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MINUTES - 07082003 - D2
-17 TO: BOARD OF SUPERVISORS � 'f'-. __;; �. CONTRA FROM: John Sweeten, County Administrator :����i:', COSTA COUNTY DATE: July S, 2003 .Vi;a�z- " SUBJECT: 2003 Series A Lease Revenue Band SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION RECOMMENDATION(S): 1. ADOPT Resolution Number 2003/427, approving the issuance of not to exceed $20 million in lease revenue bonds by the Contra Costa Financing Authority(CCCPFA)to fund various capital improvements and projects, as described below, and authorizing the necessary actions and documents in connection therein; 2. ADOPT, as the Governing Board of the CCCPFA, Resolution Number 2003/428, authorizing the issuance of not to exceed $20 million in lease revenue bonds by the Contra Costa Financing Authority (CCCPFA)to fund various capital improvements and projects, as described below, and authorizing the necessary actions and documents in connection therein; FINANCIAL IMPACT: Estimated costs and sources of funding for the projects to be financed are summarized in the table below: Project Dept. Project Annual Term Source of Annual Cost Debt bunds NCC Service West County Animal $1.9 M $160,000 25 Years Operational None Animal Shelter Services Savings _ Discovery House Health 3.5 M 355,000 13 Years Prop 36 Funds None Services Emergency various 4.7 M 720,000 10 Years User Charges None Communications Adolescent Res, Health 3.6 M 260,000 25 Years Rent from None Treatment Facil. Services Operator 1220 Morrello General 2.65 M 190,000 25 Years Rent Savings None Purchase Option Services Brentwood One- EHSD 1.2 M 110,000 15 Years State and None Stop Center Federal Funds Total $17.55 M $1,795,000 $0 CONTINUED ON ATTACHMENT: _X_YES SIGNATURE80� RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE APPROVE OTHER Z. SIGNATURE(S): ACTION OF BOARD ON Jt1Y 8, 2003 APPROVED AS RECOMMENDED X OTHER VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A X UNANIMOUS(ABSENT IV 1 TRUE AND CORRECT COPY OF AN AYES: - NOES: ACTION TAKEN AND ENTERED ABSENT: ABSTAIN: ON MINUTES OF THE BOARD OF DISPRICT III SEAT VAGARY SUPERVISORS ON THE DATE SHOWN. Contact:Jason Crapo,335-1021 ATTESTEDJULY $, 2003 JOHN SWEETEN,CLERK OF THE BOARD OF SUPERVISORS AND COUNTY ADMINISTRATOR cc: CAO,Capital Facilities and Debt Management General Services,Capital Project Management Community Development ....d, ` 8Y__s�`---� _�„�DEPUTY Sources and Uses of Bond Proceeds from this transection are currently estimated as follows: Sources: Bond Proceeds: $18,425,000 Uses: Project Fund Draws: $17,550,000 Capitalized Interest: 250,000 Cost of Issuance: 241,000 Underwriter's Discount: 177,000 Reserve Surety: 54,000 Bond Insurance: 153,000 Total. $18,425,440 Capitalized interest will be required to make debt service payments for various projects during construction prior to the time the County has useful benefit of the facilities. Staff seeks authorization to issue not to exceed $20 million in bonds for various projects in the event it becomes more cost-effective to establish a bond reserve fund instead of purchasing a reserve surety bond. The establishment of a reserve fund would require issuance of an estimated $1.3 million in additional bond proceeds, which, if required, would bring the total bond issuance to $19.7 million. The "all-in" total interest rate for this bond sale is currently estimated at approximately 4%. This estimate is subject to changes in market conditions prior to the bond sale, currently scheduled for July 29, 2003. BACKGRQUND/REASQN(S) FOR RECOMMENDATION(Sl: This bond issue will provide financing for the following capital improvement and refunding projects: West County Animal Shelter: The 'West County Animal Shelter, located at 790 San Pablo Ave., Pinole, will provide a range of animal services to Western Contra Costa County, including pet adoption, lost pet recovery and sale of animal licenses. The Board of Supervisors approved the construction contract for this project on July 9, 2002, and the project is now nearly completed. Debt service on the bonds sold for this project will be offset by decreased staffing costs resulting from operational efficiencies at this facility and the new Martinez.Animal Shelter. Discovery House: The new Discovery House will be a 40-bed residential substance abuse treatment facility for adult men located at 4545 Pacheco Blvd. It will replace the current Discovery House facility on the adjacent property, which is dilapidated and substandard for a facility of its type. The Board of Supervisors approved plans and specifications for the new Discovery House facility on May 6, 2003. The General Services Department anticipates recommending a contract award for this project this summer. Financing lease payments for this project will be made from Proposition 36 funds. Emergency Communications Improvements: On May 13, 2003, the Board of Supervisors approved a plan for upgrading the County's emergency communications system to improve the capacity, coverage and clarity of information transmitted over this system by emergency services personnel. The improvements financed with these bond proceeds will allow for reliable functioning the current system until a new system utilizing 700 MHZ or other state-of-the-art technology can be implemented. Debt service on the bond proceeds for this project will be funding from charges to users of the system. Adolescent Residential Treatment Facility: The County currently owns property at 1034 Oak Grove, Concord, which is operated by Seneca Center, Inc., as an adolescent residential treatment facility for emotionally disturbed youth through a contract with the Health Services Department. Sale of these bonds will allow for the refunding of existing debt on this facility at a lower interest rate, resulting in a decrease in annual debt service from $310,400 to an estimated $260,004. General Services Administration Building: The County has leased the 15,000 square foot office building at 1220 Morello, Martinez, since 1989. In recent years, the building has served as the administrative head quarters for the General Services Department. On June 10, 2003 the Board of Supervisors approved the exercise of the County's purchase option for the building under the current lease. Bond proceeds will allow the County to pay the $2.65 M purchase price for the building. Exercise of the purchase option will result in immediate savings to the County, as annual debt service on the bonds will be less than current annual rent. Assuming current interest rates, purchase of 1220 Morello will save the County approximately $290,000 over the remaining 6 years of the current lease. Brentwood Employment One-Stop Center: Bond proceeds will finance construction of a new 4,000 square foot facility to house an Employment One-Stop Center for the Employment and Human Services Department. The facility will be located on grounds leased from the Liberty Union High School District on the Brentwood Adult School campus. This facility will replace office space the County currently leases from the City of Brentwood at 120 Oak St. Debt service on this facility will be paid with federal Workforce Investment Act (WIA) funds. BOARD OF SUPERVISORS OF THE COUNTY OF CONTRA COSTA RESOLUTION NO. 2003/427 RESOLUTION APPROVING THE ISSUANCE BY THE COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY OF ADDITIONAL LEASE REVENUE BONDS (VARIOUS CAPITAL PROJECTS), 2003 SERIES A IN AN AMOUNT NOT TO EXCEED $20,000,000 AGGREGATE PRINCIPAL AMOUNT FOR THE FINANCING OF VARIOUS CAPITAL PROJECTS, AUTHORIZING THE FORMS OF AND DIRECTING THE EXECUTION AND DELIVERY OF A FIFTH SUPPLEMENTAL TRUST AGREEMENT, A FIFTH AMENDMENT TO FACILITY LEASE, A FIFTH AMENDMENT TO MASTER SITE LEASE AND A CONTINUING DISCLOSURE AGREEMENT; APPROVING THE FORM OF AND DISTRIBUTION OF AN OFFICIAL NOTICE OF SALE AND THE OFFICIAL STATEMENT FOR SAID BONDS; AND AUTHORIZING TAKING OF NECESSARY ACTIONS AND EXECUTION OF NECESSARY DOCUMENTS IN CONNECTION THEREWITH WHEREAS, the County of Contra Costa (the "County') and the Contra. Costa County Redevelopment Agency (tlie "Agency") have heretofore entered into a Joint Exercise of Powers Agreement, dated as of April 7, 1992 (the "Joint Powers Agreement"), which Joint Powers Agreement creates and establishes the County of Contra Costa Public Financing Authority (the "Authorit)"); WHEREAS, pursuant to Article 4 of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the "Act") and the Joint Powers Agreement, the Authority is authorized to issue bonds for financing public capital improvements whenever there are significant public benefits; WHEREAS, the Authority and U.S. Bank Trust National Association previously entered into a Trust Agreement, dated as of February 1, 1999 (as previously amended and supplemented, the "Trust Agreement"), in order to finance and refinance capital projects for the County, which Trust Agreement calls for the issuance of the bonds in one or more series pursuant to supplemental trust agreements; WHEREAS, pursuant to the Trust Agreement, the Authority has heretofore issued $74,685,000 of the Authority's Lease Revenue Bonds (Refunding and Various Capital Projects), 1999 Series A (the "1999 Series A Bonds"), $18,030,000 of the Authority's Lease Revenue Bonds (Various Capital Projects), 2001 Series A (the "2001 Series A Bonds"), $23,775,000 of the Authority's Lease Revenue Bonds (Various Capital Projects), 2001 Series B (the "2001 Series B Bonds"), $12,650,000 of the Authority's Lease Revenue Bonds (Variou8 Capital Projects), 2002 Series A (the "2002 Series A Bonds") and $25,440,000 of the Authority's Lease Revenue Bonds (Refunding and Various Capital Projects), 2002 Series B (the "2002 Series B Bonds"); oocssrI:674280.3 1 WHEREAS, in accordance with the requirements of Section 6586.5 of the Act, a public hearing regarding thefinancing proposed herein was conducted by the County on July 8, 2003; WHEREAS, notice of such hearing was published at least five days prior to such hearing in a newspaper of general circulation in the County; WHEREAS, this Board of Supervisors hereby determines that it is in the best interest of the County for the Authority to issue additional lease revenue bonds to finance various additional capital projects,including,but not limited to: Project Department Approximate Cost W. County Animal Shelter 790 San Pablo Avenue, Pinole Animal Services $1,900,000 Discovery House 4645 Pacheco Blvd.,Pacheco Health Services 3,500,000 Emergency Communications (multiple sites throughout County). DoIT 4,700,000 Adolescent Res. Treatment Facility 1034 Oak Grove, Concord Health Services 3,600,000 General Services Administration 1220 Morello, Martinez General Services 2,650,000 Brentwood One-Stop Employment Center Liberty Union Adult School 9292 d Street, Brentwood EHSD 1,200,000 $17,550,000 (collectively, the"2003 Series A Project'), WHEREAS, it is further proposed that the Authority and BNY Western Trust Company, as successor trustee (the "Trustee"), enter into a supplemental trust agreement (the "Fifth Supplemental 'Trust Agreement") acknowledged by the County, which will further supplement and amend the Trust Agreement and, pursuant to the Trust Agreement and the Fifth Supplemental Trust Agreement, the Authority will issue up to an additional not to exceed $20;000,000 aggregate principal amount of County of Contra. Costa Public Financing Authority Lease Revenue Bonds (Various Capital Projects), 2003 Series A (the "Bonds") on a parity with the 1999 Series A Bonds, the 2001 Series A Bonds, the 2001 Series B Bonds, the 2002 Series A DOCSSFi:674280.3 2 Bonds and the 2002 Series B Bonds and will use the proceeds to finance the 2003 Series A Project, fund a reserve fund and pay costs of issuance associated with such bonds; WHEREAS, it is proposed that the County enter into a Fifth Amendment to Master Site Lease (the "Fifth Amendment to Site Lease") pursuant to which it will lease the Family Law Center located at 751 Pine Street in the City of Martinez; West County Animal Shelter located at 790 San Pablo Avenue in the City of Pinole; and the Adolescent Residential Treatment Facility located at 1034 Oak Grove in the City of Concord (collectively, the "2003 Series A Facilities'), to the Authority, such leased facilities to be in addition to the facilities currently leased under the Master Site Lease, dated as of February 1, 1999, as amended, between the County and the Authority; WHEREAS, it is proposed that the County enter into a Fifth Amendment to Facility Lease(the"Fifth Amendment to Facility Lease")pursuant to which it will lease back the 2003 Series A Facilities from the Authority in addition to the facilities currently leased pursuant to the Facility Lease (Various Capital Projects), dated as of February 1, 1999, as amended, between the Authority and the County; WHEREAS, under the Fifth Amendment to Facility Lease, the County would be obligated to make additional base rental payments to the Authority which the Authority will use to pay debt service on the Bonds; WHEREAS, Tamalpais Advisors, Inc., is serving as financial advisor (the "Financial Advisor") to the County and the Authority and Orrick, Herrington & Sutcliffe LLP is serving as bond counsel ("Bond Counsel") to the County and the Authority and Lofton& Jennings is serving as Disclosure Counsel ("Disclosure Counsel") to the County and the Authority in connection with the financing; WHEREAS, the Financial Advisor and Disclosure Counsel have assisted the County and the Authority in the preparation of an Official Statement describing the Bonds and an Official Notice of Sale describing the terms of sale of the Bonds, which will be distributed to potential purchasers of the Bonds; WHEREAS, this Board has been presented with the form of each document referred to herein relating to the Bonds, and the Board has examined and approved each document and desires to authorize and direct the execution of such documents and the consummation of such financing; WHEREAS, the County has hall legal right, power and authority under the Constitution and the laws of the State of California to enter into the transactions hereinafter authorized; and WHEREAS, the County expects to finance the 2003 Series A Project on a tax- exempt basis; DOCSSF1:674280.3 3 NOW, THEREFORE, BE IT RESOLVED by the Board of Supervisors of the County of Contra Costa, as follows: Section 1. The foregoing recitals are true and correct and this Board so finds and determines. Section 2. The County hereby specifically finds and declares that the actions authorized hereby constitute and are with respect to public affairs of the County and that the statements, findings and determinations of the County set forth above are true and correct and that the issuance of the Bonds by the Authority and the financing of the 2003 Series A Project will result in demonstrable savings in effective interest rate, bond preparation,bond underwriting or bond issuance costs producing significant public benefits. Section 3. The Board of Supervisors hereby requests and approves the issuance of the Bonds by the Authority, in an aggregate principal amount of not to exceed$20,000,000 for the financing of the 2003 Series A Project. Section 4. The form of Fifth Amendment to Site Lease, on file with the Clerk of the Board of Supervisors, is hereby approved, and the Chair of the Board of Supervisors or the Vice Chair of the Board of Supervisors or the County Administrator of the County and the Clerk of the Board of Supervisors (the "Clerk") or any Deputy Clerk of the Board of Supervisors or any designee of such officials (the "Authorized Signatories") are hereby authorized and directed to execute and deliver the Fifth. Amendment to Site Lease in substantially said forth, with such changes therein as such officers may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof; rop vided, however, that the term thereof with respect to the 2003 Series A Facilities shall not exceed June 15, 2040. Section 5. The form of Fifth Amendment to Facility Lease, on file with the Clerk, is hereby approved, and any two of the Authorized Signatories are hereby authorized and directed to execute and deliver the Fifth Amendment to Facility Lease in substantially said form, with such changes therein as such officers may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof; provided, howeverthat the maximum additional annual base rental payments payable under the Fifth Amendment to Facility Lease shall not exceed $2,500,000 and the term of the Fifth Amendment to Facility Lease (including any extensions) with respect to the 2003 Series A Facilities shall not exceed June 1, 2040. Among the changes authorized to be made to the Fifth Amendment to Facility Lease are such changes as are necessary in the event the County Administrator or his designee, upon consultation with the Financial Advisor, determines it is desirable to purchase a municipal bond insurance policy and/or a reserve facility for the Bonds. Section 6. The form of Fifth Supplemental Trust Agreement by and between the Trustee and the Authority and acknowledged by the County, on file with the Clerk, is hereby approved. Any one of the Authorized Signatories is hereby authorized and directed to execute and deliver the Fifth Supplemental Trust Agreement in substantially said form, with such changes therein as such officer may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. Among the changes authorized to be made to the Fifth Supplemental Trust Agreement are such changes as are necessary in the event the DOCSSF1:674280.3 4 County Administrator or his designee, upon consultation with the Financial Advisor, determines it is desirable to purchase a municipal bond insurance policy and/or a reserve facility for the .Bonds or for the Authority to enter into an interest rate swap or other hedging product in connection with the Bonds. Section 7. The form of Preliminary Official Statement describing the Bonds, on file with the Clerk, is hereby approved and the County Administrator or his designee, is hereby authorized and directed to execute and deliver a final Official Statement in substantially said form with such additions, corrections and revisions as may be determined to be necessary or desirable by the Financial Advisor, Bond Counsel, Disclosure Counsel or the County Counsel's Office. The Financial Advisor is hereby authorized and directed to cause to be supplied to prospective underwriters and purchasers of the Bonds copies of a preliminary official statement in such form, and to supply the purchaser of the Bonds with copies of a final official statement, completed to include, among other things, the interest rate or rates and final sale information for the Bonds. The County Administrator, or his designee, is hereby authorized and directed to execute a certificate confirming that the Preliminary Official Statement has been "deemed final" by the County for purposes of Securities and Exchange Commission Rule 15c2-12. Section 8. The form of proposed Official Notice of Sale inviting bids for the Bonds on file with the Clerk is hereby approved and adopted as the Official Notice of Sale for the Bonds, with such additions, changes and corrections thereto as the County Administrator or his designee shall require or approve, such approval to be conclusively evidenced by the execution thereof. Section 9. The proposed form of Continuing Disclosure Agreement, to be dated the date of issuance of the Bonds, by and among the County and the Trustee, on file with the Clerk,is hereby approved. Any of the Authorized Signatories are hereby authorized and directed to execute and deliver the Continuing Disclosure Agreement in substantially said form,with such changes therein as such officer may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. Section 10. The Board hereby authorizes the County Administrator of his designee on behalf of the County to enter into or approve the Authority's execution and delivery of one or more investment agreements providing for the investment of moneys in the funds and accounts created under the Trust Agreement, as the County Administrator or his designee deems appropriate (collectively, the "Investment Agreement'). The Board hereby finds and determines pursuant to Government Code section 5922, that the Investment Agreement will reduce the amount and duration of interest rate risk with respect to amounts invested pursuant to such agreement. The County Administrator or his designee is hereby authorized and directed to execute and deliver or approve the execution and delivery of the Investment Agreement and any other related agreement or agreements on behalf of the County as may be approved by the County Administrator or his designee, such approval to be conclusively evidence by the execution and delivery of such agreement or agreements. Any termination amounts required to be paid by the County with respect to the Investment Agreement shall be paid from amounts invested pursuant thereto or otherwise made available therefor. DOCSSFI.674280.3 5 Section 11. The officers of the County are hereby authorized and directed, jointly and severally, to do any and all things which they may deem necessary or advisable in order to consummate the transactions herein authorized and otherwise to carry out, give effect to and comply with the terms and intent of this Resolution, including,but not limited to,preparation of title reports and/or a title insurance policy, signature certificates, no-litigation certificates, tax and rebate certificates and certificates concerning the contents of the Official Statement distributed in connection with the sale of the Bonds. The Authorized Signatories, the Director, Capital Facilities and Debt Management of the County and other appropriate officers of the County are hereby authorized and directed to execute and deliver any and all certificates, instructions as to investments, written requests and other certificates necessary or desirable to administer the Bonds or leases, pay costs of issuance or to accomplish the transactions contemplated herein. Section 12. All actions heretofore taken by the officers and agents of the County with respect to the issuance and sale of the Bonds are hereby approved and confirmed. DOCSSFI.674280.3 6 Section 13. This Resolution shall take effect from and after its date of adoption. PASSED AND ADOPTED this 8th day of ,may ,2003. Chair of the Board of Supervisors County of Contra Costa, California [Seal] ATTEST: John R. Sweeten, Clerk of the Board of Supervisors and County Administrator t By . Deputy Clerk of the Board of Supervisors of the County of Contra Costa,,State of California DocssFI:674280.3 7 CLERK'S CERTIFICATE The undersigned, Deputy Clerk of the Board of Supervisors of the County of Contra Costa,hereby certifies as follows: The foregoing is a full, true and correct copy of a resolution duly adopted at a regular meeting of the Board of Supervisors of said County duly and regularly held at the regular meeting place thereof on the eth day of ,,3 , 2003, of which meeting all of the members of said Board of Supervisors had due notice and at which a majority thereof were present; and at said meeting said resolution was adopted by the following vote: AYES: MPMISM clow, UUZM AM tit NOES: NW An agenda of said meeting was posted at least 96 hours before said meeting at the County Administration Building„ 651 Pine Street, Martinez, California, a location freely accessible to members of the public, and a brief general description of said resolution appeared on said agenda. I have carefully compared the same with the original minutes of said meeting on file and of record in my office; the foregoing resolution is a full, true and correct copy of the original resolution adopted at said meeting and entered in said minutes, and said resolution has not been amended, modified or rescinded since the date of its adoption, and the same is now in full force and effect. WUNESS my hand and the seal of the County of Contra Costa this g day of TuIY , 2003. ' ',-- ,- [Seal] Deputy Clerk of the Board of Supervisors of the County of Contra Costa, State of California UUCSSF1:674280.3 BOARD OF DIRECTORS OF THE COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY RESOLUTION NO. 2003/428 RESOLUTION AUTHORIZING THE ISSUANCE AND SALE OF ADDITIONAL LEASE REVENUE BONDS (VARIOUS CAPITAL PROJECTS), 2003 SERIES A IN AN AMOUNT NOT TO EXCEED $20,000,000 AGGREGATE PRINCIPAL AMOUNT FOR THE FINANCING OF VARIOUS CAPITAL PROJECTS, AUTHORIZING THE FORMS OF AND DIRECTING THE EXECUTION AND DELIVERY OF A FIFTH SUPPLEMENTAL TRUST AGREEMENT, A FIFTH AMENDMENT TO FACILITY LEASE, A FIFTH AMENDMENT TO MASTER SITE LEASE AND A CONTINUING DISCLOSURE AGREEMENT; APPROVING THE FORM OF AND DISTRIBUTION OF AN OFFICIAL NOTICE OF SALE AND THE OFFICIAL STATEMENT FOR SAID BONDS; AND AUTHORIZING TAKING OF NECESSARY ACTIONS AND EXECUTION OF NECESSARY DOCUMENTS IN CONNECTION THEREWITH WHEREAS, the County of Contra Costa (the "County) and the Contra Costa County Redevelopment Agency (the "Agency') have heretofore entered into a Joint Exercise of Powers Agreement, dated as of April 7, 1992 (the "Joint Powers Agreement'), which Joint Powers Agreement creates and establishes the County of Contra Costa Public Financing Authority (the "Authority"); WHEREAS, pursuant to Article 4 of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the "Act") and the Joint Powers Agreement, the Authority is authorized to issue bonds for financing public capital improvements whenever there are significant public benefits; WHEREAS, the Authority and U.S. Bank Trust National Association previously entered into a Trust Agreement, dated as of February 1, 1999 (as previously amended and supplemented, the "Trust Agreement'), in order to finance and refinance capital projects for the County, which Trust Agreement calls for the issuance of the Bonds (defined below) in one or more series pursuant to supplemental trust agreements; WHEREAS, pursuant to the Trust Agreement, the Authority has heretofore issued $74,685,000 of the Authority's Lease Revenue Bonds (Refunding and Various Capital Projects), 1999 Series A (the "1999 Series A Bonds"), $18,030,000 of the Authority's Lease Revenue Bonds (Various Capital Projects), 2001 Series A (the "2001 Series A Bonds"), $23,775,000 of the Authority's Lease Revenue Bonds (Various Capital Projects), 2001 Series B (the "2001 Series B Bonds"), $12,650,000 of the Authority's Lease Revenue Bonds (Various Capital Projects), 2002 Series A (the "2002 Series A Bonds") and $25,400,000 of the Authority's Lease Revenue Bonds (Refunding and Various Capital Projects), 2002 Series B (the "2002 Series B Bonds"); D©CSSFI:674256.3 1 WHEREAS, in accordance with the requirements of Section 6586.5 of the Act, a public hearing regarding the financing proposed herein was conducted by the County on July 8, 2003; WHEREAS, notice of such hearing was published at least five days prior to such hearing in a newspaper of general circulation in the County; WHEREAS, the Board of Supervisors, following such public hearing, determined that it is in the best interest of the County for the Authority to issue additional lease revenue bonds to finance various additional capital projects, including,but not limited to: project Department Approximate Cost W. County Animal Shelter 790 San Pablo Avenue,Pinole Animal Services $1,900,000 Discovery House 4645 Pacheco Blvd.,Pacheco Health Services 3,500,000 Emergency Communications (multiple sites throughout County) DoIT 4,700,000 Adolescent Res.Treatment Facility ' 1034 Oak Grove, Concord Health Services 3,600,400 General Services Administration 1220 Morello,Martinez General Services 2,650,000 Brentwood One-Stop Employment Center Liberty Union Adult School 929 2nd Street, Brentwood EHSD 1,200,000 $11,550,000 (collectively,the"2403 Series A Project"); WHEREAS, it is further proposed that the Authority and BNY Western Trust Company, as successor trustee (the "Trustee„), enter into a supplemental trust agreement (the "Fifth Supplemental Trust Agreement") acknowledged by the County, which will supplement and amend the Trust Agreement and authorize the Authority to issue up to an additional $20,000,000 aggregate principal amount of County of Contra Costa Public Financing Authority Lease Revenue Bonds (furious Capital projects), 2003 Series A (the "Bonds"), on a parity with the 1999 Series A Bonds, the 2001 Series A Bonds, the 2001 Series B Bonds, the 2002 Series A Bonds and the 2002 Series B Bonds and will use the proceeds to finance the 2003 Series A Project,fund a reserve fund and pay costs of issuance associated with such bonds, DOCSSFt:674255.3 2 WHEREAS, it is proposed that the Authority enter into a Fifth Amendment to Master Site Lease (the "Fifth Amendment to Site Lease") pursuant to which the County will lease the Family Law Center located at 751 Pine Street in the City of Martinez; West County Animal Shelter located at 790 San Pablo Avenue in the City of Pinole; and the Adolescent Residential Treatment Facility located at 1034 Oak Grove in the City of Concord (collectively "2003 Series A Facilities") to the Authority, such leased facilities to be in addition to the facilities currently leased pursuant to the Master Site Lease dated as of February 1, 1999, as amended,between the County and the Authority; WHEREAS, it is proposed that the Authority enter into a Fifth Amendment to Facility Lease (the"Fifth Amendment to Facility Lease")pursuant to which it will lease back the 2003 Series A Facilities to the County as additional leased facilities under the Facility Lease ('Various Capital Projects) dated as of February 1, 1999, as amended, entered into by the Authority and the County; WHEREAS, under the Fifth Amendment to Facility Lease, the County would be obligated to make additional base rental payments to the Authority which the Authority will use to pay debt service on the Bonds; WHEREAS, Tamalpais Advisors, Inc., is serving as financial advisor (the "Financial Advisor") to the County and the Authority and Orrick, Herrington & Sutcliffe LLP is serving as bond counsel ("Bond Counsel") to the County and the Authority and Lofton& Jennings is serving as disclosure counsel("Disclosure Counsel')to the County and the Authority in connection with the financing; WHEREAS, the Financial Advisor and Disclosure Counsel have assisted the County and the Authority in the preparation of an Official Statement describing the Bonds which will be distributed to potential purchasers of the Bonds; WHEREAS, a proposed form of Official Notice of Sale has been presented to this Board; WHEREAS, this Board has been presented with the form of each document referred to herein relating to the Bonds, and the Board has examined and approved each document and desires to authorize and direct the execution of such documents and the consummation of such financing, WHEREAS, the Authority has full legal right, power and authority under the laws of the State of California to enter into the transactions hereinafter authorized; and WHEREAS, the Authority expects to finance the 2003 Series A Project on a tax- exempt basis; NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the County of Contra Costa Public Financing Authority, as follows: Section 1. The foregoing recitals are true and correct and this Board so finds and determines. DOCSSFI:674256.3 3 Section 2. The issuance and sale of the Bonds by the Authority, in an aggregate principal amount of not to exceed $20,000,000 for the financing of the 2003 Series A Project is hereby authorized and approved. Section 3. The form of Fifth Amendment to Site Lease, on file with the Secretary of the Board of Directors, is hereby approved, and the Chair of the Board of Directors or the Vice Chair of the Board of Directors or the Executive Director of the Authority or the Assistant Executive Director of the Authority and the Secretary of the Board of Directors (the "Secretary) or any Assistant Secretary of the Board of Directors or any designee of such officials (the "Authorized Signatories") are hereby authorized and directed to execute and deliver the Amendment to Site Lease in substantially said form, with such changes therein as such officers may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof; Rrgy:ided however, that the term thereof with respect to the 2003 Series A Facilities shall not exceed June 15, 2040. Section 4. The form of Fifth Amendment to Facility Lease, on file with the Secretary, is hereby approved, and any two of the Authorized Signatories are hereby authorized and directed to execute and deliver the Amendment to Facility Lease in substantially said form, with such changes therein as such officers may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. Among the changes authorized to be made to such Amendment to Facility Lease are such changes as are necessary in the event the Executive Director or the Assistant Executive Director, upon consultation with the Financial Advisor, determines it is desirable to purchase amunicipal bond insurance policy and/or a reserve facility for the Bonds. Section S. The form of Fifth Supplemental Trust Agreement by and between the Trustee and the Authority and acknowledged by the County, on file with the Secretary, is hereby approved. Any two of the Authorized Signatories are hereby authorized and directed to execute and deliver the Fifth Supplemental Trust Agreement in substantially said form, with such changes therein as such officers may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. Among the changes authorized to be made to such Fifth Supplemental Trust Agreement are such changes as are necessary in the event the Executive Director or the Assistant Executive Director, upon consultation with the Financial Advisor, determines it is desirable to purchaie a municipal bond insurance policy and/or a reserve facility for the Bonds or to execute an interest rate swap or other hedging product (the "Swap"),in connection with the Bonds. Section 6. The form of Preliminary Official Statement describing the Bonds, on file with the Secretary, is hereby approved and the Executive Director or his designee, is hereby authorized and directed to execute and deliver a final Official Statement in substantially said form with such additions, corrections and revisions as may be determined to be necessary or desirable by the Financial Advisor, Bond Counsel, Disclosure Counsel or the County Counsel's Office. The Financial Advisor is hereby authorized and directed to cause to be supplied to prospective underwriters and purchasers of the Bonds copies of a preliminary official statement in such form, and to supply the purchasers of the Bonds with copies of a final official statement, completed to include, among other things the interest rate or rates, and final sale information for the Bonds,. The Executive Director or his designee, is hereby authorized and directed to execute DOCSSFI:674256.3 4 a certificate confirming that the preliminary Official Statement has been "deemed final" by the Authority for purposes of Securities and Exchange Commission Rule 15c2-12. Section 7. The form of proposed Official Notice of Sale inviting bids for the Bonds on file with the Secretary is hereby approved and adopted as the Official Notice of Sale for the Bonds, with such additions, changes and corrections thereto as the Executive Director or his designee shall require or approve, such approval to be conclusively evidenced by the execution thereof. The Secretary is hereby authorized to cause to be published a notice of the proposed sale of the Bonds as required by law. The Executive Director or his designee shall award the sale of the Bonds pursuant to the Official Notice of Sale. Section 8. The Authority acknowledges and relies upon the fact that the County has represented that it shall execute a Continuing Disclosure Agreement containing such covenants of the County as shall be necessary to allow the underwriters of the Bonds to comply with the requirements of Securities and Exchange Commission Rule 15c2-12. The Authority acknowledges and relies upon the fact that the County has covenanted that it will comply with and carry out all of the provisions of such Continuing Disclosure Agreement. Section 9. The Board hereby authorizes the Executive Director or his designee to enter into one or more investment agreements (the "Investment Agreement")providing for the investment of moneys in the funds and accounts created under the Trust Agreement and/or one or more Swaps, as the Executive Director or his designee deems appropriate. The Board hereby finds and determines pursuant to Government Code section 5922,that the Investment Agreement will reduce the amount and duration of interest rate risk with respect to amounts invested pursuant to the Investment Agreement and that the Swap is designed to reduce the amount or duration of payment,rate, spread or similar risk or result in a lower cost of borrowing when used in combination with the Bonds or enhance the relationship between risk and return with respect to investments. The Executive Director or his designee is hereby authorized and directed to execute and deliver the Investment Agreement, Swap and any other related agreement or agreements on behalf of the Authority as may be approved by the Executive Director or his designee, such approval to be conclusively evidence by the execution and delivery of such agreement or agreements. Section 10. The officers of the Authority are hereby authorized and directed, jointly and severally, to do any and all things which they may deem necessary or advisable in order to consummate the transactions herein authorized and otherwise to carry out, give effect to and comply with the terms and intent of this Resolution, including, but not limited to, executing and delivering documents related to the sale of the bonds, signature certificates, no-litigation certificates, tax and rebate certificates and certificates concerning the contents of the Official Statement distributed in connection with the sale of the Bonds. The Authorized Signatories and the Director, Capital Facilities and Debt Management of the County on behalf of the Authority are hereby authorized and directed to execute and deliver any and all certificates, instructions as to investments, written requests and other certificates necessary and desirable to administer the Bonds and the Trust Agreement or other documents authorized hereunder including executing Written Requests of the Authority authorizing disbursements from the Costs of Issuance Fund for payment of cost of issuance such as legal and financial advisor fees, trustee's fees, title DOCS5Ft:674256.3 5 insurance and bond insurance premiums, publication and printing costs, rating agency fees and similar expenses of the bond financing. Section 11. All actions heretofore taken by the officers and agents of the Authority with respect to the issuance and sale of the Bonds are hereby approved and confirmed. Section 12. This Resolution shall take effect from and after its date of adoption. PASSED AND ADOPTED this 8th day of Daly , 2003. hair of the Board of Directors County of Contra Costa Public Financing Authority [Seal] ATTEST: Deputy Clerk Docssrt:674256.3 6 NOT TO EXCEED $20,000,000 COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY LEASE REVENUE BONDS (VARIOUS CAPITAL PROJECTS), 2003 SERIES A OFFICIAL NO'T'ICE OF SALE NOTICE IS HEREBY GIVEN that facsimile proposals and electronically submitted proposals will be received by the County of Contra Costa Public Financing Authority (herein called the"Authority") at the offices of Tamalpais Advisors, Inc., 3034 Bridgeway, Suite 340, Sausalito,California 94965, facsimile number 415.331-4473, on Tuesday,July 29,2443 at the hour of 5:34 a.m., California time, for the purchase of not to exceed$24,044,000 aggregate principal amount of lease revenue bonds designated "County of Contra Costa Public Financing Authority Lease Revenue Bonds (Various Capital Projects), 2003 Series A" (herein called the "2043 Series A Bonds"), to be issued pursuant to a Trust Agreement, dated as of February 1, 1999, as amended, and as further amended by the Fifth Supplemental `frust Agreement, to be dated as of July 1, 2003 (herein called the "Trust Agreement"), by and between BNY Western Trust Company, N.A., as successor trustee (herein called the "Trustee") and the Authority. The Authority reserves the right to postpone to a later date and/or different time said public sale by announcing such postponement through The Bond Buyer Wire on Thompson Municipal Market Monitor (www.TM3.com) (the "Mews Service") not less than 1:00 p.m. (California time) on the day prior to the time bids are to be received. If no legal bid or bids are received for the 2003 Series A Bonds on said date (or such later date as is established as provided herein) at the time specified, bids will be received for the 2003 Series A Bonds on such other date and at such other time as shall be designated through. the News Service. Potential bidders will be notified via the News Service not later than 2:00 p.m. (California time)on the day prior to the date prescribed for the receipt of bids of any change to the principal payment schedule for the 2003 Series A Bonds to be utilized for the bidding process. As an accommodation to bidders, telephonic or telecopied notice of the postponement of the sale date or dates or of a change in the principal payment schedule will be given to any bidder requesting such notice to the Authority's Financial Advisor, Tamalpais Advisors, Inc., Attention: Jean Buckley, (415) 331-4473 (email: jbuckley@taadvisors.com). Failure of any bidder to receive such telephonic or telecopied notice shall not affect the legality of the sale. Bidders are referred to the Preliminary Official Statement for additional information regarding the Authority, the County of Contra Costa, California (the "County"), the 2403 Series A Bonds and the security therefor, and other matters. See "OFFICIAL STATEMENT"below. DocssFI:6saa77.a 1 TERMS RELATING TO THE 2403 SERIES A BONDS Important Note. This notice will be submitted to i-Deal LLC for posting at the TM3 website and in the Parity bid delivery system. In the event i-Deal's summary of the term of sale of the Bonds disagrees with this Official Notice of Sale in any particulars, the terms of this Oficial Notice of Sale shall control (unless notice of an amendment hereto is given as described.above). SERIES: Not to exceed $24,000,000 aggregate principal amount of 2003 Series A Bands, which are being issued as fully registered 2003 Series A Bands in denominations of $5,000 or multiples thereof, provided that no 2003 Series A Bond shall represent principal maturing in more than one year, all dated the date of delivery thereof. The 2003 Series A Bonds are the fifth series issued under the Trust Agreement and additional series of bonds may be issued on a parity with the Bonds on the terms and subject to the conditions set forth in the Trust Agreement. The County has made timely payment to date of all rental payments required to pay debt service on Bonds issued under the Trust Agreement, INTEREST RATE: Interest is payable on December 1, 2003 and semiannually thereafter on June 1 and December 1 of each year. Bidders must specify the rate or rates of interest that the 2003 Series A Bonds hereby offered for sale shall bear. Bidders will be permitted to bid different rates of interest; but (i)the maximum interest rate shall not exceed eight percent (8%) and the maximum differential between the highest and lowest rates specified in any bid shall not exceed four percent (4%) per annum; (ii) each interest rate specified in any bid must be in a multiple of one-eighth or one-twentieth of one percent per annum and a zero rate of interest cannot be specified; (iii)no 2003 Series A Bond shall bear more than one rate of interest; (iv) each 2003 Series A Bond shall bear interest from its dated date to its stated payment date at the interest rate specified in the bid; (v) all 2003 Series A Bonds payable at any one time shall bear the same rate of interest; (vi) any premium bid must be paid as part of the purchase price, and no bid will be accepted which contemplates the waiver of any interest or other concession by the bidder as a substitute for payment in full of the purchase price; (vii) any underwriting discount shall be stated as a specific sum not exceeding one percent (1.0'x/0) of the aggregate principal amount of the 2003 Series A Bonds; (viii)no original issue discount is permitted in any maturity; and (ix)the interest rate for the 2003 Series A Bonds payable in each year must either be the same as or higher than the interest rate on the 2003 Series A Bonds payable in the preceding years. The Authority reserves the right to modify or amend the terms of the sale prior to the time bids are received. BOOK-ENTRY ONLY: The 2003 Series A Bonds shall be issued in registered form by means of a book-entry system with no distribution of 2003 Series A Bonds made to the public. One 2003 Series A Bond representing each Bond maturity date will be issued to The Depository Trust Company, New York, New York ("DTC ), registered in the name of Cede & Co., its nominee. The book-entry system will evidence ownership of the 2003 Series A Bonds in the principal amount of $5,000 or any integral multiple thereof, with transfers of ownership effected on the records of DTC. Docssr::684077.2 2 PAYMENT OF DTC FEES: The Authority will submit all requisite documents to DTC for DTC-eligibility purposes. However, the purchaser of the 2003 Series A Bonds will ' be responsible for payment of all fees charged by DTC. MATURITY*. The 2003 Series A Bonds shall mature on Tune 1 in each of the years, and in the amounts, as follows: Year Year Tune 1 Amount* Tune 1 Amount* 2005 $ 2017 $ 2006 2018 2007 2019 2008 2020 2009 2021 2010 2022 2011 2023 2012 2024 2013 2025 2014 2026 2015 2027 2016 2028 Total $ ADJUSTMENT OF PRINCIPAI, PAYMENTS: The principal amounts set forth in this Official Notice of Sale reflect certain estimates of the Authority with respect to the likely interest rates of the winning bid and the premium and underwriting discount contained in the winning bid. Potential bidders will be notified via the Mews Service not later than 1:00 p.m. (California time) on the business day prior to the date prescribed for the receipt of bids, of any change to the principal payment schedule for the 2003 Series A Bonds to be utilized for the bidding process. The final maturity schedule will be designed so that the financing objectives of the County will be met. The Authority reserves the right to increase or decrease the aggregate principal amount of any maturity of the 2003 Series A Bonds by an amount not to exceed ten percent (10%) following the submission of the bids, provided, however, that the aggregate principal amount of the 2003 Series A Bonds shall not exceed $20,000,000. Each principal payment is subject to increase or decrease in $5,000 increments. The Purchaser may not withdraw its bid or change its interest rates bid as a result of any changes made to the principal amounts. The dollar amount of the price bid will be changed so that the net compensation to the successful bidder (expressed as a percentage of the aggregate principal amount of 2003 Series A Bonds) does not increase or decrease from what it would have been if no adjustment had been made to the principal amounts. 4 Preliminary,subject to change. bocssrr:684077.2 3 SERIAL BONDS AND/OR TERM BONDS: Bidders may provide that all the 2003 Series A Bonds be executed and delivered as Serial Bonds or may provide that any one or more consecutive annual principal amounts be combined into one or more Term Bonds. REOFFERING PRICE CERTIFICATE: The successful bidder for the 2003 Series A Bonds must deliver(i)reoffering prices within one hour of the bid to facilitate the final sizing of the issue and (ii) a certificate setting forth the expected final reoffering price of such 2003 Series A Bonds to the public (the "Reoffering Price Certificate") to Orrick, Herrington& Sutcliffe LLP, Old Federal Reserve Bank Building, 400 Sansome Street, San Francisco, California 94111, Attention: Mary A. Collins, by the close of business not more than one business day after the award of the 2003 Series A Bonds. The Reoffering Price Certificate shall set forth the maximum initial bona fide offering prices and concessions to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters or wholesalers) of each maturity of the 2003 Series A Bonds at which a substantial amount (at least 10%) of such maturity was sold. The form of the Reoffering Price Certificate appears as Appendix A to the Official Bid Form. For purposes of this paragraph, sales of 2003 Series A Bonds to other securities brokers or dealers will not be considered sales to the general public. REDEMPTION: The Authority shall have the right, under the circumstances described in the Preliminary Official Statement, to redeem 2003 Series A Bonds, upon the terms and conditions, and at the prices, set forth in the Preliminary Official Statement. PURPOSE: The 2003 Series A Bonds are to be issued to (i) finance various capital projects for the County, (ii) fund a reserve fund and capitalized interest and (iii)pay costs of issuance. SECURITY: The 2003 Series A Bonds are payable from, and are secured by a pledge of, Base Rental payments payable to the Authority by the County pursuant to a Facility Lease (Various Capital Projects), dated as of February 1, 1999, as amended, and as further amended by a Fifth Amendment to Facility Lease, to be dated as of July 1, 2003 (the "Facility Lease"). The County has covenanted under the Facility Lease that as long as the Facilities (as defined therein) are available for the County's use, it will take such action as may be necessary to include the Base Rental Payments in its annual budgets and to make the necessary annual appropriations therefor. The Authority will pledge to the Trustee for the benefit of the owners of the 2003.Series A Bonds the Authority's right to receive rental payments, and its right to receive and collect any proceeds of any insurance maintained under the Facility Lease. To further secure the 2003 Series A Bonds, a reserve fund will be funded as described in the Preliminary Official Statement. BOND INSURANCE POLICY: The Authority will purchase a financial guaranty insurance policy from MBIA Insurance Corporation to guarantee the scheduled payment of principal of and interest on the 2003 Series A Bonds when due. See "TME MBIA INSURANCE CORPORATION INSURANCE POLICY" in the Preliminary Official Statement. TAX-EXEMPT STATUS: In the opinion of Orrick, Herrington& Sutcliffe LLP, San Francisco, California, interest on the 2003 Series A Bonds, assuming compliance with DOCssF1:684077.2 4 certain covenants contained in the Facility Lease, the Trust Agreement and the Tax Certificate,is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. See "TAX MATTERS" in the Preliminary Oficial Statement. In the event that prior to the issuance of the 2003 Series A Bonds (a)the income received by private owners of bonds of the same type and character as the 2003 Series A Bonds shall be declared to be includable in gross income (either at the time of such declaration or at any future date) for purposes of federal income tax laws, either by the terms of such laws or by ruling of a federal income tax authority or official which is followed by the Internal Revenue Service, or by decision of any federal court, or(b)any federal income tax law is adopted that will have a substantial adverse tax effect upon owners of the 2003 Series A Bonds as such, the successful bidder may, at its option, prior to the tender of said 2003 Series A Bonds, be relieved of its obligation under the contract to purchase the 2003 Series A Bonds, and in such case the deposit accompanying its bid will be returned. LEGAL OPINION: The legal opinion of Orrick, Herrington & Sutcliffe ILP, San Francisco,California,approving the validity of the 2003 Series A Bonds will be furnished to the successful bidder without cost. DISCLOSURE COUNSEL OPINION: The successful bidder or bidders will receive a disclosure opinion addressed to them regarding the Official Statement from Lofton & Jennings, San Francisco, California to the effect that the Official Statement as of its date and as of the closing date did not contain a misstatement of material fact or omit to state any material fact necessary in order that the statements made therein in light of the circumstances under which they are made are not misleading and that the Continuing Disclosure Agreement provides a suitable basis for the successful bidder in connection with the offering of the 2003 Series A Bonds to satisfy the requirements of Rule 15c2-12 promulgated by the Securities and Exchange Commission. TERMS OF SALE BEST BID: The 2003 Series A Bonds will be awarded to the bidder offering to purchase the 2003 Series A Bonds at the lowest true interest cost to the Authority. The true interest cost for each bid will be determined on the basis of the aggregate present value of each semiannual payment. The present value will be calculated to the dated date of the 2003 Series A Bonds and will be based on the bid amount (par value plus any premium or less any discount), excluding the accrued interest from the date of the 2003 Series A Bonds to the date of the delivery of the 2003 Series A Bonds. In the event two or more bids specify the same lowest true interest cost, then the selection for award of the 2003 Series A Bonds will be made among such bidders by Taznalpais Advisors, Inc. by lot. The purchaser must pay accrued interest from the date of the 2003 Series A Bonds to the date of delivery. All interest will be computed on a 360-day year 30-day month basis from the date of the 2003 Series A Bonds. The cost of preparing the 2003 Series A Bonds will be borne by the Authority. RIGHT OF REJECTION: The Authority reserves the right, in its discretion, to reject any and all proposals and to waive any irregularity or informality in any proposals. The Authority retains absolute discretion to determine whether any bid, whether sent by facsimile or electronic transmission, is timely, complete or legible. The Authority takes no responsibility for DOCSSFi:684077.2 5 informing any bidder prior to the time for receiving bids that its bid is incomplete, illegible or not received. PROMPT AWARD: The Authority will take action awarding the 2003 Series A Bonds or rejecting all bids not later than thirty(30) hours after the expiration of the time herein prescribed for the receipt of proposals unless such time of award is waived by the successful bidder. Notice of the award will be given promptly to the successful bidder. QUALIFICATION FOR SALE; BLUE SKY: Compliance with Blue Sky laws shall be the sole responsibility of the successful bidder (the "Purchaser"). The Authority will furnish such information and take such action not inconsistent with law as the Purchaser may request and the Authority shall deem necessary or appropriate to qualify the 2003 Series A Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States of America as may be designated by the Purchaser;provided, however, that the Authority shall not execute a general or special consent to service of process or qualify to do business in connection with such qualification or determination in any jurisdiction. The Purchaser will not offer to sell or solicit any offer to buy, the 2003 Series A Bonds in any jurisdiction where it is unlawful for such Purchaser to make such offer, solicitation or sale, and the Purchaser shall comply with the Blue Sky and other securities laws and regulations of the states and jurisdictions in which the Purchaser sells the 2003 Series A Bonds. DELIVERY AND PAYMENT: Delivery of the 2003 Series A Bonds will be made to the successful bidder through DTC and is expected to occur on August 14, 2003. Payment for the 2003 Series A Bonds must be made in immediately available funds. Any expense of providing immediately available funds, whether by transfer of Federal Reserve Bank funds or otherwise, shall be borne by the purchaser. RIGHT OF CANCELLATION: The successful bidder shall have the right, at his option, to cancel the contract of purchase if the Authority shall fail to issue the 2003 Series A Bonds and tender the same for delivery within 60 days from the date of sale thereof, and in such event the successful bidder shall be entitled to the return of the deposit accompanying his bid. FORM OF BID: All bids must be for not less than all of the 2003 Series A Bonds hereby offered for sale and accrued interest to date of delivery,plus such premium or less such discount as is specified in the bid. Each bid must be delivered by facsimile or electronic transmission as described below and be received by 8:30 a.m., California time, on July 29, 2003. A facsimile transmittal sent to (415) 331.-4479, Attention: Jean Buckley, prior to the above referenced deadline will be acceptable (subject to the limitations set forth in "WARNINGS REGARDING FAX BIDS" and "WARNINGS REGARDING ELECTRONIC BIDS" immediately below). Each bid must be in accordance with the terms and conditions set forth in this Official Notice of Sale, and may be submitted on the attached Bid Form. Each bid must be accompanied by a Deposit (see "GOOD FAITH DEPOSIT"below). All bids shall be deemed to incorporate all of the terms of this Official Notice of Sale. DOCSSFI:684077.2 6 ELECTRONIC BIDS: Solely as an accommodation to bidders, the Authority will receive bids delivered electronically through the following service (the "Bid Service" or "Parity"). ■ Meals BIDCOMP Competitive Bidding System and Parity Electronic Bid Submission System 395 Hudson Street New York,NY 10014 Phone: (212) 806-8304 Fax: (212) 989-9281 Internet address: hqp://www.tm3.com If any provision of this Official Notice of Sale conflicts with information provided by the Bid Service, this Official Notice of Sale shall control. Each bidder submitting an electronic bid agrees by doing so that it is solely responsible for all arrangements with(including any charges by) the Bid Service, that the Authority does not endorse or encourage the use of the Bid Service, and that the Bid Service is not acting as an agent of the Authority. Instructions for submitting electronic bids must be obtained from the Bid Service, and the Authority does not assume any responsibility for ensuring or verifying bidder compliance with the Bid Service's procedures. The Authority shall be entitled to assume that any bid received via the Bid Services has been made by a duly authorized agent of the bidder. If a bidder submits an electronic bid for the 2003 Series A Bonds, such bidder thereby agrees to the following terms and conditions: (i) If any provision in this Official Notice of Sale with respect to the 2003 Series A Bonds conflicts with information or terms provided or required by the Bid Service, this Official Notice of Sale, including any amendments issued through the News Service, shall control; (ii) each bidder shall be solely responsible for making necessary arrangements to access the Bid Service for purposes of submitting its bid in a timely manner and in compliance with the requirements of this Official Notice of Sale; (iii) the Authority shall not have any duty or obligation to provide or assure access to the Bid Service to any bidder, and the Authority shall not be responsible for proper operation of, or have any liability for, any delays, interruptions or damages caused by use of the Bid Service or any incomplete, inaccurate or untimely bid submitted by any bidder through the Bid Service; (iv)the Authority is using the Bid Service as communication mechanisms, and not as an agent of the Authority, to conduct the electronic bidding for the 2003 Series A Bonds; (v)the Bid Service is acting as an independent contractor, and is not acting for or on behalf of the Authority; (vi)the Authority is not responsible for ensuring or verifying bidder compliance with any procedures established by the Bid Service; (vii)the Authority may regard the electronic transmission of a bid through the Bid Service (including information regarding the purchase price for the 2003 Series A Bonds and interest rates for any maturity of the 2003 Series A Bonds) as though the information were submitted on the Official Bid Form and executed on the bidder's behalf by a duly authorized signatory; (viii)if the bidder's bid is accepted by the Authority, the Official Bid Form, this Official Notice of Sale and the information that is transmitted electronically through the Bid Service shall form a contract, and the bidder shall be bound by the terms of such contract; (ix)information provided by the Bid Service to bidders shall form no part of any bid or DOCSSF 1:684077.2 7 any contract between the successful bidder and the Authority unless that information is included in this Official Notice of Sale provided by the Authority. WARNINGS REGARDING ELECTRONIC BIDS: THE AUTHORITY WILL ACCEPT BIBS IN ELECTRONIC FORM.SOLELY THROUGH PARITY ON THE OFFICIAL BID FORM CREATED FOR SUCH PURPOSE. EACH BIDDER SUBMITTING AN ELECTRONIC BID UNDERSTANDS AND AGREES BY DOING SO THAT IT IS SOLELY RESPONSIBLE FOR ALL ARRANGEMENTS WITH PARITY, THAT THE AUTHORITY NEITHER ENDORSES NOR EXPLICITLY ENCOURAGES THE USE OF PARITY, AND THAT PARITY IS NOT ACTING AS AN AGENT OF THE AUTHORITY. INSTRUCTIONS AND FORMS FOR SUBMITTING ELECTRONIC BIDS MUST BE OBTAINED FROM PARITY, AND THE AUTHORITY ASSUMES NO RESPONSIBILITY FOR ENSURING OR VERIFYING BIDDER COMPLIANCE WITH THE PROCEDURES OF PARITY. THE AUTHORITY SHALL ASSUME THAT ANY BID RECEIVED THROUGH PARITY HAS BEEN MADE BY A DULY AUTHORIZED AGENT OF THE BIDDER. THE AUTHORITY WILL MAKE ITS BEST EFFORTS TO ACCOMMODATE ELECTRONIC BIDS; HOWEVER, THE AUTHORITY, THE FINANCIAL ADVISOR AND BOND COUNSEL ASSUME NO RESPONSIBILITY FOR ANY ERROR CONTAINED IN ANY BID SUBMITTED ELECTRONICALLY, OR FOR FAILURE OF ANY BID TO BE TRANSMITTED, RECEIVED OR OPENED AT THE OFFICIAL TIME FOR RECEIPT OF BIDS. THE OFFICIAL TIME FOR RECEIPT OF BIDS WILL BE DETERMINED BY THE AUTHORITY AT THE PLACE OF BID OPENING AND THE AUTHORITY SHALL NOT BE REQUIRED TO ACCEPT THE TIME KEPT BY PARITY AS THE OFFICIAL TIME. THE AUTHORITY ASSUMES NO RESPONSIBILITY FOR INFORMING ANY BIDDER PRIOR TO THE DEADLINE FOR RECEIVING BIDS THAT ITS BID IS INCOMPLETE OR NOT RECEIVED. IN THE EVENT OF A MALFUNCTION IN THE ELECTRONIC BIDDING PROCESS, BIDDERS SHOULD SUBMIT THEIR BIDS ON THE OFFICIAL BID FORM ATTACHED HERETO?BY FAX TO: (415) 331-4473. WARNINGS REGARDING FAX BIDS: BIDS SUBMITTED BY FACSIMILE TRANSMISSION ARE DEEMED LATE AND WILL NOT BE ACCEPTED OR EVALUATED UNLESS, AT PRECISELY THE TIME INDICATED ABOVE FOR SUBMISSION OF BIDS, THE ENTIRE BID FORM HAS BEEN FULLY EJECTED FROM THE RECEIVING FACSIMILE MACHINE AT THE PLACE OF THE BID RECEIPT, AND THE INTEREST RATES, TOTAL PURCHASE PRICE, AND NAME AND SIGNATURE OF THE BIDDER ARE CLEARLY READABLE BY THAT TIME. NEITHER THE AUTHORITY, THE AUTHORITY'S FINANCIAL ADVISOR NOR BOND COUNSEL WILL ACCEPT RESPONSIBILITY FOR, AND THE BIDDEN. EXPRESSLY ASSUMES ALL RISK OF, ANY INCOMPLETE, ILLEGIBLE OR UNTIMELY BID SUBMITTED BY SUCH BIDDER BY FACSIMILE TRANSMISSION, INCLUDING BY REASON OF GARBLED TRANSMISSIONS, MECHANICAL FAILURE, ENGAGED TELEPHONE OR TELECOMMUNICATION LINES AT THE PLACE OF BID RECEIPT, OR ANY OTHER CAUSE FOR REJECTION ARISING OUT OF ANY BIDDER'S ELECTION TO DELIVER ITS BID BY SUCH MEANS. NO ATTEMPT WILL BE MADE PRIOR TO THE DEADLINE FOR RECEIPT OF BIDS TO INFORM ANY BIDDER THAT ITS BID WAS INCOMPLETE, ILLEGIBLE OR NOT RECEIVED. DOCSSF1:684077.2 8 IN THE EVENT ANY BIDDER SUBMITS MORE THAN ONE BID (WHETHER BY FACSIMILE OR OTHERWISE), THE BID MOST RECENTLY RECEIVED IN ITS ENTIRETY PRIOR TO THE DEADLINE NOTED ABOVE WILL BE CONSIDERED THE OPERATIVE BID FOR SUCH BIDDER AND ALL PREVIOUS BIDS OF SUCH BIDDER WILL BE DISREGARDED. GOOD FAITH DEPOSIT: A Good Faith Deposit ("Deposit") in the form of a certified or cashier's check or a bid bond ("Financial Surety Bond") in the amount of$200,000, payable to the order of the Authority, roust accompany each proposal as a guaranty that the bidder, if successful, will accept and pay for the 2003 Series A Bonds in accordance with the terms of the bid. If a check is used, it must accompany the bid (or be delivered no later than the submission of an electronic or facsimile bid) and be drawn on a bank or trust company having an office in San Francisco or Los Angeles,California. If a Financial Surety Bond is used,it must be from a pre-qualified insurance company whose claims paying ability is rated in the highest rating category by Moody's Investors Service or Standard & Poor's, and is licensed to issue such a bond in the State of California. The form of such Financial Surety Bond is subject to prior approval by Orrick, Herrington & Sutcliffe LLP, San Francisco, California, bond counsel, and such form must be submitted to Tamalpais Advisors, Inc., the Authority's financial advisor, a minimum of 24 hours prior to the time bids are to be received. Such Financial Surety Bond must provide that the surety shall make payment of the full amount of the Deposit by wire transfer to the Authority within 24 hours of the receipt of written notice from either the Authority or the Financial Advisor that the bidder has failed to submit the Deposit as required by this Official Notice of Sale. The Financial Surety Bond must identify each bidder whose Deposit is guaranteed by such Financial Surety Bond. If the 2003 Series A Bonds are awarded to a bidder utilizing a Financial Surety Bond, then the purchaser ("Purchaser") is required to submit its Deposit to the Authority in the form of a certified or cashier's check or wire transfer not later than 3:30 p.m., California time, on the next business day following the award. If such Deposit is not received by that time, the Financial Surety Bond may be drawn by the Authority to satisfy the Deposit requirement. The Deposit will be applied to the purchase price of the 2003 Series A Bonds. If after the award of the 2003 Series A Bonds the successful bidder fails to complete its purchase on the terms stated in its proposal, the Deposit will be retained by the Authority. The certified or cashier's check accompanying an unaccepted proposal will be returned promptly. No interest on the Deposit will accrue to any bidder. STATEMENT OF TRUE INTEREST COST; REOFFERING YIELDS: Each bidder is requested, but not required, to state in his bid the percentage true interest cost to the Authority, which shall be considered as informative only and not binding on either the bidder or the Authority. The accepted bidder shall submit a Reoffering Price Certificate in the form attached as Appendix A to the Official Bid Form, all as described under "REOFFERING PRICE CERTIFICATE"herein. NO LITIGATION: There is no litigation pending concerning the validity of the 2043 Series A Bonds, the existence of the Authority or the County or the entitlement of the officers thereof to their respective offices, and the Authority and the County will each furnish to the successful bidder a no-litigation certificate certifying to the foregoing as of and at the time of the delivery of the 2003 Series A Bonds. DOCSSF1:684077.2 9 RESALE IN OTHER STATES: The purchaser will assume responsibility for taking any action necessary to qualify the 2003 Series A Bonds for offer and sale in jurisdictions other than California, and for complying with the laws of all jurisdictions on resale of the 2003 Series A Bonds, and shall indemnify and hold harmless the Authority, the County and its officers and officials from any loss or damage resulting from any failure to comply with any such law. CUSIP NUMBERS: It is anticipated that CUSIP numbers will be printed on the 2003 Series A Bonds, but neither failure to print such numbers on any 2003 Series A Bond nor any error with respect thereto shall constitute cause for a failure or refusal by the purchaser thereof to accept delivery of and pay for the 2003 Series A Bonds in accordance with the terms of this Official Notice of Sale. All expenses in relation to the printing of CUSIP numbers on the 2003 Series A Bonds shall be paid for by the Authority, provided, however, that the CUSIP Service Bureau charge for the assignment of said numbers shall be the responsibility of and shall be paid for by the Purchaser. CALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSION FEE: Attention of bidders is directed to California Government Code Section 8856, which provides that the lead underwriter or the purchaser of the 2003 Series A Bonds will be charged the California Debt and Investment Advisory Commission fee. OFFICIAL STATEMENT: A Preliminary Official Statement has been prepared, copies of which may be obtained upon request made to the Authority or to the Authority's Financial Advisor, Tamalpais Advisors, Inc., 3030 Bridgeway, Suite 340, Sausalito, California 94965, (415) 331-4473. The preliminary Official Statement shall be "deemed final" by the Authority prior to or on the sale date for purposes of Securities Exchange Commission Rule 15c2-12(b)(1), but is subject to revision, amendment and completion in a final Official Statement. A copy of the certificate executed by the Authority indicating that the preliminary Official Statement has been deemed final as of its date will be provided to potential bidders upon request to the Financial Advisor, Tamalpais Advisors, Inc., Attention: Jean Buckley (415) 331-4473. The Executive Director of the Authority or his designee has reviewed and will further review the Official Statement and will certify that as of the date of the final Official Statement, to the best of such officer's knowledge and belief, the Official Statement does not contain an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading. The Authority will deliver to the purchaser of the 2003 Series A Bonds a certificate of the Authority as to the above, dated the date of delivery of the 2003 Series A Bonds, and further certifying that the signatory knows of no material adverse change in the condition or affairs of the Authority that would make it unreasonable for the purchaser of the 2003 Series A Bonds to rely upon the Official Statement in connection with the resale of the 2003 Series A Bonds, and authorizing the purchaser of the 2003 Series A Bonds to distribute copies of the Official Statement in connection with the resale of the 2003 Series A Bonds. The Authority will furnish to the successful purchaser, at no expense to the successful purchaser, up to 150 copies of the Official Statement within seven (7) business days of the award date. Additional copies will be made available upon request, submitted to the Financial Advisor no later than twenty-four hours after the time of receipt of bids, at the purchaser's expense, for use in connection with any resale of the 2003 Series A Bonds. DOCSSFI:684077.2 10 By making a bid for the 2003 Series A Bonds, the successful bidder agrees (i)to disseminate to all members of the underwriting syndicate, if any, copies of the final Official Statement, including any supplements prepared by the Authority, (ii)to promptly file a copy of the final Official Statement, including any supplements prepared by the Authority, with the Nationally Recognized Municipal Securities Information Repositories, and (iii)to take any and all other actions necessary to comply with applicable Securities and Exchange Commission and Municipal Securities Rulemaking Board rules governing the offering, sale and delivery of the 2003 Series A Bonds to the ultimate purchasers. CONTINUING DISCLOSURE: In order to assist bidders in complying with Securities Exchange Commission Rule 15c2w12(b)(5) (the "Rule"), the County will undertake, pursuant to a Continuing Disclosure Agreement, to provide certain annual financial information relating to the County and notices of the occurrence of certain events, if material. A description of this undertaking is set forth in the Preliminary Official Statement and will also be set forth in the Official Statement. The County has never failed to comply with the Rule in all material respects. See"CONTINUING DISCLOSURE"in the Preliminary Official Statement. RIGHT TO MODIFY OR AMEND: The Authority reserves the right to modify or amend this Official Notice of Sale in any respect, provided, however, that any such modification or amendment shall be made not later than 1:00 p.m. (California time) on the day prior to the day the bids are to be received and shall be communicated to potential bidders through the News Service. Failure of any bidder to receive notice of any modification shall not affect the sufficiency of any such notice. Dated: July 8,2003 /s/John R. Sweeten Executive Director, County of Contra Costa Public Financing Authority DOCssF I:684077.2 11 OFFICIAL BID FORM Not to Exceed$20,000,000 County of Contra Costa Public Financing Authority Lease Revenue Bonds (Various Capital Projects), 2003 Series A TO: COUNTY OF CONTRA COSTA BIDDING FIRM'S NAME: PUBLIC FINANCING AUTHORITY Ladies and Gentlemen: DATE: July 29,2003 We offer to purchase all,but not less than all,of the$20,000,000 principal amount of the above described bonds,more particularly described in your Official Notice of Sale, dated July 8,2003,all of the terms and conditions of which are made part hereof as though set forth in full in this proposal, at the aggregate principal amount thereof(together with a premium of$ ) (less an underwriter's discount of$ (not to exceed I%))plus accrued interest to the date of delivery, said interest to be payable at the rates more particularly set forth in the Schedule below. Schedule of Maturity Dates,Principal Amounts",and Interest Rates (Check+pnc) Maturity Mandatory* Date Principal" Serial' Sinking Fund Interest (Lune-11 Component Maturity Prepayment Rate 2005 $ 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019. 2020 2021 2022 2023 2024 2025 2026 2027 2028 Place a check in the appropriate column indicating whether the principal component is a serial maturity or mandatory sinking fund prepayment. Circle the final maturity of each term Bond specified. Subject to adjustment as described under"ADJUSTMENT OF PRINCIPAL PAYMENTS." DOCSSF1:6W77.2 NOTE: The interest rate bid for the Bonds payable in each year must either be the same as or higher than the interest rate bid on the Bonds payable in the preceding year. No original issue discount is permitted. Our calculation of the true interest cost, which is considered to be informative only and not a part of the proposal, is as follows: The total amount of interest payable on the Bonds during the life of the issue under the attached bid is $ . The amount of premium is $ . The amount of underwriter's discount(not to exceed I%)is$ . The true interest cost(determined as described in the section of the Official Notice of Sale entitled"Best Bid")is %. Check One: There is enclosed herewith a(certified)(cashier's)check for$200,000 payable to the order of the County of Contra Costa Public Financing Authority. We have provided the Authority with a pre-approved Financial Surety Bond as provided in the Official Notice of Sale. We agree that if we are the successful bidder for the Bonds we will provide the Authority with a Final Reoffering Price Certificate in the form attached as Exhibit AA hereto. We hereby represent that as of the date of award and as of the date of delivery of the Bonds, all members of our account either participate in DTC or clear through or maintain a custodial relationship with an entity that participates in said depository. Fallowing is a list of the members of our Respectfully submitted, account on whose behalf this bid is made. List of Members of Account: Firm: Account Manager By: Printed Name: Title: Address: Telephone No.: Fax No.: DOCSSFI:6$4077.2 2 APPENDIX A TO OFFICIAL BID FORM FORM OF REOFFERING PRICE CERTIFICATE'S This certificate is being delivered by on behalf of the purchasers (the "Purchasers") of County of Contra Costa Public Financing Authority Lease Revenue Bonds (Various Capital Projects), 2003 Series A (the "2003 Series A Bonds"). Based upon its records and information available to it, which it believes to be correct, the undersigned hereby certifies that: 1. As of July 29, 2003 (the "Sale Date"), the Purchasers have offered or reasonably expected to offer all of each maturity of the 2003 Series A Bonds listed below to the general public (excluding bond houses, brokers, or similar persons acting in the capacity of underwriters or wholesalers) in a bona fide public offering at the prices shown for each maturity. 2. The issue prices of the various maturities of the 2003 Series A Bonds as shown do not exceed the fair market prices and the yields of the various maturities are not less than the fair market yields as of the Sale Date. 3. As of the date of this certificate, all of the 2003 Series A Bonds listed have actually been offered to the general public at such prices. 4. At least 10% of each maturity of the 2003 Series A Bonds has been sold at the prices shown herein. Maturity Date June 1 Price Dated: .2003 [Name of Purchaser] By: Title: * To be delivered by the successful bidder as described under"REOFFERING PRICE CERTIFICATE" in the Official Notice of Sale. DOCSSF1:684077.2 FIFTH SUPPLEMENTAL TRUST AGREEMENT by and between COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY and BNY WESTERN TRUST COMPANY Dated as of July 1,2003 RELATING TO THE $[Amount] COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY LEASE REVENUE BONDS (VARIOUS CAPITAL PROJECTS), 2003 SERIES A (Supplementing the Trust Agreement dated as of February 1, 1999, as supplemented by the First Supplemental Trust Agreement dated as of January 1, 2001, the Second Supplemental Trust Agreement dated as of May 1,2001, the Third Supplemental Trust Agreement dated as of June 1, 2002, and the Fourth supplemental Trust Agreement dated as of July 1, 2002) DOCSSF3:674242.3 4051 1-1 23 MAC TABLE OF CONTENTS Page ARTICLE XXXVII DEFINITIONS; EQUAL SECURITY.............................. SECTION 37.01. Additional Definitions ...................................................................3 ARTICLE XXXVIII THE BONDS.......................................................................................6 SECTION 38.01. Authorization of 2003 Series A Bonds..........................................6 SECTION 38.02. Terms of the 2003 Series A Bonds................................................6 SECTION 38.03. Form of 2003 Series A Bands........................................................8 SECTION 38.04. Execution of 2003 Series A Bonds................................................8 SECTION 38.05. Transfer, Exchange and Payment of 2003 Series A Bonds...........8 SECTION 38.06. Special Covenants as to Boob-Entry Only System for 2003 SeriesA Bonds...............................................................................8 SECTION 38.07. Compliance with 2003 Series.A Continuing Disclosure Agreement.................................................................................... 10 ARTICLE XXXIX ISSUANCE OF BONDS................................................................... 10 SECTION 39.01. Procedure for the Issuance of 2003 Series A Bonds.................... 10 SECTION 39.02. 2003 Series A Project Fund......................................................... 11 SECTION 39.03. Reserve Fund Requirement Calculation...................................... 12 SECTION 39.04. Tax Covenants ............................................................................. 12 ARTICLE XL REDEMPTION OF BONDS............................................................. 12 SECTION 40.01. Extraordinary Redemption........................................................... 12 SECTION 40.02. Optional Redemption................................................................... 12 SECTION 40.03. Effect of Redemption................................................................... 13 ARTICLE XLI MUNICIPAL BOND INSURANCE; 2003 SERIES A RESERVE FACILITY....................................................................... 13 SECTION 41.01. Concerning the 2003 Series A Bond Insurer............................... 13 SECTION 41.02. Payments Under the 2003 Series A Bond Insurance Policy........ 15 SECTION 41.03. 2003 Series A Bond Insurer Default............................................ 16 SECTION 41.04. Provisions Relating to the 2003 Series A Reserve Facility......... 16 ARTICLE XLII MISCELLANEOUS PROVISIONS.................................................. 17 SECTION 42.01. 2003 Series A Bond Insurer......................................................... 17 SECTION 42.02. Validity of Supplement................................................................ 17 SECTION 42.03. Terms of 2003 Series A Bonds Subject to the Trust Agreement.................................................................................... 17 DOCs3F1:674242.3 40511-123 MAC TABLE OF CONTENTS (continued) Page SECTION 42.04. Assignment Acknowledged......................................................... 17 SECTION 42.05. Effective Date of Fifth Supplemental Trust Agreement.............. 17 SECTION 42.06. Execution in Counterparts............................................................ 17 EXHIBIT A [FORM OF 2003 SERIES A BOND]..............................................A-1 EXHIBIT B DESCRIPTION OF 2003 SEINES A PROJECT............................B-1 EXHIBIT C [FORM OF REQUISITION—COSTS OF ISSUANCE]................C-1 EXHIBIT D [FORM OF REQUISITION—PROJECT FUND] ..........................D-1 DOCSSF1:674242.3 -ii- 44511-123 MAC THIS FIFTH SUPPLEMENTAL TRUST AGREEMENT dated as of July 1, 2003, by and between the COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY (the "Authority), a joint exercise of powers authority, duly organized and validly existing pursuant to an Agreement entitled "County of Contra Costa Public Financing Authority Joint Exercise of Pourers Agreement"by and between the County of Contra Costa and the Contra Costa. County Redevelopment Agency, and BNY WESTERN TRUST COMPANY, a state banking corporation organized and existing under and by virtue of the laws of the State of California, as successor trustee (together with any successor thereto, the "Trustee"), being supplemental to the trust agreement dated as of February 1, 1999, by and between U.S. Bank Trust National Association, as original trustee and the Authority, WITNESSETH: WHEREAS, the County of Contra Costa (the "County") has leased certain real property (as further defined herein, the "Facilities") to the Authority pursuant to a Master Site Lease, dated as of February 1, 1999 (together with amendments from time to time thereto, called the"Site Lease"); WHEREAS, the County and the Authority have entered into a Fifth Amendment to Master Site Lease, dated as of July 1, 2043 (herein called the "Fifth Amendment to Master Site Lease"), to amend the Site Lease in certain respects and to lease to the Authority certain additional real property; WHEREAS, the Authority is leasing certain Facilities to the County pursuant to a Facility Lease (Various Capital Projects), dated as of February 1, 1999, as amended,including as amended by the Fifth Amendment to Facility Lease, dated as of July 1, 2403 (herein, together with other amendments thereto, collectively called the"Facility Lease"); WHEREAS,the U.S.Bank Trust National Association, as original trustee, and the Authority have heretofore executed the Trust Agreement, dated as of February 1, 1999, as supplemented by the First Supplemental Trust Agreement dated as of January 1, 2001, between the Authority and State Street Bank and Trust Company of California,N.A., as successor trustee and predecessor to the Trustee, the Second Supplemental Trust Agreement dated as of May 1, 2001, the Third Supplemental Trust Agreement dated as of June 1, 2002, the Fourth Supplemental Trust Agreement dated as of July 1, 2002 and as supplemented by this Fifth Supplemental Trust Agreement dated as of July 1, 2003 (herein, together with other supplements thereto,collectively called the"Trust Agreement„); WHEREAS, the Authority has heretofore issued pursuant to the Trust Agreement $74,685,000 County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects), 1999 Series A (the "1999 Series A Bonds"), $18,030,000 County of Contra Costa Public Financing Authority Lease Revenue Bonds(Various Capital Projects), 2001 Series A (the "2001 Series A Bonds"), $23,775,000 County of Contra Costa Public Financing Authority Lease Revenue Bonds (Various Capital Projects), 2001 Series B (the "2001 Series B Bonds"), $12,650,000 County of Contra Costa Public Financing Authority Lease Revenue Bonds (Various Capital Projects), 2002 Series A (the "2042 Series A Bonds"), and $25,440,004 County of Contra Costa Public Financing Authority Lease Revenue DOCSSF1.674242.3 44511-123 MAC Bonds (Refunding and Various Capital Projects), 2002 Series B (the "2002 Series B Bonds'), to acquire the leasehold in the Facilities and to assist the County in financing and refinancing various capital projects(as further defined herein,the"project' WHEREAS, the Authority may at any time, with the consent of the Bond Insurer, issue Additional Bonds payable from, and secured by a pledge of and lien upon,the Revenues, as provided in Section 3.013 of the Trust Agreement, provided that the proceeds of such Additional Bonds be applied to, among other things, the acquisition(by purchase or lease) of facilities to be added to the Facilities; WHEREAS, in order to provide hands for the financing of the 2003 Series A Project (hereinafter defined),the County has requested that the Authority issue the 2003 Series A Bonds (hereinafter defined) and acquire a leasehold interest in the 2003 Series A Facilities and lease the same back to the County; WHEREAS, the County will lease to the Authority the 2003 Series A Facilities pursuant to the Fifth Amendment to Master Site Lease ; WHEREAS, the County will lease back the 2003 Series A Facilities from the Authority pursuant to the terms of the Facility Lease; WHEREAS, under the Facility Lease, the County is obligated to make base rental payments to the Authority for the lease of the Facilities, WHEREAS, all rights to receive such base rental payments have been pledged without recourse by the Authority to the Trustee pursuant to the Trust Agreement; WHEREAS, under the Fifth Amendment to Facility Lease, the County is obligated to pay increased base rental payments to the Authority; WHEREAS, in consideration of such increased base rental payments and other adequate consideration, the Authority has agreed to issue bonds entitled"County of Contra Costa Public Financing Authority Lease Revenue Bonds (Various Capital Projects), 2003 Series A(the "20103 Series A Bonds"), in the aggregate principal amount of$[Amount], to provide additional funds for the Project and to acquire a leasehold interest in such additional facilities, and in connection therewith the Authority and the County have provided for the amendment of the Site Lease and the Facility Lease; WHEREAS, the 2003 Series A Bonds are payable from Revenues on a parity basis with the 1999 Series A Bonds, the 2001 Series A Bonds, the 2001 Series B Bonds, the 2002 Series A Bonds,the 2002 Series B Bands and any Additional Bonds hereafter issued by the Authority under the Trust Agreement; and WHEREAS, all acts and proceedings required by law necessary to make the 2003 Series A Bonds,when executed by the Authority, authenticated and delivered by the Trustee and duly issued, the valid, binding and legal obligations of the Authority payable in accordance with their terms, and to constitute the Trust Agreement a valid and binding agreement of the parties hereto for the uses and purposes herein set forth in accordance with its terms, have been done DOCSSF1.674242.3 40511-123 MAC 2 and taken, and the execution and delivery of this Fifth Supplemental Trust Agreement have been in all respects duly authorized; NOW, THEREFORE, THIS FIFTH SUPPLEMENTAL TRUST AGREEMENT WITNESSETH, that in order to secure the full and timely payment of the principal of,premium, if any, and the interest on all Bonds at any time issued and outstanding under the Trust Agreement, according to their tenor, and to secure the performance and observance of all the covenants and conditions therein and herein set forth, and to declare the terms and conditions upon and subject to which the Bonds are to be issued and received, and in consideration of the premises and of the mutual covenants herein contained and of the purchase and acceptance of the Bonds by the holders thereof, and for other valuable considerations, the receipt whereof is hereby acknowledged, the Authority does hereby covenant and agree with the Trustee, for the benefit of the respective holders from time to time of the Bonds, as follows: ARTICLE XXXVII DEFINITIONS; ENTAL, SECURITY SECTION 37.01. Additional Definitions. Unless the context otherwise requires, the terms defined in this Section shall for all purposes of the Trust Agreement and of any amendment hereof or supplement hereto and of any certificate, opinion, request or other document mentioned herein or therein have the meanings defined herein, the following definitions to be equally applicable to both the singular and plural forms of any of the terms defined herein and to the extent the definitions in this Section differ from the definitions of such terms contained in Section 1.01 of the Trust Agreement, the definitions in this Section shall control and the definitions in Section 1.01 shall be amended accordingly. Capitalized terms not otherwise defined herein shall have the meaning assigned to such terms in the Facility Lease. Facility ease The term "Facility Lease" means that certain lease, entitled "Facility Lease (Various Capital Projects)," by and between the Authority and the County, dated as of February 1, 1999, which lease or a memorandum thereof was recorded in the office of the County Recorder of the County on March 4, 1999 under Recorder's Serial No. 99-0059812, as originally executed and recorded or as it may from time to time be supplemented, modified or amended pursuant to the provisions hereof and thereof, including the Fifth Amendment to Facility Lease. Fifth Amendment to FacilitLease The term "Fifth Amendment to Facility Lease" means that certain lease and instrument, entitled "Fifth Amendment to Facility Lease,"by and between the Authority and the County, dated as of July 1, 2003, which instrument or a memorandum thereof was recorded in the office of the County Recorder of the County on , 2003 under Recorder's Serial No. as originally executed and recorded or as it may from time to time be supplemented, modified or amended pursuant to the provisions hereof and thereof. IOCSSF1:674242.3 40511-123 MAC 3 Fifth Amendment to Master Site Lease The term "Fifth Amendment to Master Site Lease" means that certain lease and instrument, entitled "Fifth Amendment to Master Site Lease," by and between the County and the Authority, dated as of July 1, 2003, which instrument or a memorandum thereof was recorded in the office of the County Recorder of the County on , 2403 under Recorder's Serial Number , as originally executed and recorded or as it may from time to time be supplemented, modified or amended pursuant to the provisions hereof and thereof. Fifth Supplemental Trust Agreement The term "Fifth Supplemental Trust Agreement" means this Fifth Supplemental Trust Agreement, dated as of July 1, 2003, by and between the Trustee and the Authority, executed and delivered in accordance with the Trust Agreement and which is supplemental to the Trust Agreement. Site Lease The term "Site Lease" means that certain lease, entitled "Master Site Lease," by and between the County and the Authority, dated as of February 1, 1999, which lease or a memorandum thereof was recorded in the office of the County Recorder of the County on March 4, 1999 under Recorder's Serial Number 99-0059811, as originally executed and recorded or as it may from time to time be supplemented, modified or amended pursuant to the provisions hereof and thereof including the Fifth.Amendment to Master Site Lease. 2003 Series A Bond Insurance Pglicy The term "2003 Series A Bond Insurance Policy" means the insurance policy issued by the 2403 Series A Bond Insurer guaranteeing the scheduled payment of principal of and interest on all or a portion of the 2003 Series A Bonds when due. 2403 Series A Bond Insurer The term "2003 Series A Bond Insurer" means MBIA Insurance Corporation, or any successor thereto or assignee thereof. 2003 Series A Bonds The term "2043 Series A Bonds" means the bonds issued by the Authority under and pursuant to the Trust Agreement and this Fifth Supplemental Trust Agreement, the proceeds of which will be applied to the financing of the 2003 Series A Project and to the payment of costs related thereto. 2003 Series A Continuing Disclosure Afreement The term. "2003 Series A Continuing Disclosure Agreement" means that certain Continuing Disclosure Agreement among the County and the Trustee dated the date of issuance DOCssFt:674242.3 40511-123 MAC 4 of the 2003 Series A Bonds, as originally executed and as it may be amended from time to time in accordance with the terms thereof. 2003 Series A Costs of Issuance Fund The term "2003 Series A Costs of Issuance Fund" means the fund by that name established pursuant to Section 39.01 of this Fifth Supplemental Trust Agreement. 2003 Series A Facilities The term "2003 Series A Facilities" means additional Facilities consisting of the following Family Law Center located at 751 Pine Street in the City of Martinez; West County Animal Shelter located at 790 San Pablo Avenue in the City of Pinole; and the Adolescent Residential Treatment Facility located at 1034 Oak Grove in the City of Concord; 2003 Series A Financial Guaranty Agreement The term "2003 Series A Financial Guaranty Agreement" means the Financial Guaranty Agreement, dated the date of issuance of the 2003 Series A Bonds, between the Authority and the 2003 Series A Reserve Facility Provider. 2003 Series A Project The term. "2003 Series A Project" means the Subsequent Phase of the Project financed with the proceeds of the 2003 Series A Bonds being the facilities and improvements described in Exhibit B to this Fifth Supplemental Trust Agreement, as the same may be changed by notice to the Trustee from the County. 2003 Series A Project Fund The term "2003 Series A Project Fund" means the fund of that name created pursuant to Section 39.02. 2003 Series A Reserve Facility The term "2003 Series A Reserve Facility"means the surety bond, effective as of the date of issuance of the 2003 Series A Bonds, issued by the 2003 Series A Reserve Facility Provider. 2003 Series A Reserve Facility Provider The term "2003 Series A Reserve Facility Provider" means MBIA Insurance Corporation, as issuer of the 2003 Series A Reserve Facility. DOCSSFI.674242.3 4051 1-1 23 MAC ARTICLE XXXVIII THE BONDS SECTION 38.01. Authorization of 2003 Series A Bonds. (a) A fifth Series of Bonds is hereby created and designated "County of Contra Costa Public Financing Authority Lease Revenue Bonds (Various Capital Projects), 2003 Series A." The aggregate principal amount of 2003 Series A Bonds which may be issued and Outstanding under this Fifth Supplemental Trust Agreement shall not exceed $[Amount]. The 2003 Series A Bonds shall be payable from the Revenues and secured by a pledge of and charge and lien upon the Revenues equal to the pledge, charge and lien securing the Outstanding Bonds. The 2003 Series A Bonds are issued in accordance with Article 111. (b) The Authority has reviewed all proceedings heretofore taken relative to the authorization of the 2003 Series A Bonds and has found, as a result of such review, and hereby finds and determines that all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in the issuance of the 2003 Series A Bonds do exist, have happened and have been performed in due time, form and manner as required by law, and that the Authority is now duly authorized, pursuant to each and every requirement of the Act, to issue the 2003 Series A Bonds in the form and manner provided herein for the purpose of providing funds to finance the Project,including the 2003 Series A Project and that the 2003 Series A Bonds shall be entitled to the benefit, protection and security of the provisions hereof. (c) The validity of the issuance of the 2003 Series A Bonds shall not be dependent on or affected in any way by the proceedings taken by the Authority for the finance and refinancing of the Project or by any contracts made by the Authority or its agents in connection therewith, and shall not be dependent upon the performance by any person, firm or corporation of his or its obligation with respect thereto. The 2003 Series A Bonds shall be deemed to be issued, within the meaning hereof, whenever the definitive 2003 Series A Bonds (or any temporary 2003 Series A Bonds exchangeable therefor) shall have been delivered to the purchaser thereof and the proceeds of sale thereof received. SECTION 38.02. Terms of the 2003 Series A Bonds. (a) The 2003 Series A Bonds shall be issued in the aggregate principal amount of $[Amount]. The 2003 Series A Bonds shall be dated the date of issuance thereof, shall be issued only in fully registered form in Authorized Denominations (not exceeding the principal amount of 2003 Series A Bonds maturing at any one time), and shall mature in the years and in the principal amounts and bear interest at the rates as set forth in the following schedule, subject to prior redemption as described in Article XL hereof- DOCSSF3:674242.3 40531-123 MAC 6 County of Contra Costa Public Financing Authority Lease Revenue Bonds (Various Capital Projects), 2003 Series A Maturity Date June 1 Principal Amount Interest Rate 2004 $ % 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2028 The 2003 Series A Bonds shall bear interest at the rates set forth above, payable commencing December 1, 2003, and semiannually thereafter on June 1 and December 1 in each year. The 2003 Series A Bonds shall bear interest from the Interest Payment Date next preceding the date of authentication thereof, unless such date of authentication is an Interest Payment Date, in which event they shall bear interest from such date, or unless such date of authentication is prior to the Record Date for the first Interest Payment Date, in which event they shall bear interest from their dated date. The amount of interest so payable on any Interest Payment Date shall be computed on the basis of a 360-day year consisting of twelve 30-day months. (b) Payment of interest on the 2003 Series A Bonds due on or before the maturity or prior redemption thereof shall be paid by check mailed by first class mail on each Interest Payment Date to the person in whose name the Bond is registered as of the applicable Record Date for such Interest Payment Date at the address shown on the registration books maintained by the Trustee pursuant to Section 2.07; provided, however, that interest on the 2003 Series A Bonds shall be paid by wire transfer or other means to provide immediately available funds to any Owner of at least $1,000,000 in aggregate principal amount of such Series of Bonds, at its option, to an account within the United States of America according to wire instructions given to the Trustee in writing for such purpose and on file as of the applicable Record Date preceding the Interest Payment Date in accordance with Section 2.02 of the Trust Agreement. DOCSSF1:674242.3 40511-123 MAC 7 SECTION 38.03. Form of 2003 Series A Bands, The 2003 Series A Bands and the authentication and registration endorsement and assignment to appear thereon shall be substantially in the forms set forth in Exhibit A hereto attached and by this reference herein incorporated. SECTION 38.44. Execution of 2003 Series A Bonds. The Chair or the Executive Director of the Authority is hereby authorized and directed to execute each of the 2003 Series A Bonds on behalf of the Authority and the Secretary or Assistant Secretary of the Authority is hereby authorized and directed to countersign each of the 2003 Series A Bonds on behalf of the Authority. The signatures of such officers may be by printed, lithographed or engraved by facsimile reproduction. In case any officer whose signature appears on the 2003 Series A Bonds shall cease to be such officer before the delivery of the 2003 Series A Bonds to the purchaser thereof, such signature shall nevertheless be valid and sufficient for all purposes as if such officer had remained in office until such delivery of the 2003 Series A Bonds. Only those 2003 Series A Bonds bearing thereon a certificate of authentication in the form set forth in Exhibit A hereto, executed manually and dated by the Trustee, shall be entitled to any benefit,protection or security hereunder or be valid or obligatory for any purpose, and such certificate of the Trustee shall be conclusive evidence that the 2403 Series A Bonds so authenticated have been duly authorized, executed, issued and delivered hereunder and are entitled to the benefit,protection and security hereof. SECTION 38.45. Transfer, Exchange and Payment of 2003 Series A Bonds. Any 2403 Series A Bond may, in accordance with its terms,be transferred, paid or exchanged as provided in Section 2.05 through Section 2.48, inclusive. SECTION 38.06. Special Covenants as to Book-Enja Only System for 2003 Series A Bonds. (a) Except as otherwise provided in subsections (b) and (c) of this Section 32.06, all of the 2003 Series A Bonds initially issued shall be registered in the name of Cede& Co., as nominee for DTC, or such other nominee as DTC shall request pursuant to the Representation Letter. Payment of the interest on any 2003 Series A Bond registered in the name of Cede&Co. shall be made on each Interest Payment:Date for such 2003 Series A Bonds to the account,in the manner and at the address indicated in or pursuant to the Representation Letter. (b) The 2003 Series A Bonds initially shall be issued in the form of a single authenticated fully registered bond for each stated maturity of such 2003 Series A Bonds, representing the aggregate principal amount of the 2003 Series A Bands of such maturity. Upon initial issuance, the ownership of all such 2003 Series A Bonds shall be registered in the registration records maintained by the Trustee pursuant to Section 2.47 in the name of Cede& Co., as nominee of DTC, or such other nominee as DTC shall request pursuant to the Representation fetter. The Trustee, the Authority and any paying agent may treat DTC (or its nominee) as the sole and exclusive owner of the 2003 Series A Bonds.registered in its name for the purposes of payment of the principal or redemption price of and interest on such 2003 Series A Bonds, selecting the 2403 Series A Bonds or portions thereof to be redeemed, giving any notice permitted or required to be given to Bondholders hereunder, registering the transfer of DOCSSF1:674242.3 40511-123 MAC 8 2403 Series A Bonds, obtaining any consent or other action to be taken by Bondholders of the 2043 Series A Bonds and for all other purposes whatsoever; and neither the Trustee nor the Authority or any paying agent shall be affected by any notice to the contrary. Neither the Trustee nor the Authority or any paying agent shall have any responsibility or obligation to any "Participant" (which shall mean, for purposes of this Section 32.46, securities brokers and dealers, banks, trust companies, clearing corporations and other entities, some of whom directly or indirectly own DTC), any person claiming a beneficial ownership interest in the 2043 Series A Bonds under or through DTC or any.Participant, or any other person which is not shown on the registration records as being a Bondholder, with respect to (i)the accuracy of any records maintained by DTC or any Participant, (ii)the payment by DTC or any Participant of any amount in respect of the principal or redemption price of or interest on the 2003 Series A Bonds, (iii)any notice which is permitted or required to be given to Bondholders of 2043 Series A Bonds hereunder, (iv)the selection by DTC or any Participant of any person to receive payment in the event of a partial redemption of the 2003 Series A Bonds, or(v) any consent given or other action taken by DTC as Bondholder of 2003 Series A Bonds. Notwithstanding anything to the contrary contained in this Trust Agreement, the Trustee shall pay all principal of and premium, if any, and interest on the 2003 Series A Bonds only at the times, to the accounts, at the addresses and otherwise in accordance with the Representation Letter, and,all such payments shall be valid and effective to satisfy fully and discharge the Authority's obligations with respect to the payment of the principal of and premium, if any, and interest on the 2003 Series A Bonds to the extent of the sum or sums so paid. 'Upon delivery by DTC to the Trustee of written notice to the effect that DTC has determined to substitute a new nominee in place of its then existing nominee, the 2003 Series A Bonds will be transferable to such new nominee in accordance with subsection(e)of this Section 32.06. (c) In the event that the Authority determines that the 2003 Series A Bonds should not be maintained in book-entry form, the Trustee shall, upon the written instruction of the Authority, so notify DTC, whereupon DTC shall notify the Participants of the availability through DTC of bond certificates. In such event,the 2003 Series A Bonds will be transferable in accordance with subsection (e) of this Section 32.06. DTC may determine to discontinue providing its services with respect to the 2003 Series A Bonds or a portion thereof, at any time by giving written notice of such discontinuance to the Authority or the Trustee and discharging its responsibilities with respect thereto under applicable law. In such event, the 2003 Series A Bonds will be transferable in accordance with subsection(e)of this Section 32.06. If at any time DTC shall no longer be registered or in good standing under the Securities Exchange Act or other applicable statute or regulation and a successor securities depository is not appointed by the Authority within 90 days after the Authority receives notice or becomes aware of such condition, as the case may be, then this Section 32.06 shall no longer be applicable and the Authority shall execute and the Trustee shall authenticate and deliver certificates representing the 2003 Series A Bonds as provided below. Whenever DTC requests the Authority and the Trustee to do so, the Trustee and the Authority will cooperate with DTC in taking appropriate action after reasonable notice to arrange for another securities depository to maintain custody of all certificates evidencing the 2003 Series A Bonds then Outstanding. In such event, the 2003 Series A Bonds will be transferable to such securities depository in accordance with subsection (e) of this Section 32.06, and thereafter, all references in this Fifth Supplemental Trust Agreement to DTC or its nominee shall be deemed to refer to such successor securities depository and its nominee, as appropriate. UOCSSF1:674242.3 4051 1-1 23 MAC 9 (d) Notwithstanding any other provision of this Fifth Supplemental Trust Agreement to the contrary, so long as all 2003 Series A Bonds Outstanding are registered in the name of any nominee of DTC, all payments with respect to the principal of and premium, if any, and interest on each such 2003 Series A Bond and all notices with respect to each such 2003 Series A Bond shall be made and given, respectively, to DTC as provided in or pursuant to the Representation Letter. (e) In the event that any transfer or exchange of 2003 Series A Bonds is authorized under subsection (b) or (c) of this Section 32.05, such transfer or exchange shall be accomplished upon receipt by the Trustee from the registered owner thereof of the 2003 Series A Bonds to be transferred or exchanged and appropriate instruments of transfer to the permitted transferee, all in accordance with the applicable provisions of Sections 2.05 and 2.06. In the event 2003 Series A Bond certificates are issued to Bondholders other than Cede & Co., its successor as nominee for DTC as holder of all the 2003 Series A Bonds, another securities depository as holder of all the 2003 Series A Bonds, or the nominee of such successor securities depository, the provisions of Sections 2.05 and 2.06 shall also apply to, among other things, the registration, exchange and transfer of the 2003 Series A Bonds and the method of payment of principal of,premium, if any, and interest on the 2003 Series A Bonds. SECTION 38.07. Compliance with 2003 Series A Continuing Disclosure Ag;,.reement. Pursuant to Section 15.08 of the Facility Lease, the County has undertaken all responsibility for compliance with continuing disclosure requirements, and the Authority shall have no liability to the Owners of the 2003 Series A Bonds or any other person with respect to S.E.C. Rule 15c2-12. The County has agreed that so long as it shall act as the Dissemination Agent under the 2003 Series A Continuing Disclosure Agreement, it will perform all of the provisions thereof to be performed by the Dissemination Agent. Notwithstanding any other provision of this Trust Agreement, failure of the County to comply with the Continuing Disclosure Agreement shall not be considered an Event of Default; however, any Bondholder or Beneficial Owner may take such actions as may be necessary and appropriate, including seeping mandate or specific performance by court order, to cause the County to comply with its obligations under Section 15.08 of the Facility Lease or under this Section 38.07. For purposes of this Section, "Beneficial Owner"means any person which has or shares the power, directly or indirectly, to make investment decisions concerning ownership of any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries)." ARTICLE XXXIX ISSUANCE OF BONDS SECTION 39.01. Procedure for the Issuance of 2003 Series A Bonds. At any time after the sale of the 2003 Series A Bonds in accordance with the Act, the Authority shall execute the 2003 Series A Bonds for issuance hereunder and shall deliver thein to the Trustee, and thereupon the 2003 Series A Bonds shall be authenticated and delivered by the Trustee to the purchaser thereof upon the Written Request of the Authority and upon receipt of payment therefor from the purchaser thereof. Upon receipt of payment for the 2003 Series A Bonds from the purchaser thereof(other than the portion of such purchase price to be paid directly to the 2003 Series A Bond Insurer as the premium for the Bond Insurance Policy ($ } and DOCSSFI:674242.3 40511-123 MAC 10 premium for the 2003 Series A. Reserve Facility ($ )}, the Trustee shall, unless otherwise instructed by the Authority, transfer or deposit the proceeds received from such sale (including the good faith deposit received from the County,) to the following respective parties or to the following respective accounts or:Funds,in the following order of priority; (i) deposit the amount of _ __ in the 2003 Series A Costs of Issuance Fund, which fund is hereby created and which fund the Trustee hereby covenants and agrees to maintain. All money in the Costs of Issuance Fund shall be used and withdrawn by the Trustee to pay the Costs of Issuance of the 2003 Series A Bonds upon receipt of a Written Request of the Authority in the form attached hereto as Exhibit C, filed with the Trustee, each of which shall be sequentially numbered and shall state the person(s) to whom payment is to be made, the amount(s) to be paid, the purpose(s) for which the obligation(s) was incurred and that such payment is a proper charge against said fund. On December 1, 2003, or upon the earlier Written Request of the Authority, any remaining balance in the 2003 Series A Costs of Issuance Fund shall be transferred to the 2003 Series A Project Fund and the 2003 Series A Costs of Issuance Fund shall be closed; (ii) deposit the amount of $ in the 2003 Series A Capitalized. Interest Account which account is hereby created and which account the Trustee hereby covenants and agrees to hold. The Trustee shall transfer on or before each Interest Payment Date from the 2003 Series A Capitalized Interest Account for deposit into the interest Account moneys in the following amounts to pay a portion of the Interest Payments on the Bonds on such Interest Payment Date as follows: Amount of Date Capitalized Interest December 1,2003 $ June 1, 2004 December 1,2004 On June 1, 2005, any remaining amounts in the 2003 Series A Capitalized Interest Account shall be deposited into the Revenue Fund, and (iii) deposit the amount of $ being the balance of the proceeds,in the 2003 Series A Project Fund, SECTION 39.02. 2003 Series A Project Fund. The Trustee hereby agrees to establish and maintain so long as any 2003 Series A Bonds are Outstanding the 2003 Series A Project Fund (the "2003 Series A Project Fund"). The initial payment into the 2003 Series A Project Fund is provided by Section 39.01. The moneys in the 2003 Series A Project Fund shall be disbursed by the Trustee upon the Written Request of the County in the form attached hereto as Exhibit D, for the payment of costs relating to the financing of the 2003 Series A Project. All interest earnings or profits received from investments of amounts in the 2003 Series A Project Fund shall be deposited in the 2003 Series A Project Fund until completion of the 2003 Series A Project and thereafter any remaining amounts in the 2003 Series A Project Fund will be DOCSSF1:674242.3 40511-123 MAC 11 deposited first in the Reserve Fund, to the extent necessary to make amounts on deposit in the Reserve Fund equal to the Reserve Fund Requirement, and then in the Revenue Fund and the 2003 Series A Project Fund shall be closed. . SECTION 39.03. Reserve Fund Requirement Calculation. Following issuance of the 2003 Series A Bonds, the Reserve Fund Requirement for the Outstanding Bonds will equal $ , an amount equal to 125% of average Annual Debt Service on the Outstanding Bonds. Such amount will be satisfied by the current deposit in the Reserve Fund of $ and the existing Reserve Facilities issued in the aggregate amount of $9,567,497.04, plus the deposit with the Trustee of the 2003 Series A Reserve Facility in the amount of$ . The Trustee is hereby directed to accept and acknowledge receipt of the 2003 Series A Reserve Facility for deposit to the Reserve Fund prior to the delivery of the 2003 Series A Bonds to the purchaser thereof. The Reserve Fund Requirement shall only be calculated upon the issuance of a Series of Bonds and upon the retirement or defeasance of a Series of Bonds. The Authority shall provide to the Trustee the amount so calculated. SECTION 39.04. Tax, Covenants The provisions of Section 6.03 are applicable to the 2003 Series A Bonds, the interest on which is intended by the Authority to be excluded from gross income of the Owner thereof for federal income tax purposes. ARTICLE XL REDEMPTION OF BONDS . SECTION 40.01. Extraordinary Redemption. The 2003 Series A Bonds are subject to redemption by the Authority on any date prior to their respective stated maturities, upon notice as hereinafter provided, as a whole or in part by lot within each stated maturity in integral multiples of Authorized Denominations, from prepayments made by the County pursuant to Section 7.02 of the Facility Lease, at a redemption price equal to the sum of the principal amount thereof, without premium, plus accrued interest thereon to the Redemption Date. Whenever less than all of the Outstanding Bonds are to be redeemed on any one date, the Trustee shall select, in accordance with written directions from the Authority, the Bonds to be redeemed in part from the Outstanding Bonds so that the aggregate annual principal amount of and interest on Bonds which shall be payable after such Redemption Date shall be as nearly proportional as practicable to the aggregate annual principal amount of and interest on Bonds Outstanding prior to such Redemption Date. SECTION 40.02. C}ptional Redemption. The 2003 Series A Bonds maturing on or prior to June 1, 2011, are not subject to optional redemption. The 2003 Series A Bonds maturing on or after June 1, [2012], are subject to redemption prior to their respective stated maturities at the written direction of the Authority, from any moneys deposited by the Authority or the County, as a whole or in part on any date (in such maturities as are designated in writing by the Authority to the Trustee) on or after June 1, 2011, at the following prices (expressed as a percentage of the principal amount of 2003 Series A Bonds called for redemption), plus accrued interest to the date fixed for redemption. DOCssF1:674242.3 40511-123 MAC 12 Redemption Period (dates inclusive) Redemption Price June 1,2011 through May 31,2012 101% June 1, 2012 through May 31,2013 100.5 June 1, 2013 and thereafter 100 [Add Sinking Fund Redemption, if appropriate.] SECTION 40.03. Effect of Redemption. All 2003 Series A Bonds redeemed pursuant to the provisions of this Article and Article IV shall be cancelled by the Trustee and shall be destroyed with a certificate of destruction fiunished to the Authority upon its request and shall not be reissued. ARTICLE XLI MUNICIPAL BOND INSURANCE; 2003 SERIES A RESERVE FACILITY SECTION 41.01. Concerning the 2003 Series A_ Bond. Insurer. Notwithstanding any other provision hereof, so long as the 2003 Series A Bond Insurance Policy shall be in full force and effect, the Authority and the Trustee hereby agree to comply with the following provisions. (a) The 2003 Series A Bond Insurer shall be deemed to be the sole Owner of the 2003 Series A Bonds for the purpose of exercising any voting right or privilege or giving any consent or direction or taking any other action that the Owners of the 2003 Series A Bonds are entitled to take pursuant to Article VII and Article VIII hereof. The 2003 Series A Bond Insurer shall have the exclusive right to initiate or direct proceedings upon an Event of:Default and shall be entitled to request the Trustee to intervene in judicial proceedings that affect the 2003 Series A Bonds or the security therefor; provided that the Trustee shall have the right in its sole discretion to commence an action to enforce the payment of its fees and expenses hereunder. Bondholder's direction or institution of remedies upon an Event of Default shall be subject to the prior written consent of the 2003 Series A Bond Insurer. (b) Copies of any modification or amendment to the Trost Agreement or the Facility Lease, shall be sent by the Authority to the 2003 Series A Bond Insurer, S&P and Moody's prior to the effective date thereof or as soon as practical thereafter. (c) The 2003 Series A Bond Insurer shall, to the extent it makes any payment of principal of or interest on the Insured 2003 Series A Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the 2003 Series A Bond Insurance Policy, (d) The 2003 aeries A .Bond Insurer shall have the right to advance any payment required to be made by the County or the Authority in order to prevent an Event of Default under the Trust Agreement and the Trustee shall be required to accept such advance. The Authority shall be required to reimburse the 2003 Series A Bond Insurer for any such advance. DOCSSFI:674242.3 40511-123 MAC 13 (e) The rights granted under the Trust Agreement and the Facility Lease to the 2003 Series A Bond Insurer to request, consent to or direct any action are rights granted to the 2003 Series A Bond Insurer in consideration of its issuance of the 2003 Series A Bond Insurance Policy. Any exercise by the 2003 Series A Bond Insurer of such rights is merely an exercise of the 2003 Series A Bond Insurer's contractual rights and shall not be construed or deemed to be taken for the benefit or on behalf of the 2003 Series A Bondowners, nor does such action evidence any position of the 2003 Series A Bond Insurer, positive or negative, as to whether 2003 Series A Bondowners' consent is required in addition to consent of the 2003 Series A Bond Insurer. (f) Amounts paid by the 2003 Series A Bond Insurer under the 2003 Series A Bond Insurance Policy shall not be deemed paid for purposes of the Trust Agreement and the 2003 Series A Bonds relating to such amounts shall remain Outstanding and continue to be due and owing until paid in accordance with the Trust Agreement. The Trust Agreement shall not be discharged unless all amounts due or to become due to the 2003 Series A Bond Insurer have been paid in full. (g) The 2003 Series A Bond Insurer shall be provided by the Authority or the Trustee (with respect to items (i) through (iv) and item (vii) only) with the following information: (i) Notice of any draw upon, or deficiency due to market fluctuation in the amount on deposit in, the Reserve Fund within two Business Days after knowledge thereof other than (i)withdrawals of amounts in excess of the Reserve Fund Requirement and (ii)withdrawals in connection with a refunding of 2003 Series A Bonds; (ii) Notice of any failure of the Authority to make any required deposit into the Revenue Fund within two Business Days of knowledge thereof; notice of any other Event of Default known to the Trustee within five Business Days after knowledge thereof; (iii) Prior notice of the advance refunding or redemption of any of the 2003 Series A Bonds, including the principal amount, maturities and CUSIP numbers thereof; (iv) Notice of the resignation or removal of the Trustee and the appointment of, and acceptance of duties by, any successor thereto; (v) A full original transcript of all proceedings relating to the execution of any amendment or supplement to the Trust Agreement; (vi) All reports, notices and correspondence to be delivered under the terms of the Third Supplemental Trust Agreement and, on an annual basis, copies of the audited financial statements and annual budget of the Authority; and (vii) If the Trustee has notice that any Bondholder has been required to disgorge payments of principal or interest on the 2003 Series A Bonds to a trustee in bankruptcy or creditors or others pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes an avoidable preference to such Bondholder within the meaning of any applicable bankruptcy laws, then the Trustee shall notify the 2003 Series A Bond Insurer or its DOCSSF1:674242.3 40511-123 MAC 14 designee of such fact by telephone or telegraphic notice, confirmed in writing by registered or certified mail. (viii) Such additional information as the 2003 Series A Bond Insurer from time to time may reasonably request. (h) The 2003 Series A Bond Insurer shall have the right to give notice of an Event of Default. SECTION 41.02. Payments Under the 2003 Series A Bond Insurance Policy. Notwithstanding any other provision hereof, so long as the 2003 Series A Bond Insurance Policy shall be in full force and effect, the Authority and the Trustee hereby agree to comply with the following provisions: (a) If, on the second Business Day, and again on the Business Day, prior to the interest payment date or principal payment date or the date to which Bond maturity has been accelerated ("Payment .Date") there is not on deposit with the Trustee, after malting all transfers and deposits required under the Trust Agreement, moneys sufficient and available to pay the principal of and interest on the 2003 Series A Bonds due on such Payment Date, the Trustee shall give notice to the 2003 Series A Bond Insurer and to the Insurance Paying Agent (hereinafter defined) by telephone or telegraph, confirmed in writing by registered or certified :mail, of the amount of such deficiency on such Business Day. If such deficiency is made up in whole or in part prior to or on the Payment Date, the Trustee shall so notify the 2003 Series A Bond`Insurer and the Insurance Paying Agent. if, on the Business Day prior to the related Payment Date,there continues to be a deficiency in the amount available to pay the principal of and interest on the 2003 Series A Bands due on such Payment Date, the Trustee shall matte a claim under the 2003 Series A Bond Insurance Policy and give notice to the 2003 Series A Bond Insurer and the Insurance Paying Agent (if any) by telephone of the amount of such deficiency, and the allocation of such deficiency. (b) The Trustee is hereby irrevocably designated, appointed, directed and authorized to act as attorney-in-fact for Bondholders as follows: (i) If and to the extent there is a deficiency in amounts required to pay interest on the 2003 Series A Bonds, the Trustee shall (a)execute and deliver to State Street Bank and Trust Company, N.A., or its successors under the 2003 Series A Bond Insurance Policy (the "Insurance Paying Agent"), in form satisfactory to the Insurance Paying Agent, an instrument appointing the 2003 Series A Bond Insurer as agent for such Bondholders in any legal proceeding related to the payment of such interest and an assignee to the 2003 Series A Bond Insurer of the claims for interest to which such deficiency relates and which are paid by the 2003 Series A Bond Insurer, (b)receive as designee of the respective Bondholders (and not as Trustee) in accordance with the tenor of the 2003 Series A Bond Insurance Policy payment from the Insurance Paying Agent with respect to the claims for interest so assigned, and (c)disburse the Sarre to such respective Bondholders, and (ii) If and to the extent of a deficiency in amounts required to pay principal of the 2003 Series A Bonds, the Trustee shall (a) execute and deliver to the Insurance DOCSSF1:674242.3 40511-123 MAC 15 Paying Agent in form satisfactory to the Insurance Paying Agent an instrument appointing the 2003 Series A Bond Insurer as agent for such Bondholders in any legal proceeding relating to the payment of such principal and an assignment to the Bond Insurer of any of the 2003 Series A Bonds surrendered to the Insurance Paying Agent or so much of the principal amount thereof as has not previously been paid or for which moneys are not held by the Trustee and available for such payment(but such assignment shall be delivered only if payment from the Insurance Paying Agent is received), (b) receive as designee of the respective Bondholders (and not as Trustee) in accordance with the tenor of the 2003 Series A Bond Insurance Policy payment therefor from the Insurance Paying Agent, and.(c)disburse the same to such Bondholders. (c) The Trustee shall keep a complete and accurate record of all funds deposited by the 2003 Series A Bond Insurer and Insurance Paying Agent and the allocation of such funds to payment of interest and principal in respect of any 2003 Series A Bonds. The 2003 Series A Bond Insurer shall have the right to inspect such records at reasonable times upon one Business Day's prior notice to the Trustee. SECTION 41.03. 2003 Series A Bond Insurer Default. Rights of the 2003 Series A Bond Insurer to direct or consent to actions under the Trust Agreement or the Facility Lease shall be suspended during any period in which the 2003 Series A Bond Insurer is in default in its payment obligations under the 2003 Series A Bond Insurance Policy (except to the extent of amounts previously paid by the 2003 Series A Bond Insurer and due and owing to the 2003 Series A Bond Insurer) and shall be of no force or effect in the event the 2003 Series A Bond Insurance Policy is no longer in effect or the 2003 Series A Bond Insurer asserts that the 2003 Series A Bond Insurance Policy is not in effect. SECTION 41.04. Provisions Relating to the 2003 Series A Reserve Facility. (a) In the event it is necessary to draw on the 2003 Series A Reserve Facility to pay the principal of or interest on the Bonds,the Trustee shall deliver a Demand for Payment (in the form attached to the 2003 Series A'Reserve Facility) at least three days prior to the date on which funds will be required to make such payment. (b) The Trustee shall pay to the 2003 Series A Reserve Facility Provider the amount necessary to pay all accrued and unpaid interest on amounts drawn under the 2003 Series A Reserve Facility from Revenues. (c) Before the Trust Agreement can be discharged and terminated under Section 10.01, the 2003 Series A Reserve Facility Provider must be paid all amounts owed to it under the terms of the 2003 Series A Financial Guaranty Agreement. (d) The Trustee shall be responsible for maintaining adequate records, verified with the 2003 Series A Reserve Facility Provider, as to the amount available to be drawn at any given time under the 2003 Series A Reserve Facility and as to the amounts paid and owing to the 2003 Series A Reserve Facility Provider under the terms of the 2003 Series A Financial Guaranty Agreement. DOCSSF1:674242.3 40511-123 MAC 16 (e) The 2003 Series A Bonds may not be redeemed pursuant to Section 40.02 unless all amounts owed to the 2003 Series A Reserve Facility Provider under the terms of the 2003 Series A Financial Guaranty Agreement have been paid in full. ARTICLE XLII MISCELLANEOUS PROVISIONS SECTION 42.01. 2003 Series A Bond Insurer. The 2003 Series A Bond Insurer shall have the benefit of all provisions relating to the 1999 Series B Bond Insurer included in the Facility Lease, the Site Lease and the Trust Agreement and any references to the "Band Insurer" shall include the 2003 Series A Bond Insurer, and the 2003 Series A Bond Insurer is hereby included as a third party beneficiary to the Trust Agreement. SECTION 42.02. Validity of Supplement. The County, the Authority and the Trustee hereby determine that the amendments set forth herein do not adversely affect the interest of the Owners, shall become binding without the written consents of any Owners, and are in compliance with the provisions of Section 9.01(b) of the Trust Agreement. The Trustee is making such determination based solely in reliance upon an Opinion of Counsel and the determination of the County and the Authority and the consent of the Bond Insurer. SECTION 42.03. Terms of 2003 Series A Bonds Subject to the Trust Agreement. Except as in this Fifth Supplemental Trust Agreement expressly provided, every term and condition contained in the Trust Agreement shall apply to this Fifth.Supplemental Trust Agreement and to the 2003 Series A Bonds with the same force and effect as if the same were herein set forth at length, with such omissions, variations and modifications thereof as may be appropriate to mare the same conform to this Fifth Supplemental Trust Agreement. This Fifth Supplemental Trust Agreement and all the terms and provisions herein contained shall form part of the Trust Agreement as fully and with the same effect as if all such terms and provisions had been set forth in the Trust Agreement. The Trust Agreement is hereby ratified and confirmed and shall continue in full force and effect in accordance with the terms and provisions thereof, as supplemented and amended hereby. SECTION 42.04. Assignment Acknowledged. Pursuant to the Trust Agreement, the Base Rental Payments have been assigned to the Trustee and such assignment extends to and includes the Base Rental Payments increased pursuant to the Fifth Amendment to Facility Lease. The assignment of the Base Rental Payments increased pursuant to the Fifth Amendment to Facility Lease to the Trustee is hereby approved,consented to, acknowledged and confirmed. SECTION 42.05. Effective Date of Fifth SWIemental Trust Agreement, This Fifth Supplemental Trust Agreement shall take effect upon its execution and delivery. SECTION 42.06. Execution in CounteWarts. This Fifth Supplemental Trust Agreement may be executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument. D005SF1:674242.3 4051 1-1 23 MAC 17 IN WITNESS WHEREOF, the parties hereto have executed this Fifth Supplemental Trust Agreement by their officers thereunto duly authorized as of the clay and year first written above. COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY By: Chair Attest: John R. Sweeten Executive Director and Secretary By: Assistant Executive Director BNY WESTERN TRUST COMPANY, as Trustee By: Authorized Officer Acknowledged and Approved: COUNTY OF CONTRA COSTA By: Title: Director, Capital Facilities and.Debt Management, County of Contra Costa DOCSSF1:674242.3 4051 1-1 23 MAC 18 CONSENT OF BOND INSURER The undersigned, as Bond Insurer of a portion of the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects), 1999 Series A, the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Various Capital Projects), 2001 Series A, the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Various Capital Projects), 2001 Series B, the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Various Capital Projects), 2002 Series A and the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects), 2002 Series B hereby consents to the execution and delivery of the Fifth Supplemental Trust Agreement dated as of July 1, 2003 between the County of Contra Costa Public Financing Authority and BNY Western Trust Company, as trustee, and to the issuance of the 2003 Series A Bonds for the purposes set forth therein. MBIA INSURANCE CORPORATION By: Authorized Officer UUCSSFI:674242.3 44511-123 MAC EXHIBIT A [FORM OF 2003 SERIES A BOND] No. $ COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY LEASE REVENUE BONDS (VARIOUS CAPITAL PROJECTS), 2003 SERIES A NEITHER THE FULL FAITH AND CREDIT OF THE AUTHORITY NOR THE COUNTY OF CONTRA COSTA IS PLEDGED FOR THE PAYMENT OF THE INTEREST ON OR PRINCIPAL OF THE BONDS AND NO TAX OR OTHER SOURCE OF FUNDS OTHER THAN THE REVENUES HEREINAFTER REFERRED TO IS PLEDGED TO PAY THE INTEREST ON OR PRINCIPAL OF THE BONDS. NEITHER THE PAYMENT OF THE PRINCIPAL OF NOR INTEREST ON THE BONDS CONSTITUTES A DEBT, LIABILITY OR OBLIGATION OF THE COUNTY OF CONTRA COSTA OR THE CONTRA. COSTA COUNTY REDEVELOPMENT AGENCY, THE PARTIES TO THE AGREEMENT CREATING THE AUTHORITY. Interest Maturity Dated Rate Date Date CUSIP aha REGISTERED OWNER. CEDE&.CO. PRINCIPAL SUM: DOLLARS The COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority, duly organized and validly existing under and pursuant to the laws of the State of California(the "Authority"), for value received, hereby promises to pay(but only out of the Revenues hereinafter referred to) to the registered owner identified above or registered assigns, on the maturity date specified above (subject to any right of prior redemption hereinafter provided for) the principal sum specified above, together with interest on such principal sum from the interest payment date next preceding the date of authentication of this Bond(unless this Bond is registered as of an interest payment date or during the period from the s UOCSSFI:674242.3 44512-123 MAC A-1 fifteenth calendar day of the month preceding an interest payment date to such interest payment date, in,which event it shall bear interest from such interest payment date, or unless this Bond is authenticated prior to November 15, 2003, in which event it shall bear interest from the Dated Date specified above) until the principal hereof shall have been paid at the interest rate per annum specified above, payable on December 1, 2003, and semiannually thereafter on each June I and December 1. Interest due on or before the maturity or prior redemption of this Bond shall be payable only by check mailed by first-class mail to the registered owner hereof; provided that upon the written request of a Bondholder of $1,000,000 or more in aggregate principal amount of Bonds of the Series of which this Bond is a part received by the Trustee (defined hereinafter)prior to the applicable record date, interest shall be paid by wire transfer in immediately available funds to an account within the United States of America. The principal hereof is payable in lawful money of the United States of America upon presentation of this Bond at the principal office of the Trustee. This Bond is one of a duly authorized issue of bonds of the Authority designated as its"County of Contra Costa Public Financing Authority Lease Revenue Bonds" (the"Bonds') unlimited as to principal amount and is one of a duly authorized series of such Bonds known as "(Various Capital Projects), 2003 Series A" (the "2003 Series A Bonds') issued in an aggregate principal amount of$[Amount), all of like tenor and date (except for such variations, if any, as may be required to designate varying numbers, maturities and interest rates), and is issued under and pursuant to the provisions of the Joint Exercise of Powers Act (being Chapter 5 of Division 7 of Title I of the California Government Code, as amended) and all laws amendatory thereof or supplemental thereto (the "Act") and under and pursuant to the provisions of a Trust Agreement, dated as of February 1, 1999, a First Supplemental Trust Agreement, dated as of January l, 2001 a Second Supplemental Trust Agreement dated as of May 1, 2001, a Third Supplemental Trust Agreement, dated as of June 1, 2002, a Fourth Supplemental Trust Agreement, dated as of July 1, 2002 and a Fifth Supplemental Trust Agreement dated as of July 1, 2003 (collectively, as amended from time to time, the "Trust Agreement"), between the Authority and BNY Western Trust Company, as successor trustee (together with any successor as trustee under the Trust Agreement, the "Trustee") (copies of the Trust Agreement are on file at the principal office of the Trustee in San Francisco, California). The Bonds are issued to provide funds to finance and refinance the acquisition, construction, improvement, equipping, remodeling and refinancing of certain public buildings and related facilities, located in the County of Contra Costa (as more fully defined in the Trust Agreement, the"Project"). The Bonds are limited obligations of the Authority and are payable, as to interest thereon and principal thereof, solely from certain proceeds of the Bonds held in certain funds and accounts pursuant to the Trust Agreement and the revenues (as more fully defined in the Trust Agreement, the "Revenues") derived from Base Rental Payments and other payments made by the County of Contra Costa (the "County"), and all interest or other investment income thereon,pursuant to the Facility Lease(Various Capital Projects), dated as of February 1, 1999 (as amended from time to time, including the Fifth Amendment to Facility Lease, dated as of July 1, 2003, the " Facility Lease"), by and between the Authority and the County, and the Authority is not obligated to pay the interest or premium, if any, on and principal of the Bonds except from the Revenues. All Bonds are equally and ratably secured in accordance with the terms and conditions of the Trust Agreement by a pledge and assignment of and charge and lien upon the Revenues, and the Revenues constitute a trust fund for the security DOCSSFI:674242.3 40511-123 MAC A-2 and payment of the interest or premium, if any, on and principal of the Bonds as provided in the Trust Agreement. The full faith and credit of the Authority, the Contra Costa County Redevelopment Agency (the "Agency") and the County are not pledged for the payment of the interest or premium, if any, on or principal of the Bonds. No tax shall ever be levied to pay the interest on or principal of the Bonds. The Bonds are not secured by a legal or equitable pledge of or charge or lien upon any property of the Authority or any of its income or receipts except the Revenues, and neither the payment of the interest on nor principal (or premium, if any) of the Bonds is a debt, liability or general obligation of the Authority, the County or any member of the Authority for which such entity is obligated to levy or pledge any form of taxation. Additional bonds payable from the Revenues may be issued which will rank equally as to security with the Bonds, but only subject to the conditions and upon compliance with the procedures set forth in the Trust Agreement. Reference is hereby made to the Act and to the Trust Agreement and any and all amendments thereof and supplements thereto for a description of the terms on which the Bonds are issued, the provisions with regard to the nature and extent of the Revenues, the rights of the registered owners of the Bonds, security for payment of the Bonds, remedies upon default and limitations thereon, and amendment of the Trust Agreement (with or without consent of the registered owners of the Bonds); and all the terms of the Trust Agreement are hereby incorporated herein and constitute a contract between the Authority and the registered owner of this Bond, to all the provisions of which the registered owner of this Bond,by acceptance hereof, agrees and consents. The Bonds are subject to redemption by the Authority on any date prior to their respective stated maturities, upon notice as hereinafter provided, as a whole or in part by lot within each stated maturity in integral .multiples of Authorized Denominations so that the aggregate annual principal amount of and interest on the Bonds which shall be payable after such redemption date shall be as nearly proportional as practicable to the aggregate annual principal amount of and interest on the Bonds Outstanding prior to such redemption date, from prepayments of Base Rental Payments made by the County from the proceeds received by the County due to a taking of the Facilities or portions thereof under the power of eminent domain and from the net proceeds of title insurance or insurance received for material damage or destruction to the Facilities or portions thereof received by the Authority from the County, all as provided in and under the circumstances and terms prescribed in the Facility Lease and the Trust Agreement, at the principal amount thereof plus interest accrued thereon to the date fixed for redemption,without premium. The 2003 Series A Bonds maturing on or prior to June 1, 2011, are not subject to optional redemption. The 2003 Series A Bonds maturing on or after June 1, [20121, are subject to redemption prior to their respective stated maturities at the written direction of the Authority, from any moneys deposited by the Authority or the County, as a whole or in part on any date(in such maturities as are designated in writing by the Authority to the Trustee) on or after June 1, 2011,at the following prices (expressed as a percentage of the principal amount of 2003 Series A Bonds called for redemption),plus accrued interest to the date fixed for redemption: DOCSS1;1:674242.3 40511-1.23 MAC A-3 Redemption Period (dates inclusive) Redemption Price June 1, 2011 through May 31, 2012 101% June 1, 2012 through May 31, 2013 100.5 June 1, 2013 and thereafter 100 Notice of redemption of this Bond shall be given by first-class mail not less than thirty(30) days nor more than sixty(60) days before the redemption date to the registered owner of any Bond selected for redemption, subject to and in accordance with provisions of the Trust Agreement with respect thereto. If notice of redemption has been duly given as aforesaid and money for the payment of the above-described redemption price is held by the Trustee, then this Bond shall, on the redemption date designated in such notice, become due and payable at the above-described redemption price; and from and after the date so designated, interest on this Bond shall cease to accrue and the registered owner of this Bond shall have no rights with respect hereto except to receive payment of the redemption price hereof. If an Event of Default (as defined in the Trust Agreement) shall occur, the principal of all Bonds may be declared due and payable upon the conditions, in the manner and with the effect provided in the Trust Agreement. The Trust Agreement provides that in certain events such declaration and its consequences may be rescinded by the holders of not less than a majority in aggregate principal amount of the Bonds then outstanding or by the Trustee. This Bond is transferable only on a register to be kept for that purpose at the above-mentioned corporate trust office of the Trustee by the registered owner hereof in person or by the duly authorized attorney of such owner upon payment of the charges provided in the Trust Agreement and upon surrender of this Bond together with a written instrument of transfer satisfactory to the Trustee duly executed by the registered owner or the duly authorized attorney of such owner, and thereupon a new fully registered Bond or Bonds in the same aggregate principal amount in authorized denominations will be issued to the transferee in exchange therefor. The Authority and the Trustee may deem and treat the registered owner hereof as the absolute owner hereof for the purpose of receiving payment of the interest hereon and principal hereof and for all other purposes, whether or not this Bond shall be overdue, and neither the Authority nor the Trustee shall be affected by any notice or knowledge to the contrary; and payment of the interest on and principal of this Bond shall be made only to such registered owner, which payments shall be valid and effectual to satisfy and discharge liability on this Bond to the extent of the sum or sums so paid. This Band shall not be entitled to any benefit, protection or security under the Trust Agreement or become valid or obligatory for any purpose until the certificate of authentication hereon endorsed shall have been executed and dated by the Trustee. DOCSSFI.-674242.3 40511-123 MPC. A_4 It is hereby certified and recited that all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by the Act, and by the Constitution and laws of the State of California, that the amount of this Bond., together with all other indebtedness of the Authority, does not exceed any limit prescribed by the Constitution or laws of the State of California and is not in excess of the amount of Bonds permitted to be issued under the Trust Agreement. IN WITNESS WHEREOF, the County of Contra Costa Public Financing Authority has caused this Bond to be executed in its name and on its behalf by the manual or facsimile signature of the Chair of the Authority and countersigned by the manual or facsimile signature of the Secretary of said Authority, and has caused this Bond to be dated as of the Dated Date specified above. COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY By Chair Countersigned: Secretary DOCSSFI:674242.3 44521-223 MAC A_5 [FORM OF CERTIFICATE OF AUTHENTICATION TO APPEAR ON 2003 SERIES A BONDS] This is one of the Bands described in the within-mentioned. Trust Agreement which has been registered and authenticated on BNY WESTERN TRUST COMPANY, as Trustee By Authorized Signatory UUCSSF1:6 74242.3 40511-12314 AC A-6 [INSERT STATEMENT OF INSURANCE] DO,CSSF1:674242.3 40511-123 MAC A-7 [FORM OF ASSIGNMENT TO APPEAR ON 2003 SERIES A BONDS] For value received the undersigned hereby sells, assigns and transfers unto (Taxpayer Identification Number: ) the within Bond and all rights thereunder, and hereby irrevocably constitutes and appoints attorney to transfer the within bond on the books kept for registration thereof, with full power of substitution in the premises. NOTE: The signature to this Assignment must correspond with the name as written on the face of the Bond in every particular, without alteration or enlargement or any change whatever. Dated: PLEASE INSERT SOCIAL SECURITY NUMBER, TAXPAYER IDENTIFICATION NUMBER OR OTHER IDENTIFYING NUMBER OF ASSIGNEE: Signature Guaranteed: NOTE: Signature must be guaranteed by an eligible guarantor institution. UOCSSF1:6742.42.3 40511-123 MAC A-8 EXHIBIT B DESCRIPTION OF 2003 SERIES A PROJECT Acquisition, construction,improvement and/or equipping of the following facilities: Project Department Approximate Cost W. County Animal Shelter 790 San Pablo Avenue,Pinole Animal Services $1,900,000 Discovery House 4645 Pacheco Blvd.,Pacheco Health Services 3,500,000 Emergency Communications (multiple sites throughout County) DoIT 4,700,000 Adolescent Res. Treatment Facility 1034 Oak Grove,Concord Health Services 3,600,000 General Services Administration 1220 Morello, Martinez General Services 2,650,000 Brentwood One-Stop Employment Center Liberty Union Adult School 929 2 d Street, Brentwood EHSD 1,200,000 $17,550,000 Acquisition,construction and improvement or other equipment and facilities for the County as set forth in requisitions to the Trustee. DOCSSFI:674242.3 4051 1-1 23 MAC B-1 EXHIBIT C [FORM OF REQUISITION--COSTS OF ISSUANCE] Date: No. BNY Western Trust Company 550 Kearny Street, Suite 600 San Francisco, CA 94108 Re: County of Contra Costa Public Financing Authority Lease Revenue Bonds(Various CMital Protects, 2003 Series A (Written Request of the Authority—2003 Series A Costs of Issuance Fund) Ladies and Gentlemen: This letter is our authorization to you to disburse from the 2003 Series A Costs of Issuance Fund provided for in Section 39.01 of the Trust Agreement dated as of February 1, 1999, as amended,including as amended by the Fifth Supplemental Trust Agreement, dated as of July 1,2003 (the"Trust Agreement")between the County of Contra Costa Public Financing Authority(the"Authority")and BNY Western Trust Company, as trustee, the amounts indicated on Schedule A attached hereto to the therein-named individuals, firms and corporations for expenses incident to the issuance of the above-referenced Bonds pursuant to the Trust Agreement. The obligations in the stated amounts have been incurred by the Authority and each item thereof is a proper charge against the 2003 Series A Costs of Issuance Fund. Q If checked here you are hereby authorized to close the 2003 Series A Costs of Issuance Fund and transfer any remaining balance (after payment of any amounts indicated in Schedule A)to the 2003 Series A Project Fund. DOCSSFI:674242.3 40511-123 MAC C_1 Very truly yours, COUNTY OF CONTRA COSTA.PUBLIC FINANCING AUTHORITY By Assistant Executive Director and Assistant Secretary DOCSSFl.674242.3 40521-123 MAC C-2 SCHEDULE A Item No. Ri ee Amount P ose DOCSSF1:6I4242.3 40511-123 MAC C-3 EXHIBIT D [FORM OF REQUISITION--PROJECT FUND] Date: No. BNY Western Trust Company 550 Kearny Street, Suite 500 San Francisco, CA 94108 Re: County of Contra Costa Public Financing Authority Lease Revenue Bands(Various Capital Projects), 2003 Series A (Written Request of the Authority—2003 Series A Project Fund) Ladies and Gentlemen: This letter is our authorization to you to disburse from the 2001 Series B Project Fund provided for in Section 39.02 of the Trust Agreement dated as of February 1, 1999, as amended,including as amended by the Fifth Supplemental Trust Agreement, dated as of July 1, 2003 (collectively the"Trust Agreement")between the County of Contra Costa Public Financing Authority(the"Authority")and BNy'Western Trust Company, as trustee, the amounts indicated on Schedule A attached hereto to the therein-named individuals, firms and corporations for costs related to completion of the Project. DOC3sF1:674242.3 40511-123 MAC D-1 The obligations in the stated amounts have been incurred by the County of Contra Costa and each item thereof is a proper charge against the 2003 Series A Project Fund. Very truly yours, COUNTY OF CONTRA COSTA By Director, Capital Facilities &Debt Management County of Contra Costa DOCSSB 1:674242.3 403511-123 MAC D-2 SCHEDULE A Item No. Payee AmountLurpose DC)CSSFI:674242.3 40511-123 MAC D-3 Recording requested by and return to: COUNTY OF CONTRA COSTA c/o Orrick,Herrington & Sutcliffe LLP Old Federal Reserve flank Building 400 Sansome Street San Francisco, California. 94111 Attn: Mary A. Collins f Exempt from Recording Fee Pursuant to Government Code Section 6103 FIFTH AMENDMENT TO FACILITY LEASE by and between COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY and the COUNTY OF CONTRA COSTA Dated as of July 1, 2003 (Amending the Facility Lease(Various Capital Projects) dated as of February 1, 1999 as amended by the First Amendment to Facility Lease dated as of January 1,2001,the Second Amendment to Facility Lease dated as of May 1,2001, the Third Amendment to Facility.Lease dated as of June 1,2002 and the Fourth Amendment to Facility Lease dated as of July 1,2002) €OCSSF2:683222.3 40511-123 MAG TABLE OF CONTENTS Page ARTICLE XV ADDITIONS RELATING TO LEASE REVENUE BONDS (REFUNDING AND VARIOUS CAPITAL PROJECTS), 2003 SERIESA........................................................................................................2 SECTION 15.01. Effective Date ................................................................................2 SECTION 15.02. Additional Definitions...................................................................2 SECTION 15.03. Term of Additional Facilities.........................................................3 SECTION 15.04. Use of Proceeds of 2003 Series A Bonds......................................3 SECTION 15.05. Increase to Base Rental Payments.................................................4 SECTION 15.06. Possession of Additional Facilities................................................4 SECTION 15.07. Title Insurance ...............................................................................4 SECTION 15.08. Continuing Disclosure...................................................................4 SECTION 15.09. Trust Agreement............................................................................4 SEC'T'ION 15.10. Facility Lease in Full Force and Effect..........................................4 SECTION 15.11. Execution in Counterparts..............................................................5 EXHIBIT A—Additions to Demised Premises.........................................................................A-1 EXHIBIT B`Additional Base Rental Payment........................................................................B-1 UOC38F1:683222.3 40511-123 MAC FIFTH AMENDMENT TO FACILITY LEASE This Fifth Amendment to Facility Lease, dated as of July 1, 2003, between the COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority, duly organized and existing under and by virtue of the laws of the State of California (the "Authority), as lessor, and the COUNTY OF CONTRA. COSTA, a political subdivision organized and validly existing under the Constitution and laws of the State of California(the"County"), as lessee; WITNESSETH: WHEREAS, the County has leased certain real property and the improvements thereon to the Authority pursuant to a lease, entitled "Master Site Lease" and dated as of February 1, 1999 and recorded on March 4, 1999 in the office of the County Recorder of the County, under Recorder's Instrument No. 99-0059811; as amended by the First Amendment to Master Site Lease dated as of January 1, 2001 and recorded on January 25, 2001 in the office of the County Recorder of the County, under Recorder's Instrument No. 01-17620, and the Second Amendment to Master Site Lease dated as of May 1, 2001 and recorded on May 10, 2001 in the office of the County Recorder of the County, under Recorder's Instrument No. 01-123402 and the Third Amendment to Master Site Lease dated as of June 1, 2002 and recorded on June 26, 2002 in the office of the County Recorder of the County, under Recorder's Instrument No. 2002-22-4906 and the Fourth. Amendment to Master Site Lease dated as of July 1, 2002 and recorded on September 5, 2002 in the office of the County Recorder of the County, under Recorder's Instrument No. 2002-02-311941. WHEREAS, the County has further amended said Master Site Lease pursuant to the Fifth Amendment to Master Site Lease dated as of July 1, 2003, to lease certain additional real property to the Authority consisting of the following buildings and facilities (the "2003 Series A Facilities'): Family Law Center located at 751 Pine Street in the City of Martinez; West County Animal Shelter located at 790 San Pablo Avenue in the City of Pinole; and the Adolescent Residential Treatment Facility located at 1034 Oak Grove in the City of Concord; WHEREAS, this Fifth Amendment to Facility Lease is entered into to amend and supplement in certain respects a lease between the Authority and the County entitled "Facility Lease (Various Capital Projects)," dated as of February 1, 1999 and recorded on March 4, 1999 in the office of the County Recorder of the County, State of California, under Recorder's Instrument No. 99-0059812, as amended by the First Amendment to Facility Lease, dated as of January 1, 2001 and recorded on January 25, 2001 in the office of the County Recorder of the County, State of California,under Recorder's Instrument No. 01-17621, the Second Amendment to Facility Lease, dated as of May 1, 2001 and recorded on May 10, 2001 in the office of the County Recorder of the County, State of California, under Recorder's Instrument No. 01- 123403, the Third Amendment to Facility Lease, dated as of June 1, 2002 and recorded on DOCSSF1:683222.3 40511-123 MAC June 26, 2002 in the office of the County Recorder of the County, State of California under Recorder's Instrument No. 2002-22-4907 and the Fourth Amendment to Facility Lease, dated as of July 1, 2002 and recorded on September 5, 2002 in the office of the County Recorder of the County, State of California under Recorder's Instrument No. 2002-02-311942 (together and as amended from time to time, the "Facility Lease") and to add to the property leased pursuant to the Facility Lease certain additional real property consisting of the real property and facilities leased by the County pursuant to the Fifth Amendment to Master Site Lease (the"2003 Series A Facilities'). The real property descriptions of the 2003 Series A Facilities leased hereunder are contained in Exhibit A; NOW,THEREFORE,the parties hereto agree as follows: ARTICLE XV ADDITIONS RELATING TO LEASE REVENUE BONDS (VARIOUS CAPITAL PROJECTS),2003 SERIES A SECTION 15.01. Effective_Bate. This Fifth Amendment to Facility Lease shall become effective on the date of recordation of this instrument in the office of the County Recorder of the County, State of California, or on December 1, 2003, whichever is earlier, and such date of commencement shall be hereinafter referred to as the "effective date" and on the effective date the additional real property consisting of the 2403 Series A Facilities is hereby added to the Facility Lease as set forth in ExhibitA hereto and shall be encumbered by the Facility Lease and references to Facilities in the Facility Lease shall hereafter include such real property and equipment and reference to Demised Premises in the Facility Lease shall hereafter include the real property described in Exhibit A. SECTION 15.02. Additional Definitions. From and after the effective date of this instrument, the following new definitions shall be added to Section 1.01 of the Facility Lease, in alphabetical order,to read as follows: "Fifth Amendment to Facility Lease The term `Fifth Amendment to Facility Lease' means that Fifth Amendment to Facility Lease between the Authority and the County,dated as of July 1,2003, as originally executed and recorded or as it may from time to time be supplemented,modified or amended pursuant to the provisions hereof." "Fifth Supplemental Trust Agreement The term `Fifth Supplemental Trust Agreement' means that Fifth Supplemental Trust Agreement between the Authority and the Trustee,dated as of July 1, 2003, as originally executed and recorded or as it may from time to time be supplemented,modified or amended pursuant to the provisions of the Trust Agreement." DOCSSF I:683222.3 40511-123 MAC 2 "2003 Series A:Bond Insurer The term `2003 Series A Bond Insurer" means MBIA Insurance Corporation,or any successor thereto or assignee thereof." "2003 Series A Bonds The term `2003 Series A Bonds' means the bonds issued by the Authority under and pursuant to the Trust Agreement and the Fifth Supplemental Trust Agreement, the proceeds of which will be applied to the acquisition,construction and equipping of the 2003 Series A Project and to the payment of costs related thereto." "2003 Series A.Facilities The term`2003 Series A Facilities' has the meaning set forth in the second WHEREAS clause of this Fifth Amendment to Facility Lease." "2003 Series A Project The term `2003 Series A Project' means the Subsequent Phase of the Project financed with the proceeds of the 2003 Series A Bonds being the facilities and improvements described in Exhibit B to the Fifth Supplement Trust Agreement, as the same may be changed by notice to the Trustee." SECTION 15.03. Term of Additional Facilities. The term of this Lease for the 2003 Series A Facilities shall end on June 1, 2028, unless such term is extended or sooner terminated as provided in the Facility Lease. SECTION 15.04. Use of Proceeds of 2003 Series A Bonds. The parties hereto agree that the proceeds of the 2003 Series A Bonds will be used by the Authority to finance the acquisition and construction of the 2003 Series A Project, to fund the portion of the Reserve Fund Requirement necessary for the issuance of the 2003 Series A Bonds and to pay costs related thereto as specified in the.Fifth Supplemental Trust Agreement. SEC'T'ION 15.05. Increase to Base Rental Payments. From and after the effective date of this instrument, the Base Rental Payments shall be increased by the amounts set forth in Exhibit B attached hereto. SECTION 15.06. Possession of Additional Facilities. The County hereby represents and warrants that the County has taken possession of and will occupy the 2003 Series A Facilities throughout the term of this Lease for such facilities under the terms and provisions of this Lease; the 2003 Series A Facilities are of comparable worth and economic life DOCSSFI:683222.3 4051 1-1 23 MAC 3 to the 2003 Series A Project and the 2003 Series A Facilities are ready for immediate use and occupancy by the County. SECTION 15.07. Title Insurance. The County shall have obtained or shall obtain upon the execution and delivery of this Fifth Amendment to Facility Lease policies of title insurance or supplements to existing policies on the Demised Premises, in form and substance satisfactory to the Bond Insurer, in an amount equal to the aggregate principal amount outstanding of the 1999 Series A Bonds, the 2001 Series A Bonds, the 2001 Series B Bonds, the 2002 Series A Bonds, the 2002 Series B Bonds and the 2003 Series A Bonds, issued by a company or companies of recognized standing duly authorized to issue the same, subject only to Permitted Encumbrances.. Any proceeds of such insurance shall be delivered to the Trustee as a prepayment of rent pursuant to Section 7.02 and shall be applied by the Trustee to the redemption of Bonds pursuant to Section 4.01, Section 16.01, Section 22.01, Section 28.01, Section 34.01 and Section 40.01 of the Trust Agreement. SECTION 15.08. Continuing Disclosure. The County hereby covenants and agrees that it will comply with and carry out all of the provisions of the 2003 Series A Continuing Disclosure Agreement. Notwithstanding any other provision of this Lease, failure of the County to comply with the 2003 Series A Continuing Disclosure Agreement shall not be considered an event of default hereunder, however, the Trustee may(and, at the request of any Participating Underwriter(as defined in the 2003 Series A Continuing Disclosure Agreement) or the Owners of at least 25% aggregate principal amount of Bonds Outstanding and provided satisfactory indemnification is provided to the 'Trustee; shall) or any Bondholder may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to compel the County to comply with its obligations under this Section 14.08. SECTION 15.09. Trust Agreement. The parties hereto acknowledge that the County is a first-party beneficiary to the Trust Agreement, and the Authority hereby agrees that during the term of the Facility Lease and provided the County is not in default hereunder, it will not amend the Trust Agreement in any manner materially adverse to the interests of the County. The County hereby consents to the execution and delivery of the Fifth Supplemental Trust Agreement, SECTION 15.10. Facility Lease in Full Force and Effect. Except as in this Fifth Amendment to Facility Lease expressly provided, the Facility Lease shall continue in full force and effect in accordance with the terms and provisions thereof, as amended and supplemented hereby. SECTION 15.11. Execution in Counterparts. This Fifth Amendment to Facility Lease may be executed in any number of counterparts, each of which shall be deemed to be an original, but all together shall constitute but one and the same Fifth Amendment to Facility Lease. It is also agreed that separate counterparts of this Fifth Amendment to Facility Lease may separately be executed by the Authority and the County, all with the same force and effect as though the same counterpart had been executed by both the Authority and the County. TX?CSSFi:683222.3 40511-123 MAC 4 IN WITNESS WHEREOF, the Authority and the County have caused this Fifth Amendment to Facility Lease to be executed by their respective officers thereunto duly authorized, all as of the day and year first above written. COUNTY OF CONTRA COSTA, as Lessee [SEAL] By Mark DeSaulnier Chair, Board of Supervisors County of Contra Costa, State of California Attest: John R. Sweeten Clerk of the Board.of Supervisors and County Administrator By Chief Clerk COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY, Lessor By Mark DeSaulnier Chair Attest: John R. Sweeten, Executive Director and Secretary By Assistant Executive Director 1 OCSSFI:6$3222.3 40511-123 MAC 5 EXHIBIT A Addition to Demised Premises All that certain real property situated in the County of Contra Costa, State of California,described as follows: DOCSSF1:683222.3 40511-123 MAC A_1 EXHIBIT B Additional Base Rental Payment Schedule (2003 Series A Facilities) Date Principal Interest Total Fiscal Year Total DOCSSFI:683222.3 40511-123 MAC B-I CONSENT OF TRUSTEE The undersigned, as successor trustee under the Trust Agreement dated as of February 1, 1999, as amended, between the COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY (the "Authority") and the trustee, hereby acknowledges and consents to the execution and delivery of the FIFTH AMENDMENT TO FACILITY LEASE dated as of July 1, 2003, between the Authority and the COUNTY OF CONTRA COSTA (the "County") relating to the Facility Lease(Various Capital Projects) elated as of February 1, 1999, as amended by the First Amendment to Facility Lease dated as of January 1, 2001, the Second Amendment to Facility Lease dated as of May 1, 2001, the Third Amendment to Facility Lease dated as of June 1, 2002, and the Fourth Amendment to Facility Lease dated as of July 1, 2002, between the Authority and the County. BNY"WESTERN TRUST COMPANY, as Trustee By Authorized Officer DOCSSFI:683222.3 40511-123 i4AC CONSENT OF INSURER The undersigned, as Insurer of a portion of the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects), 1999 Series A, issued pursuant to the Trust Agreement dated as of February 1, 1999, between the COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY (the "Authority") and the trustee, and as Insurer of the Authority's Lease Revenue Bonds (Various Capital Projects), 2001 Series A, issued pursuant to the First Supplemental Trust Agreement, the Authority's Lease Revenue Bonds (Various Capital Projects), 2001 Series B, issued pursuant to the Second Supplemental Trust Agreement, the Authority's Lease Revenue Bonds (Various Capital Projects) 2002 Series A, issued pursuant to the Third Supplemental Trust Agreement, and of the Authority's Lease Revenue Bonds (Various Capital Projects) 2002 Series B, issued pursuant to the Fourth Supplemental Trust Agreement, hereby consents to the execution and delivery of the Fifth Amendment to Facility Lease dated as of July 1, 2003, between the Authority and the COUNTY OF CONTRA COSTA (the "County") relating to the Facility Lease (Various Capital Projects) dated as of February 1, 1999, as amended by the First Amendment to Facility Lease, dated as of January 1, 2001, the Second Amendment to Facility Lease, dated as of May 1, 2001, the Third Amendment to Facility Lease dated as of June 1, 2002 and the Fourth Amendment to Facility Lease dated as of July 1,2002 between the Authority and the County. MBIA INSURANCE CORPORATION By Authorized Officer DOCSSF1:683222.3 40511-123 MAC Recording requested by and return to: COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY c/o Orrick,Herrington&Sutcliffe LLP Old Federal Reserve Bank Building 400 Sansome Street San Francisco, California 94111 Attn: Mary A. Collins Exempt from Recording Fee Pursuant to Government Code Section 6103 FIFTH AMENDMENT TO MASTER SITE LEASE between the COUNTY OF CONTRA COSTA and the COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY Dated as of July 1, 2003 (Amending the Master Site Lease dated as of February 1, 1999, as amended by the First Amendment to Master Site Lease dated as of January 1, 2001, the Second Amendment to Master Site Lease dated as of May 1, 2001, the Third Amendment to Master Site Lease dated as of.lune 1, 2002 and the Fourth Amendment to Master Site Lease dated as of July 1, 2002) DOCSSF1:683223.3 40511-123 MAC FIFTH AMENDMENT TO MASTER SITE LEASE This Fifth Amendment to Master Site Lease, dated as of July 1, 2003 between the COUNTY OF CONTRA COSTA, a political subdivision organized and existing under and by virtue of the laws of the State of California (the "County"), as lessor, and the COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY (the "Authority"), as lessee, a joint exercise of power authority, duly organized and existing pursuant to an Agreement, dated April 7, 1992, entitled "County of Contra Costa Public Financing Authority Joint Exercise of Powers Agreement," by and between the County of Contra Costa and the Contra Costa County Redevelopment Agency; WITNESSETH WHEREAS, this Fifth Amendment to Master Site Lease is entered into in order to amend in certain respects a lease between the County and the Authority entitled "Master Site Lease ," dated as of February 1, 1999 and recorded on March 4, 1999, in the office of the County Recorder of the County, under Recorder's Instrument No. 99-0059811, as amended by the First Amendment to Master Site Lease, dated as of January 1, 2001 and recorded on January 25, 2001, in the office of the County Recorder of the County, under Recorder's Instrument No. 2041- 4017624, the Second Amendment to Master Site Lease, dated as of May 1, 2401 and recorded on May 10, 2001, in the office of the County Recorder of the County, under Recorder's Instrument No. 2001-41-123402, the Third Amendment to Master Site Lease, dated as of June 1, 2402 and recorded on June 26, 2002 in the office of'the County Recorder of the County under Recorder's Instrument No. 2042-22-4946 and the Fourth Amendment to Master Site Lease, dated as of July 1, 2002 and recorded on September 5, 2002 in the office of the County Recorder of the DOCSSFt:683223.3 4051 1-1 23 MAC County under Recorder's Instrument No. 2002-02-311941 (together, the "Master Site Lease"), and to add to the property leased pursuant to the Master Site Lease certain additional real property consisting of the following building and facilities located in the County, the real property descriptions of which are contained in Exhibit A (capitalized terms used herein and not otherwise defined herein have the meanings assigned thereto by the Master Site Lease): Family Law Center located at 751 Pine Street in the City of Martinez; West County Animal Shelter located at 790 San Pablo Avenue in the City of Pinole, and the Adolescent Residential Treatment Facility located at 1034 teak{grove in the City of Concord; (collectively, the"2003 Series A Facilities"). NOW, THEREFORE, the parties hereto agree as follows: Section 1. This Fifth Amendment to Master Site Lease shall become effective on the date of recordation of this instrument in the office of the County Recorder of the County, State of California, or on December 1, 2063, whichever is earlier, and such date of commencement shall be hereinafter referred to as the "effective date." Section 2. From and after the effective date of this instrument, the County, for good and valuable consideration (consisting of receipt of a portion of the proceeds of the Authority's Lease Revenue Bonds (Various Capital Projects), 2003 Series A) the sufficiency of which is hereby acknowledged, hereby leases to the Authority and the Authority hereby leases from the County, the real property described in Exhibit A hereto, which real property is hereby added to the Facilities leased pursuant to the Master Site Lease and all references to the Facilities D005SFI:683223.3 40511-123 MAC 2 IN WITNESS WHEREOF, the County and the Authority have caused this Fifth Amendment to Master Site Lease to be executed by their respective officers thereunto duly authorized, all as of the day and year first above written. COUNTY OF CONTRA COSTA, as Lessor [SEAL] By Mark DeSaulnier Chair of the Board of Supervisors Attest. John R Sweeten Clerk of the Board of Supervisors and County Administrator By Chief Clerk COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY, as Lessee By Mark DeSaulnier Chair Attest: John R. Sweeten, Executive Director and Secretary By Assistant Executive Director DOCS5F1:683223.3 40511-123 MAC EXHIBIT A Additions to Facilities All that certain real property situated in the County of Contra Costa, State of California.,described as follows: DOCSSFl:6x83223.3 40511-123 MAC CONSENT OF TRUSTEE The undersigned, as successor trustee under the Trust Agreement dated as of February 1, 1999, as amended, between the County of Contra Costa Public Financing Authority (the "Authority") and the trustee, hereby acknowledges and consents to the execution and delivery of the Fifth Amendment to Master Site Lease dated as of July 1, 2003, between the County of Centra. Costa. (the "County") and the Authority, relating to the baster Site Lease, dated as of February 1, 1999, as amended by the First Amendment to Master Site Lease, dated as of January 1, 2001, the Second Amendment to Master Site Lease, dated as of May 1, 2001, the Third Amendment to Master Site Lease, dated as of June 1, 2002, and the Fourth Amendment to Master Site Lease, dated as of July 1, 2002,between the County and the Authority. BNY WESTERN TRUST COMPANY,as Trustee By: Authorized Officer DOCSSF 1:683223.3 40511-123 MAC CONSENT OF BOND INSURER The undersigned, as Insurer of a portion of the County of Contra Costa Public Financing Authority Lease Revenue Bands (Refunding and Various Capital Projects), 1999 Series A, issued pursuant to the Trust Agreement dated as of February 1, 1999, between the County of Contra Costa Public Financing Authority (the "Authority") and the trustee and as Insurer of the Authority's Lease Revenue Bonds(Various Capital Projects),2001 Series A issued pursuant to the First Supplemental Trust Agreement dated as of January 1, 2001, and as Insurer of the Authority's Lease Revenue Bonds (Various Capital Projects), 2001 Series B issued pursuant to the Second Supplemental Trust Agreement dated as of May 1, 2001, and as Insurer of the Authority's Lease Revenue Bonds (Various Capital Projects), 2002 Series A issued pursuant to the Third Supplemental Trust Agreement dated as of June 1, 2002, and as Insurer of the Authority's Lease Revenue Bonds (Various Capital Projects), 2002 Series B issued pursuant to the Fourth Supplemental Trust Agreement dated as of July 1, 2002, hereby consents to the execution and delivery of the Fifth Amendment to Master Site Lease dated as of July 1, 2003, between the County of Contra Costa(the"County") and the Authority, relating to the Master Site Lease, dated as of February 1, 1999, between the County and the Authority, as amended by the First Amendment to Master Site Lease, dated as of January 1, 2001, the Second Amendment to Master Site Lease, dated as of May 1, 2001,the Third Amendment to Master Site Lease, dated as of June 1, 2002 and the Fourth Amendment to Master Site Lease,dated as of July 1, 2002. MBIA INSURANCE CORPORATION By Authorized Officer DOCSSFl:683223.3 40511-123 MAC L&J DRAFT#4-D6/27/03 I'I2ELIIVCINAI2Y OFFICIAL S'I'A'I"EiVIENTI)A'I Ell AS OF.IIJL Z �y 2003 ' 3F'vU i SUE-BOOK ENTRY ONLY RATINGS:S&P:AAA M � See"RATINGS." in the opinion of Orrick.Herrington&Sutcliffe LLP,.Bond Counsel,based upon existing laws, regulations, rulings and court decisions,and assuming v` among other matters,the accuracy of certain representations and compliance with certain covenants, interest on the 2003 Series A Bonds is excluded from B gross income for,federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal L income taxes. In the further opinion of Bond Counsel, interest on the 2003 Series A Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current earnings when n calculating corporate alternative minimum taxable income. Bond Counsel expresses no opinion regarding any other tax consequences related to the ii, h ownership or disposition of,or the accrual or receipt of the interest on,the 2003 Series A Bonds. See "TAX MATT'E'RS"herein. V o $20,000,000* COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY r ' LEASE.REVENUE BONDS � L � ih C (VARIOUS CAPITAL PROJECTS), 2003 SERIES A s. w C � � Dated:Date of Delivery Due:June 1,as shown on inside cover w ' The County of Contra Costa Public Financing Authority Lease Revenue Bonds(Various Capital Projects),2003 Series A(the"2003 Series A Bonds') are being issued to:(i)finance or refinance the construction,acquisition and installation of various capital projects,and refund a privately placed lease that financed an adolescent resident treatment facility,(ii)to fund a reserve surety,and(iii)pay certain costs associated with the issuance of the 2003 Series A Bonds. See`PLAN OF FINANOE"and"ESTIMATED SOURCES AND USES OF FUNDS." Interest on the 2003 Series A Bonds will be payable on June I and December I of each year,commencing December 1,2003. The 2003 Series A o Bonds will be initial] delivered in book-en"form,registered in the name of Cede&Co.,as nominee of The Depository Trust Company,New York,New Y rY g P rY P Y, v :� n York ("DTC"). Principal of,redemption premium, if any, and interest on the 2003 Series A Bonds will be paid by BNY Western Trust Company, as ' Trustee,to DTC. DTC is obligated to remit such principal and interest to its DTC Participants for disbursement to the beneficial owners of the 2003 Serres A Bonds. See APPENDIX G—"DTC AND THE BOOK-ENTRY ONLY SYSTEM." The 2003 Series A Bonds are subject to optional, extraordinary and _ a mandatory redemption as described herein. c W Payment of the principal of and interest on the 2003 Series A Bonds,when due,will be insured by a bond insurance policy to be issued concurrently with the delivery of the 2003 Series A Bonds by MBIA Insurance Corporation. d d ` [MBIA Logo] a The 20113 Series A Bonds are being issued pursuant to a Trust Agreement,dated as of February 1, 1999,as previously supplemented,and as further � rL supplemented by the Fifth Supplemental Trust Agreement dated as of July 1,2003,between the Cour� of Contra Costa Public Financing Authority(the u 7 B "Authority")and the Trustee. The 2003 Series A Bonds are limited obligations of the Authority payable solely from certain revenues of the Authority,consisting primarily of Base E fl Rental Payments as defined herein to be made b the County to the Authority pursuant to a Facility Lease Various Capital Projects),dated as of February . .� Ym ( ) Y ty Y P Y ( P J ) Iry 3 1, 1999,as previously amended,and as further amended by the Fifth Amendment to Facility Lease dated as of July 1,2003,(the"Facility Lease"),between ' the Authority and the County. Pursuant to the Facility Lease, the County will lease the Facilities(defined herein)from the Authority. The County has covenanted in the Facility Lease to take such action as may be necessary to include Base Rental Payments in its annual budgets and to make the necessary a „ annual appropriations therefor. The County has agreed in the Facility Lease to make all Base Rental Payments,subject to abatement in the event of damage L, to or destruction or condemnation of all or a portion of the Facilities which results in substantial interference with the County's use and occupancy of the v Facilities,except as otherwise described herein. t w THE 2003 SERIES A BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY AND ARE NOT SECURED BY A LEGAL OR EQUITABLE PLEDGE OF, OR CHARGE OR LIEN UPON, ANY PROPERTY OF THE AUTHORITY OR THE COUNTY OR ANY OF THEIR INCOME OR RECEIPTS, EXCEPT THE REVENUES (AS DESCRIBED HEREIN). NEITHER THE FULL FAITH NOR THE CREDIT OF THE 8 w AUTHORITY OR THE COUNTY IS PLEDGED FOR THE PAYMENT OF THE INTEREST ON OR PRINCIPAL OF THE 2003 SERIES A BONDS. NEITHER THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE 2003 SERIES A BONDS NOR THE OBLIGATION TO MAKE BASE RENTAL PAYMENTS UNDER THE FACILITY LEASE CONSTITUTES A DEBT, LIABILITY OR OBLIGATION OF THE AUTHORITY OR THE c COUNTY FOR WHICH EITHER ENTITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH EITHER ENTITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE AUTHORITY HAS NO TAXING POWER. MATURITY SCHEDULE,PRINCIPAL AMOUNTS,INTEREST RATES AND PRICES/YIELDS u (See inside cover) This cover page contains certain information for general reference only. It is not intended to be a summary of security or terms of this issue. Investors Gare advised to read the entire Official Statement to obtain information essential to the making of an informed investment decision, a e The 2003 Series A Bonds are offered when, as and if issued, subject to approval of validity by Orrick. Herrington c& Sutcliffe LLP, San Francisco, q California,Bond Counsel. Certain other legal matters will be passed upon for the County and the Authority by County Counsel,and by Lofton c&Jennings, t San Francisco, California. Disclosure Counsel. Tamalpais Advisors, Inc. is Financial Advisor to the County in connection with the issuance of the 2003 Series A Bonds. It is anticipated that the 2003 Series.4 Bonds, in book-entry form, will be available for delivery through the facilities of DTC in New York, New York on or about August 14, 2003. " BIDS TO BE RECEIVED A.M.,CALIFORNIA TIME,TUESDAY,JULY 29,2003. L :J •p See APPENDIX I—"OFFICIAL NOTICE OF SALE." F t� r Dated: t: n *Prehminaiy, subject to change. No dealer,broker, salesperson or other person has been authorized by the County or the Authority to give any information or to make any representation 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 any of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of any offer to buy nor shall there be any sale of the 2003 Series A Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers of the 2003 Series A Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein,are intended solely as such and are not to be construed as representations of facts. The information set forth herein has been obtained from the County or the Authority and from other sources and is believed to be reliable but is not guaranteed as to accuracy or completeness. The information and expressions of opinions herein are subject to change without notice and neither the 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 County or the Authority since the date hereof. This Official Statement is submitted in connection with the sale of the 2003 Series A Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose,unless authorized in writing by the County. All summaries of the documents and laws are made subject to the provisions thereof and do not purport to be complete statements of any or all such provisions. All capitalized terms used herein, unless noted otherwise, shall have the meanings prescribed in the Trust Agreement and the Facility Lease. This Official Statement, including any supplement or amendment hereto,is intended to be deposited with one or more nationally recognized municipal securities information repositories. Certain statements in this Official Statement, which may be identified by the use of such terms as plan, project, expect, estimate, budget or other similar words, constitute forward-looking statements. Such forward- looking statements include, but are not limited to, statements contained in APPENDIx B—"COUNTY FINANCIAL INFORMATION." Such forward-looking statements refer to the achievement of certain results or other expectations or performance which involved known and unknown risks, uncertainties and other factors. These risks, uncertainties and other factors may cause actual results, performance or achievements to be materially different from: any projected results, performance or achievements described or implied by such forward-looking statements. The County does not plan to issue updates or revisions to such forward-Iooking statements if or when its expectations,or events, conditions or circumstances on which such statements are based, occur, or if actual results, performance or achievements are materially different from any results, performance or achievements described or implied by such forward-looking statements. The 2003 Series A Bonds have not been registered with the Securities and Exchange Commission by reason of the provisions of Section 3(a)(2)of the Securities Act of 1933, as amended. The registration or qualification of the 2003 Series A Bonds in accordance with applicable provisions of Securities Laws of the states in which these Bonds have been registered or qualified, and the exemption from registration or qualification in other states, shall not be regarded as a recommendation thereof. Neither these states nor any of their agencies have passed upon the merits of the securities or the accuracy or completeness of this Official Statement. Any representation to the contrary may be a criminal offense. In connection with this offering, the Underwriter may overallot or effect transactions which stabilize or maintain the market price of the 2003 Series A Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing,if commenced,may be discontinued at any time. This Preliminary Official Statement is submitted in connection with the sale of the 2003 Series A Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Preliminary Official Statement and the information contained herein are in a form deemed final by the County for purposes of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, as amended (except for omission of certain information permitted under Rule 15c2-12(b)(1)). However, the information herein is subject to revision, completion or amendment in a final Official Statement. 03015\pos-4 I ` , TABLE(}FCONTENTS Pa INTRODUCTION......................................—............—.......... ......... --........ ............................................ l PLANCK7FINANCE.................................. ............ ..................................................... ........................... 3 THEFACILITIES.............................................. .... ........ ...........................................................................4 ESTIMATED SOURCES AND USES {)F FUNDS.................................:........ .................... .................. 6 THE2003 SERIES ABONDS............................................................— ........................... ............ ............ b GeneralProvisions............................ .................................................................................... .... 6 Redemption Provisions..................................................................................................... .........6 Noticeof Redemption....................................................................................... ...... ...... ......... 7 Selection Vf2O03Series ABonds for Optional Redemption-----------.----.,... 7 Effect of Redemption -----....—.—...----.---.-----.---------..—,,. 8 SECURITY AND SOURCES(}F PAYMENT FOR THE BONDS............................................................ 0 General ....................................... ..................................................... ......................................... B Pledgeo[Revenues .......... ......................................................................................................... 9 BaseRental ..... .................................................................................. ............... ....... 9 ReserveFund............................................. ............................................... .............................. lO Substitutionof Property.,........................................ ................................................................. l} Insurance..................... ...................... ........................................................... --..... ----.. l1 AdditionalBonds.................................... ................................................................................. I3 DebtService Schedule............................................. ............................. ................................. l4 PRIOR RESERVE FACILITY........................................................................................... .................... l5 MUNICIPAL BOND INSURANCE P{}LlC},............. ...................... ................ ....................... ............ 15 TheInsurance Policy........................................................................................................:....... l5 MBIA Insurance Corporation--------------------------------- 16 Bond Insurer Information............ .................................................... ........ .............................. l7 Financial ofBond Insurer..... .......................... ............................................ l7 CERTAIN RISK FACTORS................ ....................................................... ............ .............................. 10 LimitedObligation............. ............................................ .......... ....................... .................... l8 Base Rental Payments Not a Debt of the County..................... ............................................... 1Q Valid and Binding Covenant to Budget and Appropriate--------.-----.----. l9 Abatement............................................... — ............................................................................ l9 LimitedRecourse noDefault..... ........... .................................................................................. l9 Limitations ooRemedies......................................................................— ................................ 20 Military Conflicts and Terrorist Activities......... .......................-- .....— .............................. 20 Risk of Earthquake and Other Natural Disasters........... ........... .............................................. 2l HazardousSubstances.... ................................................................................................. ....... 2l � Limited Liability of Authority tothe Owners ....................................................... .................. 22 StateFunding ofCounties................................. ........ ...... ....... ...... .....................................22 CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES, REVENUES AND APPROPRIATIONS.........^���...............'........................................................................ ...... .......' 22 ArticleXIII A........ ..................... ... ......— ........ ..... ........ --- ......................................... 22 ArticleXIII B ..... ...... ....... ........ ....... — .................................... ................... ...... ................ 23 VenturaDecision................ .................... ................ ............................................ ................. 24 030/5\»us-; Iii OFFICIAL STATEMENT $20,000,000* COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY LEASE REVENUE BONDS (VARIOUS CAPITAL PROJECTS), 2003 SERIES A INTRODUCTION This Official Statement (which includes the cover page and Appendices hereto) (the "Official Statement") provides certain information concerning the issuance of County of Contra Costa Public Financing Authority Lease Revenue Bonds (Various Capital Projects), 2003 Series A (the "2003 Series A Bonds"), in an aggregate principal amount of $20,000,000* by the County of Contra Costa Public Financing Authority(the "Authority"). The 2003 Series A Bonds are limited obligations of the Authority payable solely from Revenues (as hereinafter defined), consisting primarily of certain base rental payments(the"Base Rental Payments")to be made by the County of Contra Costa(the "County"), as rent for the Facilities (as defined herein). The County leases the Facilities to the Authority pursuant to a Master Site Lease, dated as of February 1, 1999, as previously amended, and as further amended by the Fifth Amendment to Master Site Lease dated as of July 1, 2003 (collectively, the "Site Lease"). The Facilities are then leased by the Authority to the County pursuant to a Facility Lease (Various Capital Projects), dated as of February 1, 1999, as previously amended, and as further amended by the Fifth Amendment to Facility Lease dated as of July 1, 2003 (collectively, the "Facility Lease"), between the County, as lessee, and the Authority, as lessor. All real property leased by the County from the Authority under the Facility Lease in connection with the Facilities is herein referred to as the "Demised Premises." The proceeds of the 2003 Series A Bonds will be applied along with funds of the County to: (i) finance or refinance the construction, acquisition and installation of various capital projects, and refund a privately placed lease that financed the acquisition, rehabilitation and construction of an adolescent residential treatment facility(collectively, the"2003 Series A Project"); (ii) fund a reserve surety; and(iii) pay certain costs associated with the issuance of the 2003 Series A Bonds. See "PLAN of REFUNDING" and "ESTIMATED SOURCES AND USES OF FUNDS." The 2003 Series A Bonds will be issued pursuant to the Constitution and the laws of the State of California (the "State"), resolutions adopted by the Authority and the County on July $, 2003 and a Trust Agreement, dated as of February 1, 1999, as previously supplemented,and as further supplemented by the Fifth Supplemental Trust Agreement dated as of July 1, 2003 (collectively, the "Trust Agreement"), between the Authority and State Street Bank and Trust Company of California, N.A., as trustee (the "Trustee"). Pursuant to the Trust Agreement, the Authority pledges to the Trustee, for the benefit of the Bondholders (as hereinafter defined), all of the Revenues, defined as the Base Rental Payments made by the County to the Authority under the Facility Lease, interest or other income from any investment of amount held in any fund or account established pursuant to the Trust Agreement or the Facility Lease (other than the Rebate Fund), and Swap Revenues. The Authority has previously issued five series of lease revenue bonds pursuant to the Trust Agreement, the "1999 Series A Bonds," the "2001 Series A Bonds," the "2001 Series B Bonds," the "2002 Series A Bonds" and the "2002 Series B Bonds"and collectively, the "Outstanding Parity Bonds," which are payable on a parity with the 2003 Series A Bonds. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Debt Service Schedule" for the outstanding debt service on the Outstanding Parity Bonds and the 2003 Series A Bonds. * Preliminary, subject to change. 0301 slpos-a .......................................................... ....... ...................................................................... _ _ ................................................................................. PLAN OF FINANCE A portion of the proceeds of will be used to finance and refinance various capital projects of the County described below and to refund a privately placed lease described below (collectively, the "2003 Series A Project")and to pay a portion of the base rental payments allocable to the 2003 Series A Project. The County presently anticipates that the capital projects described below will constitute the 2003 Series A Project, although the County may amend the 2003 Series A Project from time to time by filing a notice of change with the Trustee. See APPENDix D—"SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS---THE TRUST AGREEMENT—The 2003 Series A Bonds." • The County will use proceeds of the 2003 Series A Bonds in the amount of$1.9*million to construct an approximately 5,500 square foot, one-story building to be located at 790 San Pablo Avenue in the City of Pinole(the "Animal Shelter"). This facility will provide a range of animal services in Western Contra Costa County,including pet adoption, lost pet recovery and licensing services. • The County will use proceeds of the 2003 Series A Bonds in the approximate amount of S3e6 million to construct and equip a three-story, approximately 8,800 square foot, 40-bed adult residential substance abuse treatment facility. This facility to be known as the Discovery .Douse, is located at 4645 Pacheco Boulevard in the unincorporated area of Pacheco, California, near the City of Martinez. • The County will use proceeds of the 2003 Series A Bonds in the approximate amount of $4.7 million to acquire and install emergency communications equipment at multiple sites within the County, which equipment is designed to improve capacity, coverage and clarity of emergency communications. • The County will use proceeds of the 2003 Series A Bonds in the approximate amount of $2.65 million to exercise a purchase option for an approximately 15,000 square foot, two-story general services administration building located at 1220 Morello Avenue in the City of Martinez (the "GSA Building"). • The County will use proceeds of the 2003 Series A Bonds in the approximate amount of $1.2 million to acquire an approximately 5,000 square foot, one-story modular building located at 929 Second Street in the City of Brentwood. This building is located on the campus of an adult school and will house a one-stop career employment services program(the"Employment Center"). • In addition to the capital projects described above, the County will use proceeds of the 2003 Series A Bonds in the approximate amount of$3.6 million to refund on a current basis a privately placed lease that financed the construction and rehabilitation of two one-story buildings comprising approximately 10,600 aggregate square feet, for an adolescent residential treatment facility and a seventh through twelfth grade school for the residents. This facility is located at 1034 Oak Grove Boulevard in the City of Concord. The remaining proceeds of the 2003 Series A Bonds will be used to pay costs of issuance related to the execution and delivery of the 2003 Series Bonds. See "ESTIMATED SOURCES AND USES OF FUNDS." 03015\pas-4 3 Approx. Term Original Approx. Building of Completion Acreage Square Facility Value Facility Address Bate of Site Footage Lease ($.millions) Family Law Centert 751 Pine Street - Martinez,CA 2003 West County Animal Shelter' 900 San Pablo Avenue, Pinole,CA 2003 _ 5,500 2.501" Adolescent Residential Treatment 1034 Oak Grove Facility' Pleasant Full,CA 2002 10,600 _ 3.60" SUBTOTAL 2003 SERIES A FACILITIES: $18.90 Bray Courthouse 1020 Ward Street 1988 0.6 $48,900 2016 $10.351°t Martinez,CA Contra Costa Regional Medical 2500 Alhambra Dr. 2002 0.6 24,600 2027 $.78"' Center Laboratory Martinez,CA Data Processing Building 30 Douglas Drive 1986 1.6 35,300 2019 4.901�1 Martinez,CA East County Social Services 4545 Delta Fair Blvd. 1988 4.9 52,700 2008 5.001'} Building Antioch,CA Employment and Human Services 1650 Cavallo Road 2002151 2.0 24,500 2027 6.40('? Building Antioch,CA Forensic Science Center 1960 Muir Road 1986 0.8 20,000 2019 4.4{11`} Martinez,CA Four Buildings at Central Contra 2475,2479 and 2483 1986 7.0 21,000 2019 6.001'? Costa County Public Works Waterbird Way and 4785 Pard Blum Road Martinez,CA 595 Center Street and 19$6 1.7 45,000 2019 4.8011 Health Services Building Muir Road Martinez,CA Public Defender's Building 3811 Bissell Avenue 2002151 0.3 6,200 2027 1.821'} Richmond,CA Public Works Department 255 Glacier Drive 1986 1.3 31,200 2019 2.421'1 Administration Martinez,California Solar Electric Panels Martinez Detention Facility 2002 -- -w 2017 2.18131 and 50 Douglas Drive Martinez,CA Summit Centre 2530 Arnold Dr. 1988 20.8 113,000 2026 25.80") Martinez,CA West County Detention Facility 5555 Giant Highway 1991 47.4 243,300 2028 63.001x1 Richmond,CA TOTAL $164.75 Comprises a component of the 2003 Series A Facilities. {11 Based upon the construction cost of such project. tit Based upon acquisition cost. 131 Based upon independent appraisals completed in December 1998, 141 Based upon acquisition cost and,where applicable,improvements to the building. 151 Estimated date for completion of remodeling. The original construction completion dates for these facilities were 1988 for the Employment and Human Services Building and 1975 for the Public Defender's Building. 161 Based upon(i)an outside appraisal conducted in September 2000 that valued the property at$18.0 million,(ii)a purchase price of$2.3 million for an adjacent 13.4 acres(which were purchased on February 18,2000),and(iii)the value of tenant improvements totaling$5.5 million. Source:County Administrator's Office. 030 1 51pos-4 5 following prices (expressed as a percentage of the principal amount of the 2003 Series A Bonds called for redemption),plus accrued interest thereon to the date fixed for redemption: Redemption Period (dates inclusive) Redemption price June 1, 2011 through May 31,2012 101.0% June 1, 2012 through May 31, 2013 100.5 June 1, 2013 and thereafter 100.0 Extraordinary.Redemption. The 2003 Series A Bonds are subject to redemption by the Authority on any date prior to their respective stated maturities, upon notice as provided in the Trust Agreement, as a whole or in part by lot within each stated maturity of the 2003 Series A Bonds in Authorized Denominations, from prepayments of Base Rental payments made by the County from the net proceeds received by the County due to the taking of the Facilities or portions thereof under the power of eminent domain, or from the net proceeds of title insurance or insurance received for damage to or destruction of the Facilities or portions thereof, under the circumstances described in the Trust Agreement and the Facility Lease. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Insurance." The redemption price will be equal to the principal amount of the 2003 Series A Bonds to be redeemed and accrued interest thereon to the date of redemption, without premium. Whenever less than all of the Outstanding Bonds are to be redeemed on anyone date,the Trustee will select, in accordance with written instructions from the Authority, the Bonds to be redeemed so that the aggregate annual amounts of principal of and interest on the Bonds which will be payable after such redemption date will be as nearly proportional as practicable to the aggregate annual amounts of principal of and interest on the Bonds outstanding prior to such redemption date. Notice of Redemption Notice of redemption is to be mailed, first class postage prepaid, to the respective fawners of any 2003 Series A Bonds designated for redemption at their addresses appearing on the registration books required to be kept by the Trustee not less than 30 nor more than 60 days prior to the redemption date. Each notice of redemption will state the date of such notice, the date of issue of the Bonds, the Series, the redemption date, the redemption place, the redemption price, and the CUSIP number of the maturity or maturities, and, if less than all of any such maturity is to be redeemed, the distinctive certificate numbers of the 2003 Series A Bonds to be redeemed, and in the case of each 2003 Series A Bond called for redemption in part, state the amount which is to be redeemed. Each such notice will also state that from and after the redemption date, interest on the 2003 Series A Bonds to be redeemed will cease to accrue. Failure to receive such notice will not invalidate any of the proceedings taken in connection with such redemption. Selection of 2003 Series A Bonds for Optional Redemption The Authority will designate which maturities of Bonds are to be redeemed. Whenever less than all the Outstanding 2003 Series A Bonds maturing on any one date are to be redeemed, the Trustee will select the 2003 Series A Bonds of such maturity date to be redeemed from the Outstanding 2003 Series A Bonds payable on such maturity date by lot. For purposes of such selection, 2003 Series A Bonds will be deemed to be composed of$5,000 portions, and any such portion may be separately redeemed. In the event 2003 Series A Bonds subject to sinking fund redemption are designated for redemption, the Authority may designate which sinking account payments are allocated to such redemption. 030 r 5\pos•4 7 Should the County default under the Facility Lease, the Authority may (i) terminate the Facility Lease and take possession of the Facilities or (ii) retain the Facility Lease and seek to hold the County liable for all Base Rental Payments and Additional Payments thereunder (without acceleration) as they become due on an annual basis. See APPENDIX D—"SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS—Facility Lease—Default and Remedies." Base Rental Payments and Additional Payments may not be accelerated. See"CERTAIN RISK FACTORS." As additional security for the 2003 Series A Bonds, payment of the principal of and interest, when due, on the 2003 Series A Bonds will be insured by a municipal bond insurance policy to be issued by MBIA simultaneously with the delivery of the 2003 Series A Bonds. See "MUNICIPAL BOND INSURANCE POLICY." Pledge of Revenues The Revenues consist primarily of the Base Rental Payments made by the County to the Authority. In accordance with the Trust Agreement, all Revenues are irrevocably pledged to and will be used for the punctual payment of interest and premium, if any, on and principal of the Bonds and Reserve Facility Costs, if any, and the sums due and payable by the Authority in connection with any Sways, if any, and will not be used for any other purpose while any of the Bonds remain Outstanding; provided, however,that out of the Revenues may be applied such sums as are permitted under the Trust Agreement. This pledge constitutes a first lien on the Revenues in accordance with the terms of the Trust Agreement. The Authority has directed that all Base Rental Payments be paid directly to the Trustee to be held in trust by the Trustee in the Revenue Fund for the benefit of the Bondholders. The County has covenanted under the Facility Lease that as long as the Facilities are available for the County's use and occupancy, it will take such action as may be necessary to include all Base Rental Payments and Additional Payments due under the Facility Lease in its annual budgets and to make the necessary annual appropriations therefor. The County has timely made to date all Base Rental Payments and Additional Payments due under the Facility Lease for the 1999 Series A Bonds, the 2001 Series A Bonds and the 2001 Series B Bonds. Base Rental Payments Base Rental Payments are calculated on an annual basis for twelve-month periods commencing on June 1 and ending on May 31, and each annual Base Rental Payment is divided into two interest components, due on June I and December 1, and one principal component, due on June 1, except that the first Base Rental Payment period commenced on the original date of recordation of the Facility Lease (March 4, 1999) and ended on May 31, 1999, Each Base Rental Payment with respect to the 2003 Series A Bonds will be payable on the 15th day of the month immediately preceding its due date. Each annual Base Rental Payment (to be payable in installments as aforesaid) will be for the use of the Facilities for the twelve-month period commencing on June I of the period in which such installments are payable (except the first Base Rental period which commenced on the date of recording of the Facility Lease). The Trust Agreement requires that Base Rental Payments be deposited in the Revenue Fund maintained by the Trustee. In accordance with the Trust Agreement, the Trustee will transfer such amounts as are necessary to the Interest Account or the Principal Account, as the case may be, to pay principal of and interest on the Bonds as the same become due and payable. On each Principal Payment Date, following the payment of principal of and interest on the Bonds,any excess amount in the Revenue Fund will be transferred to the Reserve Fund, as necessary, and thereafter returned to the County. See APPENDIX D—"Sum. MARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS—Trust Agreement—Creation of Funds and Accounts." 03015\pos4 9 Substitution of Property The County and the Authority,with the written consent of the Bond Insurer, may substitute other real property as part of the Facilities for purposes of the Facility Lease provided the County has filed with the Authority and the Trustee,with copies to each rating agency then providing a rating for the Bonds, all of the following: (a) Executed copies of the Facility Lease or amendments thereto containing the amended description of the Facilities, including the legal description of the Demised Premises as modified, if necessary. (b) A Certificate of the County with copies of the Facility Lease or the Site Lease as applicable, or amendments thereto containing the amended description of the Facilities stating that such documents have been duly recorded in the official records of the County Recorder of the County. (c) A Certificate of the County, together with an appraisal performed by an independent appraiser, evidencing that the annual fair rental value of the Facilities which will constitute the Facilities after such substitution will be at least equal to 100% of the maximum amount of Base Rental Payments becoming due in the then current year ending May 31 or in any subsequent year ending May 31. (d) A Certificate of the County stating that, based upon review of such instruments, certificates or any other matters described in such Certificate of the County, the County has good merchantable title to the Facilities, which will constitute the Facilities after such substitution. The term "good merchantable title" shall mean such title as is satisfactory and sufficient for the needs and operations of the County. (e) A Certificate of the County stating that such substitution does not adversely affect the County's use and occupancy of the Facilities. (f) An Opinion of Bond Counsel stating that such amendment or modification (i) is authorized or permitted by the Constitution and laws of the State and by the Trust Agreement; (ii) complies with the terms of the Constitution and laws of the State and of the Trust Agreement; (iii)will, upon the execution and delivery thereof, be valid and binding upon the Authority and the County; and (iv) will not cause the interest on the Bonds to be included in gross income for federal income tax purposes. There is no requirement that any substitute Facilities be of the same or a similar nature or function as the then existing Facilities. The Bond Insurer may require additional conditions to the substitution of Facilities. Insurance The Facility Lease requires the County to maintain or cause to be maintained,throughout the term of the Facility Lease, insurance against loss or damage to any structures constituting any part of the Facilities by fire and lightning, with extended coverage insurance, vandalism and malicious mischief insurance and sprinkler system leakage insurance, and earthquake insurance, if available on the open market from reputable insurance companies at a reasonable cost as determined by the County. Such extended coverage insurance will, as nearly as practicable,cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance. Such insurance will be in an amount equal to the replacement cost(without deduction for depreciation) of all structures constituting any part of the Facilities, excluding the cost of excavations, of grading and filling, and of the land(except that such insurance may be subject to deductible clauses for any one loss of not to exceed $250,000 or comparable amount adjusted for inflation or more in the case of earthquake 03015\pos-4 l 1 the Facility Lease is abated, and any proceeds of such insurance not so used will be applied to pay Base Rental Payments and Additional Payments. The County also agrees to deliver to the Authority title insurance on the Demised Premises, subject only to Permitted Encumbrances, in an amount equal to the aggregate principal amount of the Bonds. The County is required under the Facility Lease to purchase commercial insurance to cover damage due to earthquake if it is available on the open market from reputable insurance companies at a reasonable cost, as determined by the County. The County has purchased an earthquake insurance policy for all of its property, including the Facilities, through the California State Association of Counties Excess Insurance Authority ("CSAC-EIA"). The County's earthquake insurance coverage and is being renewed effective July 1, 2003 with a policy limit of $130 million [with an excess shared aggregate of $25 million]. The County is in the "Zone A"designation, which has the highest potential for an earthquake among all zone designations. No assurance is given that the County will continue to maintain earthquake insurance in the future. See "CERTAIN RISK FACTORS-Risk of Earthquake and Other Natural Disasters" and APPENDIX B—"CouNTY FINANCIAL INFORMATION—Insurance." The County is also required to obtain certain liability insurance coverage in protection of the Authority and the Trustee. Additional Bonds Additional Bonds may,with the consent of the Bond Insurer(who also must consent as insurer of a portion of the 1999 Series A Bonds and all of the 2001 Series A Bonds, the 2001 Series B Bonds, the 2002 Series A Bonds and the 2002 Series B Bonds), be issued on a parity with the Outstanding Parity Bonds and the 2003.Series A Bonds upon the terms and subject to the conditions set forth in the Trust Agreement. See.APPENDIX D-"SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS- Trust Agreement-Additional Bonds." (REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) 0301 S\pos-4 13 .......................................................... _. __ PRIOR RESERVE FACILITY The Prior Reserve Facility provides that upon notice from the Trustee to the Bond Insurer to the effect that insufficient amounts are on deposit in the Revenue Fund to pay the principal of(at maturity or pursuant to mandatary redemption requirements) and interest on the Bonds, the Bond Insurer will promptly deposit with the Trustee an amount sufficient to pay the principal of and interest on the Bonds or the available amount of the Prior Reserve Facility, whichever is less. Upon the later of. (i) three days after receipt by the Bond Insurer of a Demand for Payment in the form attached to the Prior Reserve Facility, duly executed by the Trustee; or (ii) the payment date of the Bonds as specified in the Demand for Payment presented by the Trustee to the Bond Insurer, the Bond Insurer will make a deposit of funds in an account with State Street Bank and Trust Company,N.A.,in New York,New York,or its successor, sufficient for the payment to the Trustee,of amounts which are then due to the Trustee (as specified in the Demand for Payment) subject to the Surety Bond Coverage. The available amount of the Prior Reserve Facility is the initial face amount of the Prior Reserve Facility less the amount of any previous deposits by the Bond Insurer with the Trustee which have not been reimbursed by the Authority. The Authority and the Bond Insurer have entered into Financial Guaranty Agreements at the time of issuance of each prior series of Bonds (collectively, the "Agreement"). Pursuant to the Agreement, the Authority is required, but only from available Revenues, to reimburse the Bond Insurer the amount of such deposit made by the Bond Insurer with the Trustee under the Prior Reserve Facility. Such reimbursement shall be made only after all required deposits to the Principal Account and the Interest Account have been made. Under the terms of the Agreement, the Trustee is required to reimburse the Bond Insurer, with interest,until the initial face amount of the Prior Reserve Facility is reinstated. No optional redemption of Bonds may be made until the Bond Insurer's Prior Reserve Facility is reinstated. The Prior Reserve Facility is held by the Trustee in the Reserve Fund and is provided as an alternative to the Authority depositing funds or using other eligible methods to satisfy the Reserve Fund Requirement for outstanding Bonds. The premium for the Prior Reserve Facility was fully paid by the Authority at the time of delivery of each prior series of Bonds. MUNICIPAL BOND INSURANCE POLICY .The following information has been furnished by MBIA Insurance Corporation (the ".Bond Insurer')for use in this Official Statement. Reference is made to APPENDIX H for a specimen of the Municipal Bond Insurance Policy. None of the County, the Authority or the Underwriter makes any representation as to the accuracy or completeness of this information or as to the absence of material adverse changes in this information subsequent to the date hereof. The Insurance Policy The Bond Insurer's policy unconditionally and irrevocably guarantees the full and complete payment required to be made by or on behalf of the Authority to the Trustee or its successor of an amount equal to (i) the principal of(either at the stated maturity or by an advancement of maturity pursuant to a mandatory sinking fund payment) and interest on, the 2003 Series A Bonds as such payments shall become due but shall not be so paid (except that in the event of any acceleration of the due date of such principal by reason of mandatary or optional redemption or acceleration resulting from default or otherwise, other than any advancement of maturity pursuant to a mandatory sinking fund payment, the payments guaranteed by the Bond Insurer's policy shall be made in such amounts and at such times as such payments of principal would have been due had there not been any such acceleration); and (ii) the reimbursement of any such payment which is subsequently recovered from any owner of the 2003 Series A Bonds pursuant to a final judgment by a court of competent jurisdiction that such payment constitutes 03415\pos-4 15 Bond Insurer Information The following documents filed by the Company with the Securities and Exchange Commission (the "SEC") are incorporated herein by reference: (1) The Company's Annual Report on Form 10-K for the year ended December 31, 2002; and (2) The Company's Quarterly Report on Form 10-Q for the quarter ended March 31,2003. Any documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act of 1934, as amended, after the date of this Official Statement and prior to the termination of the offering of the 2003 Series A Bonds offered hereby shall be deemed to be incorporated by reference in this Official Statement and to be a part hereof. Any statement contained in a document incorporated or deemed to be incorporated by reference herein, or contained in this Official Statement, shall be deemed to be modified or superseded for purposes of this Official Statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Official Statement. The Company files annual, quarterly and special reports, information statements and other information with the SEC under File No. 1-9583. Copies of the SEC filings (including(1) the Company's Annual Report on Form 10-K for the year ended December 31, 2002, and (2) the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003), are available (i) over the Internet at the SEC's web site at http://www.see.gov; (ii) at the SEC's public reference room in Washington D.C.; (iii) over the Internet at the Company's web site at http://www.mbia.com; and (iv) at no cost, upon request to MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504. The telephone number of MBIA Insurance Corporation is(914)273-4545. As of December 31, 2002, the Bond Insurer had admitted assets of$9.2 billion (audited), total liabilities of$6.0 billion (audited), and total capital and surplus of$3.2 billion (audited) determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities. As of March 31, 2003, the Bond Insurer had admitted assets of$9.3 billion (unaudited), total liabilities of$6.1 billion(unaudited), and total capital and surplus of$3.2 billion (unaudited) determined in accordance with statutory accounting practices prescribed or'permitted by insurance regulatory authorities. Financial Strength Ratings of Bond Insurer Moody's Investors Service,Inc.rates the financial strength of the Bond Insurer"Aaa." Standard &Poor's, a division of The McGraw-Hill Companies, Inc. rates the financial strength of the Bond Insurer"AAA," Fitch Ratings rates the financial strength of the Bond Insurer"AAA." Each rating of the Bond Insurer should be evaluated independently. The ratings reflect the respective rating agency's current assessment of the creditworthiness of the Bond Insurer and its ability to pay claims on its policies of insurance. Any further explanation as to the significance of the above ratings may be obtained only from the applicable rating agency. 03015\pos-� 17 _. .._........................................................................................................................._. _. ................................._............................................................................................................................................................................................................................... ...._..... Valid and Binding Covenant to Budget and Appropriate Pursuant to the Facility Lease, the County covenants to take such action as may be necessary to include Base Rental Payments due in its annual budgets and to make necessary appropriations for all such payments. Such covenants are deemed to be duties imposed by law, and it is the duty of the public officials of the County to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the County to carry out and perform such covenants. A court, however, in its discretion may decline to enforce such covenants. Upon issuance of the 2003 Series A Bonds, Bond Counsel will render its opinion(substantially in the form of APPENDIX E—"PROPOSED FORM OF BOND COUNSEL, OPINION") to the effect that, subject to the limitations and qualifications described therein, the Facility Lease constitutes a valid and binding obligation of the County. As to the Authority's practical realization of remedies upon default by the County, see "—Default and Remedies" and "— Limitations on Remedies." Abatement In the event of loss or substantial interference in the use and occupancy of the Facilities by the County caused by damage or destruction or condemnation of the Facilities, Base Rental Payments (except for the portion of debt service attributable to the Courts Project, which will not be abated to the extent Courthouse Funds are available for the payment thereof) will be subject to abatement. In the event that the Facilities or any component thereof, if damaged or destroyed by an insured casualty, could not be replaced during the period of time that proceeds of the County's rental interruption insurance will be available in lieu of Base Rental Payments plus the period for which funds are available from the Reserve Fund or the Revenue Fund, or in the event that casualty insurance proceeds or condemnation proceeds are insufficient to provide for complete repair or replacement of the Facilities or such component of the Facilities or redemption of the Bonds, there could be insufficient funds to make payments to Owners in full. See APPENDIX D—"SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS—Facility Lease—Abatement." It is not possible to predict the circumstances under which such an abatement of rental may occur. In addition,there is no statute,case or other law specifying how such an abatement of rental should be measured. For example, it is not clear whether fair rental value is established as of commencement of the lease or at the time of the abatement. If the latter,it may be that the value of the Facilities could be substantially higher or lower than its value at the time of issuance of the 2003 Series A Bonds. Abatement, therefore, could have an uncertain and material adverse effect on the security for and payment of the 1003 Series A Bonds. The County's obligation to make payments from the Courthouse Funds for the Courts Project is not subject to abatement. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Pledge of Courthouse Funds." Limited Recourse on Default The enforcement of remedies provided in the Facilities Lease and the Trust Agreement could be both expensive and time consuming. The Trustee has no interest in the Authority's title to the Demised Premises, and has no right to terminate the Facility Lease or reenter or relet the Facilities. Upon the occurrence of one of the "events of default" described below, the County will be deemed to be in default under the Facility Lease and the Authority may exercise any and all remedies available pursuant to law or granted pursuant to the Facility Lease. Upon any such default, including a failure to pay Base Rental Payments, the Authority may either (1) terminate the Facility Lease and seek to recover certain damages or (2) without terminating the Facility Lease, (i) continue to collect rent from the County on an annual basis by seeking a separate judgment each year for that year's defaulted Base Rental Payments and/or (ii)reenter the Facilities and relet them. In the event of default, there is no right to accelerate the total 03415\pos-4 19 Although, the County maintains various insurance coverage on its properties, including sabotage and terrorism coverage for real and personal property, the County makes no representation that this insurance coverage will continue to be maintained in the future or as to the ability of any insurer to fulfill its obligations under any insurance policy. See also APPENDIX A—"COUNTY ECONOMIC,DEMOGRAPHIC AND FINANCIAL INFORMATION—FINANCIAL INFORMATION—Insurance and Self-Insurance Programs." There are three petroleum refineries located within the County, and during Fiscal Year 2001-02, the owners of these refineries were the top three principal property taxpayers in the County. A terrorist act against any of these refineries or any principal taxpayer resulting in damage or destruction to company facilities or infrastructure could have a significant impact on revenues of the County. See also APPENDIX A--"COUNTY ECONOMIC,DEMOGRAPHIC AND FINANCIAL INFORMATION—ECONOMIC AND DEMOGRAPHIC INFORMATION—Principal Taxpayers." Risk of Earthquake and Other Natural Disasters There are several earthquake faults in the greater San Francisco Bay Area that could result in damage to the Facilities ,the 2003 Series A Project, buildings, roads, bridges, and property within the County in the event of an earthquake. Past experiences, including the 1989 Loma Prieta earthquake, measuring 7.1 on the Richter scale with an epicenter approximately 60 miles south of the County, have resulted in minimal damage to the infrastructure and property in the County. Earthquake faults that could affect the County include but may not be limited to the Hayward Fault in the western part of the County, and the Concord/Green Valley, Diablo and Calaveras Faults within the eastern portions of the County. The Facility Lease does not require the County to maintain insurance on the Facilities against certain risks such as earthquakes unless such insurance is available from a reputable insurance company at a reasonable cost to the County. The County has purchased an earthquake insurance policy that expires in March 31, 2003 to cover all County property, including the Facilities. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Insurance" and APPENDIX B--"COUNTY FINANCIAL INFORMATION-- Insurance." Hazardous Substances Owners and operators of real property may be required by law to remedy conditions of the property relating to 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 operator) is obligated to remedy a hazardous substance whether or not the owner(or operator) has or had anything to do with creating or handling the hazardous substance. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly and adversely affect the operations and finances of the County. Although the County handles, uses and stores certain hazardous substances, including but not limited to, solvents, paints, certain other chemicals on or near the Demised Premises, the County knows of no existing hazardous substances which require remedial action on or near the Demised Premises. However, it is possible that such substances do currently or potentially exist and that the County is not aware of them. 0301 seas-a 21 _. _.............................................. ..._........................................................................................................................................ - ........................................................................................................................ ..................................................................................................... serve the tax rate area within which the growth occurs. Local agencies and school districts will share the, growth of "base" revenue from the tax rate area. Each year's growth allocation becomes part of each agency's allocation the following year. The County is unable to predict the nature or magnitude of future revenue sources which may be provided by the State to replace lost property tax revenues. Article.XIII A effectively prohibits the levying of any other ad valorem property tax above the I% limit except for taxes to support indebtedness approved by the voters as described above. On December 27, 2001, the Orange County Superior Court held in the case of County of Orange v. Orange County Assessment Appeals hoard No. 3, case no. OOCCO3385, that where a home's market value did not increase for two years, the Orange County assessor violated the provision of Article .XIII A limiting the annual inflation adjustment to two percent when the assessor tried to"recapture"the tax value of the property by increasing its assessed value by approximately four percent in a single year, following a year in which the assessed value had declined. The assessors in most California Counties, including the County, have used and currently use a similar methodology in raising the taxable values of property beyond two percent in a single year. The State Board of Equalization has approved this methodology for increasing assessed values in similar circumstances. In a ruling issued on December 12,2002, the Orange County Superior Court held that any Orange County taxpayer whose property assessment rose more than 2% due to "recapturing" since 1979 is part of the certified class action lawsuit filed against the County of Orange in 2000. If upheld on appeal, the class action suit may result in $1 billion in illegally collected taxes being returned to Orange County taxpayers. On January 30, 2003, the Orange County Superior Court held a hearing and ruled on the motion to determine if the Orange County Tax Collector must notify such "recapture" taxpayers of their right to file tax refund claims. The Court granted the motion, but immediately put a hold on its implementation pending further review by the appellate courts on this entire case. On April 18, 2003, , a Final Judgment was entered ruling against the current statewide practice of restoration of a property assessment based on the market value, after a prior assessment reduction due to an economic downturn. In 2002, two other local courts (Los Angeles and San Diego) ruled differently on the same issue and affirmed the current statewide practice. On June 12, 2003 an appeal was filed. The County uses the same methodology as Orange County, and as a result, is unable to predict the outcome of this litigation and what effect, if any, a similar action in the County might have on assessed values in the County. .Each Court's ruling only applies to the particular assessment involved in such case. However, if the Court's reasoning is applied generally, the loss of tax revenue to communities including the County could be significant. While, the County cannot predict the effect, if any, that the outcome of such litigation would have on property tax revenues to be received by the County, the effect could be adverse. See APPENDix A—"COUNTY ECONOMIC, DEMOGRAPHIC AND FINANCIAL INFORMATION—FINANCIAL INFORMATION—Ad Valorem Property Taxes." Article XIII B On November 6, 1979, California voters approved Proposition 4, the Gann Initiative, which added Article XIII B to the California Constitution. In June 1990, Article .XIII B was amended by the voters through their approval of Proposition 111. Article XIII B of the California Constitution limits the annual appropriations of the State and any city, county, school district, authority or other political subdivision of the State to the level of appropriations for the prior fiscal year, as adjusted annually for changes in the cost of living, population and services rendered by the governmental entity. The "base year"for establishing such appropriation limit is the 1978-79 fiscal year. Increases in appropriations by a governmental entity are also permitted(i) if financial responsibility for providing services is transferred to the governmental entity, or (ii) for emergencies so long as the appropriations limits for the three years following the emergency are reduced to prevent any aggregate increase above the Constitutional limit. Decreases are required where responsibility for providing services is transferred from the government entity. 030 1 S\POS4 23 The requirements imposed by Proposition 62 were upheld by the California Supreme Court in Santa Clara County Local Transportation Authority v. Guardino, I I Cal. 4th 220; 45 Cal. Rptr. 2d 207 (1995). In this case, the Court held that a county-wide sales tax of one-half of one percent was a special tax that, under Section 53722 of the Government Code,required a two-thirds voter approval. Because the tax received an affirmative vote of only 54.1%,this special tax was found to be invalid. Following the California Supreme Court's decision upholding Proposition 62, several actions were filed challenging taxes imposed by public agencies since the adoption of Proposition 62. On June 4, 2001, the California Supreme Court released its decision in one of these cases, Howard Jarvis Taxpayers Association v. City of La Habra, et al. ("La Habra"). In La Habra,the Court held that the public agency's continued imposition and collection of a tax is an ongoing violation,upon which the statute of limitations period begins anew with each collection. The Court also held that,unless another statute or constitutional rule provided differently, the statute of limitations for challenges to taxes subject to Proposition 62 is three years. Accordingly, a challenge to a tax subject to Proposition 62 may only be made for those taxes received within three years of the date the action is brought. The County levied a hotel tax in 1965 and subsequently increased the hotel tax in 1990. The 1990 increase raised the County's hotel tax from eight to ten percent, the current tax levied on the occupancy of any hotel room in the County. On November 5, 1996, the voters rejected a ratification of this increase in the hotel tax rate. However, it was resubmitted to and affirmed by the voters in March of 1997. Although the County did not collect the 2% portion of the tax between November of 1996 and March of 1997, it is now collecting the full 10% tax. Given the three year statute of limitations, no challenge can be brought against amounts collected prior to March 1997. Consequently, the County believes that it has no taxes to which Proposition 62 could apply. Right to Vote on Taxes)initiative-Proposition 218 On November 5, 1996, the voters of the State approved Proposition 218, known as the "Right to Vote on Taxes Act." Proposition 218 added Articles .XIII C and XIII D to the California Constitution, which contain a number of provisions affecting the ability of cities and counties to levy and collect both existing and future taxes,assessments,fees and charges. Article XIII C requires that all new local taxes be submitted to the electorate before they become effective. Taxes for general governmental purposes of the County require a majority vote and taxes for specific purposes, even if deposited in the County's general fund, require a two-thirds vote. The voter approval requirements of Proposition 218 reduce the flexibility of the Board of Supervisors to raise revenues for the general fund, and no assurance can be given that the County will be able to impose, extend or increase such taxes in the future to meet increased expenditure requirements. In addition, Article XIII D contains new provisions relating to how local agencies may levy and maintain "assessments" for municipal services and programs. "Assessment" is defined to mean any levy or charge upon real property for a special benefit conferred upon the real property. This definition applies to landscape and maintenance assessments for open space areas,street medians,street lights and parks. Article XIII D also contains several provisions affecting "fees" and "charges," defined for purposes of Article XIII D to mean "any levy other than an ad valorem tax, a special tax, or an assessment, imposed by a local government upon a parcel or upon a person as an incident of property ownership, including a user fee or charge for a property related service." All new and existing property related fees and charges must conform to requirements prohibiting, among other things, fees and charges which (i) generate revenues exceeding the funds required to provide the property related service, (ii) are used for any purpose other than those for which the fees and charges are imposed, (iii) are for a service not actually used by, or immediately available to, the owner of the property in question, or (iv) are used for general governmental services, including police, fire or library services, where the service is available 03015\pos4 25 The Authority is governed by a five member Board of Directors. The Board of Supervisors of the County constitutes the Board of Directors of the Authority. The Executive Director and Secretary of the Authority is the County Administrator and Clerk of the Board of Supervisors, the Assistant Executive Director of the Authority is the County Community Development Director, the Deputy Executive Directors of the Authority are the Director,Capital Facilities and Debt Management of the County and the County Deputy Director-Redevelopment, the Treasurer of the Authority is the County's Auditor- Controller and the Assistant Secretary of the Authority is the Director, Capital Facilities and Debt Management of the County. The Authority's powers include, but are not limited to, the power to issue bonds and to sell such bonds to public or private purchasers at public or by negotiated sale. The Authority is entitled to exercise the powers common to its members and necessary to accomplish the purposes for which it was formed. These powers include the power to make and enter into contracts; to employ agents and employees; to acquire, construct, manage, maintain and operate buildings, works or improvements; to acquire, hold or dispose of property within the County; and to incur debts, liabilities or obligations. THE COUNTY The County of Contra Costa lies northeast of the San Francisco Bay and is the ninth most populous county in California. The County seat is in the City of Martinez. Major industries in the County include petroleum refining and telecommunications. The Fiscal Year 2002-03 General Fund Budget of the County totaled approximately $1.6 billion. The General Fund Recommended Budget for Fiscal Year 200304 is approximately$1.08 billion. For certain economic, demographic and financial information with respect to the County, see APPENDIX A—"GENERAL COUNTY ECONOMIC AND DEMOGRAPHIC INFORMATION," APPENDIX B— "COUNTY FINANCIAL• INFORMATION" and APPENDIX C—"EXCERPTs FROM THE COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30,2002.53 RATINGS Moody's Investors Service ("Moody's"), Standard & Poor's, a division of the McGraw-Hill Companies, Inc. ("S&P") and Fitch Ratings("Fitch"), are expected to assign the 2003 Series A Bonds the ratings of"Aaa," "AAA"and"AAA,"respectively,with the understanding that upon delivery of the 2003 Series A Bonds, the policy insuring payment when due of the principal of and interest on the 2003 Series A Bonds will be issued by the Bond Insurer. See"MUNICIPAL BOND INSURANCE POLICY"and APPENDIX H---SPECIMEN MUNICIPAL BOND INSURANCE POLICY." Certain information was supplied by the Authority and the County to the rating agencies to be considered in evaluating the 2003 Series A Bonds. Such ratings express only the views of the rating agencies and are not a recommendation to buy,sell or hold the 2003 Series A Bonds. There is no assurance that such ratings will continue for any given period of time or that they will not be reduced or withdrawn entirely by the rating agencies, or either of them, if in their, or its,judgment, circumstances so warrant. The Authority, the County and the Trustee undertake no responsibility to oppose any such revision or withdrawal. Any such downward revision or withdrawal may have an adverse effect on the market price of the 2003 Series A Bonds, 0301 S\pos-4 27 purchaser's basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such purchaser. Owners of Premium Bonds should consult their own tax advisors with respect to the proper treatment of amortizable bond premium in their particular circumstances. The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the 2003 Series A Bonds. The Authority and the County have covenanted to comply with certain restrictions designed to assure that interest on the 2003 Series A Bonds will not be included in gross income for federal income tax purposes. Failure to comply with these covenants may result in interest on the 2003 Series A Bonds being included in federal gross income, possibly from the date of issuance of the 2003 Series A Bonds. The opinion of Bond Counsel assumes compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the 2003 Series A Bonds may adversely affect the value of the 2003 Series A Bonds or the tax status of interest on the 2003 Series A Bonds. Certain agreements,requirements and procedures contained or referred to in the Trust Agreement, the Facility Lease, the Tax Certificate and other relevant documents may be changed and certain actions (including,without limitation,defeasance of the 2003 Series A Bonds)may be taken or omitted, under the circumstances and subject to the terms and conditions set forth in such documents. Bond Counsel expresses no opinion as to any 2003 Series A Bond or the interest thereon if any such change occurs or action is taken upon the advice or approval of counsel other than Bond Counsel. Although Bond Counsel has rendered an opinion that interest on the 2003 Series A Bonds is excluded from gross income for federal income tax purposes and is exempt from State of California personal income taxes, the ownership or disposition of the 2003 Series A Bonds, or the accrual or receipt of interest on the 2003 Series A Bonds, may otherwise affect a Bondholder's federal or State tax liability. The nature and extent of these other tax consequences will depend upon the Bondholder's particular tax status and the Bondholder's other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. In addition, no assurance can be given that any future legislation, including amendments to the Code, if enacted into law, or changes in interpretation of the Code, will not cause interest on the 2003 Series A Bonds to be subject, directly or indirectly, to federal income taxation, or otherwise prevent Bondholders of the 2003 Series A Bonds from realizing the full current benefit of the tax status of such interest. Prospective purchasers of the 2003 Series A Bonds should consult their own tax advisers regarding any pending or proposed federal tax legislation. Further, no assurance can be given that the introduction or enactment of any such future legislation, or any action of the Internal Revenue Service ("IRS"), including but not limited to regulation,ruling, or selection of the 2003 Series A Bonds for audit examination, or the course or result of any IRS examination of the 2003 Series A Bonds, or obligations which present similar tax issues,will not affect the market price for the 2003 Series A Bonds. LEGAL MATTERS Orrick, Herrington & Sutcliffe LLP, San Francisco, California, Bond Counsel, will render an opinion with respect to the validity of the 2003 Series A Bonds. Copies of such approving opinion will be available at the time of delivery of the 2003 Series A Bonds. The form of the legal opinion proposed to be delivered by Bond Counsel is included as APPENDIX E to this Official Statement. Bond Counsel undertakes no responsibility for the accuracy, completeness, or fairness of this Official Statement. Certain legal matters will be passed upon for the County and the Authority by County Counsel, and by Lofton & Jennings, San Francisco, California, Disclosure Counsel. Compensation paid to Bond Counsel and Disclosure Counsel is contingent on the sale of the 2003 Series A Bonds. 430151pos4 29 .................................................... - _.......................................................................................................................................................................................................................................... ......................................................................................................................................... __ _ _ _ __ MISCELLANEOUS INFORMATION References are made herein to certain documents, reports and laws that are brief summaries thereof which do not purport to be complete or definitive and reference is made to such documents, reports and laws for full and complete statements of the contents thereof. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the Authority(or the County) and the purchasers or Owners of any of the 2403 Series A Bonds. The execution and delivery of this Official Statement has been duly authorized by the Board of Directors of the Authority and approved by the County Board of Supervisors. COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY By: John R. Sweeten Executive Director 0301 StposA 31 APPENDIX A GENERAL COUNTY ECONOMIC AND DEMOGRAPHIC INFORMATION ECONOMIC AND DEMOGRAPIHC INFORMATION General The County of Contra Costa, California (the "County") was incorporated in 1850 as one of the original 27 counties of the State of California(the "State"), with the City of Martinez as the County Seat. It is one of the nine counties in the San Francisco-Oakland Bay Area. The County covers approximately 733 square miles and extends from the northeastern shore of the San Francisco Bay easterly about 50 miles to San Joaquin County. The County is bordered on the south and west by Alameda County and on the north by the. Suisun and San Pablo Bays. The western and northern shorelines are highly industrialized, while the interior sections are suburban/residential, commercial and light industrial. The County contains 19 incorporated cities, including Richmond in the west, Antioch in the northeast, and Concord in the central portion of the County. A large part of the County is served by the San Francisco Bay Area Rapid Transit District ("BART"), which has enablers the expansion of both residential and commercial development throughout much of the County. In addition, economic development along the Interstate 680 corridor in the County has been substantial and has accounted for significant job creation in the Cities of Concord,Walnut Creek and San Ramon. County Government The County has a general law form of government. A five-member Board of Supervisors, each member of which is elected to a four-year term, serves as the County's legislative body. Also elected are the County Assessor, Auditor-Controller, Clerk-Recorder, District Attorney-Public Administrator, Sheriff-Coroner and Treasurer-Tax Collector. A County Administrator appointed by the Board of Supervisors runs the day-to-day business of the County. The current County Administrator is John R. Sweeten. Population The County is the ninth most populous county in California, with its population reaching approximately 994,900 as of January 1, 2003. This represents an increase of approximately 23% compared to the County's population in 1990. The availability of rapid transit, close proximity to major employment hubs in San Francisco and Oakland, and relatively affordable existing and new housing have combined to attract more residents to the County over the past decade. While population grew in every city in the County during the last decade, population growth has been strongest in unincorporated areas as well as in the eastern portion of the County, particularly in Antioch,Brentwood and Clayton. 03015\pos-4 A-1 As shown below, the County's civilian labor force was 523,800 in 2002. With average 2002 unemployment rates of 5.2% and 6.7% for the County and the State, respectively, the County has achieved a lower unemployment rate than the State in each of the past five years. Table A-2 COUNTY OF CONTRA COSTA EMPLOYMENT AND UNEMPLOYMENT OF RESIDENT LABOR FORCE WAGE AND SALARY EMPLOYMENT BY INDUSTRY ANNUAL AVERAGES (IN THOUSANDS) 1997 1998 1999 2900 2001 2902 Civilian Labor Force(0 472.8 479.9 490.1 505.1 509.8 523.8 Employment 453.2 462.6 475.3 490.4 493.1 496.7 County Unemployment 19.6 17.3 14.8 13.7 16.7 27.1 Unemployment Rate: County 4.1% 3.6% 3.0% 2.7% 3.3% 5.2% State of California 6.3% 5.9% 5.2% 4.9% 5.3% 6.7% Wage and Salary Employment(2) 997 1998 1999 2000 2001 Agriculture 1.1 0.9 1.3 2.2 2.4 Mining and Construction 22.1 23.3 26.3 28.0 29.8 Manufacturing 26.0 25.6 24.4 25.4 25.5 Transportation and Public Utilities 20.4 20.1 19.9 20.5 20.8 Wholesale"Trade 11.3 11.0 12.1 12.3 12.2 Retail Trade 57.4 59.2 60.6 62.0 62.2 Finance,Insurance,and Real Estate 279 28.1 28.5 28.4 30.1 Services 98.9 103.8 106.3 109.8 109.9 Government 45.6 45.5 47.2 48.2 43.2 TOTALf' 310.8 317.6 326.6 336.6 342.3 Based on place of residence. `2) Based on place of work_ Data for 2002 is not yet available. (3) "Total"may not be precise due to independent rounding. Source: State of California, Employment Development Department, and Labor Market Information Division, March 2000 benchmark. Magor Employers Major industries in the County include petroleum refining, telecommunications, financial and retail services, steel manufacturing,prefabricated metals, chemicals,electronic equipment,paper products and food processing. Most of the County's heavy manufacturing is located along the County's northern boundary fronting on the Suisun and San Pablo Bays leading to San Francisco Bay and the Pacific Ocean. The following Table A-3 provides a listing of major employers headquartered or located in the East Bay and their employment levels. 030151pos-4 A-3 Equilon Enterprises,LLC ("Equilon"), is a joint venture petroleum company between affiliates of Shell Oil Company and Texaco Inc. formed in 1998. Equilon began operating as Shell Oil Company in Martinez in 1915. The Martinez facility, located on approximately 1,100 acres, is a combined oil refinery and industrial chemical production plant. Equilon employees in the County total approximately 930, the majority of which work at the Martinez Facility. Effective Buying Income "Effective buying income" ("EBI") is a classification developed exclusively by Sales & Marketing Management magazine to distinguish it from other sources reporting income statistics. EBI is defined as "money income" less personal tax and nontax payments - a number often referred to as "disposable" or "after-tax" income. Money income is the aggregate of wages and salaries, net farm and nonfarm self-employment income, interest, dividends, net rental and royalty income, Social Security and railroad retirement income, other retirement and disability income, public assistance income, unemployment compensation, Veterans Administration payments, alimony and child support, military family allotments, net winnings from gambling and other periodic income. Money income does not include money received from the sale of property (unless the recipient is engaged in the business of selling property); the value of"in-kind" income such as food stamps, public housing subsidies, medical care,employer contributions for persons,etc.;withdrawal of bank deposits; money borrowed; tax refunds; exchange of money between relatives living in the same household; gifts and Jump-sura inheritances, insurance payments, and other types of lump-sum receipts. EBI is computed by deducting from :money income all personal income taxes (federal, state and local), personal contributions to social insurance (Social Security and federal retirement payroll deductions), and taxes on owner-occupied nonbusiness real estate. The total effective buying income for the County in 2001, as reported by Sales & Marketing Management in its Survey of Buying Power, is $23,902,953 and the median household EBI is $56,507. The 2001 County median household EBI was lower as compared to 2000, as was the case statewide and nationally. The 2001 County median household EBI of$56,507 compares to that of$49,173 for the City and County of San Francisco; $54,076 for Alameda County; $64,766 for San Mateo County; $67,502 for Santa Clara County and$40,789 for Los Angeles County. (REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) 030151pos-4 A-5 Commercial Activity Commercial activity comprises an important part of the County's economy, with taxable transactions totaling approximately$12.25 billion in 2001. Presented in Table A-5 below is a summary of taxable transactions in the County since 1997. Table A-5 COUNTY OF CONTRA COSTA TAXABLE TRANSACTIONS 1997 To 2001"' ($IN 00fl'S) 1997 1998 1999 2000 2001�1� Apparel Stores $ 277,962 $ 289,750 $304,915 $338,215 $3461190 General Merchandise Stores 1,283,994 1,379,504 1,467,490 1,625,482 1,683,803 Specialty Stores 957,508 1,070,135 1,259,681 1,278,513 1,229,075 Food Stores 478,924 486,580 509,062 544,489 583047 Eating and Drinking Places 664,184 708,982 764,682 832,962 878,955 Household and Home Furnishings and Appliances 333,179 354,814 402,219 460,121 456,144 Building Materials 591,71o(2) 581,855 680,821 766,196 850,622 Service Stations 780,857 922,502 669,467 820,701 792:340 New Vehicles - 1,074,170 1,236,531 1,484,713 1,561,089 Used Vehicles,Automotive Supplies and Parts 1,143,17&) 182,628 228,062 277,995 320,526 Cather Retail 44.700 172,779 195331 220.032 240,131 Total Retail Cutlets $6,556,188 $7„223,699 $7,718,261 $8,649,419 $8,942,822 Business and Personal Services 407,816 442,696 467,124 542,103 540,959 All Other Outlets 2,313,414 2.427 295 2.929,091 3,139,038 2,772,940 ToTAL ALL OUTLETS $9,277,418 $10,093,690 $11,114,476 $12,330,560 $12256,721 Most recent data available. (2) Includes taxable transactions for farm implements. After 1997, taxable transactions for farm implements is included in "Other Retail." (3) For 1997 only,.also includes taxable transactions for sales of new vehicles. After 1997, taxable transactions for new vehicles are reported separately. Source: State Board of Equalization. Much of the County's commercial activity is concentrated in central business districts of the cities and unincorporated towns. Regional shopping centers, numerous smaller centers and several "big box" warehouse stores serve County residents. The County is served by major banks including Bank of America and Wells Fargo Bank. In addition there are numerous local banks and branches of smaller California and foreign banks. There are over 30 savings and loan associations in the County, including Washington Mutual,World Savings and California Federal. Residential Construction Activity The value of residential construction activity increased by 34.8% in 2002 from 2001 levels, the highest annual percentage increase in the past 10 years. This was attributable to an increase of nearly 5,000 building permits for single family units and 561 multiple family units. Within incorporated cities in the County, Brentwood accounted for the greatest activity with $324.4 million of construction permits issued in 2002, an increase of 43.3% compared to 2001. Construction in unincorporated areas of the County totaled $354.2 million, an increase of 120.3% compared to 2001. 03015\pos-4 A-7 Transportation Availability of a broad transportation network has been one of the major factors in the County's economic and population growth. Interstate 80 connects the western portion of the County to San Francisco, Sacramento and points north to Interstate 5, the major north-south highway from Mexico to Canada. Interstate 680 connects the central County communities to the rest of the Bay Area via State Routes 4 and 24, the County's major east-west arteries. Caltrans is currently widening Interstate 80 in the western portion of the County at a cost of $200 million and constructing replacement spans on the Carquinez Bridge and Interstate Highway 80 and the Benicia—Martinez Bridge on Interstate Highway 680 at a cost of$1.1 billion. Ground transportation is available to County residents from the following service providers: • Central Contra Costa Transit Authority provides local bus service to the central area of the County including Walnut Creek,Pleasant Hill and Concord. • BART connects the County to Alameda County, San Francisco and Daly City and Colma in San Mateo County with two main lines, one from the San Francisco area to Richmond and the other to the Concord/Walnut Creek/Pittsburg/Bay Point area. BART now has 43 stations and 103.7 miles of roadway in its system. The BART extension to the San Francisco International Airport is complete and opened for operation on June 22, 2003. • AC Transit, provides local bus service and connects Contra Costa communities to San Francisco and Oakland. • Other bus service is provided by Greyhound. • Commuter rail service is provided by the Capital Corridor, with daily runs between the Bay Area and Sacramento that stops at the new intermodal terminal in Martinez, the County seat. • The Santa Fe and Union Pacific Railroads' main lines serve the County,both in the industrial coastal areas and the inland farm section. Commercial water transportation and docking facilities are available through a number of port and marina locations in the County. The Port of Richmond on San Francisco Bay and several privately owned industrial docks on both San Pablo and Suisun Bays serve the heavy industry located in the area. The Port of Richmond, owned and operated by the City of Richmond, covers 202 acres and handles nearly 20 million metric tons annually. The majority of the shipments are bulk liquids with the remainder consisting of scrap metal, autos,and gypsum rock. Major scheduled airline passenger and freight transportation for County residents is available at either Oakland or San Francisco International Airports, located about 20 and 30 miles, respectively, from the County. In addition there are two general aviation fields,one at Byron and the other at Concord. Agriculture The County is comprised of 470,400 acres,with 147,859 of these acres allocated to farmlands and harvested cropland. In 2001, the total gross value of agricultural products and crops reached$97,515,400, an increase of$4,917,800 compared to 2000. The value of agricultural production since 1997 is set forth in Table A-7 below. 03015\pos4 A-9 ...................... _..._.............................................................................................. _ _ Education Public school education in the County is available through nine elementary school districts, two high school districts and seven unified school districts. These districts provide 138 elementary schools, 40 middle, junior high and intermediate schools, 27 high schools, 10 necessary small and continuation high schools, and a number of preschools, adult schools, and special education facilities. In addition, there are approximately 110 private schools with six or more students in the County. School enrollment for Fiscal Year 2001-02 numbered approximately 161,742 students in public schools and 19,778 students in private schools. Higher education is available in the County through a combination of two-year community colleges and four-year colleges. The Contra Costa County Community College District has campuses in Richmond, Pleasant Hill and Pittsburg, with a satellite campus in Brentwood. California State University at Hayward operates a branch campus, called Contra Costa Center, in the City of Concord where late afternoon and evening classes in business, education and liberal arts are offered. St. Mary's College of California, a four-year private institution, is located on a 100-acre campus in Moraga. Also located within the County is the John F. Kennedy University campus in Orinda and a satellite in Walnut Creek, which is completing a move into expanded space in downtown Pleasant Hill. In addition, County residents are within easy commuting distance of the University of California, Berkeley. Health Services There are twelve privately operated hospitals and one public hospital in the County, with a combined total of approximately 1,900 beds. Four of the private hospitals are run by Kaiser, the largest health maintenance organization in the United States. Kaiser has opened a new hospital in Richmond with new critical care beds, surgical suites and a full service emergency department. The Walnut Creek- based John Muir/Mt. Diablo Health System is planning to build a new campus in Brentwood. Under State law, the County is required to administer State and federal health programs, provide for community mental health and treatment programs, and provide for a portion of the costs of such services with local revenues, such as sales and property taxes. The County Health Services Department (the "Health Services Department") provides these services to all County residents regardless of their ability to pay. The Health Services Department is responsible for providing a comprehensive health system to residents of the County including the following: clinical and laboratory services; maternal, child and adolescent health services; public health clinics services; mental health services; alcohol and drug treatment services; programs related to the prevention of disease and injury (e.g., tobacco education, senior health education); community nutrition projects; and obesity and asthma prevention. The public hospital is the Contra Costa Regional Medical Center (the "Regional Medical Center"), a 164-bed, general acute care teaching hospital that the County rebuilt and reopened to the public in 1998 on the existing site in Martinez. The Regional Medical Center provides a full range of services, including emergency, medical, surgical, perinatal pediatric and psychiatric services. The Regional Medical Center also has facilities for diagnostic imaging, clinical laboratory and pharmacy services, rehabilitation and cardio pulmonary care. Since the reopening of the Regional Medical Center in 1998 and the opening of a public health laboratory in 2001, the County converted the former Los Medanos Hospital into the Pittsburg Health Center and has completed construction of a new ambulatory care clinic on the campus of the Regional Medical Center. The County is also in the process of expanding primary care services in Antioch and Concord and in the early planning stages of replacing clinics in Brentwood and Richmond. 0301 5\pos-4 A-11 APPENDIX B COUNTY FINANCIAL INFORMATION 03015\pos-4 .................................................................................... ..................................... ........................................... .......... ....................................................... .............. ... State Bud et fur Fiscal Year 2002-03 Back r. ound. The 2002-03 Governor's Budget, released on January 10, 2002 (the "2002-03 Governor's Budget"), projected a fall-off in General fund revenues due to the national economic recession, combined with the stock market decline which began in mid-2000. Personal income tax receipts, which include stock option and capital gains realizations, were particularly affected by the slowing economy and stock market decline. As a result, the Administration projected a combined budget gap for Fiscal Years 2001-02 and 2002-03 of approximately$12.5 billion. The May Revision to the 2002-03 Governor's Budget, released in May 2042, projected further deterioration in revenues of$9.5 billion and additional costs of$1.6 billion over the 2001.02 and 2002-03 Fiscal Years. As a result, the combined budget gap for Fiscal Years 2001-02 and 2002-03 rose from the $12.5 billion estimated in January to$23.6 billion. 2002 Budget Act. The 2002 Budget Act was signed by the Governor on September 5, 2002. The budget bill passed by the Legislature did not differ substantially from the Governor's May Revision proposal. The Governor vetoed only $219 million of General fund expenditures from the budget bill passed by the Legislature. The 2002 Budget Act initially projected total General fund revenues and transfers to be $79.2 billion in Fiscal Year 2002-03 ($67.9 billion from the three largest sources) and total General Fund expenditures to be $76.7 billion in Fiscal Year 2002-03, The 2002 Budget Act also included Special Fund expenditures of $19.3 billion, with expected Special Fund revenues of 514.7 billion, and $2.8 billion of Bond Fund expenditures. The 2042 Budget Act assumed a General Fund budget reserve (balance in the Special Fund for Economic Uncertainties (the "SFEU") at June 30, 2003)of about $1 billion. As described below under Continuing Budget Shortfall," the revenue estimates have proved to be substantially overstated, as expected economic recovery has not occurred, among other factors. Based on revised estimates in the 2003-04 Governor's Budget, released on January 10, 2003, revenues and transfers in 2002-03 will be $73.1 billion, with expenditures of $75.5 billion, and the estimate for the June 30, 2003 SFEU balance is now a deficit of$5.9 billion. See "—Governor's Budget for Fiscal Year 2003-04," The 2002 Budget Act addressed a $23.6 billion gap between expenditures and resources through a combination of program reductions, loans, fund shifts, accelerations and transfers (including a temporary transfer from redevelopment agencies of$75 million to the ERAF),and modest tax changes: I. .Program cost savings in the 2001-02 and 2002-03 fiscal Years were expected to total about$7.458 billion. However, some of these savings will not be realized. 2. The receipt of$4.5 billion in Fiscal Year 2002-03 from the securitization (sale) of a large portion of the State's future receipt of payment from tobacco companies from the settlement of litigation against those companies. This sale was scheduled to close in two segments. The first sale closed in January 2003, producing General Fund revenues of$2.5 billion. The second sale which was expected to occur in April 2003 and generate up to $2.0 billion of General Fund revenues was cancelled due to unsettled market conditions. 3. A total of $2.028 billion in loans from various funds, including $1.218 billion from transportation funds. 4. The shift of $1.328 billion of expenditures from the General Frond to other funding sources, such as special funds and proposed future bond funds. 030'5\jos-4 B-2 without enough emphasis on closing the "structural deficit"between ongoing revenue sources (taxes)and ongoing expenditure commitments, (ii) the likelihood that sonic of the assumptions in the 2002 Budget Act would not be met (these two items totaling about $10 billion), and (iii) a significant downward revision in revenue estimates(totaling about$11 billion over the two-year period). In the summer of 2002, the Governor notified all State agencies to prepare Fiscal Year 2003-04 budget proposals for a minimum of 20% cut in funding. On November 21, 2002, the Governor further directed State agencies to take immediate action to reduce any non-critical or non-essential activities by not filling any vacant positions; to cancel, postpone or amend contracts, grants, purchase orders and similar commitments; to eliminate additional non-essential vacant positions; to delay construction or signing of new leases for space; to cancel or postpone non-essential trips; and to generate new proposals for current year program reductions. Shortly after the 2002 LAO Report was released, the Governor announced that the Administration also projected a substantial budget gap in Fiscal Year 2002-03 and Fiscal Year 2003-04, and he called a special session of the Legislature to begin on December 9, 2002, to consider legislation for mid-year spending cuts and other, budgetary actions. In March 2003, the Legislature enacted approximately $3.3 billion in current-year savings, primarily related to Proposition 98 deferrals, as well as a variety of reversions, cuts and redirections in other programs. In April 2003 the Legislature enacted an additional $3 billion in budget year savings, including the authorization of$1.9 billion in pension obligation bonds. Governor's Budget far Fiscal Year 1003-04. On January 10, 2003, Governor Davis released his proposed budget (the "2003-04 Governor's Budget") which projected a significant downward revision in State revenues as a result of the longer than expected economic recovery. The decline was mainly due to weak personal income tax revenues, which dropped by nearly 26% in Fiscal Year 2001-02 and was expected to decline by another 0.5% in Fiscal Year 2002-03. As a result, the Administration projected a $34.6 billion budget shortfall for Fiscal Years 2002-03 and 2003-04. The 2003-04 Governor's Budget projected revenues fromm the three largest tax sources to be about $61.7 billion in Fiscal Year 2002-03, more than $6 billion lower than projected in the 2002 Budget Act. Most of the decline is attributable to the personal income tax revenues, which are particularly impacted by the stock market's decline. The 200304 Governor's Budget projected total revenues and transfers of$73.1 billion and $69.2 billion in Fiscal Years 2002-03 and 2003-04, respectively. The estimate for Fiscal Year 2002-03 included about $2.8 billion of transfers and loans. The Administration proposed the following major actions to close the $34.6 billion budget shortfall for Fiscal Year 2002-03 and Fiscal Year 2003-04 combined: 1. Expenditure reductions totaling $20.7 billion. This amount included reductions of$6.2 billion for K-12 education, $2.1 billion for higher education, $3.3 billion for health and human services, and$2.7 billion for general government. This amount also included $4.2 billion of savings from reducing the vehicle license fee backfill to cities and counties. 2. General Fund savings totaling $8.2 billion due to the realignment of various programs, including Mental Health and Substance Abuse, Children and Youth, Healthy Communities, Long-Term Care and Court Security. Under realignment, the responsibility for these programs would be transferred to the cities and counties, and the State-local cost ratios for some programs would be changed. Realignment was estimated to cost counties and trial courts $8.3 billion. However, the 2003--04 Governor's Budget also proposed revenue increases to support the increased financial obligations of counties under realignment ($4.6 billion from a one-cent sales tax increase, $2.6 billion from the addition of 10 percent and 11 percent personal income tax brackets, and $1.2 billion from a $1.10 cigarette tax increase). 03015\pos-4 B-4 These bonds would have to be authorized by new legislation, which is presently under consideration along with other budget-related bills. 2. Elimination of most of the local government realignment proposal, leaving only about $1.7 billion for transfer of certain mental health, child abuse prevention and child welfare and adult welfare programs to counties. To fund this shift, the Governor proposed increases in tobacco taxes of 23 cents per pack in Fiscal Year 2003-04 and an additional 40 cents per pack in Fiscal Year 2004-05, and the creation of a single new 10.3% personal income tax bracket for the highest income taxpayers. The remainder of the realignment proposals are under consideration in the 2003 legislative session for implementation in Fiscal Year 2004-05. 3. Reduction of about $2 billion from the total program cuts and savings, allowing restoration of funding for a number of education, public safety and health programs. The 2003-04 May Revision continues to assume $4.2 billion of savings in Fiscal Year 2003-04 from not funding vehicle license fee offsets;based on expected administrative actions to increase the vehicle license fee tax itself. 4. A variety of other proposals for funding shifts, transfers and borrowing (aside from the deficit financing bonds) remain in the 2003-04 May Revision proposals. This includes a proposal to increase the ERAF payment made by redevelopment agencies to $250 million in Fiscal Year 2003-04 with the amount increasing over time until schools receive the amount of property taxes that would have been received in absence of redevelopment estimated at approximately $1.25 billion and the previously- mentioned pension bond issue, now estimated in the amount of $1.9 billion. The pension bonds have been authorized in statute, and by the Pension Bond Committee, which is the issuer of such bonds. A validation lawsuit is underway. The 2003-04 May Revision addresses the State's budgetary challenges in three phases: First: the accumulated budget deficit through June 30, 2003, is funded with the issuance of$10.7 billion deficit financing bonds, anticipated in 2003-04. Second: remaining cuts, savings, fund shifts, transfers and borrowing will balance the budget for Fiscal Year 2003-04. Third: a recognition that the steps taken to bring the 2003-04 budget into balance do not totally solve the underlying "structural deficit" between revenues and expenditures. If no further action is taken (assuming accuracy of revenue and expenditure estimates), there would be an estimated $7.9 billion operating deficit in Fiscal Year 2004-05. The Governor proposed that the Legislature and Administration address longer-term budget solutions over the balance of the 2003 Legislative session. The Governor did not make specific proposals in the 2003-04 May Revision, but will explore the realignment proposals and other steps. The Governor also recognizes that some budget choices could be placed before the voters in the March 2004 primary election. Realignment of Human Services Programs. State-County realignment of human services programs and program funding was enacted in 1991, and the Governor proposed in the 2003-04 Governor's Budget to create a further realignment of such programs. The 1991 realignment replaced dedicated State shares of human service program funding with a one-half cent sales tax and a 20% increase in vehicle license fees. Those revenues replaced State funding, and were allocated to counties from statewide pools by a complex series of formulae. To provide more time for legislative consideration, the majority of the realignment proposed in the 2003-04 Governor's Budget are deferred for implementation in Fiscal Year 2004-05. 03015',pos-4 B-6 (open space subventions), redirection of county revenue to the trial courts, passing a portion of federal child support penalties to counties, and a reduction in transportation funding. Many of these proposals are controversial and there can be no assurance which will eventually be enacted by the Legislature. The Governor also proposed consideration of reforms in the State and local government fiscal structure to try to avoid future budget crises like the one now facing the State, including among others, restoration of Executive Branch authority to make mid-year budget adjustments; creation of a reserve fund for proceeds from extraordinary revenue growth to be spent for one-time purposes; rebalance of the State's revenue portfolio to achieve a more stable mix of major revenue sources; and review of statutory mandates. The Governor has requested that the California Commission on Tax Policy in the New Economy prepare an interim report in late April 2003 with suggestions for structural reform for consideration as part of the upcoming May Revision process. Potential issues for consideration would include the establishment of a mandatory "rainy day„ reserve fund with a specified spending cap and trigger mechanism,how the State could reduce the volatility of its revenue streams, and changes to the fiscal structure of budget and revenue programs that should be made in light of the evolving California economy. Final action on budget adjustments for Fiscal Year 2002-03 and enactment of the 2003 Budget Act will occur following negotiations between the Legislature and the Governor over the corning months. Additional estimates and proposals will be contained in the May Revision to the 2003-04 Governor's Budget, to be released on May 14, 2003. Timely State Action. The timing of State budget actions may negatively impact the ability of the County to adjust to State budget actions. The Legislature very rarely sends a budget to the Governor by the statutory June 15'x' deadline. In the past decade, the State budget has been adopted as late as early September on two separate occasions, including the budget for the current fiscal year. When the State budget is adopted well after the official deadlines, the County's own budget decision making process becomes compressed. Adjustments to correspond to State actions may come well after the start of the fiscal year. Given the magnitude of the State's current budget crisis, and the large level of State funding in the County budget, the County may have to make corrective budget actions after it has adopted its budget for the upcoming fiscal year. On May 29, 2002, the California Court of Appeal for the Second District decided the case of Howard Jarvis Taxpayers Association, et al. v. Kathleen Connell (as Controller of the State of California). The Court held that the State Controller may not disburse funds in the absence of a final budget bill or an emergency appropriation, except when payments are made pursuant to continuing appropriations authorized by the California Constitution, statutes or other provisions of law, the Federal Labor Standards Act and certain other federal funding mandates. The Supreme Court has granted the Controller's Petition for Review (Case No. 5108099, also referred to by the Court as While v. Davis) on a procedural issue unrelated to continuing appropriations and stayed the trial court injunction. The Howard Jarvis Taxpayers Association did not seek review. However, the Supreme Court may consider all of the issues raised in the case. This matter was heard April 1, 2003, and pursuant to rules of court, a decision is expected within 90 days. As a result, certain amounts budgeted by the County that are expected to be received from the State may be delayed in the event a budget bill is not enacted in a timely matter. To the extent that State payments reflected in the County's budget are delayed, the County believes that it has sufficient resources to provide mandated County services. Future State Budgets. The County cannot predict the final outcome of future State budget negotiations, the impact that such budgets will have on its 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 030;S1pos-4 B-8 contracts; and the remaining 30% of the County's annual gas needs are purchased on a NYMEX index that will float with the monthly spot price of gas. To date, the County has not experienced power shortages; however, any fixture temporary reduction or loss of power could materially adversely affect the operations of the County. Williams Settlement and Energy Efficiency Improvement. In December, 2002 the Board of Supervisors approved a settlement (the "Settlement") with the Williams Companies that was negotiated by the State Attorney General's Office. The Settlement will result in $3.5 million in new revenue to the County between FY 2002-2003 and FY 2006-2007. These funds are restricted by terms of the Settlement to uses that promote alternative energy production or improved energy efficiency in County facilities.The County has embarked on a strategic planning effort to maximize energy efficiency improvements and associated energy cost reductions that can be achieved through use of the Settlement funds. To this end, the County has hired the engineering firm of AEPC, San Ramon, California, to provide energy consulting services and deliver a report to the County recommending energy efficiency improvement measures. County Budget Process The County is required by State law to adopt a balanced budget by August 30 of each year, although the Board of Supervisors may, by resolution, extend the date on a permanent basis or for a limited period, to October 2. The County's budget process involves a number of steps. First, upon release of the Governor's Proposed Budget in January, the County Administrator prepares a preliminary forecast of the County's budget based on current year expenditures, the assumptions and projections contained in the Governor's Proposed Budget and other projected revenue trends. Second, the County Administrator presents the County's Proposed Budget to the Board of Supervisors. Absent the adoption of a final County budget by .lune 30, the current existing budget is continued into the new fiscal year until a final budget is adopted. Third, between January and the time the State adopts its own budget, legally due no later than June 15, representatives of the County Administrator monitor, review and analyze the State budget and all adjustments made by the State legislature. Upon adoption of the final State budget, the County Administrator recommends revisions to the County's Proposed Budget to align County expenditures with approved State revenue. After conducting public hearings and deliberating the details of the budget, the Board of Supervisors adopts the County's Final Budget by August 30, or by October 2 if the Board of Supervisors has adopted a resolution to extend the deadline. The County adopted its Fiscal Year 2003-04 Adopted Budget on .dune 24, 2003, ahead of the legal deadline. In order to ensure that the budget remains in balance throughout the fiscal year, the County Administrator monitors actual expenditures and revenue receipts each month. In the event of a projected year--end deficit, steps are taken, in accordance with the State Constitution, to reduce expenditures. On a quarterly basis; the County Administrator's staff prepares a report that details the activity within each budget category and provides summary information on the status of the budget. Actions that are necessary to ensure a healthy budget status at the end of the fiscal year are recommended in the quarterly budget status reports. Other items which have major fiscal impacts are also reviewed quarterly. The County's ability to increase its revenues is limited by State laws that prohibit the imposition of fees to raise general revenue, except to recover the cost of regulation or provisions of services. See 0301 i\pos-4 B-10 formulary, and employee skill mix in all programs. As a result of these efforts, the Department was able to restrict the annual growth in total expenditures to under 2%, significantly less than the growth rate in both the Consumer Price Index and the Medical Care Price Index. Revenue Enhancement. The Board of Supervisors affirmed its support for the Health Services Department by allocating to its budget all of the $10.9 million in revenues arising from the Tobacco Master Settlement Agreement in Fiscal Year 2002-03. The settlement funds are directed solely for the provision of care to uninsured adults and children. In addition, the Health Services Department has been successful in qualifying all of its 14 outpatient hospital clinics as "Federally Qualified Health Centers." Such qualification entitles the Health Services Department to receive increases estimated to be$5 million in Fiscal Year 2003-04 to reimburse outpatient services. Fiscal Year 2002-03 Status. The Health Services Department has fully implemented its budget- balancing program for fiscal year 2002-03 and is projecting a year end operating surplus of$550,000 (all funds). The State recently received approval, after over a year of negotiations with the Federal government, for continuation of the Selective Provider Contracting Waiver Program (SPCP). The State uses some of its SPCP savings to provide additional supplemental funding (in an amount equal to 150% of current rates) to hospitals that serve a greater than average number of indigent and State Medicaid ('Medi-Cal) patients pursuant to criteria established by the State through the Disproportionate Hospitals Program. While the 150% upper payment limit benefit is no longer permanent, it appears that the federal government will continue this benefit at least for the next two years. The Regional Medical Center budgeted $6 million in annual supplemental payments, allocation of which is now confirmed and receipt of which is expected by the end of Fiscal Year 200203. Last year, the Health Services Department drafted and proposed legislation to the State Department of Health Services for an Intergovernmental Transfer Program for Safety Net Hospitals that contract with local managed care plans. Because of the SPCP waiver negotiations, the State could not support the proposal at that time. The State has since evaluated the concept, received federal approval without the need for legislation, and is moving forward to implement the program on a Statewide basis. While the full details of the implementation plan are not known at this time, it is anticipated that the net benefit to the Regional Medical Center will be in the range of $2 to $3 million annually, including approximately $1.3 to $1.9 million in the current budget year. If the State enacts this program as anticipated,the net proceeds of this action will be additive to the current projected operating surplus. The Board of Supervisors approved six months of funding in the amount of $1.1 million for expansion of 24-hour medical care coverage in West County for medical services to inmates of the County Detention Center. Due to recruitment difficulties, the Board of Supervisors authorized a request for proposals to identify an outside agency to perform the services. Bids have been received from three vendors, and are currently being reviewed. The earliest estimate for selection, contract approval, and actual employees onsite is May or.Tune of 2003. Trial Court Funding Assembly Bill 233 ("AB 233"), which was adopted by the State Legislature in 1997 and became effective January 1, 1998, transferred responsibility from the counties to the State for local trial court funding commencing in Fiscal Year 1997-98. Under the legislation, the State assumed a greater degree of responsibility for trial court operations costs starting in Fiscal Year 1997-98. The County's trial court funding requirement declined from $22.8 million in Fiscal Year 1997-98 to $16.4 million in Fiscal Year 2402-03 as a result of AB 233. 030 t 5\pos-4 B-12 current salary continuation program; and seek to reopen union contracts for the purposes of amending the current three-hour medical appointment benefit. The County is unable to predict which, if any, of the Recommendations will be implemented. However, the County estimates that if the injury prevention and ergonomic program is implemented, savings in workers' compensation benefit costs over five years would be at least$1.1 million. Recent County General Fuad Budgets Set forth below is a description of the County's comparative budgetary and expenditure experience for Fiscal Years 2000-01 through 2002-03. For a summary of the actual audited financial results of the County for Fiscal Year 2001-02, see "AUDITED FINANCIAL STATEMENTS OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30,2002"in Appendix C to this Official Statement. Fiscal Year 2040-01. The County's Fiscal Year 2000-01 Final Adopted Budget was 4% larger than the prior fiscal year. Salary and benefit increases accounted for the largest share of the increased costs. Capital projects and building maintenance costs represented a smaller portion of the increase. Fiscal Year 2041-02. The County's Fiscal Year 2001-02 Final Adopted Budget was 16.0% higher than the prior fiscal year's Final Adopted Budget. Major cost increases were the result of salary and benefit adjustments and rising energy costs. The budget was balanced through a measured strategy aimed at avoiding disruption of delivery of services. The specific elements of that strategy are presented below: I. Conservation of fund balance by placing a freeze on the funding of new positions in April 2001 and subsequently implementing a hiring freeze in May 2001. 2. Reductions in one-time costs associated with facilities, equipment purchases, computer systems and other non-continuing expenses. 3. Aggressive limits in budget baseline inflationary increases, such that increases are allowed only for prearranged or unavoidable items, such as salary and benefit growth, energy costs, facility lease increases and information technology adjustments. 4. Reductions in department baseline budgets through tighter control over vacancies. Fiscal Year 200.2-03. The County's Fiscal Year 2002-03 Final Adopted Budget was 4% higher than the Final Adopted.Budget for the prior Fiscal Year due primarily to salary and benefit increases and road construction projects. In October 2002, all County Departments were requested to plan for a budget reduction in the amount of 10% in order to conserve fund balances and avoid later layoff as a result of projected shortfalls in General Fund revenues. In March 2003, the Board of Supervisors adopted a budget plan calling for County departments to implement budget reductions necessary to achieve a 10% reduction in the County's general purpose spending. This plan became effective April 1, 2003 and will produce estimated savings of$24.1 million through the end of Fiscal Year 2003-2004. These savings will be applied to balance the County budget in Fiscal Year 2003-2004. 0301 5oros-4 B-I4 Supervisors on June 24, 2003 and is based upon anticipated growth in general purpose revenues of$34.2 million, offset by anticipated declines in federal and State program revenues of$24.5 million, resulting in a Adopted Budget that includes expenditure reductions of 2.4% ($26.6 million) compared to Fiscal Year 2002-03. The Adopted Budget contains a combination of measures that achieve a balanced budget while maintaining the quality of public services. The expenditure reduction measures in the Adopted Budget include the elimination or freezing of 121 funded frill-time equivalent positions, elimination of non- essential travel, and refinancing the County's unfunded pension liability through the issuance of pension obligation bonds. The final phase of the budget development process involves adjusting the budget to accommodate State budget impacts. It is anticipated that State revenue reductions or costs shift issues will be handled in the July through September 2003 time period. Ari Valorem Property Taxes The County administers the property tax levy and collection system for the County and all local governments in the County. Taxes are levied for each fiscal year on taxable real and personal property that is situated in the County 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 property secured by a lien on real property 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 each 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, property on the secured roll with respect to which taxes are delinquent is declared to be in default on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of the delinquent taxes and the delinquency penalty, plus a redemption penalty of one and one half percent per month to the time of redemption. If taxes are unpaid for a period of five years or more, the tax-defaulted property is declared to be subject to the Treasurer's power of sale and may be subsequently sold by the Treasurer. Legislation established the "supplemental roll" in 1984, which directs the Assessor to re-assess real property, at market value, on the date the property changes ownership or upon completion of construction. Property on the supplemental roll is eligible for billing 30 days after the reassessment and notification to the new assessee. The resultant charge (or refund) is a one-time levy on the increase (or decrease) in value for the period between the date of the change in ownership or completion of construction and the date of the next regular tax roll upon which the assessment is entered. Billings are made on a monthly basis and are due on the date mailed. If mailed between the months of July through October, the first installment becomes delinquent on December 10 and the second on April 10. If mailed within the months of November through June, the first installment becomes delinquent on the last day of the month following the month of billing. The second installment becomes delinquent on the last day of the fourth month following the date the first installment is delinquent. Property taxes on the unsecured roll are due as of the January 1 lien date and 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 one and one-half percent per month begins to accrue beginning November 1. The taxing authority has four ways of collecting unsecured personal property taxes: (1) by filing a civil action against the taxpayer; (2) by 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) by filing a certificate of delinquency for recordation in the County Recorder's office. in order to obtain a lien on certain property 03015'.pos-4 B-l6 _. ............................ __ A recent history of County tax levies, delinquencies and the Tax Losses Reserve Fund cash balances as of June 30th is shown in Table B-2 below, Table B-2 COUNTY OF CONTRA COSTA SUMMARY OF ASSESSED VALUATIONS AND AD VALOREM PROPERTY TAXATION FOR FISCAL YEARS 1992-93 THROUGH 2002-2003 Portion of Balance in Current Levy %Levy Tax Losses Fiscal Year Assessed Secured Property Delinquent at Delinquent at Reserve Fund at June 30 Valuation{1) Tax Levies June 30 June 30 June 30 1992-93 $61,393,320,088 760,559,294 24,239,204 3.19 29,042,152 1993-94 63,427,696,578 794,435,830 20,652,106 2.60 31,225,565 1994-95 65,294,364,749 823,495,651 20,640,379 2.51 24,709,211 1995-96 67,146,461,590 854,519,586 18,296,237 2.14 18,670,811 1996-97 69,242,099,630 869,580,974 18,057,023 2.08 17,154,539 1997-98 70,314,800,892 892,581,453 15,547,736 1.74 19,508,732 1998-99 73,699,554,452 939,437,1 16 15,375,159 1.64 21,322,269 1999-00 78,346,533,416 981,579,866 15,904,158 1.62 22,826,720 2000-01 84,627,977,952 1,062,831,354 16,738,410 1.57 24,247,987 2001-02 93,490,199,701 1,187,173,140 20,551,776 1.73 27,032,058 2002-03"' 100,925,700,794 1,237,603,934 N/A N/A NIA Reflects assessed value for real and personal property less exemptions. (a) Estimated. Source: County Auditor-Controller. The Teeter Plan In 1949, the California Legislature enacted an alternative method for the distribution of secured property taxes to local agencies. This method, known as the Teeter Plan, is set forth in Sections 4701-4717 of Revenue and Taxation Code of the State of California (the "Law"). The name "Teeter" refers to the then Auditor-Controller of the County, Desmond Teeter, who originated this method of tax distribution. 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 receives all future delinquent tax payments, penalties and interest, and a complex tax redemption distribution system for all participating taxing agencies is avoided. While the County bears the risk of loss on delinquent taxes that go unpaid, it benefits from the penalties associated with these delinquent taxes when they are paid. In turn, the Teeter Plan provides participating local agencies with stable cash flow and the elimination of collection risk. The constitutionality of the Teeter Plan was upheld in Carrie v. County of Contra Costa, 110 Cal. App. 2d 210 (1952). The County was the first fleeter Plan county in the State. Tax Losses Reserve Fund. Pursuant to the Law, the County is required to establish a tax losses reserve fund(the"Tax Losses Reserve Fund")to cover losses that may occur in the amount of tax liens as a result of special sales of tax-defaulted property (i.e., if the sale price of the property is less than the amount owed). During each fiscal year, the Tax Losses Reserve Fund is reviewed and when the amount of the fund exceeds certain levels, the excess may be credited to the County General Fund as provided by Sections 4703 and 4703.2 of the California Revenue and Taxation Code. State law allows any county to draw down their tax losses reserve fund to a balance equal to (i) one percent of the total of all taxes and assessments levied on the secured roll for that year, or(ii) 25% of the current year delinquent secured tax levy. The reductions in the County's Tax Losses Reserve Fund balances from Fiscal Year 1994-95 through Fiscal Year 1996-97 reflected multiple reductions in minimum reserve requirements legislated 03015\pos-4 B-18 Taxation of State-Assessed Utility property The State Constitution provides that most classes of property owned or used by regulated utilities be assessed by the State Board of Equalization (the "SBE") and taxed locally. Property valued by the SBE as an operating unit in a primary function of the utility taxpayer is known as "unitary property," a concept designed to permit assessment of the utility as a going concern rather than assessment of each individual element of real and personal property owned by the utility taxpayer. State-assessed unitary and "operating nonunitary" property (which excludes nonunitary property of regulated railways) is allocated to the counties based on the situs of the various components of the unitary property. Except for unitary property of regulated railways and certain other excepted property, all unitary and operating nonunitary property is taxed at special county-wide rates and distributed to taxing jurisdictions according to statutory formulae generally based on the distribution of taxes in the prior year. Currently, approximately 2.27%of the County's total net assessed valuation constitutes property subject to State assessment by the SBE, for which approximately $22,078,000 of property taxes were levied in Fiscal Year 2002-03. The portion of Fiscal Year 2002-03 taxes collected through the SBE assessment methodology attributable to the County General Fund is 55,484,908. Assembly Bill 81 (California Legislature 2001-2002 Regular Session), provides that commencing with the January 1, 2003 property tax lien date, the SBE will assess certain electric generation facilities. The legislation provides that the assessed value and revenues derived from such assessed property will be allocated to local jurisdictions in the same manner as locally assessed property based on the location of the property and not under the unitary property formulae. Currently, there are two power plants located in the unincorporated area of the County, within the spheres of influence of the cities of Antioch and Pittsburg. The annual aggregate property tax and franchise fees from these two facilities range from $5 million to $8 million based on the current fiscal year. If annexed by the respective cities, County revenues from these power plants would be subject to an agreement between each respective city and the County. Currently, the City of Pittsburg is considering annexation of the power plant within its sphere of influence. The City of Pittsburg and the County are negotiating an agreement, which in concept will allow the County to retain all franchise fees (approximately $35,000 annually) and natural gas surcharge fees (approximately $2.5 million annually) related to the power plant while the City of Pittsburg will receive revenues related to future development of adjacent parcels. The final agreement will require approval by the Pittsburg City Council and the Board of Supervisors before it becomes effective. In addition, the California electric utility industry is currently undergoing significant changes in its structure and in the way in which components of the industry are or are not regulated. The County is unable to predict the impact of these changes on its utility property tax revenues, or whether further legislation may be proposed or enacted in response to industry restructuring, or whether any future litigation may affect, for example, methods of assessing utility property and the allocation of assessed value to or among local taxing agencies. 03015�pos-4 B-20 _......................................................................................................................................... ......................................................................................................................................................................................................................................... ..................................................................................................................................... ........................... County has had independent audits for more than 40 years. See APPENDIX B---"EXCERPTS FROM THE COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30, 2002." In addition to the above-mentioned audits, the County Grand Jury may also conduct management audits of certain offices of the County. Funds accounted for by the County are categorized as follows: Government Funds. Government funds are used to account for all or most of the County's general government activities, including the collection and disbursement of earmarked monies (special revenue funds), the acquisition or construction of general fixed assets (capital projects funds) and the servicing of general long-term obligations (debt service funds). The General Fund is used to account for the revenues and expenditures of the County that are not accounted for by other funds. Proprietary Funds. Proprietary funds are used to account for activities similar to those in the private sector, where the measurement focus is upon determination of net income and capital maintenance. Goods or services from such activities can be provided either to outside parties (enterprise funds)or to other departments or agencies primarily within the County(internal service funds). Fiduciary Funds. Fiduciary funds are used to account for assets held by the County in a trustee capacity or as an agent for individuals, private organizations, other governments, and/or other funds. These include the Pension and Investment Funds, the Expendable Trust Fund and agency funds. Presented in Table B-5 on the following page is the County's Schedule of Revenues, Expenditures and Changes in Fund Balances for the County General Fund as of June 30th for the five most recent fiscal years for which audited financial statements are available. More detailed information from the County's audited financial report for the fiscal year ending June 30, 2002 appears in APPENDix B to this Official Statement. Pursuant to a request for proposals for auditing services, the County evaluated and interviewed responding accounting firms and selected Caporicci & Larson, Oakland, California as the new auditor for the County, commencing with the audit to be completed for the fiscal year ending June 30, 2003. (REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLAND) 030 1 5\pos-4 B-22 County Employees A summary of the number of permanent County employees follows: Table B-6 COUNTY OF CONTRA COSTA COUNTY EMPLOYEES(t) Number of As of Permanent June 30 Employees 1998 7,215 1999 7,149 2000 8,321 2001 8,654 2002 8,788 2003 8,620'2} Represents full-time equivalent employee positions authorized and funded but not necessarily filled. Excludes employees of the courts or independent fire districts. tz> Estimated. Source: County Auditor-Controller. Contract Negotiations County and District employees are represented in 36 bargaining units by 13 labor organizations, the principal ones being Local One of the Contra Costa County Employees Association ("CCCEA Local One") and Local 2700 of the American .Federation of State County and Municipal Employees ("AF'SCME") which, combined, represent approximately 50% of all County employees in a variety of classifications. The County and eleven of the labor organizations, representing approximately 85%of the County workforce, reached an agreement that extends the memoranda of understanding and provides for both wage increases and retirement enhancements. This agreement was contingent upon an offset of $100 million of the unfunded liability as approved by the Retirement Board on May 28, 2002, as follows. The Memorandums of Understanding (the "MOUS") of the employee organizations representing employees with miscellaneous retirement benefits were extended three years from the original September 30, 2002 expiration date to the new expiration date of September 30, 2005. Employees will receive salary increases of 5% effective October 1, 2002, 3% effective October 1, 2003 and 3% effective October 1, 2004. The formula for calculating retirement benefits changed from 2% at age 58.5 formula to 2% at age 55 effective January 1, 2003, and effective January 1, 2005 for employees represented by the California Nurses Association ("CNA"). The County eliminated the Tier II Retirement Plan and moved 'Fier II employees to Tier TIT, effective October 1, 2002. Employees may participate in a shared buy-back plan that would allow employees to convert previously earned retirement service credits to the higher tier('Pier III) at a 2:1 employee/employer ratio. The employee organizations that are party to this agreement include AFSCME Locals 512 and 2700, CNA, CCCEA Local One, Physicians' and Dentists' of Contra Costa County, SETU Isocal 535 and Western Council of Engineers. Wage and retirement benefit provisions for employees with safety retirements in the miscellaneous employee organizations of CCCEA Local One and SETU Local 535 expire September 30, 2006. 03015\pos-4 B-24 As of March 31, 2003, investments in the County Pool were held for the following local agencies in the indicated amounts: Table B-7 CONTRA COSTA COUNTY INVESTMENT POOL INVESTMENTS HELD BY TYPE OF LOCAL AGENCY (AS OF MARCH 31,2003) Percent Number Local Agency Par Value of Total of Agencies County of Contra Costa and Agencies $1,053,324,325 60.09% 1 School Districts 398,479,480 22.73 19 Community College District 82,382,725 4.70 1 Other Public Agenciest 218.769,882 12.48 20 TOTAL $1,752,956,412 100.00% 41 # Sanitation,Fire and Transportation Authorities,and two Joint Power Authorities are the only voluntary participants in the Pool. As of March 31, 2003, the Pool had approximately 49.8% of its assets invested in U.S. Treasury and federal agency securities. Another 36.3% of the Pool's assets were invested in highly liquid short- term money market instruments (repurchase agreements, certificates of deposit, bankers' acceptances,and commercial paper). As of March 31, 2003, the detailed composition, cost, and market value of the Pool were as follows: Tyne of Investment Cost Market Value %of Total Cash $109,356,635.4I $109,356,635.41 6.23% U.S.Treasuries 11,174,724.63 12,602,748.76 0.64 U.S.Agencies-Federal, State and Local 861,832,584.53 865,242,908.67 49.14 Money Market Instruments 636,229,902.01 637,090,117.96 36.28 Other 135,142,299.42 136,769,171.55 7.71 ToTALt $1,753,736,146.00 $1,761,061,582.35 100.00% t Totals may not add due to independent rounding. The Pool is highly liquid, with 91.53% of the portfolio having a maturity of less than one year and an average weighted days to maturity of 75.17 days. The maturity distribution of the c'ool's portfolio as of March 31, 2003 is presented in the following table. Amount Terra to Maturity (Cost Basis) %of Total Less than I year $1,605,227,203 91.53% 1 to 2 years 99,328,402 5.66 2 to 3 years 42,940,425 2.45 3 to 4 years 3,227,713 0.18 4 to 5 years 2,286,275 0.13 Greater than 5 years+ 726,12$ 0.04 TOTAL $1,753,736,146 100.00% (1) Represents bond proceeds of School Districts. The mix of investments is designed to ensure that sufficient liquid funds are available to meet disbursement requirements. Funds on hand at the end of each of the past five fiscal years in excess of disbursement requirements were as follows: 03015`pos 4 B-26 Retirement. Based upon the actuary's analysis of experience and recommended changes in assumptions, the URAL would increase by $91,666,000. Annual employer rates beginning in Fiscal Year 2002-2003 will increase by $14,088,000 to amortize the unfunded liability and to pay for annual on-going costs related to the recommended changes. At its September 2001 meeting, Board of Retirement rejected three of the five recommended changes in assumptions proposed by the actuary. Failure to adopt the three changes could understate the future UAAL by $80,280,000. The two recommended assumptions adopted would result in increased employer rates of$5,227,000. In 2000, Governor Davis signed legislation that permits 1937 Retirement Act counties to provide increased retirement benefits equal to (a) 3% of eligible salary per year of service to safety employees retiring at age 50, and(b) 2% of eligible salary per year of service to regular employees retiring at age 55. The Board of Retirement requested an actuarial study which refined projections regarding cost of such benefits. The actuary completed the study and found that the UAAL would increase by $199,000,000 if the new benefits were approved. The annual cost to pay for the new benefit and to amortize the UAAL would be $29,192,072. Representatives of the employer and the employees negotiated the approval of the new benefit and the resources to be used to pay for it. A Memorandum of Understanding ("MOU") addressing the source of payment for these additional benefits for safety employees and for general and miscellaneous employees was recently approved by the employers and all bargaining units. Pursuant to the MOU, $100,000,000 of the cost of the benefit would be funded from unrestricted reserves of the Association and safety employees would pay the remaining $99.0 million from a portion of the cost of living adjustment ("COLA") increases included in their compensation. The MOU sets forth a four year agreement beginning on July 1, 2002 under which safety employees will receive 5% to 6% COLAs out of which 2.25% is applied toward the new benefit in year 1, with additional 2.25% increments applied in years 2 through 4. The MOU provides a three year agreement beginning on October 1, 2002 for general and miscellaneous members under which they will receive a 5% COLA in year i and 3%COLAs in years 2and 3. In addition to the above, the Board of Retirement has allocated, effective July 1, 2001, $127,000,000 of the Unrestricted Reserve (see the table below) to be used to pay additional retiree benefits in the amount of $200 per month. Governor Davis signed legislation on July 21, 2001 that authorized the Board of Supervisors to provide these additional benefits. On May 21, 2002, the Board of Supervisors approved these additional benefits only to those retirees who retired prior to January 1, 1983. The actuary calculated the cost to provide these benefits at $23,162,000. At its October 9, 2002 meeting, the Board of Retirement elected to prefund this amount from the Unrestricted Reserve. In November 2002, the Association's actuary completed the actuarial evaluation for the new 3%/2%benefits under the 1937 Retirement Act. At its November 2002 meeting, the Board of Retirement voted to approve the transfer of $100 million from the Unrestricted Reserve to be applied against the UAAL created as a result of the 2%/3%benefit enhancements, resulting in an UAAL of$487,052,528; of which the payment of$319,094,714 is the responsibility of the County. In the past, the Association has been able to contribute a portion of excess earnings from its investment portfolio to the County in the form of subsidies of a portion of the County's required retirement contributions. However, the investment portfolio of the Association has not generated sufficient excess earnings recently to fund said subsidies. The Retirement Administrator of the Association informed the County in early June 2002 that subsidies would cease after December 2002. The additional net County cost is $12 million in Fiscal Year 2002-03 and $25 :million in Fiscal Year 2003-04. In Fiscal Year 2003-04, the County will continue to evaluate options for managing the shortfalls, including, the issuance of additional pension obligation bonds, management of the Association 03015\nos-4 B-28 The revenues of the Association by source, net assets at the end of the year and the total return on market value for the five years ending December 31, 2001 is set forth in Table B-9. TABLE B-9 CONTRA COSTA COUNTY EMPLOYEE'S RETIREMENT ASSOCIATION SCHEDULE OF REVENUES NET ASSETS AND RETURN ON MARKET VALUE 1997 THROUGH 2001 Source of Revenues Total Investment Net Assets Return Year Employee County Income/ End of on Market (December 31) Contributions Contributions (Loss)."' Year") Valuet33 1997 $9,856,075 $36,687,901 $409,112,609 $2,348,623,288 21.8% 1998 11,704,335 401925,393 342,811,108 2,637,020,438 16.2 1999 14,460,506 49,254,260 402,876,035 2,987,088,866 16.3 2000 15,463,367 52,986,645 30,409,387 2,931,261,879 2.2 2001 18,681,239 55,182,505 (114,531,847) 2,704,728,752 (2.4) (1) Net of Investment Expenses. (2) Net of benefits paid,administrative costs,refund of contributions and other deductions. (3) Before deduction of administrative fees and investments costs. Source: Association Comprehensive Annual Financial Reports for the years Ended December 31, 1997, 1998, 1999,2000 and 2001. Table B-10 sets forth the balances as of December 31, 2002, in selected reserve or designation categories: TABLE B-10 CONTRA COSTA COUNTY EMPLOYEE'S RETIREMENT ASSOCIATION BALANCES IN SELECTED RESERVE AND DESIGNATION CATEGORIES ASSUMING AN 8.50%ACTUARIAL RATE OF RETURN (AS OF DECEMBER 31,2002) Category Amount Statutory Contingency Reserve(equal to 1% of assets) $27,683,923 Board Contingency Designations Additional 1%Contingency Designation 27,683,923 Excess Earnings from Previous Years 316,832,593 Market Stabilization Account (385,448,325) 0301 S\pos-4 B-30 The Board of Retirement has designated $90 million from unrestricted excess earnings to cover the anticipated liability of the settlement. As of December 31, 2002, $118 million in claims covering [4,112/4,116] claimants had been paid leaving a deficit of approximately $28 million in the $90 million reserve. The Association and William M. Mercer, Inc., the former actuary, are of the opinion that some of the liability may need to be recalculated because of changes in the assumed investment rate and actuarial assumptions over the past three years. Since there is no longer a positive balance in the Excess Earnings from previous years reserve, any shortfall would become part of the URAL. Under Paulson, employers have the option of paying their outstanding amount due or amortizing the shortfall over 20 years. The County has been amortizing this amount for the past three years by incorporating such amount into the existing UAAL. In May 2003, Mercer Human Resource Consulting [successor to William M. Mercer, Inc.] prepared a calculation of the payments required by each participating employer in the Association, including the County, in order to settle the remaining Paulson liability. The net amount was computed to be $34,230,204 (calculated as the total Paulson liability in the amount of $149,346,218, less an offset equal to $115,116,014 which was transferred by the Board of Retirement, representing the $90 million from unrestricted excess earnings plus interest thereon through December 31, 2002), assuming an actuarial rate of return of 8% and the 2%/3% benefit enhancements [amortized over a period of years]. Of the $34,230,204 net Paulson liability amount, the County is responsible for the payment of $24,821,154 which is part of the UAAL. Long Term Obligations The County has never defaulted on the payment of principal or interest on any of its indebtedness. Following is a brief summary of the County's general obligation debt, pension obligation bonds, lease obligations and direct and overlapping debt. General Obligation Debt. The County has no direct general obligation bonded indebtedness, the last issue having been redeemed in Fiscal Year 1977-78. The County has no authorized and unissued debt. Pension Obligation Bonds. The County has issued pension obligation bonds to refund debentures issued to evidence its statutory obligation to make payments with respect to its unfunded actuarial accrued liability to County members of the Contra Costa County Employees' Retirement Association. Lease Obligations. The County has made use of various lease arrangements with private and public financing entities, nonprofit corporations, the County of Contra Costa Public Financing Authority and the Contra Costa County Employees' Retirement Association for the use and acquisition of capital assets. These capital lease obligations have terms ranging from five to 30 years. The longest capital lease ends in 2028. For a summary of the County's lease obligations as of June 30, 2002, see APPENDIX B— "EXCERPTS FROM THE COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30,2002—Notes to General Purpose Financial Statements." Certain of the lease obligations of the County reflect annual payments made for debt service on lease revenue bonds and certificates of participation (collectively, the "Marketable Leases") issued to finance capital projects. 03015\pos4 B-32 purposes only and the County does not guaranty the completeness or accuracy of the information contained in the Debt Report. The Debt Report generally includes long-term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the County. Such long-term obligations generally are not payable from revenues of the County (except as indicated) nor are they necessarily obligations secured by land within the County. 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. (REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLAND.) 03015\pos-4 B-34 Future Financings The County is planning to issue approximately $135 million in of taxable pension obligation bonds in August 2003. The County is also beginning a five-year planning phase with other cities, counties, and five districts for the replacement of the County's emergency radio system with a 700 mHz system. Additionally, the County may, over the next several years, undertake the replacement of the Richmond Health Center and the construction of a new Sheriff's Public Safety Command Center. Insurance and Self-Insurance Programs The County's workers' compensation exposure is self-insured to $750,000 per occurrence. See also "—Workers' Compensation Costs." The County has excess coverage through the California State Association of Counties-Excess Insurance Authority("CSAC-EIA") from $750,000 to $50 million. The County has excess coverage through CSAC-EIA for public and automobile liability to $25 million. The County is also self-insured to $1 million. CSAC-EIA is currently attempting to obtain additional excess coverage for its members. The County maintains "All Risks" insurance in an amount in excess of $600 million through CSAC-EIA with a $50,000 deductible. Loss caused by an earthquake is being renewed effective July 1, 2003 with a policy limit of$130 million with a 5%per unit deductible [and an excess shared aggregate of $25 million]. With respect to the medical malpractice exposure, the County is self-insured for $500,000 with excess coverage through CSAC-EIA up to $10 million. The County's airports are protected by commercial liability insurance up to $100 million, without a deductible. The County's Sheriff-Coroner's helicopters are insured commercially to$50 million,without a deductible. Except for the County's airports and the Sheriff-Coroner's helicopters, commercial insurance has been purchased through the California State Association of Counties' Excess Insurance Authority, a joint powers authority, whose purpose is to obtain "group" commercial reinsurance for its membership, which includes the County. Internal Service Funds are used to account for all self-insurance activities. It is the County policy to periodically infuse capital into each Fund to sufficiently cover the payment of claims, including those that either will or may require payment sometime in the future. As of June 30, 2003, the Internal Service Funds had approximately$____million in assets and$ million in liabilities. Current and future liabilities for the workers' compensation, public liability, automobile liability, and medical malpractice liability funds are determined annually by an outside actuarial firm, while the others are determined by County management personnel. In the County's opinion the Internal Service Funds are sufficiently funded, with the exception of the workers' compensation program which is experiencing increasing external cost factors such as increases in temporary disability payments and death payments due to recent legislative changes, medical costs continue to rise due to inflation and over utilization. The County is aggressively addressing these issues. see "—Workers Compensation Costs." For additional information on the County's insurance coverage, see APPENDIX B—"EXCERPTS FROM THE COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30,2002—Notes to General Purpose Financial Statements." 030151pos-4 B-36 _._._..................................................................................................................................................... APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS 0303 s\po5-4 APPENDIX F PROPOSED FORM OF CONTINUING DISCLOSURE AGREEMENT 03015\1)OS4 ...........................................................o............................ ........................ .................................................................................................................. "Participating Underwriter" shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Repository" shall mean each National Repository and the State Repository. "Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "State"shall mean the State of California. "State Repository" shall mean any public or private repository or entity designated by the State as the state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Agreement, there is no State Repository. SECTION 3. Provision of Annual Reports. (a) The County shall, or shall cause the Dissemination Agent to, not later than nine months after the end of the County's fiscal year (presently June 30), commencing with the report for the 2001- 2002 Fiscal Year, provide to each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the County 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. If the County's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(f). (b) Not later than fifteen (15) Business Days prior to the date specified in subsection (a) for providing the Annual Report to Repositories, the County shall provide the Annual Report to the Dissemination Agent and the Trustee (if the Trustee is not the Dissemination Agent); provided, however, that the County may distribute the Annual Report itself after providing written notice to the Trustee and the Dissemination Agent. If by such date, the Trustee has not received a copy of the Annual Report, the Trustee shall contact the County to determine if the County is in compliance with the first sentence of this subsection(b). (c) If the Trustee is unable to verify that an Annual Report has been provided to Repositories by the date required in subsection (a), the Trustee shall send a notice to each Repository, the Municipal Securities Rulemaking Board and the State Repository, if any, in substantially the form attached as Exhibit A. (d) The Dissemination Agent shall: (i) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and the State Repository, if any; and (ii) to the extent the County has provided the Annual Report to the Dissemination Agent, file a report with the County and (if the Dissemination Agent is not the Trustee) the Trustee certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing all the Repositories to which it was provided. SECTION 4. Content of Annual Reports. The County's Annual Report shall contain or include by reference the following: 03015ipos-4 F_2 (b) The Trustee shall, promptly upon obtaining actual Rowledge at its principal corporate trust office as specified in Section 12 hereof of the occurrence of any of the Listed Events, contact the Disclosure Representative, inform such person of the event, and request that the County promptly notify the Trustee in writing whether or not to report the event pursuant to subsection (f); provided that, failure by the Trustee to so notify the Disclosure Representative and make such request shall not relieve the County of its duty to report Listed Events as required by this Section 5. (c) Whenever the County obtains knowledge of the occurrence of a Listed Event, whether because of a notice from the Trustee pursuant to subsection (b) or otherwise, the County shall as soon as possible determine if such event would be material under applicable federal securities laws. (d) If the County has determined that Rowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, the County shall promptly notify the Trustee in writing. Such notice shall instruct the Trustee to report the occurrence pursuant to subsection (f). (e) If in response to a request under subsection (b), the County determines that the Listed Event would not be material under applicable federal securities laws, the County shall so notify the Trustee in writing and instruct the Trustee not to report the occurrence. (f) If the Trustee has been instructed by the County to report the occurrence of a Listed Event, the Trustee shall file a notice of such occurrence with the Municipal Securities Rulemaking Board and the State Repository. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(4) and (5) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Holders of affected Bonds pursuant to the Trust Agreement. (g) The Trustee may conclusively rely on an opinion of counsel that the County's instructions to the Trustee under this Section 5 comply with the requirements of the Rule. SECTION 6. Termination of Reporting Obligation. Each party's obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the County shall give notice of such termination in the same manner as for a Listed Event under Section 5(f). SECTION 7. Dissemination Agent. The County may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the form or content of ariy notice or report prepared by the County pursuant to this Disclosure Agreement. If at any time there is not any other designated Dissemination Agent, the County shall be the Dissemination Agent. SECTION 8- Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the County, the Trustee and the Dissemination Agent may amend this Disclosure Agreement (and the Trustee and the Dissemination Agent shall agree to any amendment so requested by the County provided such amendment does not impose any greater duties, nor risk of liability, on the Trustee or the Dissemination Agent, as the case may be), and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied: (a) 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; 030 1 5spos-v P-4 ........ ......... ................................................................................................................ SECTION 12. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given as follows: To the County: County of Contra Costa County Administrator's Office 651 fine Street, 6`1'Floor Martinez, CA 94553-0063 Attention: Laura W. Lockwood, Director of Capital Facilities and Debt Management Telephone: (925) 335-1098 Fax: (925) 646-1228 If to the Trustee: BNY Western Trust Company 550 Kearny Street, Suite 600 San Francisco,California 94108 Attention: Corporate Trust Department Telephone: (415) 263-2416 Fax: (415) 399-1647 Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent, SECTION 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the County, the Trustee, the Dissemination Agent, the Participating Underwriters and Folders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. 03015\pos-4 F-6 EXHIBIT A NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT Name of Issuer:County of Contra Costa Name of Issue: County of Contra Costa Public Facilities Financing Authority Lease Revenue Bonds(Various Capital Projects), 2003 Series A Date of Issuance: , 2003 NOTICE IS HEREBY GIVEN that the County of Contra Costa (the "County") has not provided an Annual Report with respect to the above-named Bands as required by Section 38.07 of the Fifth Amendment to Facility Lease, dated as of July 1, 2003, by and between the County of Contra Costa Public Financing Authority and the County. The County anticipates that the Annual Report will be filed by Dated: BNY WESTERN TRUST COMPANY, on behalf of COUNTY OF CONTRA COSTA By: cc: County of Contra Costa 030,5\po,-4 F-8 ........................................... APPENDIX G DTC AND THE BOOK-ENTRY ONLY SYSTEM The following description of the procedures and record keeping with respect to beneficial ownership interests in the Series 2003 A Bonds, payment of principal, redemption premium, if any, and interest with respect to the Series 2003 A Bonds to DTC, its Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Series 2003 A Bonds and other related transactions by and between DTC, its Participants and the Beneficial Owners is based solely on the understanding of the County of such procedures and record keeping from information provided by DTC. Accordingly, no representations can be made concerning these matters and neither DTC, its 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 its Participants, as the case may be. The County, the Trustee and the Underwriters understand that the current "Rules"applicable to DTC are on file with the Securities and Exchange Commission and that the current "Procedures" of DTC to be followed in dealing with Participants are on file with DTC. DTC will act as securities depository for the Series 2003 A Bonds. The Series 2003 A Bonds will be executed and delivered as fully registered bonds registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered certificate will be executed and delivered for each maturity date of the Series 2003 A Bonds, each in the aggregate principal amount due on such maturity date, and will be deposited with DTC. DTC, the world's largest 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 I7A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 85 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, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation, (respectively, "NSCC" "GSCC" "MBSCC", and "EMCC", also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. 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 Standard &Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of the Series 2003 A Bonds under the DTC system must be made by or through Direct Participants. which will receive a credit for the Series 2003 A Bonds 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 030 15\pos-4 G-1 corresponding detail information from the County or the Trustee,on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC (nor its nominee), the Trustee, or the County, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal of, premium, if any, and interest evidenced by the Series 2003 A Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC} is the responsibility of the County or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. AS LONG AS A BOOK.-ENTRY ONLY SYSTEM IS USED FOR THE SERIES 2003 A BONDS, THE TRUSTEE WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO BONDOWNERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY PARTICIPANT, OR OF ANY PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OR SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE SERIES 2003 A BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. NONE OF THE COUNTY, THE TRUSTEE, OR THE UNDERWRITERS HAVE ANY RESPONSIBILITY OR LIABILITY FOR ANY ASPECT OF THE RECORDS RELATING TO OR PAYMENTS MADE ON ACCOUNT OF BENEFICIAL OWNERSHIP, OR FOR MAINTAINING, SUPERVISING OR REVIEWING ANY RECORDS RELATING TO BENEFICIAL OWNERSHIP OF INTERESTS IN THE SERIES 2003 A BONDS. NONE OF THE COUNTY, THE TRUSTEE, OR THE UNDERWRITERS CAN GIVE AND DO NOT GIVE ANY ASSURANCES THAT DTC WILL DISTRIBUTE PAYMENTS TO DTC PARTICIPANTS OR THAT PARTICIPANTS OR OTHERS WILL DISTRIBUTE PAYMENTS WITH RESPECT TO THE SERIES 2043 A BONDS RECEIVED BY DTC OR ITS NOMINEES AS THE BONDOWNER THEREOF OR ANY REDEMPTION NOTICES OR OTHER NOTICES TO THE BENEFICIAL OWNERS, OR THAT THEY WILL DO SO ON A TIMELY BASIS, OR THAT DTC WILL SERVICE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT. Disclaimers AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE 2002 SERIES B BONDS, THE TRUSTEE WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO HOLDERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY PARTICIPANT, OR OF ANY PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OR SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE 2042 SERIES B BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. NONE OF THE AUTHORITY, THE COUNTY, THE TRUSTEE, OR THE UNDERWRITER HAS ANY RESPONSIBILITY OR LIABILITY FOR ANY ASPECT OF THE RECORDS RELATING TO OR PAYMENTS MADE ON ACCOUNT OF BENEFICIAL OWNERSHIP, OR FOR MAINTAINING, SUPERVISING OR REVIEWING ANY RECORDS RELATING TO BENEFICIAL, OWNERSHIP OF INTERESTS IN THE 2002 SERIES B BONDS. NONE OF THE AUTHORITY, THE COUNTY, THE TRUSTEE, OR THE UNDERWRITERS CAN GIVE AND DO NOT GIVE ANY ASSURANCES THAT DTC WILL DISTRIBUTE PAYMENTS TO DTC PARTICIPANTS OR THAT PARTICIPANTS OR OTHERS WILL DISTRIBUTE PAYMENTS WITH RESPECT TO THE. 2002 SERIES .B BONDS RECEIVED BY DTC 0301 Slpos-4 G-3 APPENDIX II SPECIMEN MUNICIPAL BOND INSURANCE POLICY 0301 s.pos-a H-I L&J DRAFT#2 61244103 COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY LEASE REVENUE BONDS(VARIOUS CAPITAL PROJECTS), 2003 SERIES A CONTINUING DISCLOSURE AGREEMENT This Continuing Disclosure Agreement (the "Disclosure Agreement"), dated as of , 2003, is executed and delivered by the COUNTY OF CONTRA COSTA, CALIFORNIA (the "County"), and BNY WESTERN TRUST COMPANY, as successor trustee (the "Trustee") in connection with the issuance by the County of Contra Costa Public Financing Authority(the "Authority") of$ Lease Revenue Bonds (Various Capital Projects), 2003 Series A (the "Bonds"). The Bands are being issued pursuant to a Trust Agreement dated as of February 1, 1999, as supplemented by a First Supplemental Trust Agreement dated as of January 1, 2001, a Second Supplemental Trust Agreement dated as of May 1, 2001, a Third Supplemental Trust Agreement dated as of June 1, 2002, a Fourth Supplemental Trust Agreement dated as of July 1, 2002 and a Fifth Supplemental Trust Agreement dated as of July 1, 2003 (collectively, the "Trust Agreement"), between the Authority and the Trustee. Pursuant to the Facility Lease dated as of February 1, 1999, as amended by the First Amendment to Facility Lease dated as of January 1, 2001, the Second Amendment to Facility Lease dated as of May 1, 2001, the Third Amendment to Facility Lease dated as of June 1, 2002, the Fourth Amendment to Facility Lease dated as of July 1, 2002 and the Fifth Amendment to Facility Lease dated as of July 1, 2003 (collectively, the "Facility Lease"), the County has covenanted to comply with its obligations hereunder and to assume all obligations for Continuing Disclosure with respect to the Bonds. The County and the Dissemination Agent covenant and agree as follows: SECTION 1. Purpose of the Disclosure A rgreement. This Disclosure Agreement is being executed and delivered by the County, the Trustee and the Dissemination Agent for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriters in complying with S.E.C. Rule 15c2-12(b)(5). SECTION 2. Definitions. In addition to the definitions set forth in the Trust Agreement, which apply to any capitalized term used in this Disclosure Agreement 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 County pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Beneficial Owner" shall mean any person which has or shares the power, directly or indirectly, to make investment decisions concerning the ownership of any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries). "Disclosure Representative" shall mean the County Administrator, Director,Capital Facilities and Debt Management or his or her designee, or such other officer or employee as the County shall designate in writing to the Trustee from time to time. "Dissemination Agent" shall mean the County, or any successor Dissemination Agent, which may be designated in writing by the County and which has filed with the Trustee a written acceptance of such designation. 03015\cdc-2 "Listed Events"shall mean any of the events listed in Section 5(a)of this Disclosure Agreement. "National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. The National Repositories approved by the Securities and Exchange Commission as of the date of this Agreement are set forth at the following website: http://www.see-gov/consumer/nrmsir.htm. "Participating Underwriter" shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Repository„ shall mean each National Repository and the State Repository. "Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "State"shall mean the State of California. "State Repository" shall mean any public or private repository or entity designated by the State as the state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Agreement,there is no State Repository. SECTION 3. Provision of Annual Reports. (a) The County shall, or shall cause the Dissemination Agent to, not later than nine months after the end of the County's fiscal year (presently .Tune 30), commencing with the report for the 2002- 2403 Fiscal Year,provide to each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Agreement; provided that the audited financial statements of the County 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. If the County's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(f). (b) Not later than fifteen (15) Business Days prior to the date specified in subsection (a) for providing the Annual Report to Repositories, the County shall provide the Annual Report to the Dissemination Agent and the Trustee (if the Trustee is not the Dissemination Agent); provided, however, that the County may distribute the Annual Report itself after providing written notice to the Trustee and the Dissemination Agent. If by such date, the Trustee has not received a copy of the Annual Report, the Trustee shall contact the County to determine if the County is in compliance with the first sentence of this subsection(b). (c) If the Trustee is unable to verify that an Annual Report has been provided to Repositories by the date required in subsection (a), the Trustee shall send a notice to each Repository, the Municipal Securities Rulemaking Board and the State Repository, if any, in substantially the form attached as Exhibit A. (d) The Dissemination Agent shall: (i) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and the State Repository, if any; and (ii) to the extent the County has provided the Annual Report to the Dissemination Agent, file a report with the County and (if the Dissemination Agent is not the Trustee) the 03415\cdc-2 2 Trustee certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing all the Repositories to which it was provided. SECTION,'4. Content of Annual Reports. The County's Annual Report shall contain or include by reference the following: I. The audited financial statements of the County for the prior fiscal year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the County'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. 2. Numerical and tabular information for the immediately preceding Fiscal Year of the type contained in the Official Statement under the following captions: (a) "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS" (report changes in "— Debt Service Schedule"); (b) APPENDIX B—"COUNTY FINANCIAL INFORMATION—Recent County General Fund Budgets" (update Table B-I "COUNTY OF CONTRA COSTA GENERAL FUND BUDGET"); (c) APPENDIX B—"COUNTY FINANCIAL INFORMATION—Ad Valorem Property Taxes" (update Table B-2 "COUNTY OF CONTRA COSTA SUMMARY OF ASSESSED VALUATIONS AND AD VALOREM PROPERTY TAXATION"); (d) APPENDIX B--"COUNTY FINANCIAL INFORMATION—Accounting Policies, Reports and Audits" (update Table B-5 "COUNTY OF CONTRA COSTA GENERAL FUND SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES"); (e) APPENDIX B—"COUN'T'Y FINANCIAL INFORMATION—Lang Term Obligations— General Obligation Debt"and"—Lease Obligations"(update Table B-12 on annual debt service). 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 County or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The County shall clearly identify each such other document so included by reference. SECTION 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5 and to the extent applicable, the County 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. principal and interest payment delinquencies; 2. non-payment related defaults; 3. modifications to rights of Holders of Bonds; 4. optional, contingent or unscheduled bond calls; 5. defeasances; 6. rating changes; 03015\cdc-2 3 7. adverse tax opinions or events adversely affecting the tax-exempt status of the Bonds; 8. unscheduled draws on the debt service reserves reflecting financial difficulties; 9. unscheduled draws on credit enhancements reflecting financial difficulties; 10. substitution of credit or liquidity providers, or their failure to perform; and 11. release, substitution or sale of property securing repayment of the Bonds. (b) The Trustee shall, promptly upon obtaining actual knowledge at its principal corporate trust office as specified in Section 12 hereof of the occurrence of any of the Listed Events, contact the Disclosure Representative, inform such person of the event, and request that the County promptly notify the Trustee in writing whether or not to report the event pursuant to subsection (f); provided that, failure by the Trustee to so notify the Disclosure Representative and make such request shall not relieve the County of its duty to report Listed Events as required by this Section 5. (c) Whenever the County obtains knowledge of the occurrence of a Listed Event, whether because of a notice from the Trustee pursuant to subsection (b) or otherwise, the County shall as soon as possible determine if such event would be material under applicable federal securities laws. (d) If the County has determined that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, the County shall promptly notify the Trustee in writing. Such notice shall instruct the Trustee to report the occurrence pursuant to subsection (f). (e) If in response to a request under subsection (b), the County determines that the Listed Event would not be material under applicable federal securities laws, the County shall so notify the Trustee in writing and instruct the Trustee not to report the occurrence. (f) If the Trustee has been instructed by the County to report the occurrence of a Listed Event, the Trustee shall file a notice of such occurrence with the Municipal Securities Rulemaking Board and the State Repository. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(4) and (5) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Holders of affected Bonds pursuant to the Trust Agreement. (g) The Trustee may conclusively rely on an opinion of counsel that the County's instructions to the Trustee under this Section 5 comply with the requirements of the Rule. SECTION 6. Termination of Reporting Obligation. Each party's obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the County shall give notice of such termination in the same manner as for a Listed Event under Section 5(f). SECTION 7. Dissemination Agent. The County may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the County pursuant to this Disclosure Agreement. If at any time there is not any other designated Dissemination Agent,the County shall be the Dissemination Agent. SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the County, the Trustee and the Dissemination Agent may amend this Disclosure Agreement (and the Trustee and the Dissemination Agent shall agree to any amendment so requested by the County provided such amendment does not impose any greater duties, nor risk of liability, on the Trustee or the Dissemination Agent, as the case may be), and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied: 0301 scdc-z 4 (a) 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) The undertaking, as amended or taking into account such waiver, would, in the opinion of 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) The amendment or waiver either(i) is approved by the Holders of the Bonds in the same manner as provided in the Trust Agreement for amendments to the Trust Agreement with the consent of Holders,or (ii) does not, in the opinion of the Trustee or nationally recognized bond counsel, materially impair the interests of the Holders or Beneficial Owners of the Bands. In the event of any amendment or waiver of a provision of this Disclosure Agreement, the County shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the County. 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(f), 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 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the County from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the County chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the County shall have no obligation under this Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. SECTION 10. Default. In the event of a failure of the County, the Trustee or the Dissemination Agent to comply with any provision of this Disclosure Agreement, the Trustee(and, at the written request of any Participating Underwriter or the Holders of at least 25% aggregate principal amount of Outstanding Bonds, shall, but only to the extent indemnified to its satisfaction), or any Holder or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the County, the Trustee or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the County, the Trustee and the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance. SECTION 11. Duties, Immunities and Liabilities of Trustee and Dissemination Agent. The Dissemination Agent and the Trustee shall have only such duties as are specifically set forth in this Disclosure Agreement, and the County, to the extent permitted by law, agrees to indemnify and save the Dissemination Agent and the Trustee, their officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending 43015\cdc-2 5 against any claim of liability, but excluding liabilities due to the Dissemination Agent's or Trustee's respective negligence or willful misconduct. The obligations of the County under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. SECTION 12. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given as follows: To the County: County of Contra Costa County Administrator's Office 651 fine Street, 6`i'Floor Martinez, CA 94553-0063 Attention: Laura W. Lockwood, Director of Capital Facilities and Debt Management Telephone: (925) 335-1098 Fax: (925) 646-1228 If to the Trustee: BNY Western Trust Company 550 Kearny Street, Suite 600 San Francisco, California 94108 Attention: Corporate Trust Department Telephone: (415)263-2416 Fax: (415) 399-1647 Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s)to which subsequent notices or communications should be sent. SECTION 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the County, the Trustee,the Dissemination Agent, the Participating Underwriters and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. 03015\cdc-2 6 ............................_...... ...................... ............ SECTION 14, Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. COUNTY OF CONTRA COSTA By Chair of the Board of Supervisors County of Contra Costa, State of California Attest: John R. Sweeten,Clerk of the Board of Supervisors and County Administrator By Chief Clerk of the Board of Supervisors BNY WESTERN TRUST COMPANY as Trustee By Authorized Officer 0301 s\cdc-a 7 EXHIBIT A NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT Name of Issuer:County of Contra Costa Name of Issue: County of Contra Costa Public Facilities Financing Authority Lease Revenue Bonds(Various Capital Projects), 2003 Series A Date of Issuance: 2003 NOTICE IS HEREBY GIVEN that the County of Contra Costa (the "County") has not provided an Annual Report with respect to the above-named Bonds as required by Section 38.07 of the Fifth Amendment to Facility Lease, dated as of July 1, 2003, by and between the County of Contra Costa Public Financing Authority and the County. The County anticipates that the Annual Report will be filed by Dated: BNY WESTERN TRUST COMPANY, on behalf of COUNTY OF CONTRA COSTA By: cc: County of Contra Costa 0301 s\cac-2 A-1 ............................................................................................................................................................................................................................................................................................................................