRANSACTIONS BY TYPE OF BUSINESS
(in$thousands)
2008-2012
2008 2009 2010 2011 2012
Retail and Food Services
Clothing and Clothing
Accessories Stores $ 17,289 $ 31,268 $ 33,871 $ 35,678 $ 39,934
General Merchandise Stores 98,333 # # # #
Food and Beverage Stores 38,979 41,454 42,565 44,267 49,225
Food Services and Drinking Places 158,015 152,975 160,993 177,414 193,066
Home Furnishings and
Appliance Stores 9,067 6,661 9,974 11,699 12,737
Building Materials and Garden
Equipment and Supplies 83,112 75,080 77,396 81,638 89,755
Motor Vehicle and Parts Dealers # # # # #
Gasoline Stations 126,937 82,493 92,823 103,943 122,154
Other Retail Group 116,997 # 189,253 # 192,866 # 207,373 # 221,458 #
Total Retail and Food Services 648,729 571184 610,488 662,012 728329
All Other Outlets 177,327 184,170 196,053 218,415 227,402
Total All Outlets $$ 5 $$QS S Q $880 4426 $2
Source: California State Board of Equalization, "Taxable Sales in California."
Note: Detail may not compute to total due to rounding.
# Sales omitted because their publication would result in the disclosure of confidential information.
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Building Activity
The following table summarizes building activity valuations for the City of Palm Springs for the five
fiscal years 2008/09 through 2012/13.
TABLE NO.9
CITY OF PALM SPRINGS
BUILDING ACTIVITY AND VALUATION
2008/09-2012/13
2008/09 2009/10 2010/11 2011/12 2012113
Residential $ 46,205,943 $ 36,524,918 $ 32,433,590
Commercial 90,523,790 38,722,659 23,497,970
Total Valuation %136.729.733
Number of Residential Units 4 0 23
Source: City of Palm Springs.
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FINANCIAL INFORMATION
Economic Conditions and Outlook
The City, like many other municipalities, was not immune to the effects of the most recent economic
recession. The City's General Fund revenues were hampered as a result of declining assessed values,
depressed consumer spending and reduced tourism, and further by the dissolution of redevelopment
throughout the State. The City implemented an aggressive budget reduction plan beginning in 2009.
However, most of the City's tax revenues have reached or exceeded pre-recession levels as described
below,and the City's Budget for Fiscal Year 2014/15 reflects continued revenue growth.
Property Tax. Property values in the Coachella Valley were impacted significantly by the recession and
have been the slow to recover. Between 2008 and 2012, assessed values in the City declined by 13%.
Assessed values stabilized in Fiscal Year 2012/13 and grew by 4% in Fiscal Year 2013/14, including
partial recapture of the market value reductions in real estate in prior years as discussed under the caption
"Taxable Property and Assessed Valuation" below. Recapture of prior years' market value reductions is
expected to continue in 2014/15, and although the inflationary rate is limited to 0.454% in 2014/15, the
City is projecting an overall 4%increase in assessed values.
Sales Tax. Sales tax receipts were also affected by the economic downturn, declining by 15% between
Fiscal Years 2007/08 and 2009/10. Sales tax receipts rebounded by 17% in Fiscal Year 2010/11 to pre-
recession levels and have continued steady with measured increases since then. The City is projecting a
4.5%increase in sales tax in Fiscal Year 2014/15.
Measure J Sales Tax. Voters in the City approved the levy of an additional 1% sales tax for a 25-year
term,commencing April 1, 2012, This new sales tax effectively doubled the amount of sales tax received
by the City starting in Fiscal Year 2012/13. The City's policy is to use the additional sales tax to service
the debt that was issued to fund improvements relating to its downtown revitalization project (see
"Downtown Palm Springs" below), as well as other City-wide one-time capital projects, programs, and
deferred maintenance.
Transient Occupancy Tax. Tourism is important to the City's economy. In 2007, the City established a
Transient Occupancy Tax Hotel Incentive Reimbursement Program that refunds a portion of the transient
occupancy tax to a hotel for a period of ten years for qualified new construction or significantly renovated
hotels. More than $200 million has been invested in refurbishing and renovating numerous hotels, large
and small,since 2009.
After a period of weaker tourist spending between 2007 and 2009, which reduced transient occupancy
taxes by 11%, the City experienced a 17% increase in transient occupancy tax collections in Fiscal Year
2010/11, followed by a 13% increase in 2011/12. Some of this increase follows the completion of major
remodels of the City's larger hotels. Increased international marketing efforts and increased airline routes
and seat capacity made through the City's airline incentive program which led to WestJet, Alaska,
Frontier, Allegiant and Virgin America adding or expanding service have also positively affected hotel
occupancy.
Transient occupancy tax for Fiscal Year 2013/14 is expected to have increased over 8%, after a similar
increase in 2012/13. As of Fiscal Year 2013/14, transient occupancy tax exceeds pre-recession levels by
$6.5 million. After such significant increases in prior years,transient occupancy tax is projected level off
in Fiscal Year 2014/15. The City is receiving developer interest for new hotel stock and expects that the
addition of new hotels will increase the transient occupancy tax in future years.
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Salaries and Benefits. To deal with the impacts of declining revenues, the City implemented a 10%
furlough for non-sworn general employees. For these employees, the furlough began in May 2009 and
was not eliminated until Fiscal Year 2013/14. Police safety personnel were subject to a 5% furlough for a
short period of time during Fiscal Year 2011/12. The last cost of living increase for most bargaining
groups was effective for Fiscal Year 2009/10. The City also reduced its personnel by 25% City-wide
between 2009 and 2012,through early retirement programs, layoffs or attrition. Fiscal Year 2012/13 was
the first time that the City added positions. The City will add another 4 positions in Fiscal Year 2014/15
as it begins to restore service capacity. The City reduced retirement benefits for new employees hired
after January 1,2013
The California Public Employees' Retirement Plan ("PERS") continues to revise their actuarial
assumptions and increase contribution rates, significantly impacting past budgets and the current Fiscal
Year 2014/15 Budget (see "Retirement Programs"below). The City's contribution rates are projected by
PERS to double in the 10 year period between 2010/11 and 2019/20. In addition, the City is funding
retirement health benefits on a pay-as-you-go basis, which is less than the actuarial required contribution.
The costs of retirement pension and health benefits is one of the City's greatest challenges in the next
several years.
Redevelopment Agency Dissolution. In 2012 State legislation required redevelopment agencies
throughout the State to be dissolved. The City received certain one-time distributions of property tax
resulting from dissolution of its redevelopment agency and will continue to receive certain residual
property tax of its former redevelopment agency. See "RISK FACTORS - State Budget; Redevelopment
Agency Legislation" for a further discussion of the impact of redevelopment dissolution on the City.
Since 2012,the City has had to assume certain expenses of its former redevelopment agency that were in
excess of maximum amounts permitted by the new State law, or were not allowed by the State
Department of Finance, which oversees the dissolution process and has ultimate approval or disapproval
powers over payment of the former redevelopment agency's obligations, including obligations to the City.
For example, the former redevelopment agency, and then the Successor Agency,paid $1.6 million of the
debt service on the 2004 Bonds pursuant to actions taken under the prior redevelopment law. The State
Department of Finance has disallowed such payments by the Successor Agency for Fiscal Year 2014/15.
Downtown Palm Springs. As described above, with the demise of redevelopment as an economic
development tool, the City's voters approved a sales tax to provide the City with funding for various
projects throughout the City. One such project was funding of$43 million in infrastructure and project
improvements for the Downtown Palm Springs development. The Downtown Palm Springs development
is a$150-$180 million commercial,hotel and residential development in the heart of the City's downtown
area. This development replaces an obsolete enclosed mall with new city streets throughout the 13-acre
site and effectively incorporates both residential and retail uses into an urban village which presents a
pedestrian-friendly environment with a number of plazas and walkways. Upon completion, the
development will have reintegrated a property that had been massed into a monolithic"superblock"back
into the downtown street grid, resulting in a strong public gathering place comprised of well-designed
public spaces linked by a total entertainment and retail environment. The entire street grid created under
the plan and conveyed to the City was designed to maximize its use for events. All of this area will be
available to be closed off for special events and public activities.
The demolition of the existing structures is either complete or underway. Construction is expected to
begin in late summer 2014 on the Kimpton Hotel, a six-story 4-star boutique hotel, with an expected
opening by the end of 2015. All infrastructure should be completed by the last quarter of 2015, with new
commercial developments being completed in phases. The first phase is anticipated to be completed by
the end of 2015, with subsequent phases expected to be complete by mid-2016. A second hotel is planned
to open by the end of 2016. The Downtown Palm Springs development has been a catalyst for other
development in and around downtown.
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Airline Incentive Program. The Palm Springs International Airport continues to implement a$1 million
marketing support program to add new routes or extend the current length of existing routes. The
addition of Frontier and Virgin America to serve the airport, and the addition of new routes or the
extension of routes by existing carvers has increased overall seat capacity serving the Palm Springs
International Airport by 25%.
Fund Balance Reserves. Despite the difficult economic climate,the City was able to maintain relatively
stable Unassigned General Fund reserves between Fiscal Year 2010/11 and 2013/14. Beginning in April
2012, all the new voter-approved sales tax was transferred to a special fund and reserved for capital
improvements, and not included in the Assigned General Fund reserve, although it is available for
General Fund purposes. See"Financial Statements- GASB Statement No. 54"below for a discussion of
General Fund fund balance designations by category and "General Fund Revenues and Expenditures —
Measure J Fund"below.
Fiscal Year 2014/15. The City originally expected to have a balanced budget for Fiscal Year 2014/15,
until the State Department of Finance notified staff that it would not allow the$1.6 million of 2004 Bonds
debt service to be paid by the Successor Agency. The budget shown in Table No. 10 reflects the increase
in debt service resulting from this decision by the Department of Finance. Not included in Table No. 10
are the debt service savings that the City expects to realize from the refinancing of the 2004 Bonds with
the issuance of the Bonds ($1 million in Fiscal Year 2014/15 and $400,000 annually for the next 10
years), nor the City's share of residual property tax that will be realized as a result of reduced allowable
Successor Agency expenditures of$432,000 annually,both partially mitigating the increase in the General
Fund's contribution to debt service.
Budgetary Process and Administration
The annual budget adopted by the City Council provides for the general operation of the City. The annual
budget is adopted in summary by the City Council in June of each year for the General, special revenue,
debt service, capital projects and proprietary type funds. A resolution is adopted specifying the total
appropriations for each departmental activity.
Total appropriations for each fund may only be increased or decreased by the City Council by passage of
a resolution amending the budget, with the exception of budget adjustments which involve offsetting
revenues and expenditures. In cases involving offsetting revenues and expenditures,the Finance Director
is authorized to increase or decrease an appropriation for a specific purpose where said appropriation is
offset by unbudgeted revenue which is designated for said specific purpose.
The City Manager and Assistant City Manager have authority to adjust the amounts appropriated between
the departments and activities of a fund, objects with each departmental activity and between accounts
within the objects, provided, however, that the total appropriations for each fund may not exceed the
amounts provided in the budget resolution.
The level on which expenditures may not legally exceed appropriations is the fund level. Budgets for the
various funds are adopted on a basis consistent with generally accepted accounting principles(GAAP).
General Fund Revenues and Expenditures
The City's General Fund Budget includes programs which are provided on a largely city-wide basis. The
programs and services are financed primarily by the City's share of property taxes, sales tax, revenues
from the State,and charges for services provided.
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Revenues
The revenues in Table No. 10 that follows are categorized as:
• Taxes, detailed in Table No. 15 "Tax Revenues by Source," which includes general property tax,
sales tax, utility users tax, transient occupancy tax, franchise tax (cable, utility, trash), and other
taxes such as documentary transfer tax;
• Licenses and Permits, which includes business licenses, construction building permits, zoning
and subdivision fees,rent control registration fees and dog licenses;
• Fines and Penalties,which includes municipal and vehicle code violations and library fines;
• Revenue from Use of Money and Property,which includes interest income and rental income;
• Intergovernmental Revenue, which includes motor vehicle license fees and payments from the
Agua Caliente Band of Cahuilla Indians;
• Charges for Services, comprised of towing,charges for special police or fire department services,
and other charges such as plan checking, building inspection, and other municipal services,
recreation fees, animal shelter fees,overhead charged to other departments and funds for General
Fund support and administrative functions;
• Miscellaneous Revenue, which includes an administrative services charge to the City's
redevelopment agency. These charges may be affected in future years (see "RISK FACTORS -
State Budget;Redevelopment Agency Legislation"herein)
The largest components of estimated Fiscal Year 2014/15 General Fund revenues are sales tax (25.6%),
transient occupancy tax(24.2%)and property tax(20%),
Expenditures
The expenditures in Table No. 10 that follows are categorized by governmental function. Each function
generally includes salaries and benefits,materials and supplies,and capital outlay,if any.
Salaries and Benefits include direct personnel costs, benefits, health insurance costs and workers'
compensation and unemployment insurance costs. Materials and supplies include non-personnel
operating costs and contract professional services.
The City has both a police department and a fire department. Public safety expenditures represent
approximately 39.8%of the total budgeted General Fund expenditures for Fiscal Year 2014/15.
Measure J Fund
The Measure J Fund was set up by policy of the City Council and moneys transferred to this fund (the
portion of sales tax derived from the voter-approved tax increase in 2011),while not legally restricted,are
used for the debt service on the 2012 Series B Lease Revenue Bonds issued to fund a major downtown
revitalization project,as well as City-wide capital projects. However,the revenues of the Measure J Fund
are available for purposes of the General Fund. The City has determined to show the Measure J Fund as a
separate capital projects fund for financial reporting purposes. See "FINANCIAL INFORMATION -
Financial Statements" herein). For the purposes of Table No. 10 and Table No. 15, the Measure J Fund
activity is not combined with the General Fund activity, but shown as a separate line item to determine
available fund balance.
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A comparison of the actual results for Fiscal Year 2012/13, and the estimated results for Fiscal Year
2012/13 and the Fiscal Year 2014/15 Budget is shown in Table No. 10. Historical General Fund and
Measure J Fund activity is shown in Table Nos. 23 and 25.
The largest changes in revenue estimates between the Fiscal Year 2014/15 budget and the current Fiscal
Year 2013/14 estimates result from:
Continued growth in property tax, sales tax and transient occupancy tax
Fee increases for services, increased building permit activity and an increase in the City's
administrative charges
Approximately$2 million increase for employee costs for PERS increases and the pay range step
increases(after a 5 year freeze).
Addition of personnel in Development Services,Building Department and Parks Department
Addition of personnel in Police Department
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TABLE NO.10
CITY OF PALM SPRINGS
GENERAL FUND REVENUES AND EXPENDITURES
2012/13 2013/14 2014/15 $ %
Actual Esdmate Budgie[ Change(t) Change 0
Revenues:
Taxes $71,163,884 $76,845,180 $77,590,162 $ 744,982 1.0%
Licenses and Permits 2,395,767 2,791,200 3,018,676 227,476 8.1
Intergovernmental 4,667,803 1,144,799 1,032,500 (112,299) (9.8)
Charges for Services 4,741,818 4,295,913 4,954,384 658,471 15.3
Use of Money and Property 77,562 190,500 193,500 3,000 1.6
Miscellaneous 629,895 246,459 170,343 (76,116) (30.9)
Subtotal 83,676,729 85,514,051 86,959,565 1,445,514 1.7
Transfers In 887,500 887,500 887.500 0.0
Total Revenues 84,564,229 86,401,551 87,847,065 1,445,514 1.7
Expenditures•
General Government 10,258,480 10,667,515 11,065,904 398,389 3.7
Public Safety 31,639,896 33,920,892 35,666,615 1,745,723 5.1
Cultural and Convention Center 2,890,229 5,528,263 5,559,134 30,871 0.6
Parks and Recreation 9,962,784 6,753,942 6,780,878 26,936 0.4
Public Works 6,382,836 8,913,151 9,733,948 820,797 9.2
Library 1,983,175 2,427,335 2,471,981 44,646 1.8
Debt Service 4,045,526 4,339,301 6,090,351 1,751,050 40.4
Department Savings 1 350 000 1 350 000 0.0
Subtotal 67,162,926 71,200,399 76,018,811 4,818,412 6.8
Transfers Out-Measure J Fund 11,046,045 11,000,000 11,000,000 - (0.0)
Transfers Out-Other Fonds 2.993A51 2.400,668 2,378,254 22,586 0.9
Total Expenditures 81,202,422 84,601,067 89,397,065 4,795,998 5.7
Extraordinary Loss (230,152) - -
Net Change in Fund Balances 3,131,655 1,800,484 (1,550,000)
Beginning Unassigned Fund Balance 13,041,689 12,803,298 12,103,782
Change in Restricted/Assigned Fund Balance (3,370,046) (2,500,000)
Ending Unassigned Fund Balance 12,803,298 12,103,782 10,553,782
Ending Measure 7 Fund Balance 9,788,825 1 L104,366 14,304,366
Available Fund Balance $22.592.123 P2.20R.14R $24.RSR_14R
Source: City of Palm Springs.
0) Change between 2013/14 estimate and 2014/15 budget.
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Ad Valorem Property Taxes
Taxes are levied for each fiscal year on taxable real and personal property which is situated in the City as
of the preceding January 1. For assessment and collection purposes, property is classified either as
"secured"or"unsecured," and is listed accordingly on separate parts of the assessment roll. The"secured
roll" is that part of the assessment roll containing State assessed property and real property having a tax
lien which is sufficient, in the opinion of the assessor, to secure payment of the taxes. Other property is
assessed on the"unsecured roll."
Property taxes on the secured roll are due in two installments, on November 1 and February 1 of the fiscal
year. If unpaid, such taxes become delinquent on December 10 and April 10, respectively, and a 10%
penalty attaches to any delinquent payment in addition to a$20 cost on the second installment. On July 1
of each fiscal year any property which is delinquent will become defaulted. Such property may thereafter
be redeemed by payment of the delinquent taxes and the delinquency penalty, plus a redemption penalty
of 1/2%per month to the time of redemption, together with any other charges permitted by law. If taxes
are unpaid for a period of five years or more,the property is subject to sale by the County Tax Collector.
The exclusive means of enforcing the payment of delinquent taxes with respect to property on the secured
roll is the sale of the property securing the taxes for the amount of taxes which are delinquent.
Property taxes on the unsecured roll become delinquent,if unpaid on August 31. A 10%penalty attaches
to delinquent taxes on property on the unsecured roll, and an additional penalty of 1%z%per month begins
to accrue on November 1 of the fiscal year. The County has four ways of collecting delinquent unsecured
personal property taxes: (1) a civil action against the taxpayer; (2) 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; (3) filing a certificate of delinquency for record in the County Recorder's Office, in order to
obtain a lien on certain property of the taxpayer; and (4) seizure and sale of personal property,
improvements or possessory interests belonging or assessed to the assessee.
Taxable Property and Assessed Valuation. Set forth in Table No. 11 are historical assessed valuations
for secured and unsecured property within the City. Article XIIIA of the California Constitution
prescribes the method for determining the full cash value of real property and the maximum ad valorem
tax on real property. The full cash value, once established, is subject to annual adjustment to reflect
inflation at a rate not to exceed 2% or a reduction in the California Consumer Price Index. There may
also be declines in valuations if the California Consumer Price Index is negative.
Proposition 8 provides for the assessment of real property at the lesser of its originally determined (base
year)full cash value compounded annually by the inflation factor,or its full cash value as of the lien date,
taking into account reductions in value due to damage, destruction, obsolescence or other factors causing
a decline in market value. Reductions based on Proposition 8 do not establish new base year values, and
the property may be reassessed as of the following lien date up to the lower of the then-current fair market
value or the factored base year value. The City saw significant Proposition 8 reductions in property
values between 2008 and 2012, reducing assessed value by over 13%. After remaining level in 2013,
assessed values increased by 4% in 2014. See"RISK FACTORS - Constitutional Limitation on Taxes and
Expenditures-Article XIIIA"and"-Proposition 8 Adjustments"herein.
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TABLE NO. 11
CITY OF PALM SPRINGS
GROSS ASSESSED VALUE OF ALL TAXABLE PROPERTY
Fiscal Year Secured Unsecured Total
2007/08 $9,346,216,644 $503,243,449 $ 9,849,460,093
2008/09 9,684,032,632 602,259,586 10,286,292,218
2009/10 9,212,511,984 517,770,317 9,730,282,301
2010/11 8,633,812,919 523,017,706 9,156,830,625
2011/12 8,355,843,908 552,198,136 8,908,042,044
2012/13 8,434,428,737 554,896,889 8,989,325,626
2013/14 8,816,703,090 531,713,706 9,348,416,796
Source: County of Riverside Auditor-Controller.
Note: These values are reported by the County of Riverside after the tax roll is equalized and may be different
than values shown as of June 30 each fiscal year in the statistical section of the City's Comprehensive
Annual Financial Report.
Largest Taxpayers. The principal property taxpayers as of June 30,2013 are as shown in Table No. 12.
TABLE NO.12
CITY OF PALM SPRINGS
LARGEST PROPERTY TAXPAYERS
Assessed Percent
Taxpayer Valuation of Total
Tenet Health System Desert Inc. $120,583,408 1.35%
Windpower Partners 1993 LP 93,003,850 1.04
TKG Smoketree Commons LLC 58,297,231 0.65
Indigo Generation LLC 56,800,000 0.64
Riviera Reincarnate 48,315,372 0.54
Endure Investment 47,124,237 0.53
HH Palm Springs 39,066,000 0.44
Skywest Airlines Inc. 35,205,134 0.40
Walmart Real Estate Business Trust 29,268,402 0.33
San Gorgonio Westwinds II Inc. 28,435,000 0.32
$556,098,634 6.24%
Source: City of Palm Springs.
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Property Tax Collections. Property tax levies and collections for the City are set forth in Table No. 13.
The County has adopted the Teeter Plan. Generally, the Teeter Plan provides for a tax distribution
procedure by which secured roll taxes are distributed to taxing agencies within the County included in the
Teeter Plan on the basis of the tax levy,rather than on the basis of actual tax collections. The County then
receives all future delinquent tax payments, penalties and interest, and a complex tax redemption
distribution system for all participating taxing agencies is avoided.
TABLE NO.13
CITY OF PALM SPRINGS
SECURED TAX LEVIES AND COLLECTIONS
Fiscal Total Collections within the Fiscal Collections
Year Tax Year of the Levy in Total
Ended Levy for Percentage Subsequent Tax Percentage
June 30 Fiscal Year Amount of Levy Years Collections of Levy
2009 # # # # # #
20101r $37,164,518 $34,897,314 93.90% $1,377,973 $36,275,287 97.61%
2011 0 36,589,289 33,749,104 92.24% 617,134 34,366,238 93.92%
2012(4 31,699,331 26,581,718 83.86% 1,613,650 28,195,368 88.95%
2013 01 34,832,425 27,301,032 78.38% 1,440,591 28,741,623 82.51%
Source: City of Palm Springs and Riverside County Auditor-Controller.
0) Includes City property taxes and redevelopment agency tax increment, prior to any passthroughs to other
agencies.
# County of Riverside was unable to provide this information.
Redevelopment Agencies. The California Redevelopment Law (Part 1 of Division 24 of the Health &
Safety Code of the State) authorizes the redevelopment agency of any city or county to receive an
allocation of tax revenues resulting from increases in assessed values of properties within designated
redevelopment project areas (the "incremental value") occurring after the year the project area is formed.
In effect, local taxing authorities, such as the City,realize tax revenues only on the assessed value of such
property at the time the redevelopment project is created for the duration of such redevelopment project.
There are 2 redevelopment projects in the City,the Merged Redevelopment Project No. 1 and the Merged
Redevelopment Project No. 2. Table No. 14 sets forth total assessed valuations and redevelopment
agency incremental values.
The State Legislature approved a bill, AB XI 26, during the 2011/12 State budget process. AB XI 26
eliminated redevelopment agencies State-wide. The California Redevelopment Association and the
League of California Cities filed a petition with the California Supreme Court (the "Court'), requesting
the Court to review the constitutionality of AB XI 26. On December 29, 2011, the Court issued its
opinion and upheld AB XI 26. As a result of the decision, all California redevelopment agencies,
including the City's Redevelopment Agency were dissolved as of February 1,2012, Certain tax revenues
allocable to the City's former Redevelopment Agency will continue to be available to the City, as
Successor Agency, to pay certain obligations of the former Redevelopment Agency, and some of those
revenues may be redirected to other taxing agencies,such as the County, school districts, and cities. Any
General Fund impact resulting from AB XI 26 (and subsequent Legislation AB 1484)were incorporated
into the City's budget beginning in 2012/13. As a result of redevelopment dissolution, the City has
received approximately $3.6 million in one-time revenues. The City expects to receive approximately
$535,000 per year in additional Successor Agency residual property taxes.
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See "TABLE NO. 15 — TAX REVENUES BY SOURCE" and "RISK FACTORS - State Budget;
Redevelopment Agency Legislation."
TABLE NO.14
CITY OF PALM SPRINGS
TOTAL AND NET PROPERTY TAX VALUATIONS
Total Redevelopment
Fiscal Assessed Agency Net Percent
Year Valuation Incremental Value Value Change
2007/08 $ 9,849,460,093 $1,639,123,225 $8,210,336,868
2008/09 10,286,292,218 1,804,146,174 8,482,146,044 3.3%
2009/10 9,730,282,301 1,793,987,230 7,936,295,071 (6.4)
2010/11 9,156,830,625 1,610,030,699 7,546,799,926 (4.9)
2011/12 8,908,042,044 1,492,740,281 7,415,301,763 (1.7)
2012/13 8,989,325,626 1,490,615,195 7,498,710,431 1.1
2013/14 9,348,416,796 1,504,251,239 7,844,165,557 4.6
Source: County of Riverside Auditor-Controller. _
State Legislative Shift of Property Tax Allocation
Since 1992/93, the State has required that local agencies including counties remit a portion of property
taxes received to augment school funding. These funds are deposited in each county's Education
Revenue Augmentation Fund ("ERAF"). These property taxes are permanently excluded from the
County's property tax revenues.
On November 2, 2004,California voters approved Proposition IA, which amended the State Constitution
to significantly reduce the State's authority over major local government revenue sources. Under
Proposition IA, the State may not (i) reduce local sales tax rates or alter the method of allocating the
revenue generated by such taxes, (ii) shift property taxes from local governments to schools or
community colleges,(iii)change how property tax revenues are shared among local governments without
two-third approval of both houses of the State Legislature,or(iv)decrease Vehicle License Fees revenues
without providing local governments with equal replacement funding. Beginning in Fiscal Year 2008/09,
the State was permitted to shift to schools and community colleges a limited amount of local government
property tax revenue if certain conditions are met, including (a) a proclamation by the Governor that the
shift is needed due to a severe financial hardship of the State, and (b) approval of the shift by the State
Legislature with a two-thirds vote of both houses. Under such a shift, the State must repay local
governments for their property tax losses,with interest,within three years. Proposition lA does allow the
State to approve voluntary exchanges of local sales tax and property tax revenues among local
governments within a county. The first shift occurred in 2008/09. 2012/13 was the first year that another
shift was allowable,but the State has not implemented another borrowing yet.
In addition, certain other provisions in the State budget have resulted in a realignment of property tax
revenues. See "RISK FACTORS - State Budget" herein and "Other Local Taxes - Sales and Use Taxes"
and"Property Tax In Lieu of Motor Vehicle License Fee"below.
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Local Taxes
In addition to ad valorem taxes on real property,the City receives the following non-real estate local taxes
(see "RISK FACTORS - Constitutional Limitation on Taxes and Expenditures - Proposition 218" and
"-Voter-Approved Taxes"herein):
Sales and Use Taxes. Sales tax is collected and distributed by the State Board of Equalization. Each
local jurisdiction receives an amount equal to 1% of taxable sales within their jurisdiction. In addition,
the City receives a portion of a ''/3 cent sales tax increase approved by voters in 1993,which is recorded in
"Intergovernmental Revenues." Sales tax generated by this increase is used to offset certain expenses for
public safety. On November 8, 2011,voters in the City approved the levy of an additional 1% sales tax
for a 25-year term,commencing April 1,2012. This new sales tax effectively doubled the amount of sales
tax received by the City starting in 2012/13. The City's policy is to use the additional sales tax to service
the debt that was issued to fund improvements relating to its downtown revitalization project, as well as
other City-wide capital projects.
Franchise Taxes. The City levies a franchise tax on its cable television, trash collection and utility
franchises. The tax was not approved by majority vote of the electorate, although the current tax was
approved prior to the passage of Proposition 62 and has not been increased.
Transient Occupancy Tax. The City levies a transient occupancy tax on hotel and motel bills. Rates are
different for "group meeting hotels" (over 125 rooms) than for other hotels and motels. In November
2001,voters in the City approved an increase of the tax which raised the tax rate for group meeting hotels
from 10.8%to 12.5%, and the tax rate for all other hotels from 10%to 11.5%. In November 2003,voters
in the City approved an additional increase of the tax rate for group meeting hotels, which is currently
13.5%.
More than$200 million has been invested by numerous hotel owners in refurbishing and renovating their
properties since 2009. The largest of these are the 410-room Renaissance Palm Springs (located at the
Convention Center), the 194-suite Hyatt Regency Suites, the 260-room Hilton Hotel and the 410-room
Riviera Resort & Spa. In addition, the Hard Rock Hotel purchased a 163-room existing hotel and
completed extensive remodeling. In 2007, the City established a Transient Occupancy Tax Hotel
Incentive Reimbursement Program that refunds a portion of the transient occupancy tax to a hotel for a
period of ten years for qualified new construction or significantly renovated hotels.
Utility Users Tax. Palm Springs levies a utility users tax,which was first levied pursuant to an ordinance
of the City Council adopted in July 1986. On November 3, 2009, voters ratified the tax and approved
amendments to the City's Utility User Tax ordinance,which modernized the definitions of the Telephone
User Tax portion to include, among other things, WIP, IP-TV, text messaging, paging, and private
communication services. The amendment reduced the rate for telecommunication and video services
subject to the tax from 5%to 4.5%. The tax rate for electricity and gas services is unaffected and remains
at 5%. The utility user tax represents approximately 8%of Palm Springs's General Fund revenues.
Access Line Tax. Also in November 2009, the voters approved an access line tax in lieu of the
emergency response fee that the City had levied for the purpose of funding improvements to and
operation of the City's 911 emergency communications system. The access line tax is approximately
$1,000,000 per year, and is deposited in the City's Emergency Response Fund and used for,among other
things, lease payments in respect of the purchase of communications equipment. The access line tax is
not included in Table No. 15 below.
There is no time limit established for the collection of the utility users tax or the transient occupancy tax.
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Medical Cannabis Tax. In November 2013 voters approved Measure B, allowing the City to choose to
tax medical cannabis dispensaries up to 15% of their revenue. The current tax rate is 10%, and the tax
commenced January 1,2014.
Other Taxes. Includes the documentary stamp tax which is assessed for recordation of real property
transfers,PEG fees,new development tax and parking tax.
A history of actual and projected tax revenue by source are shown in the following table.
TABLE NO.15
CITY OF PALM SPRINGS
TAX REVEN
UES
Estimated Budget
2010/11 2011/12 2012/13 2013/14 2014/15
Property Tax $16,774,104 $16,273,975 $16,672,589 $17,400,729 $17,544,968
Successor Agency Residual
Property Tax 0) - 459,056 1,982,424 2,130,925 1,132,744
Sales and Use Tax)2) 9,633,250 10,179,526 10,902,013 10,613,210 11,513,210
Sales and Use Tax-Measure J(n - 1,950,533 11,046,045 11,000,000 11,000,000
Franchise Tax 2,995,503 3,007,511 3,024,692 3,000,000 3,000,000
Transient Occupancy Tax)4) 15,731,036 17,874,173 19,396,331 21,021,076 21,270,000
Utility User Tax 6,936,963 6,879,047 7,093,712 7,000,000 7,000,000
Medical Cannabis Tax(1) - - - 450,000 900,000
Other Taxes 548,032 786,660 1.046A78 748,000 748.000
Total General Fund Tax
Revenues $52,618,888 $57,410,481 $71,163,884 $73,363,940 $74,108,922
Property Tax In Lieu of VLF)b) 3,578A66 3,481.240 3,513,005 3,481.240 3,481,240
Total Budgeted Taxes
with VLF $56_197.354 $60.891.721 $74.676.RR9 $76.845.IR0 $77.590.162
Source: City of Palm Springs.
0) The City received certain one-time property tax as a result of redevelopment dissolution, and will receive its
share of certain ongoing Successor Agency residual property tax revenue.
(z) Net of$400,000 prior years'sales tax withholding in 2013/14 for State correction of a misallocation of revenue
to Palm Springs from a particular business located outside of the City.
0) City voters approved an additional 1%City sales tax,which commenced in April 2012.
)4) Net of the City's payments under the hotel incentive program($636,000 in 2014/15).
(1) In November 2013 voters approved Measure B, allowing the City to choose to tax medical cannabis
dispensaries up to 15%of their revenue. The current tax rate is 10%,and the tax commenced January 1,2014.
)6) The City budgets property tax paid in-lieu of VLF in"Taxes"for budget purposes, but they are recorded in the
financial statements as "Intergovernmental Revenue." See "Motor Vehicle License Fee" below. For budget
purposes,these amounts are included in"Taxes."
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Motor Vehicle License Fees
As described above, the City receives a portion of Department of Motor Vehicles license fees ("VLF")
collected statewide. The total VLF budgeted for Fiscal Year 2014/15 is $3,481,240, all of which is
budgeted as property tax (shown in Table No. 15 above), to be received through an in lieu payment from
State property tax revenues. In the City's financial statements, these amounts are shown as
"Intergovernmental Revenues."Although the VLF is shown in Table No. 15 in all years as"Property Tax
In Lieu of VLF" for comparison purposes, the property tax portion of the VLF was phased in over several
years.
Other Revenue Sources
Intergovernmental Revenues. These revenues consist of Proposition 172 sales tax,payments in-lieu of
property tax from the State homeowners'relief exemption, and payments from the Agua Caliente Band of
Cahuilla Indians under a Casino Agreement,as well as their contribution to the City's tourism budget.
Licenses and Permits. These revenues consist primarily of business licenses, building construction
permit fees,and zoning and subdivision fees,vacation rental permits and other permits.
Use of Money and Property. These revenues consist primarily of investment earnings and rental
income.
Charges for Services. The City charges fees for dispatch services and alarm response, plan checking,
building inspection and other municipal services. The City also collects fees for its recreation programs.
These revenues also include library fines, parking citations, false fire alarm fees and other fines for
municipal code violations.
Retirement Programs
Plan Description. The City contributes to the California Public Employees Retirement System
("PERS"), an agent 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
State statute and City ordinance. Copies of PERS' annual financial report may be obtained from their
Executive Office located at 400 P Street,Sacramento,California 95814,
California Public Employees' Pension Reform Act of 2013. On September 12, 2012, the Governor
signed into law the California Public Employees'Pension Reform Act of 2013 (the"Reform Act"),which
makes changes to both PERS and California State Teachers' Retirement System ("CaISTRS"), most
substantially affecting new employees hired after January 1,2013 (the"Implementation Date"). For non-
safety PERS participants hired after the Implementation Date, the Reform Act changes the normal
retirement age by increasing the eligibility for the 2% age factor from age 55 to 62 and increases the
eligibility requirement for the maximum age factor of 2.5%to age 67. Among the other changes to PERS
and CaISTRS,the Reform Act also: (i) requires all new participants enrolled in PERS and CaISTRS after
the Implementation Date to contribute at least 50% of the total annual normal cost of their pension benefit
each year as determined by an actuary, (ii) requires CaISTRS and PERS to determine the final
compensation amount for employees based upon the highest annual compensation earnable averaged over
a consecutive 36-month period as the basis for calculating retirement benefits for new participants
enrolled after the Implementation Date, and (iii) caps "pensionable compensation" for new participants
enrolled after the Implementation Date at 100% of the federal Social Security contribution and benefit
base for members participating in Social Security or 120% for members not participating in social
security, while excluding previously allowed forms of compensation under the formula such as payments
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for unused vacation, annual leave,personal leave, sick leave, or compensatory time off. Ultimately, the
Reform Act will reduce the City's long-term pension obligation as existing employees retire and new
employees are hired to replace them.
Funding Policy. Active plan members are required by State statute to contribute 8% and 9% of annual
covered salary for miscellaneous and safety employees respectively. The City is required to contribute at
an actuarially determined rate established by PERS. The City makes the contributions required of City
employees on their behalf and for their account. Separately funded plans have been established for each
employee group. Benefit provisions and all other requirements are established by State statute and City
contracts with employee bargaining groups.
PERS set contribution rates for 2010/11 based on a 4.9% negative return on investments which occurred
in 2007/08, For the Fiscal Year 2008/09, the PERS portfolio had lost more than 23% of its value. This
loss began affecting PERS contribution rates in 2011/12, A history of the PERS annual portfolio rate of
return is shown below. The PERS portfolio rate of return for the most recent fiscal year ending June 30,
2013 was 13.2%,but for the most recent calendar year 2013,a slightly higher rate of return of 16.2%was
achieved. Future earnings performance and adjustments of assumptions may increase or decrease future
contribution rates for plan participants,including the City.
TABLE NO.16
PERS HISTORICAL INVESTMENT RETURNS
Year Ending Rate of
June 30 Return
2004 16.7%
2005 12.6
2006 12.3
2007 19.1
2008 (4.9)
2009 (23.4)
2010 11.6
2011 20.9
2012 1.0
2013 13.2
Source: California Public Employees'Retirement System.
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The City's percentage of payroll for PERS payments for each retirement account for 2007/08 through
2014/15 and estimates for 2015/16 through 2019/20 are shown in the table below. These rates do not
include the employees'contribution rates.
TABLE NO.17
CITY OF PALM SPRINGS
EMPLOYER RETIREMENT CONTRIBUTION RATES
Fiscal Year Miscellaneous Safety
2007/08 14,257% 22.782%
2008/09 14.421 22.844
2009/10 13.906 24.232
2010/11 14.910 24.626
2011/12 19.430 30.822
2012/13 18.800 32.959
2013/14 20.494 34.075
2014/15 23.068 38.630
2015/16* 24.700 41.300
2016/17* 26.400 43,900
2017/18* 28.100 46.500
2018/19* 29.700 49.100
2019/20* 31.400 51.800
* Projected by PERS based on various assumptions,including an investment return of 7.5%.
In March 2012, PERS voted to decrease the investment rate of return used in future actuarial valuations
from 7.75% to 7.5%. This change was implemented over a two-year period beginning with the 2013/14
rates.
In April 2013, PERS voted to raise employer rates roughly 50% over the next seven years, replacing
current actuarial methods. Over five years, the new method increases employer rates to the level needed
to project 100%funding in 30 years.
Also in April 2013, PERS approved a recommendation to change the amortization and smoothing
policies. Prior to this change, PERS employed an amortization and smoothing policy, which spread
investment returns over a 15-year period while experience gains and losses were amortized over a rolling
30-year period. Effective with the June 30, 2013 valuations, PERS will no longer use an actuarial value
of assets and will employ an amortization and smoothing policy that will spread rate increases or
decreases over a 5-year period, and will amortize all experience gains and losses over a fixed 30-year
period.
The new amortization and smoothing policy will be used for the first time in the June 30, 2013 actuarial
valuations. These valuations will be performed in the fall of 2014 and will affect employer contribution
rates beginning in Fiscal Year 2015/16.
PERS has told plan participants to expect that the new method would result in contribution rates from 3%
to 6%(of pay)higher than the current methods would have produced at the end of either the six-or seven-
year period.
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In February 2014, PERS adopted new demographic assumptions regarding improved mortality rates.
According to PERS, this could result in rates as much as 2% to 5%higher. The impact would be phased
in and affects rates beginning in Fiscal Year 2016/17.
Benefit Tiers. The City has established two tiers of benefits for employees in each of the Safety and
Miscellaneous employee plans, based on date of hire. Benefits have been reduced for recently hired
employees (such as retirement benefits commencing at 55 instead of 50 for safety members hired after
January 1, 2011). Ultimately, the new benefits will reduce the City's long-term pension obligation as
existing employees retire and new employees are hired to replace them.
Annual Pension Costs. A ten-year history of the City's required annual pension costs and percentage of
annual pension costs contributed is shown in the table below. The required contribution was determined
as part of an annual actuarial valuation using the entry age normal actuarial cost method. The most recent
actuarial assumptions included (a) 7.50% investment rate of return (net of administrative expenses), (b)
projected salary increases of 3.30% to 14.20% for miscellaneous employees and 3.30% to 14.20% for
safety employees depending on age, service, and type of employment, and (c) 3.00% payroll growth.
Both (a) and (b) included an inflation (cost-of-living adjustment) component of 2.75%. The actuarial
value of PERS assets was determined using techniques that smooth the effects of short-tern volatility in
the market value of investments over a fifteen-year period. PERS unfunded actuarial accrued liabilities
(or surplus) is being amortized as a level percentage of projected payroll on a closed basis. The average
remaining amortization period at June 30, 2013 was 23 years for miscellaneous employees and 27 years
for safety employees for prior and current service unfunded liability.
The table below presents the total payment to PERS of the Annual Pension Cost, which includes both
employer and employee contributions paid by the City.
TABLE NO.18
CITY OF PALM SPRINGS
TEN YEAR TREND INFORMATION FOR ANNUAL PENSION COSTS
ALL PLANS COMBINED EMPLOYER AND EMPLOYEE COSTS
Annual Percent
Pension APC of APC
Fiscal Year Cost(APC) Contributed Contributed
2003/04 $2,665,000 $2,665,000 100%
2004/05 6,498,000 6,498,000 100
2005/06 7,933,000 7,933,000 100
2006/07 8,557,000 8,557,000 100
2007/08 8,089,000 8,451,000 104
2008/09 8,904,000 9,251,000 104
2009/10 8,309,000 8,640,000 104
2010/11 7,826,000 8,136,000 104
2011/12 9,402,000 9,688,000 103
2012/13 7,877,000 8,136,000 103
Source: City of Palm Springs Comprehensive Annual Financial Report.
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Set forth below is a ten-year analysis of the actuarial value of assets as a percentage of the actuarial
accrual liability and the unfunded actuarial accrued liability as a percentage of the annual covered payroll
as of June 30 of each year indicated for the City's combined employee groups.
TABLE NO. 19
CITY OF PALM SPRINGS
HISTORICAL FUNDING PROGRESS(ACTUARIAL VALUE)
(ALL PLANS COMBINED)
Unfunded
Actuarial Entry Age Unfunded Liability as a
Valuation Actuarial Actuarial Actuarial Percent of
Date Valuation of Accrued Accrued Funded Covered Covered
June 30 Assets Liabili Liabili Ratio Payroll Payroll
2003 $176,603 $215,315 $38,713 82.0% $25,631 151.0%
2004 185,822 226,759 40,936 81.9 26,209 156.2
2005 199,868 240,780 40,912 83.0 25,498 160.5
2006 214,958 256,006 41,048 84.0 27,739 148.0
2007 251,415 275,143 23,729 91.4 30,303 78.3
2008 266,824 295,627 28,803 90.3 33,417 86.2
2009 277,407 325,445 48,038 85.2 32,972 145.7
2010 287,186 340,124 52,938 84.4 31,594 167.6
2011 297,775 359,319 61,544 82.9 30,731 200.3
2012 303,139 372,378 69,239 81.4 30,091 230.1
Source: City of Palm Springs Comprehensive Annual Financial Report.
A historical comparison of actuarial value of assets to the market value of assets in the plans is shown
below.
TABLE NO.20
CITY OF PALM SPRINGS
TEN YEAR TREND INFORMATION FOR ASSET VALUES
(ALL PLANS COMBINED)
Actuarial
Valuation Actuarial Market % of Actuarial Funded Funded
Date Valuation of Value Value to Ratio Ratio
June 30 Assets of Assets Market Value Actuarial Market
2003 $176,603 $160,548 110.00/0 82.0% 74.6%
2004 185,822 183,061 101.5 81.9 80.7
2005 199,868 206,400 96.8 83.0 85.7
2006 214,958 228,936 93.9 84.0 89.4
2007 251,415 289,888 86.7 91.4 105.4
2008 266,824 270,956 98.5 90.3 91.7
2009 277,407 201,224 137.9 85.2 61.8
2010 287,186 223,107 128.7 84.4 65.6
2011 297,775 262,301 113.5 82.9 73.0
2012 303,139 252,694 120.0 81.4 67.9
Source: California Public Employees'Retirement System.
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Other Post Employment Benefits
Plan Description. The City provides retiree medical benefits under the PERS health plan which provides
medical insurance benefits to eligible retirees and their spouses in accordance with various labor
agreements. Employees are eligible for retiree health benefits if they retire from the City on or after age
50 (unless disabled) and are eligible for a PERS pension. The benefits are available only to prior and
existing employees who retire from the City. It does not provide for benefits to newly-hired employees
on a going forward basis. Membership of the plan consisted of 450 eligible active employees and 158
enrolled eligible retirees at June 30, 2013. These amounts do not reflect current retirees not enrolled in
the PERS health plan who are eligible to enroll in the plan at a later date.
Funding Policy. The contribution requirements of plan members and the City are established and may be
amended by City Council. The contribution required to be made under City Council and bargaining unit
requirements is based on a pay-as-you-go basis(i.e.,as medical insurance premiums become due).
Annual OPEB Cost and Net OPEB Obligation. The City's annual other post employment benefit
("OPEB") cost (expense)is calculated based on the annual required contribution of the employer(ARC),
an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The
ARC represents a level of funding that,if paid on an ongoing basis,is projected to cover normal cost each
year and amortize any unfunded actuarial liabilities(or funding excess)over a period not to exceed thirty
years. The following table shows the components of the City's annual OPEB cost for the last four fiscal
years, the amount actually contributed to the plan, and changes in the City's net OPEB obligation for
these benefits:
2009/10 2010/11 2011/12 2012/13
Annual required contribution $ 5,999,053 $ 6,696,932 $ 7,137,459 $ 6,919,257
Interest on net OPEB obligation 230,233 454,867 674,496 809,984
Adjustment to annual required contribution (77,256) (441,707) (952,100) (885,376)
Annual OPEB cost(expense) 6,152,030 6,710,092 6,859,855 6,843,865
Contributions made(including premiums paid) (1.160,158) (1,829,452) _(1,599,058) (2,378,429)
Increase in net OPEB obligation 4,991,872 4,880,640 5,260,797 4,465,436
Net OPEB obligation-beginning of year 5.116.285 10.108,157 14,988,797 20,249,594
Net OPEB obligation-end of year $10.10R.157 $14.9R8997 0 49 94 $24.715.030
The City's annual OPEB cost and the percentage of annual OPEB cost contributed to the plan for Fiscal
Years 2008/09 through 2012/13, and the net OPEB obligation as of June 30, 2009 through June 30, 2013
were as follows:
Percentage of
Fiscal Annual OPEB Cost Net Pension
Year OPEB Cost Contributed Oblieation
2008/09 $5,999,053 14.7% $ 5,116,285
2009/10 6,152,030 18.9% 10,108,157
2010/11 6,710,092 27.3% 14,988,797
2011/12 6,859,855 23.3% 20,249,594
2012/13 6,843,865 34.8% 24,715,030
The City's annual contribution to OPEB costs is estimated to be $ for Fiscal Year 2013/14 and
budgeted to be$ for Fiscal Year 2014/15.
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Funded Status and Funding Progress. Actuarial valuations of an ongoing plan involve estimates of the
value of 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
employer 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 presents information about
whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial
accrued liabilities for the benefits.
SCHEDULE OF FUNDING PROGRESS
(in$thousands)
Entry Age UAAL as a
Actuarial Actuarial Actuarial Unfunded Percentage of
Valuation Accrued Value of AAL Funded Covered Covered
Date Liability Assets UAAL Ratio payroll Payroll
6/30/09 $77,025,425 $ - $77,025,425 0% $31,245,000 246.5%
6/30/11 99,590,050 - 99,590,050 0 26,309,954 378.5
6/30/13 106,506,259 - 106,506,259 0 34,035,753 312.9
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 the 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 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 assets,consistent with the long-term perspective of the calculations.
The actuarial cost method used for determining the benefit obligations is the Entry Age Normal Cost
Method. The most recent actuarial assumptions included a 4.0%investment rate of return,which is based
on assumed long-term investment retums on plan assets,and an annual healthcare cost trend rate of 8.5%,
graded down by 0.5% per year to an ultimate rate of 6.0%. The UAAL is being amortized as a level
percentage of projected payroll on a closed basis over 30 years. The remaining amortization period as of
June 30,2013 is 26 years. It is assumed the City's payroll will increase 3.25%per year.
Employee Relations and Collective Bargaining
City employees are represented by 6 labor unions and associations. Currently 94% of all City employees
are covered by negotiated agreements. All agreements expire June 30
Bareainine Unit Number of Employees
Management and Professional 68
General 169
Police Management 2
Police Safety 86
Fire Management 18
Fire Safety 34
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Risk Management
The City is exposed to various risks of loss related to its operation,including losses associated with errors
and omissions, injuries to employees and members of the public. The City's Internal Service Risk
Management Fund is used to account for and finance its uninsured risks of loss.
The City purchases commercial insurance from The Everest National Insurance Company ("ENIC") for
general liability claims. Under this policy, ENIC covers claims in excess of the City's self-insured
retention of$300,000 per occurrence and provides general liability coverage up to$10,000,000 per claim.
The City purchases commercial workers' compensation insurance from Safety National Casualty
Corporation. Under this policy, employers recover claims in excess of the City's self insured retention of
$1,000,000 and provides employer's liability coverage up to $50,000,000 in addition to workers'
compensation statutory limits.
During the past three fiscal (claims) years, none of the above programs of protection have had any
settlements or judgments that exceeded pooled or insured coverage. There have been no significant
reductions in pooled or insured liability coverage in the prior year.
The claims and judgments liability reported in the Internal Service Risk Management Fund is based on
the requirements of Governmental Accounting Standards Board Statements No. 10 and No. 30, which
requires that a liability for claims and judgments 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 of loss can be reasonably estimated. As of June 30, 2012 and June
30, 2013,claims and judgments payable, including estimated claims for incurred but not reported claims,
amounted to$3,871,949 and$4,819,043 respectively.
City Investment Policy and Portfolio
The City administers a pooled investment program, except for those funds which are managed separately
by trustees appointed under bond indentures. This program enables the City to combine available cash
from all funds and to invest cash that exceeds current needs. Under the City's Investment Policy and in
accordance with the Government Code, the City may invest in the following types of investments subject
to certain limitations on maturity and amount:
U.S. Treasury Obligations, U.S. Agency Securities, Negotiable Certificates of Deposit, Medium-Tenn
Notes, Money Market Mutual Funds, Mortgage Pass-Through Securities, County Pooled Investment
Funds,and Local Agency Investment Fund.
As of May 31, 2014, the market value of the City Treasurer's investment portfolio (excluding funds
deposited in checking accounts) was $ The diversification of the City Treasurer's
investment portfolio assets as of such date is shown in the following table.
TWpe of Investment % of Combined Portfolio
U.S.Government Agencies
Local Agency Investment Fund
100.0%
The weighted average maturity of the investment portfolio was _ days. The current yield of the
investment portfolio at May 31,2014 was_%.
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Obligations of the City
Except as noted below, the City will have the following outstanding indebtedness as of June 30, 2014
payable from the City's General Fund, exclusive of obligations to be paid from specifically pledged
revenues, such as revenue bonds, tax allocation bonds and assessment bonds. It includes obligations that
the City allocates internally to other special revenue funds,as described below.
Original Amount Final
Category of Obligation Issue Outstanding Maturity
(1) 2002 Certificates of Participation $ 8,000,000 $ 7,160,000 2027
(2) 2004 Lease Revenue Bonds 62,395,000 53,145,000 2035
(3) 2007 Pension Obligation Bonds 19,832,588 19,825,760 2035
(4) 2007 Lease Revenue Bonds 20,365,000 16,280,000 2027
(5) 2012 Series A Lease Revenue Bonds 23,980,000 21,595,000 2026
(6) 2012 Series B Lease Revenue Bonds 44,965,000 42,585,000 2035
(7) Capital Leases-Vehicles 913,648 459,483 2018
(8) Capital Lease— Comm Equipment 3,366,478 1,861,748 2019
(9) Capital Lease—Energy Conservation 18,402,793 18,402,793 2033
(10)Note Payable 490,000 432,508 2020
(11) Compensated Absences 5,244,366 5,244,366 N/A
(1) In 2002, the City entered into a lease agreement with the Authority to pay rental payments
securing the Authority's Taxable Variable Rate Demand Certificates of Participation, 2002 Series
A. Interest is payable at a variable rate of interest. The annual lease payments, including credit
fees, are estimated to be $300,000 in Fiscal Year 2011/12, based on an estimated interest rate of
0.33%. The current letter of credit securing these Certificates is issued by Union Bank with a
confirming letter of credit issued by California State Teachers Retirement System. The letter of
credit expires July 31,2012 and the confirming letter of credit expires July 31,2014.
(2) To be refunded with the proceeds of the Bonds.
(3) The City issued Taxable Pension Obligation Bonds in March 2007, Proceeds of the bonds were
deposited in the City's account with the California Public Employees'Retirement System in order
to fund a portion of the City's unfunded pension actuarial accrued liability. Debt service
payments are $1,215,000 in Fiscal Year 2014/15 and increase annually by approximately 4% per
year. The outstanding balance above includes the accreted value of capital appreciation bonds.
(4) In 2007, the City entered into a lease agreement with the Authority to pay rental payments
securing the Authority's 2007 Lease Revenue Bonds issued to refinance obligations relating to
various City capital improvements, including a golf course. The lease payments are
approximately $1,600,000 through 2016, and declining to $1,350,000 thereafter. Approximately
$950,000 annual debt service through maturity is allocable to and paid by the City's Golf Course
Enterprise Fund. Approximately$250,000 of annual debt service through maturity is allocable to
and paid by the City's Co-Generation Plant Internal Service Fund.
(5) The 2012 Series A Lease Revenue Bonds were issued to refinance prior obligations relating to the
City's Convention Center. Together with the debt service on the Bonds described below, lease
payments are approximately $5.7 million annually for the financings relating to the Convention
Center facility.
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(6) The 2012 Series B Lease Revenue Bonds were issued finance improvements relating to the City's
downtown revitalization plan. Lease payments are approximately $3.2 million annually, and are
allocated and paid from Measure J sales tax funds (see `FINANCIAL INFORMATION — Other
Local Taxes").
(7) The City has entered into a lease agreement to finance the acquisition of a fire truck. Annual
lease payments are approximately $131,000. The lease payments relating to fire truck is paid
from the City's Motor Vehicle Replacement Fund
(8) The City has entered into a lease agreement to finance the acquisition of emergency
communications equipment. Annual lease payments are approximately $422,000. The lease
payments relating to the emergency communications equipment are paid from the City's
Emergency Response Fund(funded with a voter-approved access line fee).
(9) The City has entered into a lease agreement to finance the acquisition and installation of energy
and water conservation equipment and replacement of the cooling tower in the City's Co-
Generation Plant. Annual lease payments are approximately $280,000 in Fiscal Year 2014/15,
$1,006,000 in Fiscal Year 2015/16 and increase annually by approximately 4% per year. The
lease payments relating to the cooling tower replacement are paid by the City's Co-Generation
Plant Internal Service Fund,of which approximately 50% is paid by the Airport.
(10) The City has entered into a note payable to Chino Cinego Foundation for the purchase of
property. Annual payments are$89,342.
(11) Represents that portion of compensated absences not expected to be paid during the current year,
as of June 30,2013.
The City may issue approximately $8 million in additional debt during Fiscal Year 2014/15 secured and
payable from Gas Tax Revenues,for the purpose of funding street improvements.
Direct and Overlapping Debt
Set forth on the following page is a direct and overlapping debt report (the "Debt Report") prepared by
California Municipal Statistics, as of June 30, 2014. The Debt Report is included for general information
purposes only. The City has not reviewed the Debt report for completeness or accuracy and makes no
representations in connection therewith. Any inquiries concerning the scope and methodology of
procedures carried out to compile the information presented should be directed to California Municipal
Statistics.
The Debt Report generally includes long-term obligations sold in the public credit markets by public
agencies whose boundaries overlap the boundaries of the City in whole or in part. Such long-term
obligations are not payable from the City's General Fund nor are they necessarily obligations secured by
property within the City. In many cases,long-term obligations issued by a public agency are payable only
from the general fund or other revenues of such public agency.
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TABLE NO.21
CITY OF PALM SPRINGS
DIRECT AND OVERLAPPING DEBT
(to be completed)
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Financial Statements
The City's accounting policies conform to generally accepted accounting principles and reporting
standards set forth by the State Controller. The audited financial statements also conform to the principles
and standards for public financial reporting established by the National Council of Government
Accounting and the Governmental Accounting Standards Board.
Basis of Accounting and Financial Statement Presentation. The government-wide financial statements
are reported using the accrual basis of accounting. Revenues are recorded when earned and expenses are
recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are
recognized as revenues in the year for which they are levied. Grants and similar items are recognized as
revenue as soon as all eligibility requirements imposed by the provider have been met.
Governmental fund financial statements are reported using the modified accrual basis of accounting.
Revenues are recognized as soon as they are both measurable and available. Revenues are considered to
be available when they are collectible within the current period or soon enough thereafter to pay liabilities
of the current period. Expenditures generally are recorded when a liability is incurred, as under accrual
accounting. However,debt service expenditures are recorded only when payment is due.
The City retained the firm of Lance, Soil & Lunghard, LLP, Certified Public Accountants, Brea,
California, to examine the general purpose financial statements of the City as of and for the year ended
June 30, 2013. The following tables summarize the audited Balance Sheet and audited Statement of
Revenues, Expenditures and Changes in Fund Balance of the City's General Fund, Community
Promotions Fund and Measure J Sales Tax Fund for the last five fiscal years.
The Community Promotions Fund was set up by policy of the City Council and moneys deposited to this
fund, while not legally restricted, was used for the Convention Visitor's Bureau, the City's Tourism
Division and Convention Center. However, the revenues of the Community Promotions Fund were
available for purposes of the General Fund, and to a large extent, paid a portion of General Fund
expenditures for the Convention Center. The City determined to no longer show the Community
Promotions Fund as a separate fund for financial reporting purposes, beginning with Fiscal Year ending
June 30,2011.
The City's voters approved Measure J, a ballot measure to increase the City's sales tax. The Measure J
Fund was set up by policy of the City Council and moneys deposited to this fund, while not legally
restricted, are used for the debt service on the 2012 Series B Lease Revenue Bonds issued to finance
improvements in the City's downtown, as well as a variety of capital projects City-wide. However, the
revenues of the Measure J Fund are available for purposes of the General Fund,
See "APPENDDC B" hereto for the audited financial statements for the fiscal year ended June 30, 2013.
The City has not requested, and the auditor has not provided, any review or update of such statements in
connection with the inclusion in this Official Statement.
GASB Statement No. 54. The City was required to implement GASB Statement No. 54, Fund Balance
Reporting and Governmental Fund Type Definition,for the Fiscal Year ending June 30,2011. GASB No.
54 establishes fund balance classifications that comprise a hierarchy based primarily on the extent to
which a government is bound to observe constraints imposed upon the use of the resources reported in
governmental funds.
The initial distinction that is made in reporting fund balance information is identifying amounts that are
considered nonspendable, which are amounts that cannot be spent because they are either (a) not
spendable in form or (b) legally or contractually required to be maintained intact. GASB No. 54 also
provides for additional classification as"restricted,""committed,""assigned,"and"unassigned"based on
the relative strength of the constraints that control how specific amounts can be spent.
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GASB Statement Nos.67 and 68. On June 25, 2012,GASB approved two new standards("Statements")
with respect to pension accounting and financial reporting standards for state and local governments and
pension plans. The new Statements,No. 67 and No. 68,will replace GASB Statement No. 27 and most of
Statements No. 25 and No. 50. The changes will impact the accounting treatment of pension plans in
which state and local governments participate. Major changes include: 1) the inclusion of unfunded
pension liabilities on the government's balance sheet (currently, such unfunded liabilities are typically
included as notes to the government's financial statements);2)more components of full pension costs will
be shown as expenses regardless of actual contribution levels; 3) lower actuarial discount rates will be
required to be used for underfunded plans in certain cases for purposes of the financial statements; 4)
closed amortization periods for unfunded liabilities will be required to be used for certain purposes of the
financial statements; and 5) the difference between expected and actual investment returns will be
recognized over a closed five-year smoothing period. In addition, according to GASB, Statement No. 68
means that, for pensions within the scope of the Statement, a cost-sharing employer that does not have a
special funding situation is required to recognize a net pension liability, deferred outflows of resources,
deferred inflows of resources related to pensions and pension expense based on its proportionate share of
the net pension liability for benefits provided through the pension plan. Because the accounting standards
do not require changes in funding policies,the full extent of the effect of the new standards on the City is
not known at this time. The reporting requirements for pension plans will take effect for the fiscal year
beginning after June 15, 2013 and the reporting requirements for government employers, including the
City,will take effect for the fiscal year begimring after June 15,2014.
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TABLE NO.22
CITY OF PALM SPRINGS
GENERAL FUND BALANCE SHEET
As of June 30
2009 2010 2011 2012 2013
Assets:
Pooled cash and investments $ 9,319,711 $ 6,863,687 $14,157,502 $15,385,469 $17,407,162
Receivables:
Accounts 4,381,398 4,417,412 5,182,777 6,903,381 7,087,511
Accrued interest 793,259 793,259 793,259 793,259 793,259
Prepaid costs - - - - 248,750
Deposits - - 200,000 200,000 200,000
Advances to other funds 3,221,785 3,221,785 2,815,000 1,210,000 1,210,000
Land held for resale 49,950 49,950 49,950 49,950 49,950
Advance to Successor Agency - - - - 2,011,785
Total assets RI7766107 Sl$,'t4fi 09} $ 19R 4RR $25.542059 $29.00R.417
Liabilities and Fund Balances
Liabilities:
Accounts payable $ 1,176,510 $ 1,013,376 $ 1,690,747 $ 2,807,001 $ 4,237,580
Accrued liabilities - 1,572,805 1,157,967 552,313 454,663
Accrued wages payable 1,753,406 - - - -
Deferred revenue 2,065,622 2,065,622 1,568,259 - -
Deposits Payable - - 4,457 4,812 6,586
Advances from other funds 49,950 49,950 49,950 49,950 49,950
Total Liabilities 5,045,488 4,701,753 4,471,380 3,414.076 4,748,779
Continued on next page.
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TABLE NO.22
CITY OF PALM SPRINGS
GENERAL FUND BALANCE SHEET
As of June 30
Continued from previous page.
2009 2010 2011 2012 2013
Deferred Inflows of Resources
Unavailable revenues $ S $ $ 1,343,259 S 1,343.259
Total Deferred Inflows of Resources - - - 1,343,259 1,343,259
Fund Balances:
Reserved:
Encumbrances 208,255 271,508 - - -
Prepaid costs - - - - 248,750
Land held for resale 49,950 49,950 - - -
Notes and loans - - - - 2,011,785
Advances to other funds 3,221,785 3,221,785 2,815,000 1,210,000 1,210,000
Continuing appropriations 336,839 370,536 - - -
911 fees l0 1,848,115 - - - -
Deposits - - 200,000 200,000 200,000
Unreserved:
General Fund
Undesignated 7,055,671 6,730,561 - - -
Assigned to:
Public Safety - - 16,661 39,898 88,570
Parks and Recreation - - 25,301 50,687 68,452
Public Works - - 23,185 19,911 50,750
Continuing appropriations - - 1,841,258 1,663,921 2,549,662
General government - - 305,928 301,192 193,135
Library - - 20,402 17,376 20,148
Anticipated future obligations - - 1,700,000 1,500,000 1,350,000
Deficit reduction - - - 1,740,050 1,753,058
PEG fees - - - - 368,771
Unassigned - - 11,779,373 13,041,689 12,803,298
Total Fund Balances $12,720,615 $10,644.340 $18,727,108 $19,784,724 522,916.379
Total Liabilities,deferred inflows of
resources,and Fund Balances S17 76F 103 515346.093 523.19R.4RR 524.542.059 $29.008.417
Source: City of Palm Springs Comprehensive Annual Financial Report.
o) Accumulated emergency fees,transferred to the City's Emergency Response Fund in Fiscal Year 2009/10.
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TABLE NO.23
CITY OF PALM SPRINGS
GENERALFUND
STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCE
For the year ended June 30
2009 2010 2011 2012 2013
Revenues:
Taxes 0) $38,407,322 $42,303,836 $52,618,888 $57,410,481 $71,163,884
Licenses and permits 2,486,344 2,185,432 2,488,279 2,357,573 2,395,767
Fines and penalties tzt 537,607 - - - 750
Intergovernmental 6,416,391 5,328,699 5,133,038 4,603,466 4,667,803
Charges for services 4,245,170 4,547,430 4,646,687 4,443,087 4,741,818
Use of money and property(3) 5,485,647 3,081,817 339,641 307,868 77,562
Transient occupancy taxes to 5,549,063 - - - -
Contributions 77,859 108,402 190,962 53,562 21,595
Miscellaneous 297,353 549,213 559,475 547,699 607,550
Total Revenues 63,502,756 58,104,829 65,976,970 69,723,736 83,676,729
Expenditures:
Current:
General government 9,600,391 8,359,253 8,127,888 9,957,068 10,258,480
Public safety 33,%1,616 31,374,847 28,274,204 30,287,353 31,639,896
Cultural and convention center 14i - - 2,421,474 2,816,914 2,890,229
Public works 8,379,925 7,318,516 6,949,371 7,347,007 9,962,784
Parks and recreation 6,344,562 5,726,043 7,913,049 8,354,839 6,382,836
Library 2,811,349 2,057,261 1,888,598 2,035,379 1,983,175
Debt service(5)
Principal retirement - - 1,555,000 1,625,000 1,910,000
Interest and fiscal charges - - 2,656,613 2,150,662 2.135.526
Total Expenditures 61,097,843 54,835,920 59,786.197 64,574,222 67,162,926
Excess(Deficiency)of Revenues
Over(Under)Expenditures 2,404,913 3,268,909 6.190.773 5,149.514 16,513,803
Continued on the next page.
Source: City of Palm Springs Comprehensive Annual Financial Report.
co Prior to 2009/10,transient occupancy taxes were shown separately from other taxes in the financial statements.
In addition, only a portion of transient occupancy taxes were recorded in the General Fund, with the balance
recorded in the Community Promotions Fund. See Table No. 15 and 27.
0) Beginning in 2009/10,fines and penalties were combined with charges for services.
(1) Prior to 2009/10, separate amounts were shown in the financial statements for"investment income"and"rental
income." They have been combined and shown above as "Use of Money and Property" for comparison
purposes.
I41 Prior to Fiscal Year 2010/11,these expenditures were recorded in the Community Promotions Fund.
s) Prior to Fiscal Year 2010/11, these expenditures were included in "transfers out" to the City's Debt Service
Fund,in both the General Fund and the Community Promotions Fund.
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TABLE NO.23
CITY OF PALM SPRINGS
GENERALFUND
STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCE
For the year ended June 30
2009 2010 2011 2012 2013
Other Financing Sources(Uses):
Transfers in 4,255,000 5,570,356 4,538,924 1,544,814 887,500
Transfers out (11,224,157) (11,475,540) (2.646.929) (4,031,712) (14,039,4961
Total Other Financing Sources(Uses)
(6,969,1571 (5,905,184) 1,891.995 (2,486,898) (13.15L996)
Extraordinary gain(/loss) - - - (1,605,000) (230,152)
Net Change in Fund Balances (4,564,244) (2,636,275) 8,082,768 1,057,616 3,131,655
Fund Balances,Beginning of Year,
as previously reported 17,284,859 12,720,615 10,644,340 18,727,108 19,784,724
Restatements 560.000
Fund Balances,Beginning of Yew,
as restated 17,284,859 13,280,615 10,644.340 18,727,108 19,784.724
Fund Balances,End of Year $12.720.615 $10 644.3411 $1 R 727.1 OR $19 7R4 724 22
Source: City of Palm Springs Comprehensive Annual Financial Report. Ali
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TABLE NO.24
CITY OF PALM SPRINGS
MEASURE JFUND
BALANCESHEET
For the year ended June 30
2012 2013
Assets
Pooled cash and investments $ 596,733 $8,228,392
Accounts Receivable 1,353,800 1,615,501
Interest Receivable 11.791
Total Assets
Liabilities and Fund Balance
Liabilities:
Accounts payable $ 29,519 $ 58,746
Accrued liabilities 8113
Total Liabilities 29,519 66.859
Fund Balance:
Restricted for Public Works 1.921.014 9,788,825
Total Fund Balances 1,921,014 9.788.825
Total Liabilities and Fund Balances
Source: City of Palm Springs Comprehensive Annual Financial Report.
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TABLE NO.25
CITY OF PALM SPRINGS
MEASURE JFUND
STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCE
For the year ended June 30
2012 2013
Revenues:
Use of money and property $ $ (24,561)
Total Revenues - (24,561
Expenditures:
Public works 29,519 203,811
Total Expenditures 29,519 2( 28,372)
Excess(deficiency)of Revenues Over
(under)Expenditures (29,519 (228,372)
Other Financing Sources(uses):
Transfers in 1,950,533 11,046,045
Transfers out (2,949,862)
Total Other Financing Sources(uses) 1,950,533 8,096,183
Net change in fund balance 1,921,014 7,867,811
Fund Balance at Beginning of Year - 1,921.014
Fund Balance at End of Year $1 4?141 $9 Z
Source: City of Palm Springs Comprehensive Annual Financial Report.
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TABLE NO.26
CITY OF PALM SPRINGS
COMMUNITY PROMOTIONS FUND
BALANCESHEET
For the year ended June 30
2009 2010 20110)
Assets
Pooled cash and investments $ - $ 67,803 $ -
Deposits 200,000 200,000 -
Receivables: -
Accounts 888,780 952,385
Total Assets $10. 8.8.780 $L2201.$.& $ -
Liabilities and Fund Balances
Liabilities:
Accounts payable $ 338,516 $ 325,421 $
Due to other funds - - -
Deposits payable 194A06 195,691
Total Liabilities 532,922 521.112
Fund Balance:
Reserved for:
Encumbrances - 2,363 -
Deposits 200,000 -
Continuing appropriations 193,563 10,000 -
Unreserved:
Special purposes - - -
Undesignated 162,295 686,713
Total Fund Balances S 55M58 699.07 1--
Total Liabilities and Fund Balances $�$ 80 $122QL88 $
Source: City of Palm Springs Comprehensive Annual Financial Report.
Beginning with the Fiscal Year ending June 30, 2011, the Community Promotions Fund is no longer reported
separately from the City's General Fund.
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TABLE NO.27
CITY OF PALM SPRINGS
COMMUNITY PROMOTIONS FUND
STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCE
For the year ended June 30
2009 2010 20110)
Revenues:
Rental income $ 12,000 $ 12,000 $
Charges for services - - -
Transient occupancy taxes 7,204,015 7,524,508 -
Donations and contributions 99,432 95,911 -
Miscellaneous 66,766 57,240
Total Revenues 7,382,213 7,689,659
Expenditures:
General government 2,983,557 2,100,514 -
Cultural and convention center 2,379,047 2,027,671 -
Parks and recreation 884,981 718,256
Total Expenditures 6,247,585 4,846,441
Excess(deficiency)of Revenues Over
(under)Expenditures 1,134,628 2,843,218
Other Financing Sources(uses):
Transfers in - - -
Transfers out (652,080) (2,700,000) (699,076
Total Other Financing Sources(uses) (652,080) (2,700,000) (699,076
Net change in fund balance 482,548 143,218 (699,076)
Fund Balance at Beginning of Year 73.310 555,858 699,076
Fund Balance at End of Year 858 $ $
Source: City of Palm Springs Comprehensive Annual Financial Report.
lD Beginning with the Fiscal Year ending June 30, 2011, the Community Promotions Fund is no longer reported
separately from the City's General Fund.
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RISK FACTORS
The purchase of the Bonds involves investment risk. If a risk factor materializes to a sufficient degree, it
could delay or prevent payment of principal of and/or interest on the Bonds. Such risk factors include,
but are not limited to, the following matters and should be considered, along with other information in
this Official Statement, bypotential investors.
The Lease Payments
City's Lease Payments and Other Payments. The City's Lease Payments and other payments due
under the Lease Agreement (including the costs of improvement,repair and maintenance of the Facilities
and taxes, other governmental charges and assessments levied against the Facilities) are not secured by
any pledge of taxes or other revenues of the City but are payable from yearly appropriations of any funds
lawfully available to the City. If the City's revenue sources are less than its total obligations, the City
could choose to fund other services before making Lease Payments and other payments due under the
Lease Agreement. The same result could occur if,because of State Constitutional limits on expenditures,
the City is not permitted to appropriate and spend all of its available revenues (see "Constitutional
Limitation on Taxes and Expenditures" herein). To the extent these types of events or other events
adversely affecting the funds available to the City occur in any year, the funds available to make Lease
Payments may be decreased.
The City has the capacity to enter into other obligations which may constitute additional charges against
its revenues. To the extent that additional obligations are incurred by the City,the funds available to the
City to make Lease Payments may be decreased.
Abatement. Except to the extent that amounts are available (1) in the Reserve Account or (2) from
proceeds of rental interruption insurance, the amount of Lease Payments due under the Lease Agreement
will be adjusted or abated during any period in which by reason of damage or destruction to the Facilities,
eminent domain proceedings or some other event there is substantial interference with the use and
possession of the Facilities. The amount of such abatement shall be such that the resulting Lease
Payments, exclusive of the amounts described above, do not exceed the fair rental value for the use and
possession of the portion of the Facilities not damaged, destroyed, interfered with or taken. Such
abatement shall continue for the period commencing with such damage, destruction, interference or
taking and ending with the substantial completion of the replacement or work of repair or the removal of
the title defect causing such interference with use. The Lease Agreement shall continue in full force and
effect following an event of abatement and the City waives any right to terminate the Lease by virtue of
an abatement event. Notwithstanding the provisions of the Lease Agreement and the Trust Agreement
specifying the extent of abatement in the event of the City's failure to have use and possession of the
Facilities, such provisions may be superseded by operation of law,and, in such event,the resulting Lease
Payments may not be sufficient to pay all of that portion of the remaining principal and interest
represented by the Bonds and the 2012 Bonds. The amount of such abatement shall reduce the Lease
Payments applicable to the Bonds and the 2012 Bonds prorata.
In the event that such funds are insufficient to make all payments with respect to the Bonds and the 2012
Bonds during the period that the Facilities, or portion thereof, is being restored, then all or a portion of
such payments may not be made and no remedy is available to the Trustee or the Owners under the Lease
Agreement or the Trust Agreement for nonpayment under such circumstances. Failure to pay principal or
interest on to the Bonds as a result of abatement of the City's obligation to make Lease Payments under
the Lease Agreement is not an event of default under the Trust Agreement or the Lease Agreement. In the
event that Lease Payments are abated due to damage caused by earthquake or flood, such abatement may
continue indefinitely, as no insurance for such damages is required under the Lease Agreement and the
City cannot be compelled to repair or replace the damaged Facilities or to redeem the Bonds and the 2012
Bonds but has covenanted in the Lease Agreement to use its best efforts to repair or replace the Facilities
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from other lawfully available funds to the extent that the Net Proceeds are insufficient. See "APPENDIX
A-SUMMARY OF PRINCIPAL LEGAL DOCUMENTS-Lease Agreement-Abatement."
Insurance. The Lease Agreement obligates the City to obtain and keep in force various forms of
insurance, to assure repair or replacement of the Facilities in the event of damage or destruction to the
Facilities (see"APPENDIX A- SUMMARY OF PRINCIPAL LEGAL DOCUMENTS -LEASE AGREEMENT-
Insurance" herein). The City's insurance policy limit for property damage of City facilities is
$10,000,000 per occurrence (including damage from earthquake or flooding). It is possible that if there
were damage to numerous City facilities and the damage was greater than $10,000,000, the City might
choose to apply available insurance proceeds to other City facilities before repairing the convention
center. The City does have a separate$25 million insurance policy for the Wastewater Treatment Plant, in
addition to the policy for all other City facilities. The City makes no representation as to the ability of
any insurer to fulfill its obligations under any insurance policy provided for in the Lease Agreement. In
addition,certain risks may not be covered by such Facilities insurance(see"SOURCES OF PAYMENT FOR
THE BONDS-Insurance Relating to the Property"herein).
In the event the Facilities is partially or completely damaged or destroyed due to any uninsured or
underinsured event,it is likely that Lease Payments will be partially or completely abated. Apart from the
Net Proceeds of insurance, the City and the Authority will have no obligation to expend any funds to
repair or replace such damaged or destroyed Facilities. If any Facilities so damaged or destroyed is not
repaired or replaced within the period during which the proceeds of rental interruption insurance or
amounts in the Reserve Account are available, any such abatement could prevent the City from making
timely Lease Payments.
Discovery of a Hazardous Substance That Would Limit the Beneficial Use of the Facilities. In
general,the owners and lessees of a parcel may be required by law to remedy conditions of the Facilities
relating to the releases or threatened releases of hazardous substances. The federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980 sometimes referred to as CERCLA or
the Superfund Act, is the most well-known and widely applicable of these laws but California laws with
regard to hazardous substances are also stringent and similar. Under many of these laws, the owner (or
lessee) is obligated to remedy a hazardous substance condition of Facilities whether or not the owner (or
lessee) had any involvement in creating or handling the hazardous substance. The effect, therefore,
should the Facilities be affected by a hazardous substance, might be to limit the beneficial use of the
Facilities upon discovery and during remediation. The City is not aware of any such conditions on the
Facilities.
Limited Recourse on Default; No Acceleration
If an event of default occurs and is continuing under the Lease Agreement, there is no remedy of
acceleration of any Lease Payments which have not come due and payable in accordance with the Lease
Agreement. The City will continue to be liable for Lease Payments as they become due and payable in
accordance with the Lease Agreement if the Trustee does not terminate the Lease Agreement, and the
Trustee would be required to seek a separate judgment each year for that year's defaulted Lease
Payments. Any such suit for money damages would be subject to limitations on legal remedies against
counties in California, including a limitation on enforcement of judgments against funds or Facilities
needed to serve the public welfare and interest. In addition, the enforcement of any remedies provided in
the Lease Agreement and the Trust Agreement could prove both expensive and time-consuming. The City
is not aware of any such conditions on the Lease Facilities.
The Lease Agreement permits the Trustee to take possession of and re-lease the Facilities in the event of a
default by the City under the Lease Agreement. However, due to the fact that the Facilities serves
essential governmental purposes and, the specialized nature of the Facilities, it is unlikely that the Trustee
could readily re-lease it for rents which are sufficient to enable it to pay principal and interest on the
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Bonds and the 2012 Bonds in full when due or that a court would permit such remedy to be exercised on a
timely basis.
State Budget; Redevelopment Agency Legislation
The following information concerning the State's budgets has been obtained from publicly available
information which the City believes to be reliable; however, the City does not guaranty the accuracy or
completeness of this information and has not independently verified such information. Furthermore, it
should not be inferred from the inclusion of this information in this Official Statement that the principal of
or interest with respect to the Bonds is payable by or the responsibility of the State of California.
State Budget. Information about the State budget and State spending is available at various State-
maintained websites. Text of proposed and adopted budgets may be found at the website of the State
Department of Finance, www.dofca.sov, under the heading "California Budget." An impartial analysis
of the budget is posted by the Office of the Legislative Analyst("LAO") at www.lao.ca.eov. 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, www.treasurerca.gov. 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 City makes no representation whatsoever as to the accuracy or
completeness of any of the information on such websites.
According to the State Constitution, the Governor of the State (the "Governor") is required to propose a
budget to the State Legislature (the "Legislature") by no later than January 10 0£each year, and a final
budget must be adopted by the vote of each house of the Legislature no later than June 15,although this
deadline has been routinely breached in the past. The State budget becomes law upon the signature of the
Governor,who may veto specific items of expenditure.
Prior to Fiscal Year 2010/11, the State budget had to be adopted by a two-thirds vote of each house of the
Legislature. However, in November 2010, the voters of the State passed Proposition 25, which reduced
the vote required to adopt a budget to a majority vote of each house and which provided that there would
be no appropriation from the current budget or future budget to pay any salary or reimbursement for
travel or living expenses for members of the Legislature for the period during which the budget was
presented late to the Governor.
Potential Impact of State of California Financial Condition on the City. The State's financial
difficulties may affect the amount and timing of payments to or for the benefit of cities and counties of
funds provided by the State. From time to time, some of the State's budget solutions may increase the
financial stress of cities, counties and other local governments because they (1) decrease local revenues
(particularly the property tax, road improvement funding, public safety or other categorical funded
initiatives) or (2) directly or indirectly increase demand for local programs (such as public safety or
indigent health programs). There can be no assurances that the State's financial difficulties will not
materially adversely affect the financial condition of the City.
The financial condition of the State is subject to a number of other risks in the future, including
particularly potential significant increases in required state contributions to the Public Employees'
Retirement System, increased financial obligations related to other post-employment benefits, and
increased debt service.
As noted above,the State is facing significant financial stress. There can be no assurances that, as a result
of the current or any future State financial stress,the State will not significantly reduce or delay revenues
to local governments (including the City) or shift financial responsibility for programs to local
governments as part of its efforts to address the State financial difficulties. No prediction can be made by
the City as to what measures the State will adopt to respond to potential future financial difficulties. The
City cannot predict the final outcome of future State budget negotiations, the impact that such budgets
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will have on the City's finances and operations or what actions will be taken in the future by the State
Legislature and Governor to deal with changing State revenues and expenditures. Current and future
State budgets will be affected by national and State economic conditions and other factors, including the
current economic downturn, over which the City has no control. There can be no assurances that State
actions to respond to State financial difficulties will not adversely affect the financial condition of the
City. For several fiscal years during the recent recession the State faced a structural deficit that resulted in
substantial annual deficits and reductions in expenditures. Although the State is projecting a budget
surplus in the current fiscal year, the State is still facing continuing financial challenges and unfunded
long-term liabilities of more than $200 billion, which could result in future reductions or deferrals in
amounts payable to the City. The State's financial condition and budget policies affect local public
agencies throughout California. To the extent that the State budget process results in reduced revenues to
the City, the City will be required to make adjustments to its budget. State budget policies can also
impact conditions in the local economy and could have an adverse effect on the local economy and the
City's major revenue sources.
Former Redevelopment Agency of the City of Palm Springs. In 1973, the City Council of the City
created the Community Redevelopment Agency of the City of Palm Springs (the "Redevelopment
Agency")pursuant to the Community Redevelopment Law,set forth in California Health and Safety Code
("HSC") commencing with Section 33000. The Redevelopment Agency undertook a program to
redevelop project areas encompassing certain parts of the City.
Pursuant to AB Xl 26, as upheld (and modified as to certain deadlines) by the California Supreme Court
in California Redevelopment Association, et al. v Ana Matosantos, et al. (53 Cal.4th 231(2011)),
redevelopment agencies throughout the State were dissolved as of February 1, 2012. AB XI 26 was
signed into State law in June 2011. Subsequently, AB 1484, which amended and supplemented the
provisions of AB Xl 26, was signed into State law in June 2012. Together,AB Xl 26 and AB 1484 are
referred to in this Official Statement as the"Dissolution Act."
In accordance with the provisions of the Dissolution Act, the City elected to serve as the Successor
Agency to the Redevelopment Agency. The Dissolution Act provides that the Successor Agency is a
separate public entity from the City and none of the liabilities or assets of the Redevelopment Agency
become liabilities or assets of the City. However,AB 1484,as set forth in Health and Safety Code section
34176, provided that the City may retain specified housing assets and housing functions and obligations
of the former RDA and become a Successor Housing Entity. The City,via resolution,elected to do so and
assigned such duties to the City. The Successor Agency is charged with the responsibility of winding
down the affairs of the former Redevelopment Agency. The Successor Agency's authority is limited to
the extent needed to implement such wind down. The Dissolution Act requires the establishment of an
Oversight Board (composed primarily of representatives of certain affected taxing entities) for the
Successor Agency. The Oversight Board has the power to direct the Successor Agency to take certain
actions and certain Successor Agency actions must first be approved by the Oversight Board, all as
prescribed by the Dissolution Act. The Oversight Board's actions are subject to review by the State
Department of Finance(the"Department").
Certain expenditures of the former Redevelopment Agency are now bome by the General Fund beginning
with Fiscal Year 2012/13 to the extent that they are not considered either enforceable obligations or fall
within a prescribed administrative allowance for the operation and wind down of the former
Redevelopment Agency's activities.
Prior to the Dissolution Act,the City's General Fund loaned$3,789,655 for operating costs to the former
Redevelopment Agency. The City's Wastewater Fund loaned an additional $1,227,000 and the
Sustainability Fund loaned another $1,226,542 for project costs. The Department did not approve the
immediate payment of such amounts which were listed in certain Recognized Obligation Payment
Schedules filed by the Successor Agency. The Dissolution Act provides that after meeting certain criteria,
such loan,with interest at the rate paid by the State's Local Agency Investment Fund,may be reinstated at
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some future date. The City has eliminated any loan repayment from its budgets, but intends to reinstate
the loan repayment with approval of the Oversight Board and the Department. Repayment terms will be
governed by the Dissolution Act, however such amounts will not be authorized to be paid until the
Successor Agency is able to repay a loan to the Housing Successor Agency for $4,055,879 borrowed to
make payments to the State's Supplemental Educational Revenue Augmentation Fund in 2009.
Therefore,it will likely be many years before the City's General Fund is repaid.
Further, the City's General Fund loaned the Successor Agency $1.5 million in December 2013 to avoid a
withholding of funds to pay enforceable obligations during the period January 1 to June 30, 2014. The
Department did not approve the repayment of such amounts which were listed in the Recognized
Obligation Payment Schedule filed by the Successor Agency in February 2014. The City and Successor
Agency's recourse is to readopt the loan agreement, with the Oversight Board's approval, or initiate
litigation in an effort to get the payments approved in a future period.
Finally, the Redevelopment Agency, and then the Successor Agency, was paying $1.6 million per year
toward the debt service on the 2004 Bonds in accordance with actions it took in 2007 under HSC Section
33445. The Department also denied the payment of such amounts which were listed in the Recognized
Obligation Payment Schedule filed by the Successor Agency in February 2014. The City and Successor
Agency may initiate litigation to get the payments approved in the future. The City cannot predict when
and if it will initiate litigation, and if initiated, what the outcome of that litigation will be. The loss of the
$1.6 million toward debt service of the 2004 Bonds(being refunded with the proceeds of the Bonds),will
be mitigated in Fiscal Year 2014/15 by (1) the increase in the residual property tax the City will receive
since the payment cannot be made by the Successor and (2)reduced debt service on the Bonds due to the
refunding, and(3) additional residual property tax the City will receive due to a refunding of some of the
Redevelopment Agency's tax allocation bonds. However,beginning in Fiscal Year 2015/16,the impact of
the loss of the $1.6 million reimbursement on an ongoing basis is likely to be as much as $700,000
annually,after taking into account the debt service savings and the additional residual property taxes.
As noted above, the funding of the former Redevelopment Agency's budget and other payments to the
City are subject to reduction or elimination based on the ultimate interpretations of the terms of the
Dissolution Act. There can be no assurance that the Dissolution Act will not interfere with the receipt by
the City from the former Redevelopment Agency of the amounts contemplated to be received by it.
There are numerous lawsuits pending regarding various aspects of the Dissolution Act and it will be
subject to legal challenge and judicial interpretation based on constitutional and other considerations. The
City is unable to predict the outcome of any such lawsuits or their effect on the City's finances.
Possessory Interest Taxes; Bureau of Indian Affairs Regulations
The City has enjoyed a long relationship with the Agua Caliente Band of Cahuilla Indians. Established in
1876, the Agua Caliente reservation now contains more than 32,000 acres in a checkerboard pattern
spanning parts of the City,Cathedral City,Rancho Mirage and the San Jacinto and Santa Rosa mountains.
As a result of this checkerboard pattern, the reservation is deeply connected to the local communities and
the infrastructure of the City.
Certain residents of and businesses in Palm Springs lease property on reservation land. When a person or
entity leases, rents, or uses real estate owned by a government agency for its exclusive use, a taxable
possessory interest occurs. The County collects possessory interest taxes pursuant to, among other
authority, Sections 61, 107-107.9 of the Revenue and Taxation Code of the State of California from non-
tribal members who lease property on reservation land. For fiscal year 2012/13, the County collected
approximately $29 million in such possessory interest taxes, County-wide. The County then redistributes
portions of such taxes to cities, school districts and other local governments, including the City and the
Successor Agency.
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On December 5, 2012,the Department of the Interior, Bureau of Indian Affairs promulgated final federal
regulations, that became effective on January 4, 2013, governing the applicability of state and local taxes
on surface property interests in leased tribal land. The regulations (25 CFR 162.017) (the "Property
Taxation Regulations")provide that—
(a) Subject only to applicable Federal law, permanent improvements on the leased land, without
regard to ownership of those improvements, are not subject to any fee, tax, assessment, levy, or
other charge imposed by any State or political subdivision of a State. Improvements may he
subject to taxation by the Indian tribe with jurisdiction.
(b) Subject only to applicable Federal law, activities under a lease conducted on the leased premises
are not subject to any fee, tax, assessment, levy, or other charge (e.g., business use, privilege,
public utility, excise, gross revenue taxes) imposed by any State or political subdivision of a
State.Activities may be subject to taxation by the Indian tribe with jurisdiction.
(c) Subject only to applicable Federal law, the leasehold or possessory interest is not subject to any
fee,tax,assessment, levy, or other charge imposed by any State or political subdivision of a State.
Leasehold or possessory interests may be subject to taxation by the Indian tribe with jurisdiction.
In light of the Property Taxation Regulations, the Agua Caliente Band of Cahuilla Indians has sued the
County and various related County defendants (Aqua Caliente Band of Cahuilla Indians v. Riverside
County. et al.; Case No. 14-00007JGB) in U.S. District Court for the Central District of California,
Eastern Division to prevent the assessment of possessory interest taxes on tribal land, including land
located in Palm Springs. In the complaint, the tribe argues that the possessory interest tax increases the
economic burden on the tribe and its members by devaluing Indian land leases. According to the
complaint, the tax also limits the tribe's income, since it has agreed to forgo its own tax to avoid the
double taxation of leaseholders. The litigation is in the early stages. If the tribe ultimately prevails,
however, leaseholders may potentially be entitled to refunds of possessory interest taxes collected by the
County during the four year period prior to commencement of the litigation. The City and the Successor
Agency cannot predict the outcome of this or any other litigation relating to possessory interest taxes or
any other taxes imposed on leased tribal property.
If the tribe prevails with respect to their claims, the loss of property tax revenue to the General Fund,
based on the possessory interest value loss of$1.06 billion calculated based on the City's share of the 1%
general property tax levy is estimated to be $2.4 million annually. The City would stand to lose another
estimated $600,000 of its share of residual property tax and other tax sharing payments relating to the
Successor Agency's loss of a net incremental value of$262 million.
If the tribe prevails, the City would expect the tribe to pay the City services provided to such properties
and previously funded in part with the possessory interest tax amounts, but there is no guarantee that
such an agreement would be reached.
Enforcement of Remedies
The enforcement of any remedies provided in the Lease Agreement and the Trust Agreement could prove
both expensive and time consuming. The rights and remedies provided in the Lease Agreement and the
Trust Agreement may be limited by and are subject to the limitations on legal remedies against counties,
including State constitutional limits on expenditures, and limitations on the enforcement of judgments
against funds needed to serve the public welfare and interest; by federal bankruptcy laws, as now or
hereafter enacted; applicable bankruptcy, insolvency, reorganization,moratorium, or similar laws relating
to or affecting the enforcement of creditors'rights generally,now or hereafter in effect(see"- Bankruptcy
of the City"below);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 Constitution;
the reasonable and necessary exercise, in certain exceptional situations, of the police powers inherent in
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the sovereignty of the State and its governmental bodies in the interest of serving a significant and
legitimate public purpose; and the limitations on remedies against municipal entities in the State.
Bankruptcy proceedings or the exercise of powers by the federal or State government, if initiated, could
subject the Owners of the Bonds to judicial discretion and interpretation of their rights in bankruptcy or
otherwise,and consequently may entail risks of delay, limitation or modification of their rights.
The legal opinions to be delivered concurrently with the delivery of the Bonds(including Bond Counsel's
legal opinion) will be qualified, as to the enforceability of the Bonds, the Trust Agreement, the Lease
Agreement, the Assignment Agreement and other related documents, by bankruptcy, insolvency,
reorganization, moratorium, arrangement, fraudulent conveyance and other laws relating to or affecting
creditors' rights, to the application of equitable principles, to the exercise of judicial discretion in
appropriate cases,and to the limitation on legal remedies against counties in the State. See"-Bankruptcy
of the City"below.
Bankruptcy
In addition to the limitation on remedies contained in the Trust Agreement, the rights and remedies
provided in the Trust Agreement and the Lease Agreement may be limited by and are subject to the
provisions of federal bankruptcy laws and to other laws or equitable principles that may affect the
enforcement of creditors'rights. The City is a governmental unit and therefore cannot be the subject of an
involuntary case under the United States Bankruptcy Code (the "Bankruptcy Code"). However, the City
is a municipality and therefore may seek voluntary protection from its creditors pursuant to Chapter 9 of
the Bankruptcy Code for purposes of adjusting its debts. If the City were to become a debtor under the
Bankruptcy Code,the City would be entitled to all of the protective provisions of the Bankruptcy Code as
applicable in a Chapter 9 case. Among the adverse effects of such a bankruptcy might be: (i) the
application of the automatic stay provisions of the Bankruptcy Code,which, until relief is granted,would
prevent collection of payments from the City or the commencement of any judicial or other action for the
purpose of recovering or collecting a claim against the City and could prevent the Trustee from making
payments from funds in its possession; (ii) the avoidance of preferential transfers occurring during the
relevant period prior to the filing of a bankruptcy petition; (iii) the existence of unsecured or secured debt
which may have a priority of payment superior to that of Owners of the Bonds; and(iv)the possibility of
the adoption of a plan (a"Plan") for the adjustment of the City's debt without the consent of the Trustee
or all of the Owners of the Bonds, which Plan may restructure, delay, compromise or reduce the amount
of any claim of the Owners if the Bankruptcy Court finds that the Plan is "fair and equitable" and in the
best interests of creditors.
In addition,the City could either reject the Site and Facilities Lease or the Lease Agreement or assume the
Site and Facilities Lease or the Lease Agreement despite any provision of the Site and Facilities Lease or
the Lease Agreement that makes the bankruptcy or insolvency of the City an event of default thereunder.
If the City rejects the Lease Agreement, the Trustee, on behalf of the Owners of the Bonds, would have a
pre-petition unsecured claim that may be substantially limited in amount and this claim would be treated
in a manner under a Plan over the objections of the Trustee or Owners of the Bonds. Moreover, such
rejection would terminate the Lease Agreement and the City's obligations to make payments thereunder.
The City may also be permitted to assign the Lease Agreement(or the Site and Facilities Lease) to a third
party, regardless of the terms of the transaction documents. If the City rejects the Site and Facilities
Lease,the Trustee, on behalf of the Owners of the Bonds, would have a pre-petition unsecured claim and
this claim would be treated in a manner under a Plan over the objections of the Trustee or Owners of the
Bonds. Moreover, such rejection may terminate both the Site and Facilities Lease and the Lease
Agreement and the obligations of the City to make payments thereunder.
The Authority is a public agency and, like the City,cannot be the subject of an involuntary case under the
Bankruptcy Code. The Authority may also seek voluntary protection under Chapter 9 of the Bankruptcy
Code. If the Authority were to become a debtor under the Bankruptcy Code, the Authority would be
entitled to all of the protective provisions of the Bankruptcy Code as applicable in a Chapter 9 case. Such
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a bankruptcy could adversely affect the payments under the Trust Agreement. Among the adverse effects
might be: (i) the application of the automatic stay provisions of the Bankruptcy Code, which, until relief
is granted,would prevent collection of payments from the Authority or the commencement of any judicial
or other action for the purpose of recovering or collecting a claim against the Authority and could prevent
the Trustee from making payments from funds in its possession; (ii)the avoidance of preferential transfers
occurring during the relevant period prior to the filing of a bankruptcy petition; (iii) the existence of
unsecured or secured debt which may have priority of payment superior to that of the Owners of the
Bonds;and(iv)the possibility of the adoption of a Plan for the adjustment of the Authority's debt without
the consent of the Trustee or all of the Owners of the Bonds, which Plan may restructure, delay,
compromise or reduce the amount of any claim of the Owners if the Bankruptcy Court finds that the Plan
is fair and equitable and in the best interests of creditors.
In addition, in a bankruptcy of the Authority, the assignment by the Authority to the Trustee of the Site
and Facilities Lease and the Lease Agreement could be characterized as a pledge rather than an absolute
assignment. Under such circumstances, the Authority may be able to either reject the Site and Facilities
Lease or the Lease Agreement or assume the Site and Facilities Lease or the Lease Agreement despite any
provision of the Site and Facilities Lease or the Lease Agreement that makes the bankruptcy or insolvency
of the Authority an event of default thereunder. If the Authority rejects the Site and Facilities Lease, the
Trustee, on behalf of the Owners of the Bonds, would have a pre-petition unsecured claim that may be
substantially limited in amount and this claim would be treated in a manner under a Plan over the
objections of the Trustee or Owners of the Bonds. Moreover,such rejection would terminate both the Site
and Facilities Lease and the Lease Agreement and the obligations of the City to make payments
thereunder. If the Authority rejects the Lease Agreement, the Trustee, on behalf of the Owners of the
Bonds, would have a pre-petition unsecured claim and this claim would be treated in a manner under a
Plan over the objections of the Trustee or Owners of the Bonds. Moreover,such rejection may terminate
the Lease Agreement and the City's obligations to make payments thereunder. The Authority may also be
permitted to assign the Site and Facilities Lease or the Lease Agreement to a third party,regardless of the
terms of the transaction documents.
In a bankruptcy of the City, if a material unpaid liability is owed to PERS or any other pension system
(collectively the "Pension Systems") on the filing date, or accrues thereafter, such circumstances could
create additional uncertainty as to the City's ability to make Lease Payments. Given that municipal
pension systems in California are usually administered pursuant to state constitutional provisions and, as
applicable, other state and/or city or City law, the Pension Systems may take the position, among other
possible arguments, that their claims enjoy a higher priority than all other claims, that Pension Systems
have the right to enforce payment by injunction or other proceedings outside of a City bankruptcy case,
and that Pension System claims cannot be the subject of adjustment or other impairment under the
Bankruptcy Code because that would purportedly constitute a violation of state statutory, constitutional
and/or municipal law. It is uncertain how a bankruptcy judge in a City bankruptcy would rule on these
matters. In addition, this area of law is presently very unsettled because issues of pension underfunding
claim priority, pension contribution enforcement, and related bankruptcy plan treatment of such claims
(among other pension-related matters) are presently the subject of litigation in the Chapter 9 cases of
several California municipalities,including the cities of Stockton and San Bernardino.
Constitutional Limitation on Taxes and Expenditures
State Initiative Measures Generally. Under the California Constitution, the power of initiative is
reserved to the voters for the purpose of enacting statutes and constitutional amendments. Voters have
exercised this power through the adoption of Proposition 13 ("Article XIIIA") and similar measures, the
most recent of which were approved as Propositions 22 and 26 in the general election held on
November 2,2010.
Any such initiative may affect the collection of fees, taxes and other types of revenue by local agencies
such as the City. Subject to overriding federal constitutional principles, such collection may be materially
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and adversely affected by voter-approved initiatives,possibly to the extent of creating cash-flow problems
in the payment of outstanding obligations such as the Lease Agreement.
Article XIIIA. Article XIIIA of the California Constitution limits the taxing powers of California public
agencies. Article XIIIA provides that the maximum ad valorem tax on real Facilities cannot exceed 1%of
the "full cash value" of the Facilities, and effectively prohibits the levying of any other ad valorem
Facilities tax except for taxes above that level required to pay debt service on voter-approved general
obligation bonds. "Full cash value"is defined as"the City assessor's valuation of real Facilities as shown
on the 1975/76 tax bill under `full cash value' or, thereafter, the appraised value of real Facilities when
purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment." The
"full cash value" is subject to annual adjustment to reflect inflation at a rate not to exceed 2% or a
reduction in the consumer price index or comparable local data. Article XIIIA has subsequently been
amended to permit reduction of the "full cash value" base in the event of declining Facilities values
caused by substantial damage,destruction or other factors, and to provide that there would be no increase
in the"full cash value"base in the event of reconstruction of Facilities damaged or destroyed in a disaster
and in other special circumstances. There may also be declines in valuations if the California Consumer
Price Index is negative.
The foregoing limitation does not apply to ad valorem taxes or special assessments to pay the interest and
prepayment charges on any indebtedness approved by the voters before July 1, 1978 or any bonded
indebtedness for the acquisition or improvement of real Facilities approved by two-thirds of votes cast by
the voters voting on the proposition.
In the general election held November 4, 1986, voters of the State of California approved two measures,
Propositions 58 and 60, which further amend the terms "purchase" and "change of ownership," for
purposes of determining full cash value of Facilities under Article XIIIA, to not include the purchase or
transfer of(1) real Facilities between spouses, and(2) the principal residence and the first $1,000,000 of
other Facilities between parents and children. Proposition 60 amends Article XIIIA to permit the
Legislature to allow persons over age 55 who sell their residence and buy or build another of equal or
lesser value within two years in the same city, to transfer the old residence's assessed value to the new
residence. In the March 26, 1996 general election, voters approved Proposition 193, which extends the
parents-children exception to the reappraisal of assessed value. Proposition 193 amended Article XIIIA
so that grandparents may transfer to their grandchildren whose parents are deceased, their principal
residences, and the first$1,000,000 of other Facilities without a reappraisal of assessed value.
Because the Revenue and Taxation Code does not distinguish between positive and negative changes in
the California Consumer Price Index used for purposes of the inflation factor, there was a decrease of
0.237% in 2009/10 — applied to the 2010/11 tax roll — reflecting the actual change in the California
Consumer Price Index, as reported by the State Department of Finance. For each fiscal year since Article
XIIIA has become effective (the 1978/79 Fiscal Year), the annual increase for inflation has been at least
2%except in eight fiscal years(including for Fiscal Year 2014/15)as shown below:
Tax Roll Percentage Tax Roll Percentage
1981/82 1.000% 2004/05 1.867%
1995/96 1.190% 2010/11 (0.237)%
1996/97 1.110% 2011/12 0.753%
1998/99 1.853% 2014/15 0.454%
Proposition 8 Adjustments. Proposition 8, approved in 1978, provides for the assessment of real
Facilities at the lesser of its originally determined(base year) full cash value compounded annually by the
inflation factor, or its full cash value as of the lien date, taking into account reductions in value due to
damage, destruction, obsolescence or other factors causing a decline in market value. Reductions based
on Proposition 8 do not establish new base year values, and the Facilities may be reassessed as of the
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following lien date up to the lower of the then-current fair market value or the factored base year value.
The State Board of Equalization has approved this reassessment formula and such formula has been used
by City assessors statewide. The City has seen Proposition 8 reductions from the maximum amount that
could be assessed on property since 2009. See "FINANCIAL INFORMATION - Taxable Property and
Assessed Valuation"herein.
Article XIIIB. On November 6, 1979, California voters approved Proposition 4, or the Gann Initiative,
which added Article XIIIB to the California Constitution. Article XIIIB limits the annual appropriations
of the State and any city,City, city and City, school district,authority or other political subdivision of the
State. The "base year"for establishing such appropriations limit is the 1978/79 Fiscal Year,and the limit
is to be adjusted annually to reflect changes in population, consumer prices and certain increases in the
cost of services provided by public agencies.
Appropriations subject to Article XIIIB include generally the proceeds of taxes levied by or for the entity
and the proceeds of certain State subventions, refunds of taxes, benefit payments from retirement,
unemployment insurance and disability insurance funds. "Proceeds of taxes" include,but are not limited
to, all tax revenues, certain State subventions, and the proceeds to an entity of government, from (1)
regulatory licenses, user charges and user fees, to the extent that such charges and fees exceed the costs
reasonably home in providing the regulation,product or service, and (2) the investment of tax revenues.
Article XIIIB includes a requirement that if an entity's revenues in any year exceed the amounts permitted
to be spent, the excess would have to be returned by revising tax rates or fee schedules within the next
two subsequent fiscal years.
In the June 1990 election, the voters approved Proposition I II amending the method of calculation of
State and local appropriations limits. Proposition I I I made several changes to Article XIIIB. First, the
term "change in the cost of living" was redefined as the change in the California per capita personal
income ("CPCPI") for the preceding year. Previously, the lower of the CPCPI or the United States
Consumer Price Index was used. Second, the appropriations limit for the fiscal year was recomputed by
adjusting the 1986/87 limit by the CPCPI for the three subsequent years. Third and lastly,Proposition I I I
excluded appropriations for"qualified capital outlay for fiscal 1990/91 as defined by the legislature"from
proceeds of taxes.
Section 7910 of the Government Code requires the City to adopt a formal appropriations limit for each
fiscal year. The City's appropriations limit for 2014/15 is $136,034,338. The City's appropriations
subject to the limit for 2014/15 are$83,546,419, Based on this,the appropriations limit is not expected to
have any impact on the ability of the City to continue to budget and appropriate the Lease Payments as
required by the Lease Agreement.
Proposition 62. Proposition 62 was a statutory initiative adopted in the November 1986 general election.
Proposition 62 added Sections 53720 to 53730, inclusive, to the California Government Code. It
confirmed the distinction between a general tax and special tax,established by the State Supreme Court in
1982 in City and City of San Francisco v Farrell, by defining a general tax as one imposed for general
governmental purposes and a special tax as one imposed for specific purposes. Proposition 62 further
provided that no local government or district may impose (i) a general tax without prior approval of the
electorate by majority vote or(ii) a special tax without such prior approval by two-thirds vote. It further
provided that if any such tax is imposed without such prior written approval,the amount thereof must be
withheld from the levying entity's allocation of annual Facilities taxes for each year that the tax is
collected. By its terms, Proposition 62 applies only to general and special taxes imposed on or after
August 1, 1985, Proposition 62 was generally upheld in Santa Clara City Local Transportation Authority
v Guardino,a California Supreme Court decision filed September 28, 1995.
Proposition 218. On November 5, 1996, California voters approved Proposition 218 —Voter Approval
for Local Government Taxes —Limitation on Fees,Assessments, and Charges —Initiative Constitutional
Amendment, Proposition 218 added Articles XIIIC and XIIID to the California Constitution, imposing
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certain vote requirements and other limitations on the imposition of new or increased taxes, assessments
and property-related fees and charges. Proposition 218 states that all taxes imposed by local governments
shall be deemed to be either general taxes or special taxes. Special purpose districts, including school
districts,have no power to levy general taxes. No local government may impose, extend or increase any
general tax unless and until such tax is submitted to the electorate and approved by a majority vote. No
local government may impose,extend or increase any special tax unless and until such tax is submitted to
the electorate and approved by a two-thirds vote.
Proposition 218 also provides that no tax,assessment, fee or charge shall be assessed by any agency upon
any parcel of property or upon any person as an incident of property ownership except: (i)the ad valorem
property tax imposed pursuant to Article XIII and Article XIIIA of the California Constitution, (ii) any
special tax receiving a two-thirds vote pursuant to Section 4 of Article XIIIA the California Constitution,
and (iii) assessments, fees, and charges for property related services as provided in Article XIIID.
Proposition 218 added voter requirements for assessments and fees and charges imposed as an incident of
property ownership, other than fees and charges for sewer, water, and refuse collection services. In
addition, all assessments and fees and charges imposed as an incident of property ownership, including
sewer, water, and refuse collection services, are subjected to various additional procedures, such as
hearings and stricter and more individualized benefit requirements and findings. The effect of such
provisions will presumably be to increase the difficulty a local agency will have in imposing, increasing
or extending such assessments, fees and charges.
Proposition 218 also extended the initiative power to reducing or repealing any local taxes, assessments,
fees and charges. This extension of the initiative power is not limited to taxes imposed on or after
November 6, 1996, the effective date of Proposition 218, and could result in retroactive repeal or
reduction in any existing taxes, assessments, fees and charges, subject to overriding federal constitutional
principles relating to the impairment of contracts.
Proposition 218 provides that, effective July 1, 1997, fees that are charged "as an incident of property
ownership"may not"exceed the funds required to provide the property related services"and may only be
charged for services that are"immediately available to the owner of the property"
The City does not expect the application of Proposition 218 will have a material adverse impact on its
ability to pay Lease Payments.
Voter-Approved Taxes. Palm Springs levies a utility users tax. The utility users tax was first levied
pursuant to an ordinance of the City Council adopted in July 1986. On November 3, 2009,by majority,
voters ratified the tax and approved amendments to the City's Utility User Tax ordinance, which
modernized the definitions of the Telephone User Tax portion to include, among other things, WIP, IP-
TV, text messaging, paging, and private communication services. The amendment reduced the rate for
telecommunication and video services subject to the tax from 5%to 4.5%. The tax rate for electricity and
gas services is unaffected and remains at 5%. The utility user tax represents approximately 8% of Palm
Springs's General Fund revenues. The voters also approved an access line tax in lieu of an emergency
response fee. This tax is used to fund operation of the City's 911 Communication System.
The City levies a transient occupancy tax on hotel and motel bills. In November 2001, voters in the City
approved an increase of the tax which raised the tax rate for group meeting hotels from 10.8% to 12.5%,
and the tax rate for all other hotels from 10% to 11.5%. In November 2003, voters in the City approved
an additional increase of the tax rate for group meeting hotels,which is currently 13.5%.
There is no time limit established for the collection of the utility users tax or the transient occupancy tax.
On November 8, 2011, voters approved, by majority vote, an additional 1% sales tax to be levied and
collected on behalf of the City. This additional sales tax is expected to generate approximately $11
million in Fiscal Year 2014/15. The tax will be levied and collected for 25 years.
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In November 2013, voters approved by majority vote, a measure that allows the City to choose to tax
medical cannabis dispensaries up to 15% of their revenue. The current tax rate is 10%, and the tax
commenced January 1, 2014. There is no time limit established for the collection of the medical cannabis
tax.
The City does not expect the application of Proposition 218 will have a material adverse impact on its
ability to pay Lease Payments.
Proposition 1A. Proposition I("Proposition lA"), proposed by the Legislature in connection with the
2004/05 Budget Act and approved by the voters in November 2004, restricts State authority to reduce
major local tax revenues such as the tax shifts permitted to take place in Fiscal Years 2004/05 and
2005/06. Proposition lA provides that the State may not reduce any local sales tax rate, limit existing
local government authority to levy a sales tax rate or change the allocation of local sales tax revenues,
subject to certain exceptions. Proposition IA generally prohibits the State from shifting to schools or
community colleges any share of property tax revenues allocated to local governments for any fiscal year,
as set forth under the laws in effect as of November 3, 2004. Any change in the allocation of property tax
revenues among local governments within a City must be approved by two-thirds of both houses of the
Legislature.
Proposition IA provides, however, that beginning in Fiscal Year 2008/09, the State may shift to schools
and community colleges up to 8% of local government property tax revenues, which amount must be
repaid, with interest,within three years,if the Governor proclaims that the shift is needed due to a severe
state financial hardship,the shift is approved by two-thirds of both houses and certain other conditions are
met. Such a shift may not occur more than twice in any 10-year period. The State may also approve
voluntary exchanges of local sales tax and property tax revenues among local governments within a
county.
For Fiscal Year 2009/10, 8%of the City's property tax revenues were diverted to the State as a result of a
Proposition IA suspension. The City participated in a Proposition IA Securitization Program (the
"Program") sponsored by the California Statewide Communities Development Authority. The Program
allowed the City to exchange its anticipated State property tax receivable for cash.
Proposition I also provides that if the State reduces the vehicle license fee rate below 0.65% of vehicle
value, the State must provide local governments with equal replacement revenues. Further, Proposition
IA requires the State to suspend State mandates affecting cities, counties and special districts, excepting
mandates relating to employee rights, schools or community colleges, in any year that the State does not
fully reimburse local governments for their costs to comply with such mandates.
Proposition 22. On November 2, 2010, voters in the State approved Proposition 22. Proposition 22,
known as the "Local Taxpayer, Public Safety, and Transportation Protection Act of 2010," eliminates or
reduces the State's authority to (i) temporarily shift property taxes from cities, counties and special
districts to schools, (ii) use vehicle license fee revenues to reimburse local governments for State-
mandated costs (the State will have to use other revenues to reimburse local governments), (iii) redirect
property tax increment from redevelopment agencies to any other local government, (iv)use State fuel tax
revenues to pay debt service on State transportation bonds, or (v) borrow or change the distribution of
State fuel tax revenues.
Proposition 26. On November 2, 2010,voters in the State also approved Proposition 26. Proposition 26
amends Article XIIIC of the State Constitution to expand the definition of"tax" to include "any levy,
charge, or exaction of any kind imposed by a local government" except the following: (1) a charge
imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to
those not charged, and which does not exceed the reasonable costs to the local government of conferring
the benefit or granting the privilege; (2) a charge imposed for a specific government service or product
provided directly to the payor that is not provided to those not charged, and which does not exceed the
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reasonable costs to the local government of providing the service or product; (3)a charge imposed for the
reasonable regulatory costs to a local government for issuing licenses and permits, performing
investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative
enforcement and adjudication thereof; (4) a charge imposed for entrance to or use of local government
property, or the purchase, rental, or lease of local government property; (5) a fine, penalty, or other
monetary charge imposed by the judicial branch of government or a local government, as a result of a
violation of law; (6) a charge imposed as a condition of property development; and (7) assessments and
property-related fees imposed in accordance with the provisions of Article XIIID. Proposition 26
provides that the local government bears the burden of proving by a preponderance of the evidence that a
levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the
reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a
payor bear a fair or reasonable relationship to the payor's burdens on, or benefits received from, the
governmental activity. The City does not expect the provisions of Proposition 26 to materially impede its
ability to pay Lease Payments when due.
Future Initiatives. From time to time other initiative measures could be adopted, affecting the ability of
the City to increase revenues and appropriations.
Early Redemption Risk
Early payment of the Lease Payments and early redemption of the Bonds may occur in whole or in part
without premium, on any date if the Facilities or a portion thereof are lost, destroyed or damaged beyond
repair or taken by eminent domain and from the proceeds of title insurance (see "THE BONDS -
Redemption - Extraordinary Redemption From Insurance or Condemnation Proceeds"), or if the City
exercises its right to prepay Lease Payments in whole or in part pursuant to the provisions of the Lease
Agreement and the Trust Agreement.
Loss of Tax Exemption
As discussed under the caption "LEGAL MATTERS - Tax Matters" herein, interest on the Bonds could
become includable in gross income for purposes of federal income taxation retroactive to the date the
Bonds were executed and delivered as a result of future acts or omissions of the City in violation of its
covenants contained in the Trust Agreement and the Lease Agreement. Should such an event of taxability
occur, the Bonds are not subject to special redemption or any increase in interest rate and will remain
outstanding until maturity or until prepaid under one of the redemption provisions contained in the Trust
Agreement.
In addition,Congress has considered in the past, is currently considering and may consider in the future,
legislative proposals, including some that carry retroactive effective dates, that, if enacted, would alter or
eliminate the exclusion from gross income for federal income tax purposes of interest on municipal
bonds, such as the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors
regarding any pending or proposed federal tax legislation. The City can provide no assurance that federal
tax law will not change while the Bonds are outstanding or that any such changes will not adversely affect
the exclusion of the interest on the Bonds from gross income for federal income tax purposes. If the
exclusion of the interest on the Bonds from gross income for federal income tax purposes were amended
or eliminated,it is likely that the market price for the Bonds would be adversely impacted.
IRS Audit of Tax-Exempt Bond Issues
The Internal Revenue Service has initiated an expanded program for the auditing of tax-exempt bond
issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit
by the Internal Revenue Service. It is also possible that the market value of the Bonds might be affected
as a result of such an audit of the Bonds (or by an audit of similar bonds).
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Seismic Considerations
According to the Seismic Safety Element of the City's General Plan, the City is located in a seismically
active region and the Facilities could be impacted by a major earthquake originating from the numerous
faults in the area. Seismic hazards encompass both potential surface rupture and ground shaking. These
hazards could result in damage to the Facilities, and possibly, abatement of all or a portion of the Lease
Payments.
The Palm Springs planning area has numerous fault traces that are part of the larger San Andreas Fault
Zone. Small magnitude earthquakes have occurred on these faults periodically. Of primary concern are
the Banning Fault, the Palm Canyon Fault and the San Jacinto Fault. Ground rupture occurred along the
Banning Fault Zone as a result of a magnitude 5.9 earthquake on July 8, 1986. Only minor damage was
sustained by any structures within the City. The San Jacinto Fault approaches within 6.5 miles of the City
and is considered to be one of the major branches of the San Andreas Fault system,extending from Cajon
Pass (near San Bernardino) into Mexico. The San Jacinto Fault Zone is considered to be the most
seismically active fault zone in southern California. The Palm Canyon Fault is exposed in the bedrock in
the southeastern portion of the City and has been inferred by researchers as extending northward beneath
the City under the alluvium. No evidence is available as to the existence or precise location of the Palm
Canyon Fault within the alluvium or regarding its potential activity.
No repairs to the Facilities were required as a result of any recent earthquake. The City makes no
representation regarding the impact that a future seismic event may have on the Facilities.
A major earthquake could cause widespread destruction and significant loss of life in a populated area
such as the City. If an earthquake were to substantially damage or destroy taxable property within the
City, a reduction in taxable values of property in the City and a reduction in revenues available to the
General Fund to make Lease Payments would be likely to occur. Seismic activity may also reduce or
eliminate the use and occupancy of the Facilities by the City. There is no assurance that, in the event of a
natural disaster, sufficient City reserves or Federal Emergency Management Agency assistance would be
available for the repair or replacement of any Facilities.
The City has adopted a Natural Hazards Mitigation Plan. This plan includes a hazard analysis for
earthquake,flood,landslide and fire risk,and is required to comply with Federal Emergency Management
Agency requirements for disaster relief funding.
If such events described above occur, the City's emergency response to such an event may add
unanticipated expenditures to the General Fund budget, some or all of which may not be reimbursed by
federal or state disaster funding, and, if reimbursed, may not be received by the City in a timely manner.
This could lead to reduced ability by the City to make Lease Payments. Such event could also result in
substantial damage to properties in the City, which, in turn, could substantially reduce the value of such
properties and could affect the ability or willingness of the property owners to pay their property taxes.
Secondary Market Risk
There can be no assurance that there will be a secondary market for purchase or sale of the Bonds, and
from time to time there may be no market for them, depending upon prevailing market conditions, the
financial condition or market position of firms who may make the secondary market and the financial
condition of the City.
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LEGAL MATTERS
Enforceability of Remedies
The remedies available to the Trustee and the Owners of the Bonds upon an event of default under the
Trust Agreement, the Lease Agreement, the Site Lease, or any other document described herein are in
many respects dependent upon regulatory and judicial actions which are often subject to discretion and
delay. Under existing law and judicial decisions, the remedies provided for under such documents may
not be readily available or may be limited. In the case of any bankruptcy proceeding involving the City,
the rights of the Owners could be modified at the direction of the court. The various legal opinions to be
delivered concurrently with the delivery of the Bonds will be qualified to the extent that the enforceability
of certain legal rights related to the Trust Agreement, the Lease Agreement, the Site Lease and other
pertinent documents is subject to limitations imposed by bankruptcy, reorganization, insolvency or other
similar laws affecting the rights of creditors generally and by equitable remedies and proceedings
generally.
Approval of Legal Proceedings
Jones Hall,A Professional Law Corporation, San Francisco, California, as Bond Counsel, will render an
opinion which states that the Lease Agreement represents a valid and binding obligation of the Authority
and the City, enforceable against the Authority and the City, as applicable, in accordance with its terms
except as limited by bankruptcy,insolvency,moratorium and other similar laws affecting creditors'rights,
by equitable principles,by the exercise of judicial discretion and by limitations on legal remedies against
municipalities in the State. See"APPENDIX D"hereto for the proposed form of Bond Counsel's opinion.
The Authority and the City have no knowledge of any fact or other information which would indicate that
the Trust Agreement,the Lease Agreement,the Site Lease or the Bonds are not so enforceable against the
Authority and the City, as applicable, except to the extent such enforcement is limited by principles of
equity, by state and federal laws relating to bankruptcy, reorganization, moratorium or creditors' rights
generally and by limitations on legal remedies against municipalities in the State.
Certain legal matters will be passed on by Fulbright & Jaworski LLP, a member of Norton Rose
Fulbright, Los Angeles, California, as Disclosure Counsel and by Woodruff, Spradlin & Smart, Orange,
California, as City Attorney. Fees payable to Bond Counsel and Disclosure Counsel are contingent upon
the sale and delivery of the Bonds.
Tax Exemption
Federal Tax Status. 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, 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. The
opinions described in the preceding sentence are subject to the condition that the City and the Authority
comply with all requirements of the Internal Revenue Code of 1986 (the "Tax Code") 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 City and the Authority have
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.
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Tax Treatment of Original Issue Discount and Premium. 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 each 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 is 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 straightline 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 straightline 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.
California Tax Status. In the further opinion of Bond Counsel, interest on the Bonds is exempt from
California personal income taxes.
Other Tax Considerations. 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.
Proposed Form of Tax Opinion. A copy of the proposed form of opinion of Bond Counsel is included
as"APPENDIX D."
Absence of Litigation
The Authority will furnish a certificate dated as of the date of delivery of the Bonds that there is not now
known to be pending or threatened any litigation restraining or enjoining the execution or delivery of the
Trust Agreement, the Lease Agreement or the sale or delivery of the Bonds or in any manner questioning
the proceedings and authority under which the Trust Agreement and the Site Lease and the Lease
Agreement are to be executed or delivered or the Bonds are to be delivered or affecting the validity
thereof.
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CONCLUDING INFORMATION
Rating on the Bonds
Standard & Poor's has assigned their rating of"A" to the Bonds. Such rating reflects only the views of
the rating agency and any desired explanation of the significance of such rating should be obtained from
the rating agency. Generally, a rating agency bases its rating on the information and materials furnished
to it and on investigations, studies and assumptions of its own. There is no assurance such rating will
continue for any given period of time or that such rating will not be revised downward or withdrawn
entirely by the rating agency, if in the judgment of such rating agency, circumstances so warrant. Any
such downward revision or withdrawal of such rating may have an adverse effect on the market price of
the Bonds.
Underwriting
The Bonds were sold to Stifel,Nicolaus & Company,Incorporated(the"Underwriter"). The Underwriter
is offering the Bonds at the prices set forth on the inside front cover page hereof. The initial offering
prices may be changed from time to time and concessions from the offering prices may be allowed to
dealers,banks and others. The Underwriter has purchased the Bonds at a price equal to$
which amount represents the principal amount of the Bonds, plus a net original issue premium of
$ , and less an Underwriter's discount of$ The Underwriter will pay certain
of its expenses relating to the offering.
The Financial Advisor
The material contained in this Official Statement was prepared by the Authority with the assistance of the
Financial Advisor who advised the Authority and the City as to the financial structure and certain other
financial matters relating to the Bonds. The information set forth herein received from sources other than
the City has been obtained by the Authority from sources which are believed to be reliable, but such
information is not guaranteed by the Authority or the Financial Advisor as to accuracy or completeness,
nor has it been independently verified. Fees paid to the Financial Advisor are contingent upon the sale
and delivery of the Bonds.
Continuing Disclosure
The City will covenant to provide annually certain financial information and operating data by not later
than February 15 each year commencing February 15, 2015 and to provide the audited General Purpose
Financial Statements of the City for the fiscal year ending June 30, 2014 and for each subsequent fiscal
year when they are available (together,the"Annual Report"), and to provide notices of the occurrence of
certain other enumerated events. The Annual Report will be filed by the City on the Electronic Municipal
Market Access system ("EMMA") operated by the Municipal Securities Rulemaking Board
(www.emma.msrb.org). The notices of enumerated events will be timely filed by the City with the
Municipal Securities Rulemaking Board through the EMMA system. The specific nature of the
information to be contained in the Annual Report or the notices of enumerated events and certain other
terms of the continuing disclosure obligation are set forth in "APPENDIX C - FORM OF CONTINUING
DISCLOSURE CERTIFICATE." These covenants have been made in order to assist the Underwriter in
complying with Securities and Exchange Commission Rule 15c2-12 (the "Rule"). The City has never
failed to comply,in all material respects,with its undertakings under the Rule.
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Additional Information
The summaries and references contained herein with respect to the Trust Agreement, the Site Lease, the
Lease Agreement, the Bonds, statutes and other documents, do not purport to be comprehensive or
definitive and are qualified by reference to each such document or statute and references to the Bonds are
qualified in their entirety by reference to the form hereof included in the Trust Agreement. Copies of the
Trust Agreement, the Site Lease and the Lease Agreement may be obtained after delivery of the Bonds
from the City at 3200 E.Tahquitz Canyon Way,Palm Springs,California 92262.
References
Any statements in this Official Statement involving matters of opinion,whether or not expressly so stated,
are intended as such and not as representations of fact. This Official Statement is not to be construed as a
contract or agreement between the Authority and the purchasers or Owners of any of the Bonds.
Execution
The execution of this Official Statement by the Executive Director of the Authority and the City Manager
has been duly authorized by the Authority and by the City,respectively.
CITY OF PALM SPRINGS FINANCING AUTHORITY
By: /s/
Executive Director
CITY OF PALM SPRINGS
By: /s/
City Manager
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APPENDIX A
SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
[to be provided by Bond Counsel]
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APPENDIX B
CITY AUDITED FINANCIAL STATEMENTS
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APPENDIX C
FORM OF CONTINUING DISCLOSURE CERTIFICATE
This CONTINUING DISCLOSURE CERTIFICATE (the "Disclosure Certificate") is executed
and delivered by the CITY OF PALM SPRINGS (the "City") in connection with the issuance of
$ City of Palm Springs Financing Authority Lease Revenue Refunding Bonds, 2014 Series A
(Convention Center Project) (the "Bonds"). The Bonds are being issued pursuant to a Trust Agreement,
dated as of April 1, 1991, as amended and supplemented, including as amended and supplemented by a
Supplemental Trust Agreement No. 5, dated as of June 1, 2014, by and between U.S. Bank National
Association, as trustee (the "Trustee"), the City, and the City of Palm Springs Financing Authority (the
"Trust Agreement"). The City covenants and agrees as follows:
Section 1. Puroose of this Disclosure Certificate. This Disclosure Certificate is being
executed and delivered by the City for the benefit of the Beneficial Owners and bondholders in order to
assist the Participating Underwriter in complying with Securities and Exchange Commission Rule 15c2-
12.
Section 2. Definitions. In addition to the definitions set forth in the Trust Agreement,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 City 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.
"Dissemination Agent" shall mean the City or any successor Dissemination Agent designated in
writing by the City and which has filed with the City a written acceptance of such designation. In the
absence of such a designation,the City shall act as the Dissemination Agent.
"EMMA" or "Electronic Municipal Market Access" means the centralized on-line repository
system located at www.emma.msrb.org for documents filed with the MSRB pursuant to the Rule, such as
official statements and disclosure information relating to municipal bonds, notes and other securities as
issued by state and local governments.
"Listed Events" shall mean any of the events listed in Section 5(a) and (b) of this Disclosure
Certificate.
"MSRB" means the Municipal Securities Rulemaking Board, which has been designated by the
Securities and Exchange Commission as the sole repository of disclosure information for purposes of the
Rule, or any other repository of disclosure information which may be designated by the Securities and
Exchange Commission as such for purposes of the Rule in the future.
"Participating Underwriter" shall mean Stifel,Nicolaus &Company, Incorporated, or any of the
original underwriters of the Bonds required to comply with the Rule in connection with offering of the
Bonds.
"Repository"shall mean each National Repository and each State Repository,if any.
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"Rule" shall mean Rule 15c2-12 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.
"State Repository"shall mean any public or private repository or entity designated by the State as
a state repository for the purpose of the Rule. As of the date of this Certificate, there is no State
Repository.
Section 3. Provision of Annual Reports.
(a) Delivery of Annual Report to MSRB. The City shall, or shall cause the
Dissemination Agent to, not later than February 15 in each year, commencing with the report for the
2013/14 Fiscal Year,which is due not later than February 15,2015 and to file with EMMA,in a readable
PDF or other electronic format as prescribed by the MSRB, an Annual Report that 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 cross-reference other information as
provided in Section 4 of this Disclosure Certificate; provided, that the audited financial statements of the
City may be submitted separately from the balance of the Annual Report and later than the date required
above for the filing of the Annual Report if they are not available by that date.
(b) Change of Fiscal Year. If the City's fiscal year changes, it shall give notice of
such change in the same manner as for a Listed Event under Section 5(d).
(c) Delivery of Annual Report to Dissemination Agent. Not later than fifteen days
prior to the date specified in subsection (a) for providing the Annual Report to EMMA, the City shall
provide the Annual Report to the Dissemination Agent (if other than the City). If by such date, the
Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall notify
the City.
(d) Report of Non-Compliance. If the City is unable to provide an Annual Report by
the date required in subsection(a),the Dissemination Agent shall send a notice to EMMA in substantially
the form attached as Exhibit A.
(e) Annual Compliance Certification. The Dissemination Agent shall, if the
Dissemination Agent is other than the City, file a report with the City certifying that the Annual Report
has been provided pursuant to this Disclosure Certificate,stating the date it was provided.
Section 4. Content of Annual Reports. The City's Annual Report shall contain or
incorporate by reference the following:
(a) Audited financial statements of the City for the preceding fiscal year,prepared in
accordance with the laws of the State and including all statements and information prescribed for
inclusion therein by the Controller of the State. I£the City'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.
(b) To the extent not included in the audited final statement of the City, the Annual
Report shall also include the following information, insofar as available from public records:
(i) Table No.22-General Fund Balance Sheet;and
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(ii) Table No. 23 - General Fund Statement of Revenues, Expenditures
and Changes in Fund Balance.
(iii)Table No. 24—Measure J Fund Balance Sheet; and
(iv)Table No. 25—Measure J Fund Statement of Revenues,Expenditures
and Changes in Fund Balance.
(c) 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 City 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. The City shall clearly identify each such other document so included by reference.
If the document included by reference is a final official statement, it must be available from
EMMA.
(d) In addition to any of the information expressly required to be provided under
paragraph (b) of this Section 4, the City shall provide such further information, if any, as may be
necessary to make the specifically required statements or information(as set forth herein), in the light of
the circumstances under which they are made,not misleading.
Section 5. Reporting of Significant Events.
(a) Reportable Events. The City shall, or shall cause the Dissemination (if not the
Agency)to,give notice of the occurrence of any of the following events with respect to the Bonds:
(1) Principal and interest payment delinquencies.
(2) Unscheduled draws on debt service reserves reflecting financial
difficulties.
(3) Unscheduled draws on credit enhancements reflecting financial
difficulties.
(4) Substitution of credit or liquidity providers,or their failure to perform.
(5) Defeasances.
(6) Rating changes.
(7) Tender offers.
(8) Bankruptcy, insolvency, receivership or similar event of the obligated
person.
(9) Adverse tax opinions, 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
security,or other material events affecting the tax status of the security.
(b) Material Reportable Events. The City shall give, or cause to be given, notice of
the occurrence of any of the following events with respect to the Bonds,if material:
(1) Non-payment related defaults.
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(2) Modifications to rights of security holders.
(3) Bond calls.
(4) The release, substitution, or sale of property securing repayment of the
securities.
(5) The consummation of a merger, consolidation, or acquisition involving
an obligated person or the sale of all or substantially all of the assets of the obligated
person,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.
(6) Appointment of a successor or additional trustee, or the change of name
of a trustee.
(c) Determination of Materiality of Listed Events. Whenever the City obtains
knowledge of the occurrence of a Listed Event, the City shall as soon as possible determine if such event
would be material under applicable federal securities laws.
(d) Notice to Dissemination Agent. If the City has determined that knowledge of the
occurrence of a Listed Event would be material under applicable federal securities laws, the City shall
promptly notify the Dissemination Agent(if other than the City) in writing. Such notice shall instruct the
Dissemination Agent to report the occurrence pursuant to subsection(d).
(e) Notice of Listed Events. The City shall file, or cause the Dissemination Agent to
file, a notice of the occurrence of a Listed Event, if material, with EMMA, in a readable PDF or other
electronic format as prescribed by the MSRB, in a timely manner not in excess of ten (10) business days
after the occurrence of the Listed Event. Notwithstanding the foregoing, notice of Listed Events
described in subsections (a)(5) and (b)(3) need not be given under this subsection any earlier than the
notice(if any)of the underlying event is given to Certificate holders of affected Bonds.
Section 6. Identifying Information for Filings with EMMA. All documents provided to
EMMA under this Disclosure Certificate shall be accompanied by identifying information as prescribed
by the MSRB.
Section 7. Termination of Reporting Obligation,
The City's obligations under this
Disclosure Certificate shall terminate upon the 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 City shall give notice
of such termination in the same manner as for a Listed Event under Section 5.
Section 8. Dissemination Agent.
(a) Appointment of Dissemination Agent. The initial Dissemination Agent shall be
the City. The City 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 agent, with or
without appointing a successor Dissemination Agent. If the Dissemination Agent is not the City, the
Dissemination Agent shall not be responsible in any manner for the content of any notice or report
prepared by the City pursuant to this Disclosure Certificate.
(b) Compensation of Dissemination Agent. The Dissemination Agent,if not the City,
shall be paid compensation by the City for its services provided hereunder in accordance with its schedule
of fees as agreed to between the Dissemination Agent and the City 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 not be deemed to be acting in any fiduciary capacity for the
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City, Holders or Beneficial Owners, or any other party. The Dissemination Agent may rely and shall be
protected in acting or refraining from acting upon any direction from the City or an opinion of nationally
recognized bond counsel. The Dissemination Agent may at any time resign by giving written notice of
such resignation to the City.
Section 9. Amendment: Waiver. Notwithstanding any other provision of this Disclosure
Certificate, the City may amend this Disclosure Certificate (and the Dissemination Agent shall agree to
any amendment so requested by the City that does not impose any greater duties or risk of liability on the
Dissemination Agent), and any provision of this Disclosure Certificate may be waived, provided that the
following conditions are satisfied:
(a) Change in Circumstances. If the amendment or waiver relates to the provisions
of Sections 3(a),4 or 5(a), it may only be made in connection with a change in circumstances that arises
from a change in legal requirements, change in law, or change in the identity, nature, or status of an
obligated person with respect to the Bonds,or the type of business conducted;
(b) Compliance as of Issue Date. The undertaking, as amended or taking into
account such waiver, would, in the opinion of a nationally recognized bond counsel, have complied with
the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account
any amendments or interpretations of the Rule,as well as any change in circumstances;and
(c) Consent of Holders;Non-impairment Opinion. The amendment or waiver either
(i) is approved by the Certificate holders in the same manner as provided in the Trust Agreement for
amendments to the Trust Agreement with the consent of Certificate holders,or(ii)does not,in the opinion
of nationally recognized bond counsel, materially impair the interests of the Certificate holders or
Beneficial Owners.
If this Disclosure Certificate is amended or any provision of this Disclosure Certificate is waived,
the City shall describe such amendment or waiver in the next following 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 City. In addition, if the amendment relates to the accounting
principles to be followed in preparing financial statements, (i) notice of such change shall be given in the
same manner as for a Listed Event under Section 5(d), and (ii) the Annual Report for the year in which
the change is made should present a comparison (in narrative form and also, if feasible, in quantitative
form) between the financial statements as prepared on the basis of the new accounting principles and
those prepared on the basis of the former accounting principles.
Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed
to prevent the City 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 City chooses to include any information in any Annual Report or notice of
occurrence of a Listed Event in addition to that which is specifically required by this Disclosure
Certificate, the City 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.
Section 11. Default. In the event of a failure of the City to comply with any provision of this
Disclosure Certificate, any Certificate holder or Beneficial Owner may take such actions as may be
necessary and appropriate,including seeking mandate or specific performance by court order,to cause the
City to comply with its obligations under this Disclosure Certificate. The sole remedy under this
Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate
shall be an action to compel performance.
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Section 12. Duties, Immunities and Liabilities of Dissemination Agent. All of the
immunities, indemnities, and exceptions from liability in Article IX of the Trust Agreement insofar as
they relate to the Trustee shall apply to the Dissemination Agent in this Disclosure Certificate. The
Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate,
and the City agrees to indemnify and save the Dissemination Agent,and its officers, directors,employees
and agents, harmless against any loss, expense and liabilities which it may incur arising out of the
disclosure of information pursuant to the Disclosure Certificate or arising out of or in the exercise of
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 have no duty of obligation to review
any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity
for the City, the owner of a Certificate, or any other party. The Trustee shall have no liability to any party
for any monetary damages or other financial liability of any kind whatsoever related to or arising from
any breach of this Disclosure Certificate. No person shall have any right to commence any action against
the Dissemination Agent seeking any remedy other than to compel specific performance of this
Certificate. The Dissemination Agent may rely and shall be protected in acting or refraining from acting
upon any written direction from the City or an opinion of Special Counsel. The obligations of the City
under this Section shall survive resignation or removal of the Dissemination Agent or the Trustee and
payment of the Bonds.
Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the
City, the Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners from
time to time of the Bonds,and shall create no rights in any other person or entity.
Date: ,2014 CITY OF PALM SPRINGS
By:
Its: Finance Director and Treasurer
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EXHIBIT A
NOTICE TO MSRB OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: City of Palm Springs Financing Authority
Name of Issue: $ City of Palm Springs Financing Authority
Lease Revenue Refunding Bonds,2014 Series A
(Convention Center Project)
Date of Issuance: _'2014
NOTICE IS HEREBY GIVEN that the City has not provided an Annual Report with respect to the above-
named Issue as required by the Continuing Disclosure Certificate dated , 2014, furnished by
the City in connection with the Issue. The City anticipates that the Annual Report will be filed by
Date:
CITY OF PALM SPRINGS,as Dissemination Agent
By:
Authorized Officer
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APPENDIX D
FORM OF BOND COUNSEL'S OPINION
[to be provided by Bond Counsel]
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APPENDIX E
THE BOOK-ENTRY SYSTEM
The following description of the Depository Trust Company ("DTC'), the procedures and record
keeping with respect to beneficial ownership interests in the Bonds, payment of principal, interest and
other payments on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of
beneficial ownership interest in the Bonds and other related transactions by and between DTC, the DTC
Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no
representations can be made concerning these matters and neither the DTC Participants nor the
Beneficial Owners should rely on the foregoing information with respect to such matters, but should
instead confirm the same with DTC or the DTC Participants, as the case may be.
Neither the issuer of the Bonds (the 'Issuer') nor the trustee, fiscal agent or paying agent
appointed with respect to the Bonds (the "Agent')take any responsibility for the information contained in
this Appendix.
No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute
to the Beneficial Owners(a)payments of interest,principal or premium, if any, with respect to the Bonds,
(b) certificates representing ownership interest in or other confirmation or ownership interest in the
Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered
owner of the Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC
Indirect Participants will act in the manner described in this Appendix. The current "Rules" applicable
to DTC are on file with the Securities and Exchange Commission and the current 'Procedures" of DTC
to be followed in dealing with DTC Participants are on file with DTC.
1. The Depository Trust Company("DTC"),New York,NY,will act as securities depository
for the Bonds (the "Securities"). The Securities 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 Security certificate will be issued for each issue
of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC.
If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be
issued with respect to each $500 million of principal amount, and an additional certificate will be issued
with respect to any remaining principal amount of such issue.
2. 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 1934. 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
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Participants are on file with the Securities and Exchange Commission. More information about DTC can
be found at www.dtcc.com. The information contained on these Internet sites is not incorporated herein
by reference.
3. Purchases of Securities under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of
each actual purchaser of each Security ("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
Securities 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 Securities,except in the event that use of the book-entry system for the Securities is
discontinued.
4. To facilitate subsequent transfers, all Securities 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 Securities 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 Securities; DTC's records
reflect only the identity of the Direct Participants to whose accounts such Securities 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.
5. 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 Securities may wish to take
certain steps to augment the transmission to them of notices of significant events with respect to the
Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents.
For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the
Securities 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.
6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue
are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with
respect to Securities unless authorized by a Direct Participant in accordance with DTC's MMI
Procedures. Under its usual procedures,DTC mails an Omnibus Proxy to Issuer 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 Securities are credited on the record date (identified in a listing attached to
the Omnibus Proxy).
8. Redemption proceeds and distributions on the Securities 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 Issuer or Agent, 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,Agent, or
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Issuer,subject to any statutory or regulatory requirements as may be in effect from time to time. Payment
of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as
may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent,
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.
9. DTC may discontinue providing its services as depository with respect to the Securities at
any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a
successor depository is not obtained, Security certificates are required to be printed and delivered.
10, Issuer may decide to discontinue use of the system of book-entry-only transfers through
DTC (or a successor securities depository). In that event, Security certificates will be printed and
delivered to DTC.
11. The information in this section concerning DTC and DTC's book-entry system has been
obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the
accuracy thereof.
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