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HomeMy WebLinkAboutMINUTES - 07212015 - D.5RECOMMENDATION(S): Acting as the Governing Board of the County of Contra Costa Public Financing Authority: 1. ADOPT Resolution No. 2015/277, approving the issuance by the Contra Costa Public Financing Authority of Lease Revenue Bonds (Refunding and Capital Projects), 2015 Series A and 2015 Series B, in a principal amount not to exceed $90,000,000 to finance various capital projects and a refunding of outstanding bonds for savings; 2. APPROVE and AUTHORIZE the forms of and directing the execution and delivery of a Trust Agreement, Site Lease, Facilities Lease, Bond Purchase Contract, an Official Statement (Preliminary version attached), an Escrow Agreement, an Eighth Amendment to Site Lease, and an Eighth Amendment to Facility Lease and related financing documents; and 3. APPROVE and AUTHORIZE the taking of necessary actions and the execution of necessary documents in connection therewith. APPROVE OTHER RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE Action of Board On: 07/21/2015 APPROVED AS RECOMMENDED OTHER Clerks Notes: VOTE OF SUPERVISORS AYE:John Gioia, District I Supervisor Candace Andersen, District II Supervisor Mary N. Piepho, District III Supervisor Karen Mitchoff, District IV Supervisor ABSENT:Federal D. Glover, District V Supervisor Contact: Timothy Ewell, 925-335-1036 I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supervisors on the date shown. ATTESTED: July 21, 2015 David Twa, County Administrator and Clerk of the Board of Supervisors By: June McHuen, Deputy cc: D. 5 To:Contra Costa County Public Financing Authority From:David Twa, County Administrator Date:July 21, 2015 Contra Costa County Subject:LEASE REVENUE BONDS (REFUNDING AND CAPITAL PROJECTS) 2015 SERIES A AND 2015 SERIES B FISCAL IMPACT: Issuance of up to $90 million in bond financing. In current market conditions, the County expects to issue $19.15 million for new capital projects and approximately $45.64 to refund existing lease revenue bonds. The refunding of eligible bonds at current market rates will save the County approximately $3.77 million through 2028. BACKGROUND: The County has two new projects to finance, approximately $6.5 million in solar panels and approximately $14 million to expand the Behavioral Health and Medical Clinic at the West County Clinic. In addition, a portion of the Authority’s existing Lease Revenue Bonds can be refunded in the current market for debt service savings. In the current market, the Authority could issue approximately $19,150,000 of fixed rate Series 2015A Bonds (the “2015A Bonds”) to finance the acquisition and installation of solar panels and to fund the construction, acquisition, installation and equipping of the Behavioral Health and Medical Clinic. The Authority could issue approximately $45,640,000 of fixed rate Series 2015B Bonds (the “2015B Bonds”) to refund a portion of the Authority’s outstanding Lease Revenue Bonds issued under the 1999 Trust Agreement for debt service savings. 2015A Bonds: Solar Panels Project- The Authority would finance approximately $6,500,000 in project funds for the solar panels. The bonds would have level debt service and amortize over 10 years, with principal paid from 2016 through 2025. Behavioral Health and Medical Clinic Expansion- The Authority would finance approximately $14,000,000 in project funds for the medical clinic expansion. These bonds would have a 20 year final maturity with level debt service and principal paid from 2018 through 2035. Bond counsel has advised that no principal should amortize until expected completion of the project. The estimated debt service based on current market rates for the 2015A Bonds is shown below: 2015B Bonds: The 2015B Bonds would be structured with uniform savings by refunded series, and based on current market conditions would include all or a portion of the following outstanding Lease Revenue Bonds: Refunding savings are dependent on market rates and the savings available from a refunding of the 2007A Bonds are particularly rate sensitive, given that the call date is two years in the future. Based on current market rates, $29.14 million of the 2007A Bonds would be refunded representing only the 2020 through 2026 maturities of the 2007A Bonds. Debt service and annual debt service savings for the 2015B Bonds is shown below. Issue Maturities to be Refunded Call Date Refunded Principal (subject to change) Series 1999A 2016-2028 Within 30 days $11,240,000 Series 2002A 2016 Within 30 days $575,000 Series 2002B 2016-2019 Within 30 days $5,350,000 Series 2003A 2016-2017 Within 30 days $1,565,000 Series 2007A 2018-2028 6/1/2017 $41,150,000 A summary of the proposed issuance is provided in the table below. 1999 Trust Agreement: All of the potential refunded bonds were issued pursuant to the 1999 Trust Agreement. Under that Trust Agreement, the County is able to purchase out and release specific leased assets by prepaying base rental payments associated with those assets. Any amendment of the lease is subject to consent of the bond insurer, National Public Finance Guarantee (“NPFG”). NPFG has consented to the amendment and the County will be able to release the assets listed in the table below from the 1999 Trust Agreement, assuming all of the Series 1999A, 2002A, 2002B and 2003A bonds are refunded, as currently planned. Assuming the above assets are released, they will then be available to secure the 2015A and 2015B Bonds. The 2015A and 2015B Bonds would be issued under a new 2015 Trust Agreement. As with the Authority’s existing Lease Revenue Bonds, the total value of the leased facilities must equal or exceed the par amount of the bonds and the fair market rental value of the leased facilities must equal or exceed the annual debt service payments on the bonds. The 2015A and 2015B Bonds are not expected to have level overall debt service because the two new money projects have different amortization periods and the refunded bonds do not have level debt service. As such, the intention would be to secure the 2015A and 2015B Bonds with several assets, with various lease maturity dates based on the shape of the 2015A and 2015B debt service. Under current market conditions, it is expected that the Authority could issue the new money and refunding bonds using solely the assets released from the 1999 Trust Agreement. In addition, the Authority plans to release the Public Works Department Administration building, the Four Buildings at Central Contra Costa County Public Works Yard and the Summit Centre entirely. The assets that are targeted for inclusion in the 2015 Trust Indenture are indicated in the far right column of the table above. However, given volatile market conditions, the County would need to be prepared to secure additional assets in the case that the size of the refunding increases and the five buildings targeted for inclusion in the 2015 Trust Agreement are not adequate to secure the 2015 Bonds. In this case, the proposed assets to add to the financing are listed below. All of the above results are subject to market conditions at the time of financing. It is also important to note that the results above assume that the 2015A and 2015B Bonds are issued with a surety bond to fund a reserve fund for the bonds. Piper Jaffray, the proposed underwriter for the bonds, has been in discussions with bond insurers to secure a surety bond for the financing. It is recommended that the Board approve the proposed financing and that the documentation and potential leased assets preserve the flexibility to respond to the current market’s volatile conditions. CONSEQUENCE OF NEGATIVE ACTION: The Authority will be unable to issue the bonds, delaying construction and reimbursement of capital projects. In addition, the County would be unable to realize savings from refunding of existing debt. CHILDREN'S IMPACT STATEMENT: No impact. CLERK'S ADDENDUM CLOSED the public hearing; and ADOPTED recommendations as presented. ATTACHMENTS Resolution No. 2015/277 Body of Resoution No. 2015/277 Trust Agreement Site Lease Facilities Lease Eighth Amendment to 1999 Master Site Lease Eighth Amendment to 1999 Facility Lease 2015 Escrow Agreement for Multiple LRBs Consent of Bond Insurer - National Public Finance Guarantee Preliminary Official Statement Continuing Disclosure Agreement OH&S Draft 7/13/2015 OHSUSA:761763646 TRUST AGREEMENT by and between the COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY and WELLS FARGO BANK, NATIONAL ASSOCIATION as Trustee Dated as of July 1, 2015 $____________ County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects), 2015 Series A and 2015 Series B OHSUSA:761763646 THIS TRUST AGREEMENT dated as of July 1, 2015 (the “Trust Agreement”), by and between the COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY (the “Authority”), a joint exercise of powers authority duly organized and existing pursuant to a n agreement entitled “Joint Exercise of Powers Agreement” by and between the County of Contra Costa and the Contra Costa County Redevelopment Agency, and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America and qualified to accept and administer the trusts hereby created, as trustee (the “Trustee”); W I T N E S S E T H: WHEREAS, the Authority is a joint exercise of powers authority duly organized and operating pursuant to Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (hereinafter, the “Act”); WHEREAS, Article 4 of the Act authorizes and empowers the Authority to issue bonds to assist local agencies in financing projects and programs consisting of certain public improvements or working capital or liability and other insurance needs whenever a local agency determines that there are significant public benefits from so doing; WHEREAS, 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”), $12,650,000 of the Authority’s Lease Revenue Bonds (Various Capital Projects), 2002 Series A (the “2002 Series A Bonds”), $25,440,000 of the Authority’s Lease Revenue Bonds (Refunding and Various Capital Projects), 2002 Series B (the “2002 Series B Bonds”), $18,500,000 of the Authority’s Lease Revenue Bonds (Various Capital Projects), 2003 Series A (the “2003 Series A Bonds”) and $122,065,000 of the Authority’s Lease Revenue Bonds (Refunding and Various Capital Projects), 2007 Series A (the “2007 Series A Bonds” and, collectively 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 Bonds and the 2003 Series A Bonds, the “Prior Bonds”) pursuant to a Trust Agreement, dated as of February 1, 1999 (as supplemented and amended, the “Prior Trust Agreement”), between the Authority and Wells Fargo Bank, National Association successor to U.S. Bank National Association, as trustee (the “Prior Trustee”); WHEREAS, the County of Contra Costa (the “County”) following a public hearing duly noticed and held, has determined that the consummation of the transactions contemplated in the Site Lease (as hereinafter defined), the Facilities Lease (as hereinafter defined) and this Trust Agreement will result in significant public benefits; WHEREAS, the Authority is empowered pursuant to the Facilities Lease and the aforementioned Article 4 of the Act to cause the lease of the Facilities (as hereinafter defined), and to cause the financing of the Project (as hereinafter defined) and the refunding of the Prior Bonds through the issuance of its bonds; WHEREAS, the County has determined to finance various capital projects as set forth in Exhibit D to the Facilities Lease (as amended from time to time, the “Capital Projects”); 2 OHSUSA:761763646 WHEREAS, the Authority intends to assist the County in financing the Capital Projects and refunding a portion of the Prior Bonds (the “2015 Refunded Bonds”) by issuing the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects), 2015 Series A (the “2015 Series A Bonds”) and the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects), 2015 Series B (the “2015 Series B Bonds” and collectively with the 2015 Series A Bonds, the “2015 Bonds”); WHEREAS, the County will lease to the Authority certain capital assets of the County (the “Facilities”) pursuant to the Site Lease; WHEREAS, the County will lease back the Facilities from the Authority pursuant to the terms of the Facilities Lease; WHEREAS, the Authority has authorized the issuance of the 2015 Series A Bonds, in an aggregate principal amount of _____________________________ dollars ($[A par amount]) and the issuance of the 2015 Series B Bonds, in an aggregate principal amount of _____________________________ dollars ($[B par amount]) to assist in financing a portion of the Capital Projects and refunding the 2015 Refunded Bonds; WHEREAS, to reduce the borrowing costs of the Authority and the base rental payments of the County, and to help the financing of the Capital Projects and the refunding of the 2015 Refunded Bonds, from which significant public benefit will be achieved, the 2015 Bonds shall be issued pursuant to Article 4 of the Act; WHEREAS, to provide for the authentication and delivery of the Bonds (as hereinafter defined), to establish and declare the terms and conditions upon which the Bonds are to be issued and secured and to secure the full and timely payment of the principal thereof and premium, if any, and interest thereon, the Authority has authorized the execution and delivery of this Trust Agreement; and WHEREAS, the Authority has determined that all acts and proceedings required by law necessary to make the Bonds, when executed by the Authority and authenticated and delivered by the Trustee, duly issued and the valid, binding and legal obligations of the Authority payable in accordance with their terms, and to constitute this Trust Agreement a valid and binding agreement of the parties hereto for the uses and purposes herein set forth, have been done and taken, and have been in all respects duly authorized; NOW, THEREFORE, THIS 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 this 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 consideration, the receipt whereof is hereby acknowledged, the Authority does 3 OHSUSA:761763646 hereby covenant and agree with the Trustee, for the benefit of the respective holders from time to time of the Bonds, as follows: ARTICLE I DEFINITIONS; EQUAL SECURITY SECTION 1.01 Definitions. Unless the context otherwise requires, the terms defined in this Section shall for all purposes hereof and of any Supplemental Trust Agreement and of any certificate, opinion, request or other document herein or therein mentioned have the meanings herein specified, unless otherwise defined in such other document. Capitalized terms not otherwise defined herein shall have the meaning assigned to such terms in the Facilities Lease. “Accreted Interest” means, with respect to Capital Appreciation Bonds, as of the date of calculation, the Accreted Value thereof minus the Denominational Amount thereof. “Accreted Value” means, with respect to Capital Appreciation Bonds, as of the date of calculation, the Denominational Amount thereof plus the interest accrued thereon to such date of calculation, compounded from the date of initial delivery at the interest rate thereof on each June 1 and December 1, as determined in accordance with the Supplemental Trust Agreement authorizing such Bonds, assuming between compounding dates that such Accreted Value increases by straight line interpolation in equal daily amounts on the basis of a year of three hundred sixty (360) days composed of twelve (12) months of thirty (30) days each. “Act” means the Joint Exercise of Powers Act (being Chapter 5 of Division 7 of Title 1 of the Government Code of the State, as amended) and all laws amendatory thereof or supplemental thereto. “Additional Bonds” means all bonds of the Authority authorized by and at any time Outstanding pursuant hereto and executed, issued and delivered in accordance with Article III. “Authority” means the County of Contra Costa Public Financing Authority created pursuant to the Act and its successors and assigns in accordance herewith. “Authorized Denominations” means, with respect to the 2015 Bonds, $5,000 or any integral multiple thereof. “Bond Counsel” means counsel of recognized national standing in the field of law relating to municipal bonds, appointed by the Authority. “Bond Year” means the twelve (12)-month period ending on June 1 of each year to which reference is made. “Bondholder” or “Owner” means any person who shall be the registered owner of any Outstanding Bond. 4 OHSUSA:761763646 “Bonds” means the 2015 Bonds and all Additional Bonds of the Authority authorized by and at any time Outstanding pursuant hereto and executed, issued and delivered in accordance with Section 2.02(a) and Section 3.01. “Business Day” means a day that is not a Saturday, Sunday or legal holiday on which banking institutions in the State of New York or California is authorized to remain closed, or a day on which the Federal Reserve system is closed. “Capital Appreciation Bonds” means Bonds the interest on which is compounded semiannually on each Interest Payment Date and paid at maturity as specified in the accreted value table for such Bonds in an exhibit to a Supplemental Trust Agreement. “Capital Projects” means the various public capital improvements and projects, including, but not limited to the acquisition, installation, implementation and construction of the 2015 Project, as described in the Facilities Lease, as the same may be amended from time to time by a Certificate of the County delivered to the Trustee, to be financed by a portion of the proceeds of the 2015 Series A Bonds. “Certificate of the Authority” means an instrument in writing signed by any of the following officials of the Authority: Chair, Vice-Chair, Executive Director, Assistant Executive Director or Deputy Executive Director or a designee of any such officer, or by any other person (whether or not an officer of the Authority) who is specifically authorized by resolution of the Authority for that purpose. “Certificate of the County” means an instrument in writing signed by any of the following County officials: the Chair of the Board of Supervisors, the County Administrator of the County, the Treasurer-Tax Collector of the County or the County Finance Director or by any such officials’ duly appointed designee, or by any other officer of the County duly authorized by the Board of Supervisors of the County for that purpose. “Code” means the Internal Revenue Code of 1986, as amended. “Continuing Disclosure Agreement” means that certain Continuing Disclosure Agreement executed by the County and Digital Assurance Certification, L.L.C., as dissemination agent, dated the date of issuance and delivery of the 2015 Bonds, as originally executed and as it may be amended from time to time in accordance with the terms thereof. “Costs of Issuance” means all items of expense directly or indirectly payable by or reimbursable to the County or the Authority and related to the authorization, execution and delivery of the Facilities Lease, the Site Lease, this Trust Agreement and the issuance and sale of the Bonds, including, but not limited to, costs of preparation and reproduction of documents, costs of rating agencies and costs to provide information required by rating agencies, filing and recording fees, fees and charges of the Trustee, legal fees and charges, fees and disbursements of consultants and professionals, fees and charges for preparation, execution and safekeeping of the Bonds, title search and title insurance fees, fees of the Authority and any other authorized cost, charge or fee in connection with the issuance of the Bonds. 5 OHSUSA:761763646 “Costs of Issuance Fund” means the fund by that name established pursuant to Section 3.01. “County” means the County of Contra Costa, a County organized and validly existing under the Constitution and general laws of the State. “Current Interest Bonds” means Bonds the interest on which is payable on each Interest Payment Date to the maturity date for each such Bond. “Debt Service” means, for any Fiscal Year or other period, the sum of (1) the interest accruing during such Fiscal Year or other period on all Outstanding Bonds, assuming that all Outstanding Serial Bonds are retired as scheduled and that all Outstanding Term Bonds are redeemed or paid from sinking fund payments as scheduled (except to the extent that such interest is to be paid from the proceeds of sale of any Bonds so long as such funded interest is in an amount equal to the gross amount necessary to pay such interest on the Bonds and is invested in Permitted Investments which mature no later than the related Interest Payment Date), (2) the principal amount of all Outstanding Serial Bonds maturing during such Fiscal Year or other period, and (3) the principal amount of all Outstanding Term Bonds required to be redeemed or paid (together with the redemption premiums, if any, thereon) during such Fiscal Year or other period; provided, that the foregoing shall be subject to adjustment and recalculation as follows. (a) with respect to Capital Appreciation Bonds, the Accreted Value payment shall be deemed a principal payment and interest that is compounded and paid as Accreted Value shall be deemed due on the scheduled redemption or payment date of such Capital Appreciation Bond; and (b) with respect to Variable Rate Bonds, the interest payments shall be calculated at a rate equal to 150% of the average rate borne by such Bonds or, if no Bonds are Outstanding, at a rate of a comparable index (i.e. SIFMA Swap Index) designated by the Authority, in the last 12 months, but not to exceed twelve percent (12%) per annum. “Denominational Amount” means, with respect to Capital Appreciation Bonds, the initial offering price thereof, which represents the principal amount thereof, and, with respect to the Current Interest Bonds, the principal amount thereof. “Depository” means DTC or another recognized securities depository selected by the Authority which maintains a book-entry system for the Bonds. “Dissemination Agent” means [Digital Assurance Certification, L.L.C.] or any successor appointed under the Continuing Disclosure Agreement. “DTC” means The Depository Trust Company, New York, New York. “Escrow Agent” means Wells Fargo Bank, National Association, as escrow agent, or any successor thereo. 6 OHSUSA:761763646 “Escrow Agreement” means that certain Escrow Agreement, by and between the Escrow Agent and the Authority, dated as of July 1, 2015, providing for the redemption and defeasance of the 2015 Refunded Bonds. “Escrow Fund” means the fund of the same name defined in the Escrow Agreement. “Event of Default” shall have the meaning specified in Section 7.01. “Facilities” shall mean the real property and the improvements thereon, as set forth in Exhibit A to the Facilities Lease, or any County buildings, other improvements and facilities added thereto or substituted therefor, or any portion thereof, in accordance with the Facilities Lease and this Trust Agreement. “Facilities Lease” means that certain lease, entitled “Facilities Lease”, by and between the County and the Authority, dated as of July 1, 2015, which lease or a memorandum thereof was recorded in the office of the County Recorder of the County of Contra Costa on ___________, 2015 as document 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. “Fiscal Year” means the twelve (12)-month period terminating on June 30 of each year, or any other annual accounting period hereafter selected and designated by the Authority as its Fiscal Year in accordance with applicable law. “Fixed Rate Bonds” means Bonds of any Series which bear interest at a fixed interest rate from the date of such Bonds until the maturity or redemption date thereof. “Government Securities” means (1) cash; (2) U.S. Treasury Certificates, Notes and Bonds (including State and Local Government Series – “SLGS”); (3) direct obligations of the U.S. Treasury which have been stripped by the Treasury itself, such as CATS, TIGRS and similar securities; (4) Resolution Funding Corp. (REFCORP) strips (interest component only) which have been stripped by request to the Federal Reserve Bank of New York in book entry form; (5) pre-refunded municipal bonds rated the same rating as U.S. Treasury securities, or if not rated, then pre-refunded bonds that have been pre-refunded with cash, direct U.S. or U.S. guaranteed obligations; and (6) obligations issued by the following agencies which are backed by the full faith and credit of the U.S.: (a) U.S. Export-Import Bank direct obligations or fully guaranteed certificates of beneficial ownership, (b) Farmers Home Administration (FmHA) certificates of beneficial ownership, (c) Federal Financing Bank, (d) General Services Administration participation certificates, (e) U.S. Maritime Administration Guaranteed Title XI financing, (f) U.S. Department of Housing and Urban Development (HUD) Project Notes, Local Authority Bonds, New Communities Debentures – U.S. government guaranteed debentures, and U.S. Public Housing Notes and Bonds – U.S. government guaranteed public housing notes and bonds. “Independent Certified Public Accountant” means any certified public accountant or firm of such accountants duly licensed and entitled to practice and practicing as 7 OHSUSA:761763646 such under the laws of the State or another state of the United States of America or a comparable successor, appointed and paid by the Authority, and who, or each of whom – (1) is in fact independent according to the Statement of Auditing Standards No. 1 and not under the domination of the Authority or the County; (2) does not have a substantial financial interest, direct or indirect, in the operations of the Authority or the County; and (3) is not connected with the Authority or the County as a member, officer or employee of the Authority or the County, but who may be regularly retained to audit the accounting records of and make reports thereon to the Authority or the County. “Interest Payment Date” means, with respect to the 2015 Bonds, June 1 and December 1 in each year, commencing December 1, 2015. “Interest Payment Period” means the period from and including each Interest Payment Date (or, for the first Interest Payment Period, the date of the Bonds) to and including the day immediately preceding the next succeeding Interest Payment Date. “Joint Powers Agreement” means the Joint Exercise of Powers Agreement by and between the County and the Contra Costa County Flood Control and Water Conservation District, dated April 7, 1992, as originally executed and as it may from time to time be amended or supplemented pursuant to the provisions hereof and thereof. “Moody’s” means Moody’s Investors Service a corporation duly organized and existing under and by virtue of the laws of the State of Delaware, and its successors and assigns, except that if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term “Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency selected by the County. “Opinion of Counsel” means a written opinion of Bond Counsel. “Outstanding,” when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 9.02) all Bonds except (1) Bonds theretofore cancelled by the Trustee or surrendered to the Trustee for cancellation; (2) Bonds paid or deemed to have been paid within the meaning of Section 10.01; (3) Bonds deemed tendered but not yet presented for purchase; and (4) Bonds in lieu of or in substitution for which other Bonds shall have been executed, issued and delivered by the Authority pursuant hereto. 8 OHSUSA:761763646 “Permitted Encumbrances” means (1) liens for general ad valorem taxes and assessments, if any, not then delinquent, or which the County may, pursuant to the Facilities Lease, permit to remain unpaid; (2) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record as of the date of recordation of the Facilities Lease in the office of the County Recorder of the County of Contra Costa and which the County certifies in writing will not materially impair the use of the Facilities; (3) the Site Lease, as it may be amended from time to time and the Facilities Lease, as it may be amended from time to time; (4) this Trust Agreement, as it may be amended from time to time; (5) any right or claim of any mechanic, laborer, materialman, supplier or vendor not filed or perfected in the manner prescribed by law; (6) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions to which the Authority and the County consent in writing and certify to the Trustee will not materially impair the ownership interests of the Authority or use of the Facilities by the County; and (7) subleases and assignments of the County which will not adversely affect the exclusion from gross income of interest on the Bonds. “Permitted Investments” means any of the following: (1) Government Securities; (2) direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America; (3) bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): (a) Farmers Home Administration (FmHA) certificates of beneficial ownership, (b) Federal Housing Administration (FHA) debentures, (c) General Services Administration participation certificates, (d) Government National Mortgage Association (GNMA or “Ginnie Mae”) guaranteed mortgage-backed bonds and guaranteed pass-through obligations (participation certificates), (e) U.S. Maritime Administration guaranteed Title XI financing, and (f) U.S. Department of Housing and Urban Development (HUD) Project Notes and Local Authority Bonds; (4) bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit U.S. government agencies (stripped securities are only permitted if they have been stripped by the agency itself): (a) Federal Home Loan Bank System senior debt obligations (consolidated debt obligations), (b) Federal Home Loan Mortgage Corporation (FHLMC or “Freddie Mac”) participation certificates (mortgage- backed securities) and senior debt obligations, (c) Federal National Mortgage Association (FNMA or “Fannie Mae”) mortgage-backed securities and senior debt obligations (excluded are stripped mortgage securities which are valued greater than par on the portion of unpaid principal), (d) Resolution Funding Corp. (REFCORP) strips (interest component only) which have been stripped by request to the Federal Reserve Bank of New York in book entry form, and (e) Farm Credit System Consolidated systemwide bonds and notes; 9 OHSUSA:761763646 (5) money market funds registered under the Federal Investment Company Act of 1940, the shares of which are registered under the Federal Securities Act of 1933, and which have a rating by S&P of AAAm-G, AAAm, or AA-m and, if rated by Moody’s, rated Aaa, Aal or Aa2, and which funds may include funds which the Trustee, its affiliates, or subsidiaries provide investment advisory or other management services; (6) certificates of deposit secured at all times by collateral described in (2) and/or (3) above (which collateral must be held by a third party and subject to a perfected first security interest held by the Trustee) with a maturity of one year or less and issued by commercial banks, savings and loan associations or mutual savings banks whose short term obligations are rated “A- 1+” or better by S&P and “Prime-l” by Moody’s; (7) certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC, including BIF and SAIF; (8) investment agreements, including guaranteed investment contracts; (9) commercial paper rated “Prime-1” by Moody’s and “A-1+” or better by S&P; (10) bonds or notes issued by any state or municipality which is rated by Moody’s and S&P in one of the two highest long-term rating categories assigned by such agencies; (11) federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured and unguaranteed obligation rating of “Prime-1” or “A3” or better by Moody’s and “A-1+” or better by S&P; (12) repurchase agreements that provide for the transfer of securities from a dealer bank or securities firm (seller/borrower) to the Trustee (buyer/lender) and the transfer of cash from the Trustee to the dealer bank or securities firm with an agreement that the deal er bank or securities firm will repay the cash plus a yield to the Trustee in exchange for the securities at a specified date and that satisfy the following criteria: (a) repurchase agreements must be between the municipal entity and dealer banks or securities firms that are (i) on the Federal Reserve reporting dealer list which fall under the jurisdiction of the SIPC and which are rated A or better by S&P and Moody’s, or (ii) banks rated “A” or above by S&P and Moody’s, and (b) repurchase agreements must include the following: (i) securities that are acceptable for transfer, including those describe in clauses (2) and (3) above, (ii) terms of not more than 30 days, (iii) collateral must be delivered to the Trustee (if Trustee is not supplying the collateral) or third party acting as agent for the Trustee (if the Trustee is supplying the collateral) before or simultaneously with payment (perfection by possession of certificated securities), (iv) the Trustee must have a perfected first priority security interest in the collateral, (v) collateral must be free and clear of third-party liens and, in the case of an SIPC broker, must not have been acquired pursuant to a repurchase agreement or reverse repurchase agreement, (vi) failure to maintain the requisite collateral percentage, after a two day restoration period, requires the Trustee to liquidate collateral, (vii) securities must be valued weekly and marked-to-market at 10 OHSUSA:761763646 current market price plus accrued interest, and (viii) the value of-collateral must be equal to 104% or, if the securities used as collateral are FNMA or FHLMC securities, 105%, of the amount of cash transferred to the dealer bank or security firm under the repurchase agreement plus accrued interest and, if the value of securities held as collateral slips below such amount, then additional cash and/or acceptable securities must be transferred; (13) pre-refunded municipal bonds rated the same rating as U.S. Treasury securities or, if there is no rating, then pre-refunded bonds pre-refunded with cash, direct U.S. or U.S. guaranteed obligations; (14) the County of Contra Costa Investment Pool; (15) shares of beneficial interest issued by the Investment Trust of California (CalTRUST) pursuant to California Government Code Section 6509.7 and authorized for local agency investment pursuant to California Government Code Section 53601(o); and (16) the Local Agency Investment Fund of the State of California. The Trustee may conclusively rely on the written instructions of the Authority and the County that such investment is a Permitted Investment. “Person” means a corporation, firm, association, partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof. “Principal Office” refers to the office of the Trustee noted in Section 11.09 and such other offices as the Trustee may designate from time to time. “Principal Payment Date” means any date on which principal of the Bonds is required to be paid (whether by reason of maturity, redemption or acceleration). “Project” means the Capital Projects and any additional facilities or improvements financed with proceeds of Additional Bonds. “Project Fund” means the fund by that name established pursuant to Section 3.02. “Rating Category” means one of the general long-term (or short-term, if so specifically provided) rating categories of either Moody’s and S&P, without regard to any refinement or gradation of such rating category by a numerical modifier (unless a short-term rating) or otherwise. “Record Date” means the close of business on the fifteenth (15th) calendar day (whether or not a Business Day) of the month preceding any Interest Payment Date. “Redemption Date” shall mean the date fixed for redemption of any Bonds. 11 OHSUSA:761763646 “Redemption Price” means, with respect to any Bond (or portion thereof), the principal amount of such Bond (or portion) plus the applicable premium, if any, payable upon redemption thereof pursuant to the provisions of such Bond and this Trust Agreement. “Representation Letter” means the blanket letter of representation of the Authority to DTC or any similar letter to a substitute depository. “Reserve Fund” means the fund by that name created pursuant to Section 5.03(d). “Reserve Fund Requirement” means with respect to all Outstanding 2015 Bonds an amount equal to the least of (i) the maximum annual debt service attributable to the Outstanding 2015 Bonds, (ii) 125% of average annual debt service attributable to the Outstanding 2015 Bonds and (iii) 10% of the proceeds of the 2015 Bonds. The Reserve Fund Requirement means, for any Additional Series of Bond, as of any date of calculation, the amount, if any, specified by a Supplemental Trust Agreement as the amount required to be held in an account in the Reserve Fund for the payment of principal of and interest on that Series of Additional Bonds. “Responsible Officer” means any officer of the Trustee assigned to administer its duties under this Trust Agreement. “Revenue Fund” means the fund by that name created pursuant to Section 5.02 hereof. “Revenues” means (i) all Base Rental Payments and other payments paid by the County and received by the Authority pursuant to the Facilities Lease (but not Additional Payments), and (ii) all interest or other income from any investment, pursuant to Section 5.05, of any money in any fund or account (other than the Rebate Fund) established pursuant to this Trust Agreement or the Facilities Lease. “Serial Bonds” means Bonds for which no sinking fund payments are provided. “Series,” whenever used herein with respect to Bonds, means all of the Bonds designated as being of the same series, authenticated and delivered in a simultaneous transaction, regardless of variations in maturity, interest rate, redemption and other provisions, and any Bonds thereafter authenticated and delivered upon transfer or exchange of or in lieu of or in substitution for (but not to refund) such Bonds as herein provided. “S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, and its successors and assigns, except that if such entity shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term S&P shall be deemed to refer to any other nationally recognized securities rating agency selected by the County. “Site Lease” means that certain lease, entitled “Site Lease,” by and between the County and the Authority, dated as of July 1, 2015, which lease or a memorandum thereof was 12 OHSUSA:761763646 recorded in the office of the County Recorder of the County of Contra Costa on _________, 2015 as document 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. “State” means the State of California. “Supplemental Trust Agreement” means any trust agreement then in full force and effect which has been duly executed and delivered by the Authority and the Trustee amendatory hereof or supplemental hereto; but only if and to the extent that such Supplemental Trust Agreement is executed and delivered pursuant to the provisions hereof. “Tax Certificate” means the Tax Certificate and Agreement delivered by the Authority and the County at the time of the issuance and delivery of a Series of Bonds, as the same may be amended or supplemented in accordance with its terms. “Term Bonds” means Bonds which are payable on or before their specified maturity dates from sinking fund payments established for that purpose and calculated to retire such Bonds on or before their specified maturity dates. “Trust Agreement” means this Trust Agreement, dated as of July 1, 2015, between the Authority and the Trustee, as originally executed and as it may from time to time be amended or supplemented by all Supplemental Trust Agreements executed pursuant to the provisions hereof. “Trustee” means Wells Fargo Bank, National Association, or any other association or corporation which may at any time be substituted in its place as provided in Section 8.01. “2015 Bonds” means collectively, the 2015 Series A Bonds and the 2015 Series B Bonds. “2015 Project” means the acquisition, installation, implementation and construction of certain projects of the County, specifically the solar photovoltaic panels and the new medical clinic located at 13601 San Pablo Avenue, San Pablo, California, and payment of any costs associated with financing of said projects, as set forth in Exhibit D to the Facilities Lease as the same may be changed from time to time, in accordance with Section 3.07 of the Facilities Lease, by the County by filing a Certificate of the County with the Trustee. “2015 Refunded Bonds” means 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), 2002 Series A, the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects), 2002 Series B, the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Various Capital Projects), 2003 Series A and the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects), 2007 Series A identified in the Escrow Agreement, all issued under the Prior Trust Agreement. 13 OHSUSA:761763646 “2015 Reserve Facility” means [description of surety bond]. “2015 Series A Bonds” means the Bonds of such Series issued pursuant to Section 2.02(a) hereof. “2015 Series B Bonds” means the Bonds of such Series issued pursuant to Section 2.02(a) hereof. “Variable Rate Bonds” means Bonds of any Series which bear interest at a variable interest rate. “Written Request of the Authority” means an instrument in writing signed by or on behalf of the Authority by its Chair, Vice-Chair, Executive Director, Assistant Executive Director or Deputy Executive Director or a designee of any such officer or by any other person (whether or not an officer of the Authority) who is specifically authorized by resolution of the Board of Directors of the Authority to sign or execute such a document on its behalf. “Written Request of the County” means an instrument in writing signed by the County Administrator of the County or his designee, or by the County Finance Director of the County, or by any other officer of the County duly authorized by the Board of Supervisors of the County in writing to the Trustee for that purpose. SECTION 1.02 Equal Security. In consideration of the acceptance of the Bonds by the Bondholders thereof, this Trust Agreement shall be deemed to be and shall constitute a contract among the Authority, the Trustee and the Bondholders from time to time of all Bonds authorized, executed, issued and delivered hereunder and then Outstanding to secure the full, timely and final payment of the interest on and principal of and redemption premiums, if any, on all Bonds which may from time to time be authorized, executed, issued and delivered hereunder, subject to the agreements, conditions, covenants and provisions contained herein; and all agreements and covenants set forth herein to be performed by or on behalf of the Authority shall be for the equal and proportionate benefit, protection and security of all Bondholders of the Bonds without distinction, preference or priority as to security or otherwise of any Bonds over any other Bonds by reason of the number or date thereof or the time of authorization, sale, execution, issuance or delivery thereof or for any cause whatsoever, except as expressly provided herein or therein. SECTION 1.03 Interpretation. Unless the context otherwise indicates, words expressed in the singular shall include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for convenience only and shall be deemed to mean or include the neuter, masculine or feminine gender, as appropriate. Headings of articles and sections herein and the table of contents hereof are solely for convenience of reference, do not constitute a part hereof and shall not affect the meaning, construction or effect hereof. 14 OHSUSA:761763646 ARTICLE II THE BONDS SECTION 2.01 Authorization of Bonds; 2015 Bonds. (a) Bonds may be issued hereunder from time to time in order to obtain moneys to carry out the purposes of the Authority. The maximum principal amount of Bonds which may be issued hereunder is not limited but is subject to the provisions of Article III. The Bonds are designated generally as “County of Contra Costa Public Financing Authority Lease Revenue Bonds,” each Series thereof to bear such additional designation as may be necessary or appropriate to distinguish such Series from every other Series of Bonds. The Bonds may be issued in such Series as from time to time shall be established and authorized by the Authority, subject to the covenants, provisions and conditions herein contained. (b) Two initial Series of Bonds are hereby created and designated “County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects), 2015 Series A” and “County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects), 2015 Series B.” The aggregate principal amount of 2015 Series A Bonds which may be issued and Outstanding under this Trust Agreement shall not exceed ______________________ dollars ($[A par amount]) and the aggregate principal amount of 2015 Series B Bonds which may be issued and Outstanding under this Trust Agreement shall not exceed ______________________ dollars ($[B par amount]). (c) The Authority has reviewed all proceedings heretofore taken relative to the authorization of the 2015 Bonds and has found, as a result of such review, and hereby finds and determines that all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in the issuance of the 2015 Bonds do exist, have happened and have been performed in due time, form and manner as required by law, and that the Authority is now duly authorized, pursuant to each and every requirement of the Act, to issue the 2015 Bonds in the form and manner provided herein for the purpose of providing funds to finance the Capital Projects and refund the 2015 Refunded Bonds, and that the 2015 Bonds shall be entitled to the benefit, protection and security of the provisions hereof. (d) The validity of the issuance of the 2015 Series A Bonds shall not be dependent on or affected in any way by the proceedings taken by the Authority for the financing of the Capital Projects or by any contracts made by the Authority or its agents in connection therewith, and shall not be dependent upon the performance by any person, firm or corporation of his or its obligation with respect thereto. The recital contained in the 2015 Series A Bonds that the same are issued pursuant to the Act and pursuant hereto shall be conclusive evidence of their validity and of the regularity of their issuance, and all 2015 Series A Bonds shall be incontestable from and after their issuance. The 2015 Series A Bonds shall be deemed to be issued, within the meaning hereof, whenever the definitive 2015 Series A Bonds (or any temporary 2015 Series A Bonds exchangeable therefor) shall have been delivered to the purchaser thereof and the proceeds of sale thereof received. 15 OHSUSA:761763646 SECTION 2.02 Terms of the 2015 Bonds. (a) The 2015 Series A Bonds shall be issued in the aggregate principal amount of ________________________________________ dollars ($[A par amount]). The 2015 Series B Bonds shall be issued in the aggregate principal amount of ________________________________________ dollars ($[B par amount]). The 2015 Bonds, shall be issued as Fixed Rate 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 2015 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 schedules, subject to prior redemption as described in Article IV hereof: County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects), 2015 Series A Maturity Date (June 1) Principal Amount Interest Rate 16 OHSUSA:761763646 County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects), 2015 Series B Maturity Date (June 1) Principal Amount Interest Rate The 2015 Bonds shall bear interest at the rates set forth above, payable commencing December 1, 2015 and semiannually thereafter on June 1 and December 1 in each year. The 2015 Bonds shall pay interest to the registered owner thereof from the Interest Payment Date next preceding the date of authentication thereof, unless such date of authentication is after the Record Date for an Interest Payment Date, in which event they shall pay interest from such Interest Payment Date, or unless such date of authentication is on or prior to the Record Date for the first Interest Payment Date, in which event they shall pay 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 2015 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 any Series of 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, 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. (c) Interest on any Bond shall cease to accrue (i) on the maturity date thereof, provided that there has been irrevocably deposited with the Trustee an amount sufficient to pay the principal amount thereof, plus interest accrued thereon to such date; or (ii) on the redemption date thereof, provided there has been irrevocably deposited with the Trustee an amount sufficient to pay the Redemption Price thereof, plus interest accrued thereon to such date. The Owner of such Bond shall not be entitled to any other payment, and such Bond shall no longer be 17 OHSUSA:761763646 Outstanding and entitled to the benefits of this Trust Agreement, except for the payment of the principal amount or Redemption Price, of such Bond, as appropriate, from moneys held by the Trustee for such payment. (d) The principal of the Bonds shall be payable by check in lawful money of the United States of America at the Principal Office of the Trustee. No payment of principal shall be made on any Bond unless and until such Bond is surrendered to the Trustee for cancellation. (e) The Trustee shall identify all payments (whether made by check or by wire transfer) of interest, principal, and premium by the CUSIP number of the related Bonds. SECTION 2.03 Form of 2015 Bonds. The 2015 Bonds and the authentication and registration endorsement and assignment to appear thereon shall be substantially in the form set forth in Exhibit A attached hereto and by this reference is herein incorporated. SECTION 2.04 Execution of Bonds. The Chair or the Executive Director of the Authority is hereby authorized and directed to execute each of the 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 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 Bonds shall cease to be such officer before the delivery of the 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 Bonds. Only those Bonds bearing thereon a certificate of authentication in the form hereinbefore recited, 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 2015 Bonds so authenticated have been duly authorized, executed, issued and delivered hereunder and are entitled to the benefit, protection and security hereof. SECTION 2.05 Transfer and Payment of Bonds. (a) Any Bond may, in accordance with its terms, be transferred in the books required to be kept pursuant to the provisions of Section 2.07 by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation accompanied by delivery of a duly executed written instrument of transfer in a form acceptable to the Trustee. Whenever any Bond or Bonds shall be surrendered for transfer, the Authority shall execute and the Trustee shall authenticate and deliver to the transferee a new Bond or Bonds of the same Series and maturity for a like aggregate principal amount of Authorized Denominations. The Trustee shall require the payment by the Bondholder requesting such transfer of any tax or other governm ental charge required to be paid with respect to such transfer as a condition precedent to the exercise of such privilege. The Authority and the Trustee may, except as otherwise provided herein, deem and treat the registered owner of any Bond as the absolute owner of such Bond for the purpose of receiving payment thereof and for all other purposes, whether such Bond shall be overdue or not, 18 OHSUSA:761763646 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 and redemption premium, if any, on such Bond shall be made only to such registered owner, which payments shall be valid and effectual to satisfy and discharge liability on such Bond to the extent of the sum or sums so paid. The Trustee shall not be required to register the transfer of or exchange any Bonds which has been selected for redemption in whole or in part, from and after the day of mailing of a notice of redemption of such Bond selected for redemption in whole or in part as provided in Section 4.04 or during the period established by the Trustee for selection of Bonds for redemption. SECTION 2.06 Exchange of Bonds. Bonds may be exchanged at the Principal Office of the Trustee for a like aggregate principal amount of Bonds of the same Series and maturity in Authorized Denominations. The Trustee shall require the payment by the Bondholder requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange as a condition precedent to the exercise of such privilege. The Trustee shall not be required to exchange any Bond which has been selected for redemption in whole or in part, from and after the day of mailing of a notice of redemption of such Bond selected for redemption in whole or in part as provided in Section 4.04 or during the period established by the Trustee for selection of Bonds for redemption. SECTION 2.07 Bond Registration Books. The Trustee will keep at its office sufficient books for the registration and transfer of the Bonds, which during normal business hours shall be open to inspection by the Authority upon reasonable notice, and upon presentation for such purpose the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer the Bonds in such books as hereinabove provided. SECTION 2.08 Mutilated, Destroyed, Stolen or Lost Bonds; Temporary Bonds. If any Bond shall become mutilated, the Trustee, at the expense of the Bondholder, shall thereupon authenticate and deliver a new Bond of like tenor and amount in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be cancelled. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence be satisfactory to the Trustee and indemnity satisfactory to the Trustee shall be given, the Trustee, at the expense of the Bondholder, shall thereupon authenticate and deliver a new Bond of like tenor in lieu of and in substitution for the Bond so lost, destroyed or stolen. The Trustee may require payment of a reasonable sum for each new Bond issued under this Section 2.08 and of the expenses which may be incurred by the Authority and the Trustee in the premises. Any Bond issued under the provisions of this Section in lieu of any Bond alleged to be lost, destroyed or stolen shall be equally and proportionately entitled to the benefits of this Trust Agreement with all other Bonds of the same Series secured by this Trust Agreement. Neither the Authority nor the Trustee shall be required to treat both the original Bond and any replacement Bond as being Outstanding for the purpose of determining the principal amount of Bonds which may be issued hereunder or for the purpose of determining any 19 OHSUSA:761763646 percentage of Bonds Outstanding hereunder, but both the original and replacement Bond shall be treated as one and the same. The Bonds issued under this Trust Agreement may be initially issued in temporary form exchangeable for definitive Bonds when ready for delivery. The temporary Bonds may be printed, lithographed or typewritten, shall be of such denominations as may be determined by the Authority, shall be in fully registered form and may contain such reference to any of the provisions of this Trust Agreement as may be appropriate. Every temporary Bond shall be executed and authenticated as authorized by the Authority, in accordance with the terms of the Act. If the Authority issues temporary Bonds it will execute and furnish definitive Bonds without delay and thereupon the temporary Bonds may be surrendered, for cancellation, in exchange therefor at the Principal Office of the Trustee, and the Trustee shall deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of authorized denominations. Until so exchanged, the temporary Bonds shall be entitled to the same benefits under this Trust Agreement as definitive Bonds delivered hereunder. SECTION 2.09 Special Covenants as to Book-Entry Only System for 2015 Bonds. (a) Except as otherwise provided in subsections (b) and (c) of this Section 2.09, all of the 2015 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 2015 Bond registered in the name of Cede & Co. shall be made on each Interest Payment Date for such 2015 Bonds to the account, in the manner and at the address indicated in or pursuant to the Representation Letter. (b) The 2015 Bonds initially shall be issued in the form of a single authenticated fully registered bond for each stated maturity of such 2015 Bonds, representing the aggregate principal amount of the 2015 Bonds of such maturity. Upon initial issuance, the ownership of all such 2015 Bonds shall be registered in the registration records maintained by the Trustee pursuant to Section 2.07 in the name of Cede & Co., as nominee of DTC, or such other nominee as DTC shall request pursuant to the Representation Letter. The Trustee, the Authority and any paying agent may treat DTC (or its nominee) as the sole and exclusive owner of the 2015 Bonds registered in its name for the purposes of pa yment of the principal or redemption price of and interest on such 2015 Bonds, selecting the 2015 Bonds or portions thereof to be redeemed, giving any notice permitted or required to be given to Bondholders hereunder, registering the transfer of 2015 Bonds, obtaining any consent or other action to be taken by Bondholders of the 2015 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 2.09, 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 2015 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 20 OHSUSA:761763646 or redemption price of or interest on the 2015 Bonds, (iii) any notice which is permitted or required to be given to Bondholders of 2015 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 2015 Bonds, or (v) any consent given or other action taken by DTC as Bondholder of 2015 Bonds. The Trustee shall pay all principal of and premium, if any, and interest on the 2015 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 2015 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 2015 Bonds will be transferable to such new nominee in accordance with subsection (e) of this Section 2.09. (c) In the event that the Authority determines that the 2015 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 2015 Bonds will be transferable in accordance with subsection (e) of this Section 2.09. DTC may determine to discontinue providing its services with respect to the 2015 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 2015 Bonds will be transferable in accordance with subsection (e) of this Section 2.09. 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 2.09 shall no longer be applicable and the Authority shall execute and the Trustee shall authenticate and deliver certificates representing the 2015 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 2015 Bonds then Outstanding. In such event, the 2015 Bonds will be transferable to such securities depository in accordance with subsection (e) of this Section 2.09, and thereafter, all references in this Trust Agreement to DTC or its nominee shall be deemed to refer to such successor securities depository and its nominee, as appropriate. (d) Notwithstanding any other provision of this Trust Agreement to the contrary, so long as all 2015 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 2015 Bond and all notices with respect to each such 2015 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 2015 Bonds is authorized under subsection (b) or (c) of this Section 2.09, such transfer or exchange shall be accomplished upon receipt by the Trustee from the registered owner thereof of the 2015 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 2015 Bond certificates are 21 OHSUSA:761763646 issued to Bondholders other than Cede & Co., its successor as nominee for DTC as holder of all the 2015 Bonds, another securities depository as holder of all the 2015 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 2015 Bonds and the method of payment of principal of, premium, if any, and interest on the 2015 Bonds. ARTICLE III ISSUANCE OF 2015 BONDS SECTION 3.01 Procedure for the Issuance of 2015 Bonds. At any time after the sale of the 2015 Bonds in accordance with the Act, the Authority shall execute the 2015 Bonds for issuance hereunder and shall deliver them to the Trustee, and thereupon the 2015 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 th ereof. Upon receipt of payment for the 2015 Bonds from the purchaser thereof, the Trustee shall, unless otherwise instructed by the Authority, apply the proceeds received from such sale to the following respective parties or to the following respective accounts, in the following order of priority: (i) transfer the amount of $____________ to the Escrow Agent for deposit to the Escrow Fund to refund the 2015 Refunded Bonds; (ii) deposit the sum of $__________ to the 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 Bonds upon receipt of a Written Request of the Authority, in substantially 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 __________, or upon the earlier Written Request of the Authority, any remaining balance in the Costs of Issuance Fund shall be transferred to the 2015 Series A Project Account within the Project Fund and the Costs of Issuance Fund shall be closed; (iii) deposit the amount of $____________ in the 2015 Series A Project Account within the Project Fund; and (iv) deposit the 2015 Reserve Facility in the 2015 Reserve Account within the Reserve Fund. SECTION 3.02 Project Fund. The Trustee hereby agrees to establish and maintain so long as any Bonds are Outstanding the Project Fund and, within the Project Fund, a Project Account for each Series of Bonds (the initial payment into which is provided for in Section 3.01). The moneys in the Project Fund shall be disbursed by the Trustee upon the Written Request of the County in substantially the form of Exhibit B hereto filed with the Trustee, for the payment of Project Costs relating to the Project. 22 OHSUSA:761763646 Before any payment is made from the Project Fund, there shall be filed with the Trustee a Written Request of the County showing with respect to each payment to be made: (i) the item number of the payment; (ii) the name of the person to whom payment is due; (iii) the amount to be paid; and (iv) the purpose for which the obligation to be paid was incurred. Each such Written Request shall be sufficient evidence to the Trustee and shall state: (a) that obligations in the stated amounts have been incurred by the County, and that each item thereof is a proper charge against the Project Fund and has not been the subject of a prior requisition; and (b) that there has not been filed with or served upon the County notice of any lien, right to lien or attachment upon, or claim affecting the right to receive payment of, any of the moneys payable to any of the persons named in such Written Request, which has not been released or will not be released simultaneously with the payment of such obligation, other than materialmen’s or mechanics’ liens accruing by mere operation of law. Upon receipt of each such Written Request, the Trustee will pay the amount set forth in such Written Request as directed by the terms thereof. The Trustee need not make any such payment if it has received notice of any lien, right to lien or attachment upon, or claim affecting the right to receive payment of, any of the moneys to be so paid, which has not been released or will not be released simultaneously with such payment. All interest earnings on amounts on deposit in the Project Fund shall be deposited therein. Upon the completion of the 2015 Project, any amounts remaining in the 2015 Series A Project Account shall be expended on Capital Projects as specified by the County, subject to the receipt by the Authority of an Opinion of Counsel that such expenditures will not cause the interest on the 2015 Bonds to be included in gross income for purposes of federal income taxation. SECTION 3.03 Conditions for the Issuance of Additional Bonds. The Authority may at any time issue Additional Bonds pursuant to a Supplemental Trust Agreement, payable from the Revenues as provided herein and secured by a pledge of and charge and lien upon the Revenues as provided herein equal to the pledge, charge and lien securing the Outstanding Bonds theretofore issued hereunder, but only subject to the following specific conditions, which are hereby made conditions precedent to the issuance of any such Additional Bonds: (a) The Authority shall be in compliance with all agreements and covenants contained herein. 23 OHSUSA:761763646 (b) The Supplemental Trust Agreement shall require that the proceeds of the sale of such Additional Bonds shall be applied to the acquisition (by purchase or lease) or construction of facilities to be added to the Facilities or for the refunding of Outstanding Bonds. (c) The aggregate principal amount of Bonds issued and at any time Outstanding hereunder shall not exceed any limit imposed by law, by this Trust Agreement or by any Supplemental Trust Agreement. (d) The Facilities Lease shall have been amended, if necessary, and duly recorded in the official records of the County Recorder of the County, so that the Base Rental Payments payable by the County thereunder in each Fiscal Year shall at least equal Debt Service, including Debt Service on the Additional Bonds, in each Fiscal Year. (e) The Facilities Lease shall have been amended and duly recorded in the official records of the County Recorder of the County, so as to lease to the County the project being financed from the proceeds of such Additional Bonds or facilities of comparable worth and economic life. (f) If the proceeds of such Additional Bonds are to be used, in whole or in part, to finance construction on real property not described in the Facilities Lease and which are to be the leased Facilities hereunder or the additional Facilities to be leased are not situated on property described in the Facilities Lease, (1) the Site Lease shall have been amended so as to lease to the Authority such additional real property; and (2) the Facilities Lease shall have been amended so as to lease to the County such additional real property. (g) If the additional Facilities to be leased are to be constructed, the Trustee shall be paid an amount of capitalized interest on the Additional Bonds for the estimated period of construction and six months thereafter. (h) If a Supplemental Trust Agreement shall provide for a Reserve Fund, then, if necessary, that from such proceeds or other sources an amount shall be deposited in the Reserve Fund so that following such deposit there shall be on deposit in the R eserve Fund an amount at least equal to the Reserve Fund Requirement. SECTION 3.04 Proceedings for Authorization of Additional Bonds. Whenever the Authority and the County shall determine to execute and deliver any Additional Bonds pursuant to Section 3.03, the Authority and the Trustee shall enter into a Supplemental Trust Agreement providing for the issuance of such Additional Bonds, specifying the maximum principal amount of such Additional Bonds and prescribing the terms and conditions of such Additional Bonds. The Supplemental Trust Agreement shall prescribe the form or forms of such Additional Bonds and, subject to the provisions of Section 3.03, shall provide for the distinctive designation, denominations, method of numbering, dates, payment dates, interest rates (or method of determining the rates, if variable), interest payment dates, provisions for redemption (if desired) and places of payment of principal and interest. 24 OHSUSA:761763646 Before such Additional Bonds shall be issued, the County and the Authority shall file or cause to be filed the following documents with the Trustee: (a) An Opinion of Counsel setting forth that (1) such Counsel has examined the Supplemental Trust Agreement and the amendment to the Facilities Lease and the Site Lease required by Section 3.03(d), (e), and (f); (2) the execution and delivery of the Additional Bonds have been sufficiently and duly authorized by the County and the Authority; (3) said amendment to the Facilities Lease and the Site Lease if any, when duly executed by the County and the Authority, will be valid and binding obligations of the County and the Authority; and (4) all the conditions to the issuance of the Additional Bonds set forth in this Trust Agreement have been satisfied. (b) A Certificate of the Authority stating that the requirements of Section 3.03 have been met. (c) A certified copy of a resolution or ordinance of the County authorizing the execution of the amendments to the Facilities Lease required by Section 3.03(d), (e), and (f). (d) An executed counterpart or duly authenticated copy of any amendment to the Facilities Lease required by Section 3.03(d), (e), and (f). (e) A Certificate of the County stating that the insurance required by Sections 5.01, 5.02 and 5.03 of the Facilities Lease is in effect. (f) If the proceeds of such Additional Bonds are to be used, in whole or in part, to finance construction or acquire facilities on real property not then described in the Facilities Lease, an executed counterpart or duly authenticated copy of the Site Lease required by Section 3.03(f) that has been duly recorded in the official records of the County Recorder of the County. (g) A title insurance policy insuring the Authority’s leasehold or fee title in the real property on which the Facilities are located, and, if the proceeds of such Additional Bonds are to be used to finance construction on real property not then described in the Facilities Lease and such project is to be the Facilities leased hereunder, a title insurance policy insuring the Authority’s leasehold or fee title in such real property, such title insurance policy to be in an amount at least equal to the aggregate amount of outstanding Bonds (including Additional Bonds to be issued) or, at the option of the Authority, an opinion of counsel or Certificate of the County or such other evidence of the Authority’s or County’s leasehold or fee interest in such real property as shall be acceptable to the Authority. Upon the delivery to the Trustee of the foregoing instruments and upon the Trustee’s receipt of Certificates of the County and of the Authority stating that all applicable provisions of this Trust Agreement have been complied with (so as to permit the issuance of the Additional Bonds in accordance with the Supplemental Trust Agreement then delivered to the Trustee), the Trustee shall authenticate and deliver said Additional Bonds in the aggregate principal amount specified in such Supplemental Trust Agreement to, or upon the Written Request of, the Authority. 25 OHSUSA:761763646 SECTION 3.05 Limitations on the Issuance of Obligations Payable From Revenues. The Authority will not, so long as any of the Bonds are Outstanding, issue any obligations or securities, however denominated, payable in whole or in part from Revenues except the following: (a) Bonds of any Series authorized in accordance with the provisions of Section 3.04; (b) Obligations which are junior and subordinate to the payment of the principal, premium, interest and reserve fund requirements, if any, for the Bonds and which subordinated obligations are payable as to principal, premium, interest and reserve fund requirements, if any, only out of Revenues after the prior payment of all amounts then required to be paid hereunder from Revenues for principal, premium, interest and reserve fund requirements, if any, for the Bonds, as the same become due and payable and at the times and in the manner as required in this Trust Agreement. ARTICLE IV REDEMPTION OF BONDS SECTION 4.01 Extraordinary Redemption. The 2015 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(a) of the Facilities 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 4.02 Optional Redemption. The 2015 Series A Bonds maturing on or prior to June 1, 20__ are not subject to optional redemption. The 2015 Series A Bonds maturing on or after June 1, 20__, 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, 20__, at a redemption price equal to 100% of the principal amount of the 2015 Series A Bonds called for redemption, plus accrued interest to the date fixed for redemption, without premium. The 2015 Series B Bonds maturing on or prior to June 1, 20__ are not subject to optional redemption. The 2015 Series B Bonds maturing on or after June 1, 20__, 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, 26 OHSUSA:761763646 20__, at a redemption price equal to 100% of the principal amount of the 2015 Series B Bonds called for redemption, plus accrued interest to the date fixed for redemption, without premium. SECTION 4.03 Mandatory Sinking Fund Redemption. The 2015 Term Bonds, upon notice as hereinafter provided, shall also be subject to mandatory sinking fund redemption prior to maturity, in part on June 1 of each year on the Mandatory Sinking Account Payment Dates specified in Section 5.03, by lot, from and in the amount of the mandatory sinking account payments set forth in Section 5.03 at a redemption price equal to the sum of the principal amount thereof plus accrued interest thereon to the redemption date, without premium. SECTION 4.04 Selection of Bonds for Redemption. The Authority shall designate which maturities of Bonds and the principal amount of Bonds which are to be redeemed (other than Bonds subject to redemption pursuant to Section 4.03). If less than all Outstanding Bonds of the same Series maturing by their terms on any one date are to be redeemed at any one time, the Trustee shall select the Bonds of such maturity date to be redeemed by lot and shall promptly notify the Authority in writing of the numbers of the Bonds so selected for redemption. For purposes of such selection, Bonds shall be deemed to be composed of multiples of minimum Authorized Denominations and any such multiple may be separately redeemed. In the event Term Bonds are designated for redemption, the Authority may designate which sinking account payments are allocated to such redemption. SECTION 4.05 Notice of Redemption; Cancellation; Effect of Redemption. Notice of redemption shall be mailed by first-class mail by the Trustee, not less than twenty (20) nor more than sixty (60) days prior to the redemption date to the respective Bondholders of the Bonds designated for redemption at their addresses appearing on the registration books of the Trustee. Each notice of redemption shall state the date of such notice, the date of issue of the Bonds, the Series, the redemption date, the Redemption Price, the place or places of redemption (including the name and appropriate address of the Trustee), the CUSIP number (if any) of the maturity date or maturities, and, if less than all of any such maturity is to be redeemed, the distinctive certificate numbers of the Bonds of such maturity, to be redeemed and, in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice shall also state that on said date there will become due and payable on each of said Bonds the Redemption Price thereof, together with interest accrued thereon to the redemption date, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then surrendered at the address of the Trustee specified in the redemption notice. Failure to receive such notice shall not invalidate any of the proceedings taken in connection with such redemption. The Trustee may give a conditional notice of redemption prior to the receipt of all funds or satisfaction of all conditions necessary to effect the redemption, provided that redemption shall not occur unless and until all conditions have been satisfied and the Trustee has on deposit and available or, if applicable, has received, all of the funds necessary to effect the redemption; otherwise, such redemption shall be cancelled by the Trustee and the Trustee shall mail notice of such cancellation to the recipients of the notice of redemption being cancelled. The Authority may, at its option, on or prior to the date fixed for redemption in any notice of optional redemption, rescind and cancel such notice of redemption by Written 27 OHSUSA:761763646 Request to the Trustee and the Trustee shall mail notice of such cancellation to the recipients of the notice of redemption being cancelled. If notice of redemption has been duly given as aforesaid and money for the payment of the Redemption Price of the Bonds called for redemption plus accrued interest to the redemption date is held by the Trustee, then on the redemption date designated in such notice Bonds so called for redemption shall become due and payable, and from and after the date so designated interest on such Bonds shall cease to accrue, and the Bondholders of such Bonds shall have no rights in respect thereof except to receive payment of the Redemption Price thereof plus accrued interest to the Redemption Date. All Bonds redeemed pursuant to the provisions of this Article shall be cancelled by the Trustee and shall be destroyed with a certificate of destruction furnished to the Authority upon its request and shall not be reissued. ARTICLE V REVENUES SECTION 5.01 Pledge of Revenues. (a) All Revenues, any other amounts (including proceeds of the sale of the Bonds) held by the Trustee in any fund or account established hereunder (other than amounts on deposit in the Rebate Fund created pursuant to Section 6.03) and any other amounts (excluding Additional Payments) received by the Authority in respect of the Facilities are hereby irrevocably pledged and assigned to the payment of the interest and premium, if any, on and principal of the Bonds as provided herein, and the Revenues and other amounts pledged hereunder shall not be used for any other purpose while any of the Bonds remain Outstanding; provided, however, that out of the Revenues and other moneys there may be applied such sums for such purposes as are permitted hereunder. This pledge shall constitute a pledge of and charge and first lien upon the Revenues, all other amounts pledged hereunder and all other moneys on deposit in the funds and accounts established hereunder (excluding amounts on deposit in the Rebate Fund created pursuant to Section 6.03) for the payment of the interest on and principal of the Bonds in accordance with the terms hereof and thereof. (b) At least three (3) Business Days prior to each date on which a Base Rental Payment is due, pursuant to the Facilities Lease, the Trustee shall notify the County of the amount of the installment of Base Rental Payment needed to pay the principal of and interest on the Bonds due on the next following Interest Payment Date. Any failure to send such notice shall not affect the County’s obligation to make timely payments of installments of Base Rental Payments. SECTION 5.02 Receipt and Deposit of Revenues in the Revenue Fund. In order to carry out and effectuate the pledge, assignment, charge and lien contained herein, the Authority agrees and covenants that all Revenues and all other amounts pledged hereunder when and as received shall be received by the Authority in trust hereunder for the benefit of the Bondholders and shall be transferred when and as received by the Authority to the Trustee for deposit in the 28 OHSUSA:761763646 Revenue Fund (the “Revenue Fund”), which fund is hereby created and which fund the Trustee hereby agrees and covenants to maintain in trust for Bondholders so long as any Bonds shall be Outstanding hereunder. The County has been directed to pay all Base Rental Payments directly to the Trustee. If the Authority receives any Base Rental Payments, it shall hold the same in trust as agent of the Trustee and shall immediately transfer such Base Rental Payments to the Trustee. All Revenues and all other amounts pledged and assigned hereunder shall be accounted for through and held in trust in the Revenue Fund, and the Trustee shall have no beneficial right or interest in any of the Revenues except only as herein provided. All Revenues and all other amounts pledged and assigned hereunder, whether received by the Authority in trust or deposited with the Trustee as herein provided, shall nevertheless be allocated, applied and disbursed solely to the purposes and uses hereinafter in this Article set forth, and shall be accounted for separately and apart from all other accounts, funds, money or other resources of the Trustee. SECTION 5.03 Establishment and Maintenance of Accounts for Use of Money in the Revenue Fund; Reserve Fund (a) Revenue Fund. Subject to Section 6.03, all money in the Revenue Fund shall be set aside by the Trustee in the following respective special accounts or funds within the Revenue Fund (each of which is hereby created and each of which the Trustee hereby covenants and agrees to cause to be maintained) in the following order of priority: (1) Interest Account, and (2) Principal Account. All money in each of such accounts shall be held in trust by the Trustee and shall be applied, used and withdrawn only for the purposes hereinafter authorized in this Section. On each Principal Payment Date, following payment of principal of and interest on the Bonds, any excess amount on deposit in the Revenue Fund shall be transferred to the Reserve Fund to the extent necessary to increase the amount therein to the Reserve Fund Requirement for all Bonds that have a Reserve Fund Requirement and any excess shall be returned to the County as an excess payment of Base Rental Payments. (b) Interest Account. On or before each Interest Payment Date, the Trustee shall set aside from the Revenue Fund and deposit in the Interest Account that am ount of money which is equal to the amount of interest becoming due and payable on all Outstanding Bonds on such Interest Payment Date. No deposit need be made in the Interest Account if the amount contained therein and available to pay interest on the Bonds is at least equal to the aggregate amount of interest becoming due and payable on all Outstanding Bonds on such Interest Payment Date. All money in the Interest Account shall be used and withdrawn by the Trustee solely for the purpose of paying the interest on the Bonds as it shall become due and payable (including accrued interest on any Bonds purchased or redeemed prior to maturity). 29 OHSUSA:761763646 (c) Principal Account. On or before each June 1, commencing June 1, 2016, the Trustee shall set aside from the Revenue Fund and deposit in the Principal Account an amount of money equal to the amount of all sinking fund payments required to be made on such June 1 into the respective sinking fund accounts for all Outstanding Term Bonds and the principal amount of all Outstanding Serial Bonds maturing on such June 1. On or before each Redemption Date, the Trustee shall set aside from the Revenue Fund and deposit in the Principal Account an amount of money equal to the Redemption Price required to be paid on such Redemption Date. No deposit need be made in the Principal Account if the amount contained therein and available to pay principal of the Bonds is at least equal to the aggregate amount of the principal of all Outstanding Serial Bonds maturing by their terms on such June 1 plus the aggregate amount of all sinking fund payments required to be made on such June 1 for all Outstanding Term Bonds. The Trustee shall establish and maintain within the Principal Account a separate subaccount for the Term Bonds of each Series and maturity, designated as the “____ Sinking Account” (the “Sinking Account”), inserting therein the Series and maturity (if more than one such account is established for such Series) designation of such Bonds. With respect to each Sinking Account, on each mandatory sinking account payment date established for such Sinking Account, the Trustee shall apply the mandatory sinking account payment required on that date to the redemption (or payment at maturity, as the case may be) of Term Bonds of the Series and maturity for which such Sinking Account was established, upon the notice and in the manner provided in Article IV. (i) The Trustee shall establish and maintain within the Principal Account a Sinking Account for the 2015 Series A Term Bonds maturing on June 1, 20__. Subject to the terms and conditions set forth in this Section and Section 4.04, the Term Bonds maturing on June 1, 20__, shall be redeemed (or paid at maturity, as the case may be) by application of mandatory sinking account payments in the amounts and upon the dates as follows: 2015 Series A 20__Sinking Account Mandatory Sinking Account Payment Date (June 1) Mandatory Sinking Account Payments __________________ *Maturity If the 2015 Series A Term Bonds are optionally redeemed in part, the Authority may designate the Mandatory Sinking Account Payments to be allocated to such optional redemption. 30 OHSUSA:761763646 (ii) The Trustee shall establish and maintain within the Principal Account a Sinking Account for the 2015 Series B Term Bonds maturing on June 1, 20__. Subject to the terms and conditions set forth in this Section and Section 4.04, the Term Bonds maturing on June 1, 20__, shall be redeemed (or paid at maturity, as the case may be) by application of mandatory sinking account payments in the amounts and upon the dates as follows: 2015 Series B 20__ Sinking Account Mandatory Sinking Account Payment Date (June 1) Mandatory Sinking Account Payments __________________ *Maturity If the 2015 Series B Term Bonds are optionally redeemed in part, the Authority may designate the Mandatory Sinking Account Payments to be allocated to such optional redemption. All money in the Principal Account shall be used and withdrawn by the Trustee solely for the purpose of paying the principal or Redemption Price of the Bonds as it shall become due and payable, whether at maturity or redemption, except that any money in any Sinking Account shall be used and withdrawn by the Trustee only to redeem or to pay Term Bonds for which such Sinking Account was created. (d) Reserve Fund. The Trustee hereby agrees to establish and maintain the Reserve Fund, and to establish and maintain the 2015 Reserve Account within the Reserve Fund. The Authority shall satisfy the Reserve Fund Requirement for the 2015 Bonds by depositing the 2015 Reserve Facility with the Trustee. If a Supplemental Trust Agreement establishes a Reserve Requirement for a Series of Bonds, the Trustee shall establish, maintain and hold in trust an account within the Reserve Fund solely for the benefit of those Bonds. On the date of issuance of any such additional Bonds, there shall be deposited in the account money or a reserve facility meeting the requirements of the Supplemental Trust Agreement in an amount equal to the Reserve Fund Requirement for the Series of Bonds secured by that account. Moneys in an account in the Reserve Fund shall be used and withdrawn by the Trustee solely for the purposes of paying principal of and interest on the Bonds for which such account is held when such principal and interest are due if insufficient moneys for the payment thereof are on deposit in the Principal Account and the Interest Account. So long as the Authority is not in default hereunder, any cash amounts in the Reserve Fund in excess of t he Reserve Fund Requirement shall be withdrawn from the Reserve Fund and transferred to the 31 OHSUSA:761763646 Revenue Fund on each Interest Payment Date, following the payment of any amounts due on such date. If the Reserve Fund Requirement is satisfied by a reserve facility, the Trustee shall draw on such reserve facility in accordance with its terms, in a timely manner, to the extent necessary to pay the principal of and interest on the Bonds for which such account is held . The 2015 Reserve Facility is only available to pay the principal of and interest on the 2015 Bonds. SECTION 5.04 Application of Insurance Proceeds. In the event of any damage to or destruction of any part of the Facilities covered by insurance, the Aut hority, shall cause the proceeds of such insurance to be utilized for the repair, reconstruction or replacement of the damaged or destroyed portion of the Facilities, and the Trustee shall hold said proceeds in a fund established by the Trustee for such purpose separate and apart from all other funds designated the “Insurance and Condemnation Fund”, to the end that such proceeds shall be applied to the repair, reconstruction or replacement of the Facilities to at least the same good order, repair and condition as it was in prior to the damage or destruction, insofar as the same may be accomplished by the use of said proceeds. The County shall file a Certificate of the County with the Trustee that sufficient funds from insurance proceeds or from any funds legally available to the County, or from any combination thereof, are available in the event it elects to repair, reconstruct or replace the Facilities. The Trustee shall invest said proceeds in Permitted Investments pursuant to the Written Request of the County, as agent for the Authority under the Facilities Lease, and withdrawals of said proceeds shall be made from time to time upon the filing with the Trustee of a Written Request of the County, stating that the County has expended moneys or incurred liabilities in an amount equal to the amount therein stated for the purpose of the repair, reconstruction or replacement of the Facilities, and specifying the items for which such moneys were expended, or such liabilities were incurred, in reasonable detail. Any balance of such proceeds not required for such repair, reconstruction or replacement and the proceeds of use and occupancy insurance shall be paid to the Trustee as Base Rental Payments and applied in the manner provided by Section 5.01. Alternatively, the County, if the proceeds of such insurance together with any other moneys then available for such purpose (including allocable portions of the Reserve Fund) are sufficient to prepay all, in case of damage or destruction in whole of the Facilities, or that portion, in the case of partial damage or destruction of the Facilities, of the Base Rental Payments and all other amounts relating to the damaged or destroyed portion of the Facilities, may elect not to repair, reconstruct or replace the damaged or destroyed portion of the Facilities and thereupon shall cause said proceeds to be used for the redemption of Outstanding Bonds pursuant to the applicable provisions of Section 4.01. The County shall not apply the proceeds of insurance as set forth in this Section 5.04 to redeem the Bonds in part due to damage or destruction of a portion of the Facilities unless the Base Rental Payments on the undamaged portion of the Facilities will be sufficient to pay the scheduled principal and interest on the Bonds remaining unpaid after such redemption. SECTION 5.05 Deposit and Investments of Money in Accounts and Funds. Subject to Section 6.03, all money held by the Trustee in any of the accounts or funds established pursuant hereto shall be invested in Permitted Investments at the Written Request of the Authority or, if no instructions are received, in money market funds described in clause (5) of the definition of Permitted Investments. Such investments shall, as nearly as practicable, mature on 32 OHSUSA:761763646 or before the dates on which such money is anticipated to be needed for disbursement hereunder; provided, however, that moneys in the Reserve Fund shall be invested in Permitted Investments with a term to maturity not exceeding five (5) years. For purposes of this restriction, Permitted Investments containing a repurchase option or put option by the investor shall be treated as having a maturity of no longer than such option. Unless otherwise instructed by the Authority, all interest or profits received on any money so invested shall be 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 for all Bonds that have a Reserve Fund Requirement, and then in the Revenue Fund; provided that, with respect to the Project Fund, earnings on amounts in such fund shall be credited to such fund until completion of the respective Projects. The Trustee shall value Permitted Investments held in the Reserve Fund no later than June 1 and December 1 in each year; provided that for purposes of this Section the value of any such Permitted Investment shall be an amount equal to the lesser of the cost or the fair market value of such Permi tted Investment. The Trustee and its affiliates may act as principal, agent, sponsor or advisor with respect to any investments. The Trustee shall not be liable for any losses on investments made in accordance with the terms and provisions of this Trust Agreement. Investments purchased with funds on deposit in the Revenue Fund shall mature not later than the payment date or redemption date, as appropriate, immediately succeeding the investment. Subject to Section 6.03, investments in any and all funds and accounts except for the Rebate Fund may be commingled for purposes of making, holding and disposing of investments, notwithstanding provisions herein for transfer to or holding in particular funds and accounts amounts received or held by the Trustee hereunder, provided that the Trustee shall at all times account for such investments strictly in accordance with the funds and accounts to which they are credited and otherwise as provided in this Trust Agreement. The Authority acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Authority the right to receive brokerage confirmations of security transactions as they occur, the Authority specifically waives receipt of such confirmations to the extent permitted by law. The Trustee will furnish the Authority periodic cash transaction statements which include detail for all investment transactions made by the Trustee hereunder. ARTICLE VI COVENANTS OF THE AUTHORITY SECTION 6.01 Punctual Payment and Performance. The Authority will punctually pay out of the Revenues the interest on and principal of and redemption premiums, if any, to become due on every Bond issued hereunder in strict conformity with the terms hereof and of the Bonds, and will faithfully observe and perform all the agreements and covenants to be observed or performed by the Authority contained herein and in the Bonds. SECTION 6.02 Against Encumbrances. The Authority will not make any pledge or assignment of or place any charge or lien upon the Revenues except as provided in Section 33 OHSUSA:761763646 5.01, and will not issue any bonds, notes or obligations payable from the Revenues or secured by a pledge of or charge or lien upon the Revenues except as provided in Section 3.04. SECTION 6.03 Rebate Fund. (a) In addition to the accounts created pursuant to Section 5.03, the Trustee shall establish and maintain a fund separate from any other fund or account established and maintained hereunder designated as the Rebate Fund. There shall be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to the Tax Certifi cate. All money at any time deposited in the Rebate Fund shall be held by the Trustee in trust, to the extent required to satisfy the Rebate Requirement (as defined in the Tax Certificate), for payment to the United States of America. Notwithstanding the provisions of Sections 5.01, 5.02, 5.05, 9.01 and 10.01 relating to the pledge of Revenues, the allocation of money in the Revenue Fund, the investments of money in any fund or account, the application of funds upon acceleration and the defeasance of Outstanding Bonds, all amounts required to be deposited into or on deposit in the Rebate Fund shall be governed exclusively by this Section 6.03 and by the Tax Certificate (which is incorporated herein by reference). The Trustee shall be deemed conclusively to have complied with such provisions if it follows the written directions of the Authority, and shall have no liability or responsibility to enforce compliance by the Authority with the terms of the Tax Certificate. (b) Any funds remaining in the Rebate Fund with respect to a Series of Bonds after redemption and payment of all such Series of Bonds and all other amounts due hereunder or under the Facilities Lease relating to such Series of Bonds, or provision made therefor satisfactory to the Trustee, including accrued interest and payment of any applicable fees and expenses of the Trustee and satisfaction of the Rebate Requirement (as defined in the Tax Certificate), shall be withdrawn by the Trustee and remitted to or upon the Written Request of the Authority. SECTION 6.04 Tax Covenants. (a) The Authority hereby covenants that it shall not take any action or inaction, or fail to take any action, or permit any action to be taken on behalf of the Authority or cause or permit any circumstances within its control to arise or continue, if such action or inaction would cause any of the Bonds to be treated as an obligation not described in Section 103(a) of the Code. This covenant shall survive the payment in full of the Bonds. (b) In the event that at any time the Authority is of the opinion that for purposes of this Section it is necessary to restrict or to limit the yield on the investment of any moneys held by the Trustee under this Trust Agreement, the Authority shall so instruct the Trustee in a Request of the Authority accompanied by a supporting Opinion of Bond Counsel, and the Trustee shall take such action as may be necessary in accordance with such instructions. (c) Notwithstanding any provisions of this Section, if the Authority shall provide to the Trustee an Opinion of Counsel that any specified action required under this Section or the Tax Certificate is no longer required or that some further or different action is required to maintain the exclusion from federal income tax of interest on the Bonds, the 34 OHSUSA:761763646 Authority and the Trustee may conclusively rely on such opinion in complying with the requirements of this Section and the Tax Certificate, and, notwithstanding Article IX hereof, the covenants hereunder shall be deemed to be modified to that extent. (d) The foregoing provisions of this Section 6.04 shall not be applicable to any Series of Bonds or the proceeds thereof that the Authority determines upon the issuance thereof are to be taxable bonds, the interest on which is intended to be in cluded in the gross income of the Owner thereof for federal income tax purposes. SECTION 6.05 Accounting Records and Reports. The Trustee will keep or cause to be kept proper books of record and accounts in which complete and correct entries shall be made of all transactions relating to the receipts, disbursements, allocation and application of the Revenues, and such books shall be available for inspection by the Authority at reasonable hours and under reasonable conditions. The Trustee shall provide to the Authority monthly statements covering the funds and accounts held pursuant to the Trust Agreement. Not more than one hundred eighty (180) days after the close of each Fiscal Year, the Trustee shall furnish or cause to be furnished to the Authority a complete financial statement (which may be in the form of the Trustee’s customary account statements) covering receipts, disbursements, allocation and application of Revenues for such Fiscal Year. The Authority shall keep or cause to be kept such information as is required under the Tax Certificate. SECTION 6.06 Prosecution and Defense of Suits. The Authority will defend against every suit, action or proceeding at any time brought against the Trustee upon any claim to the extent arising out of the receipt, application or disbursement of any of the Revenues or to the extent involving the failure of the Authority to fulfill its obligations hereunder; provided, that the Trustee or any affected Bondholder at its election may appear in and defend any such suit, action or proceeding. The Authority will indemnify and hold harmless the Trustee against any and all liability claimed or asserted by any person to the extent arising out of such failure by the Authority, and will indemnify and hold harmless the Trustee against any reasonable attorney’s fees or other reasonable expenses which it may incur in connection with any litigation to which it may become a party by reason of its actions hereunder, except for any loss, cost, damage or expense resulting from the negligence or willful misconduct by the Trustee. Notwithstanding any contrary provision hereof, this covenant shall remain in full force and effect even though all Bonds secured hereby may have been fully paid and satisfied. SECTION 6.07 Further Assurances. Whenever and so often as reasonably requested to do so by the Trustee or any Bondholder, the Authority will promptly execute and deliver or cause to be executed and delivered all such other and further assurances, documents or instruments, and promptly do or cause to be done all such other and further things as may be necessary or reasonably required in order to further and more fully vest in the Bondholders all rights, interests, powers, benefits, privileges and advantages conferred or intended to be conferred upon them hereby. SECTION 6.08 Maintenance of Revenues. The Authority will promptly collect all rents and charges due for the occupancy or use of the Facilities as the same become due, and will promptly and vigorously enforce its rights against any tenant or other person who does not pay such rents or charges as they become due. Pursuant to Section 5.02 and the Facilities Lease, the 35 OHSUSA:761763646 County is to pay all Base Rental Payments directly to the Trustee. The Authority will at all times maintain and vigorously enforce all of its rights under the Facilities Lease. SECTION 6.09 Amendments to Facilities Lease and Site Lease. (a) The Authority shall not supplement, amend, modify or terminate any of the terms of the Facilities Lease, or consent to any such supplement, amendment, modification or termination, without the prior written consent of the Trustee. The Trustee shall give such written consent if such supplement, amendment, modification or termination (a) will not materially adversely affect the interests of the Bondholders or result in any material impairment of the security hereby given for the payment of the Bonds (provided that such supplement, amendment or modification shall not be deemed to have such adverse effect or to cause such material impairment solely by reason of substitution of real property pursuant to Section 2.03 of the Facilities Lease), (b) is to add to the agreements, conditions, covenants and terms required to be observed or performed thereunder by any party thereto, or to surrender any right or power therein reserved to the Authority or the County, (c) is to cure, correct or supplement any ambiguous or defective provision contained therein, (d) is to accommodate any substitution in accordance with Section 2.03 or prepayment in accordance with Section 7.02 of the Facilities Lease, (e) is to modify the legal description of the Facilities to conform to the requirements of title insurance or otherwise to add or delete property descriptions to reflect accurately the description of the parcels intended or preferred to be included therein, or substituted for the Facilities pursuant to the provisions of Section 2.03 of the Facilities Lease, or deleted due to prepayment pursuant to the provisions of Section 7.02 of the Facilities Lease, or (f) if the Trustee first obtains the written consent of the Bondholders of a majority in principal amount of the Bonds then Outstanding to such supplement, amendment, modification or termination; provided, that no such supplement, amendment, modification or termination shall reduce the amount of Base Rental Payments to be made to the Authority or the Trustee by the County pursuant to the Facilities Lease to an amount less than the scheduled principal and interest payments on the Outstanding Bonds, or extend the time for making such payments, or permit the creation of any lien prior to or on a parity with the lien created by this Trust Agreement on the Base Rental Payments (except as expressly provided in the Facilities Lease), in each case without the written consent of all of the Bondholders of the Bonds then Outstanding. (b) The Authority shall not supplement, amend, modify or terminate any of the terms of the Site Lease, or consent to any such supplement, amendment, modification or termination, without the prior written consent of the Trustee. The Trustee shall give such written consent if such supplement, amendment, modification or termination (a) will not materially adversely affect the interests of the Bondholders or result in any material impairment of the security hereby given for the payment of the Bonds, (b) is to add to the agreements, conditions, covenants and terms required to be observed or performed thereunder by any party t hereto, or to surrender any right or power therein reserved to the Authority or the County, (c) is to cure, correct or supplement any ambiguous or defective provision contained therein, (d) is to modify the legal description of the Facilities to conform to the requirements of title insurance or otherwise to add or delete property descriptions to reflect accurately the description of the parcels intended or preferred to be included therein, or substituted for the Facilities pursuant to the provisions of Section 2.03 of the Facilities Lease, or deleted due to prepayment pursuant to 36 OHSUSA:761763646 the provisions of Section 7.02 of the Facilities Lease, or (e) if the Trustee first obtains the written consent of the Bondholders of a majority in principal amount of the Bonds then Outstanding to such supplement, amendment, modification or termination. SECTION 6.10 Leasehold Estate. The Authority will be, on the date of the delivery of the Bonds, the owner and lawfully possessed of the leasehold estate described in the Site Lease, and the Facilities Lease will be, on the date of delivery of the Bonds, a valid subsisting demise for the term therein set forth of the property which it purports to demise. At the time of the delivery of the Bonds, the County will be the owner in fee simple of the premises described in the Site Lease, the Site Lease will be lawfully made by the County and the covenants contained in the Site Lease on the part of the County will be valid and binding. At the time of the delivery of the Bonds, the Authority will have good right, full power and lawful authority to lease said leasehold estate, in the manner and form provided in the Facilities Lease, and the Facilities Lease will be duly and regularly executed. Without allowance for any days of grace which may or might exist or be allowed by law or granted pursuant to any terms or conditions of the Facilities Lease, the Authority will in all respects promptly and faithfully keep, perform and comply with all the terms, provisions, covenants, conditions and agreements of the Facilities Lease to be kept, performed and complied with by it. The Authority will not do or permit anything to be done, or omit or refrain from doing anything, in any case where any such act done or permitted to be done, or any such omission of or refraining from action, would or might be a ground for declaring a forfeiture of the Facilities Lease, or would or might be a ground for cancellation or termination of the Facilities Lease by the lessee thereunder. The Authority will promptly deposit with the Trustee (to be held by the Trustee until the title and rights of the Trustee under this Trust Agreement shall be released or reconvened) any and all documentary evidence received by it showing compliance with the provisions of the Facilities Lease to be performed by the Authority. The Authority, immediately upon its receiving or giving any notice, communication or other document in any way relating to or affecting the Facilities Lease, or the leasehold estate th ereby created, which may or can in any manner affect the estate of the lessor or of the Authority in or under the Facilities Lease, will deliver the same, or a copy thereof, to the Trustee. SECTION 6.11 Compliance With Continuing Disclosure Agreement. Pursuant to Section 8.08 of the Facilities 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 Bonds or any other person with respect to S.E.C. Rule 15c2 -12. 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, and the Trustee at the request of any Participating Underwriter (as defined in the Continuing Disclosure Agreement) or the Holders of at least 25% aggregate principal amount of Bonds Outstanding and provided satisfactory indemnification is provided to the Trustee, shall, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the County to comply with its obligations under Section 8.08 of the Facilities Lease or under this Section 6.11. For purposes of this Section, “Beneficial Owner” means any person which has or shares the power, directly or 37 OHSUSA:761763646 indirectly, to make investment decisions concerning ownership of any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries).” ARTICLE VII EVENTS OF DEFAULT AND REMEDIES OF BONDHOLDERS SECTION 7.01 Events of Default and Acceleration of Maturities. If one or more of the following events (herein called “events of default”) shall happen, that is to say: (a) if default shall be made by the Authority in the due and punctual payment of the interest on any Bond when and as the same shall become due and payable; (b) if default shall be made by the Authority in the due and punctual payment of the principal or premium, if any, of any Bond when and as the same shall become due and payable, whether at maturity as therein expressed or by proceedings for mandatory redemption; (c) if default shall be made by the Authority in the performance of any of the other agreements or covenants required herein to be performed by the Authority, and such default shall have continued for a period of sixty (60) days or (or if the Authority notifies the Trustee that in its reasonable opinion the failure stated in the notice can be corrected, but not within such 60 day period, the failure will not constitute an event of default if the Authority commences to cure the failure within such 60 day period and thereafter diligently and in good faith cures such failure in a reasonable period of time); (d) if the Authority shall file a petition or answer seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if a court of competent jurisdiction shall approve a petition filed with or without the consent of the Authority seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if under the provisions of any other law for the relief or aid of debtors any court of competent jurisdiction shall assume custody or control of the Authority or of the whole or any substantial part of its property; or (e) if an Event of Default has occurred under Section 6.01 of the Facilities Lease; then and in each and every such case during the continuance of such event of default the Trustee, upon the written request of the Bondholders of not less than a majority in aggregate principal amount of the Bonds then Outstanding shall, by notice in writing to the Authority, declare the principal of all Bonds then Outstanding and the interest accrued thereon to be due and payable immediately, and upon any such declaration the same shall become due and payable, anything contained herein or in the Bonds to the contrary notwithstanding. The Trustee shall promptly notify all Bondholders by first class mail of any such event of default which is continuing of which a Responsible Officer has actual knowledge or written notice. 38 OHSUSA:761763646 This provision, however, is subject to the condition that if at any time after the principal of the Bonds then Outstanding shall have been so declared due and payable and before any judgment or decree for the payment of the money due shall have been obtained or entered the Authority shall deposit with the Trustee a sum sufficient to pay all matured interest on all the Bonds and all principal of the Bonds matured prior to such declaration and premium, if any, with interest at the rate borne by such Bonds on such overdue interest and principal and premium, if any, and the reasonable fees and expenses of the Trustee, and any and all other defaults known to the Trustee (other than in the payment of interest on and principal of the Bonds due and payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall have been made therefor, then and in every such case the Trustee or the Bondholders of not less than a majority in aggregate principal amount of Bonds then Outstanding, by written notice to the Authority and to the Trustee, may on behalf of the Bondholders of all the Bonds then Outstanding rescind and annul such declaration and its consequences; but no such rescission and annulment shall extend to or shall affect any subsequent default or shall impair or exhaust any right or power consequent thereon. SECTION 7.02 Application of Funds Upon Acceleration. All moneys in the accounts and funds provided in Sections 3.01, 3.02, 5.02, 5.03 and 5.04 upon the date of the declaration of acceleration by the Trustee as provided in Section 7.01 and all Revenues (other than Revenues on deposit in the Rebate Fund) thereafter received by the Authority hereunder shall be transmitted to the Trustee and shall be applied by the Trustee in the following order: First, to the payment of the reasonable fees, costs and expenses of the Trustee in providing for the declaration of such event of default and carrying out its duties under this Agreement, including reasonable compensation to their accountants and counsel together with interest on any amounts advanced as provided herein and thereafter to the payment of the reasonable costs and expenses of the Bondholders, if any, in carrying out the provisions of this Article, including reasonable compensation to their accountants and counsel; and Second, upon presentation of the several Bonds, and the stamping thereon of the amount of the payment if only partially paid or upon the surrender thereof if fully paid, to the payment of the whole amount then owing and unpaid upon the Bonds for interest and principal, and premium, with (to the extent permitted by law) interest on the overdue interest and principal and premium at the rate borne by such Bonds, and in case such money shall be insufficient to pay in full the whole amount so owing and unpaid upon the Bonds, then to the payment of such interest, principal and premium and (to the extent permitted by law) interest on overdue interest and principal and premium without preference or priority among such interest, principal and premium and interest on overdue interest and principal and premium ratably to the aggregate of such interest, principal and premium and interest on overdue interest and principal and premium. SECTION 7.03 Institution of Legal Proceedings by Trustee. If one or more of the events of default shall happen and be continuing, the Trustee may, and upon the written request of the Bondholders of a majority in principal amount of the Bonds then Outstanding, and in each case upon being indemnified to its reasonable satisfaction therefor, shall, proceed to protect or enforce its rights or the rights of the Bondholders of Bonds under this Trust Agreement and 39 OHSUSA:761763646 under Article VI of the Facilities Lease by a suit in equity or action at law, either for the specific performance of any covenant or agreement contained herein, or in aid of the execution of any power herein granted, or by mandamus or other appropriate proceeding for the enforcement of any other legal or equitable remedy as the Trustee shall deem most effectual in support of any of its rights and duties hereunder. SECTION 7.04 Non-Waiver. Nothing in this Article or in any other provision hereof or in the Bonds shall affect or impair the obligation of the Authority, which is absolute and unconditional, to pay the interest on and principal of and redemption premiums, if any, on the Bonds to the respective Bondholders of the Bonds at the respective d ates of maturity or upon prior redemption as provided herein from the Revenues as provided herein pledged for such payment, or shall affect or impair the right of such Bondholders, which is also absolute and unconditional, to institute suit to enforce such payment by virtue of the contract embodied herein and in the Bonds. A waiver of any default or breach of duty or contract by the Trustee or any Bondholder shall not affect any subsequent default or breach of duty or contract or impair any rights or remedies on any such subsequent default or breach of duty or contract. No delay or omission by the Trustee or any Bondholder to exercise any right or remedy accruing upon any default or breach of duty or contract shall impair any such right or remedy or s hall be construed to be a waiver of any such default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the Bondholders by the Act or by this Article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Trustee or the Bondholders. If any action, proceeding or suit to enforce any right or exercise any remedy is abandoned, the Authority, the Trustee and any Bondholder shall be restored to their former positions, rights and remedies as if such action, proceeding or suit had not been brought or taken. SECTION 7.05 Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Bondholders is intended to be exclusive of any other remedy, and each such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by the Act or any other law. SECTION 7.06 Limitation on Bondholders’ Right to Sue. No Bondholder of any Bond issued hereunder shall have the right to institute any suit, action or proceeding at law or equity, for any remedy under or upon this Trust Agreement, unless (a) such Bondholder shall have previously given to the Trustee written notice of the occurrence of an event of default as defined in Section 7.01; (b) the Bondholders of at least a majority in aggregate principal amount of all the Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such suit, action or proceeding in its own name; (c) said Bondholders shall have tendered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply with such request for a period of sixty (60) days 40 OHSUSA:761763646 after such request shall have been received by, and said tender of indemnity shall have been made to, the Trustee. Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Bondholder of Bonds of any remedy hereunder; it being understood and intended that no one or more Bondholders of Bonds shall have any right in any manner whatever by his or their action to enforce any right under this Trust Agreement, except in the manner herein provided, and that all proceedings at law or in equity to enforce any provision of this Trust Agreement shall be instituted, had and maintained in the manner herein provided and for the equal benefit of all Bondholders of the Outstanding Bonds. ARTICLE VIII THE TRUSTEE SECTION 8.01 The Trustee. Wells Fargo Bank, National Association shall serve as the initial Trustee for the Bonds for the purpose of receiving all money which the Authority is required to deposit with the Trustee hereunder and for the purpose of allocating, applying and using such money as provided herein and for the purpose of paying the interest on and principal of and redemption premiums, if any, on the Bonds presented for payment, with the rights and obligations provided herein. The Authority, unless there exists any Event of Default as defined in Section 7.01, may at any time remove the Trustee initially appointed and any successor thereto and may appoint a successor or successors thereto by an instrument in writing; provided, that any such successor shall be a bank, banking institution, or trust company, having (or whose parent holding company has) a combined capital (exclusive of borrowed capital) and surplus of at least five hundred million dollars ($500,000,000) and subject to supervision or examination by federal or state authority. If such bank, banking institution, or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purpose of this Section the combined capital and surplus of such bank, banking institution, or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Trustee may at any time resign by giving written notice of such resignation to the Authority, and by mailing by first class mail to the Bondholders notice of such resignation. Upon receiving such notice of resignation, the Authority shall promptly appoint a successor Trustee by an instrument in writing. Any removal or resignation of a Trustee and appointment of a successor Trustee shall become effective only upon the acceptance of appointment by the successor Trustee. The successor Trustee shall send notice of its acceptance by first class mail to the Bondholders. If, within thirty (30) days after notice of the removal or resignation of the Trustee no successor Trustee shall have been appointed and shall have accepted such appointment, the removed or resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee, which court may thereupon, after such notice, if any, as it may deem proper and prescribe and as may be required by law, appoint a successor Trustee having the qualifications required hereby. 41 OHSUSA:761763646 The Trustee is hereby authorized to pay or redeem the Bonds when duly presented for payment at maturity or on redemption prior to maturity. The Trustee shall cancel all Bonds upon payment thereof or upon the surrender thereof by the Authority and shall destroy such Bonds and a certificate of destruction shall be delivered to the Authority upon its request. The Trustee shall keep accurate records of all Bonds paid and discharged and cancelled by it. The Trustee shall, prior to an event of default, and after the curing or waiv er of all events of default that may have occurred, perform such duties and only such duties as are specifically set forth in this Trust Agreement and no implied duties or obligations shall be read into this Trust Agreement. The Trustee shall, during the existence of any event of default (that has not been cured or waived), exercise such of the rights and powers vested in it by this Trust Agreement, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. SECTION 8.02 Liability of Trustee. The recitals of facts, agreements and covenants herein and in the Bonds shall be taken as recitals of facts, agreements and covenan ts of the Authority, and the Trustee assumes no responsibility for the correctness of the same or makes any representation as to the sufficiency or validity hereof or of the Bonds, or shall incur any responsibility in respect thereof other than in connection with the rights or obligations assigned to or imposed upon it herein, in the Bonds or in law or equity. The Trustee shall not be liable in connection with the performance of its duties hereunder except for its own negligence or willful misconduct. The Trustee shall not be bound to recognize any person as the Bondholder of a Bond unless and until such Bond is submitted for inspection, if required, and such Bondholder’s title thereto satisfactorily established, if disputed. The Trustee shall not be liable for any error of judgment made in good faith, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts. The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Bondholders of not less than a majority (or any lesser amount that may direct the Trustee in accordance with this Agreement) in aggregate principal amount of the Bonds at the time Outstanding, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Trust Agreement. The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Trust Agreement at the request, order or direction of any of the Bondholders pursuant to the provisions of this Trust Agreement unless such Bondholders shall have offered to the Trustee reasonable security or indemnity against the reasonable costs, expenses and liabilities that may be incurred therein or thereby. The Trustee has no obligation or liability to the Bondholders for the payment of the interest on, principal of or redemption premium, if any, with respect to the Bonds from its own funds; but rather the Trustee’s obligations shall be limited to the performance of its duties hereunder. 42 OHSUSA:761763646 The Trustee shall not be deemed to have knowledge of any event of default (except payment defaults) unless and until a Responsible Officer shall have actual knowledge thereof or a Responsible Officer of the Trustee shall have received written notice thereof at its Principal Office. The Trustee shall not be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements herein or of any of the documents executed in connection with the Bonds, or as to the existence of a default or event of default thereunder. The Trustee shall not be responsible for the validity or effectiveness of any collateral given to or held by it. The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through attorneys-in-fact, agents or receivers and shall not be answerable for the negligence or misconduct of any such attorney-in-fact, agent or receiver selected by it with due care. The Trustee shall be entitled to advice of counsel and other professionals concerning all matters of trust and its duty hereunder, but the Trustee shall not be answerable for the professional malpractice of any attorney-in-law or certified public accountant in connection with the rendering of his professional advice in accordance with the terms of this Trust Agreement, if such attorney-in-law or certified public accountant was selected by the Trustee with due care. The Trustee shall not be concerned with or accountable to anyone for the subsequent use or application of any moneys which shall be released or withdrawn in accordance with the provisions hereof. Whether or not therein expressly so provided, every provision of this Trust Agreement, the Facilities Lease or related documents relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Article. The Trustee makes no representation or warranty, express or implied, as to the title, value, design, compliance with specifications or legal requirements, quality, durability, operation, condition, merchantability or fitness for any particular purpose for the use contemplated by the Authority or County of the Facilities or the Project. In no event shall the Trustee be liable for incidental, indirect, special or consequential damages in connection with or arising from the Facilities Lease or this Trust Agreement for the existence, furnishing or use of the Facilities or the Project. The Trustee shall be protected in acting upon any notice, resolution, requisition, request (including any Written Request of the Authority or the County), consent, order, certificate, report, opinion, bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. Before the Trustee acts or refrains from acting, the Trustee may consult with counsel, who may be counsel of or to the Authority, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. Whenever in the administration of its rights and obligations hereunder the Trustee shall deem it necessary or desirable that a matter be established or proved prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein 43 OHSUSA:761763646 specifically prescribed) may, in the absence of bad faith on the part of the Trustee, be deemed to be conclusively proved and established by a Certificate of the Authority, which certificate shall be full warrant to the Trustee for any action taken or suffered under the provisions hereof upon the faith thereof, but in its discretion the Trustee may in lieu thereof accept other evidence of such matter or may require such additional evidence as it may deem reasonable. No provision of this Trust Agreement shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance or exercise of any of its duties hereunder, or in the exercise of its rights or powers. The Trustee is not responsible for the content of any official statement or any other offering or disclosure material prepared in connection with the Bonds. SECTION 8.03 Compensation and Indemnification of Trustee. The Authority covenants to pay (but solely from Additional Payments) to the Trustee from time to time, and the Trustee shall be entitled to, compensation for all services rendered by it in the exercise and performance of any of the powers and duties hereunder of the Trustee, and the Authority will pay or reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee, in accordance with any of the provisions of this Trust Agreement (including the reasonable compensation and the reasonable expenses and disbursements of their counsel (including the allocated reasonable fees and disbursements of in - house counsel) and of all persons not regularly in their employ) except any such expense, disbursement or advance as may arise from their negligence or willful misconduct. The Authority, to the extent permitted by law, shall indemnify, defend and hold harmless the Trustee against any loss, damage, liability or expense incurred without negligence or willful misconduct on the part of the Trustee arising out of or in connection with the acceptance or administration of the trusts created hereby, including reasonable costs and expenses (including reasonable attorneys’ fees and disbursements) of defending itself against or investigating any claim or liability in connection with the exercise or performance of any of its powers hereunder. The rights of the Trustee and the obligations of the Authority under this Section 8.03 shall survive the discharge of the Bonds and this Trust Agreement and the resignation or removal of the Trustee. ARTICLE IX AMENDMENT OF THE TRUST AGREEMENT SECTION 9.01 Amendment of the Trust Agreement. (a) This Trust Agreement and the rights and obligations of the Authority and of the Bondholders may be amended at any time by a Supplemental Trust Agreement which shall become binding when the written consent of the Bondholders of a majority in aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in Section 9.02, are filed with the Trustee; provided that if such modification or amendment will, by its terms, not take effect so long as any Bonds of any particular maturity or Series remain Outstanding, the consent of the Owners of such Bonds shall not be required and such Bonds shall not be deemed to be Outstanding for the purpose of any calculation of Bonds Outstanding under this Section. No such amendment shall (1) extend the maturity of or reduce the interest rate on 44 OHSUSA:761763646 or amount of interest on or principal of or redemption premium, if any, on any Bond without the express written consent of the Bondholder of such Bond, or (2) permit the creation by the Authority of any pledge of or charge or lien upon the Revenues as provided herein superior to or on a parity with the pledge, charge and lien created hereby for the benefit of the Bonds, or (3) reduce the percentage of Bonds required for the written consent to any such amendment, or (4) modify any rights or obligations of the Trustee, the Authority, or the County without their prior written assent thereto, respectively. It shall not be necessary for the consent of the Bondholders to approve the particular form of any Supplemental Trust Agreement, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Authority and the Trustee of any Supplemental Trust Agreement pursuant to this subsection (a), the Trustee shall mail a notice on behalf of the Authority, setting forth in general terms the substance of such Supplemental Trust Agreement to the Bondholders at the addresses shown on the registration books maintained by the Trustee. Any failure to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such Supplemental Trust Agreement. (b) The Trust Agreement and the rights and obligations of the Authority and of the Bondholders may also be amended at any time by a Supplemental Trust Agreement which shall become binding upon adoption but without the consent of any Bondholders, for any purpose that will not materially adversely affect the interests of the Bondholders, including (without limitation) for any one or more of the following purposes: (i) to add to the agreements and covenants required herein to be performed by the Authority other agreements and covenants thereafter to be performed by the Authority, or to surrender any right or power reserved herein to or conferred herein on the Authority; (ii) to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained herein or in regard to questions arising hereunder which the Authority may deem desirable or necessary; (iii) to provide for the issuance of any Additional Bonds and to provide the terms of such Additional Bonds, subject to the conditions and upon compliance with the procedure set forth in Article III (which shall be deemed not to adversely affect Bondholders); or (iv) to add to the agreements and covenants required herein, such agreements and covenants as may be necessary to qualify the Trust Agreement under the Trust Indenture Act of 1939. SECTION 9.02 Disqualified Bonds. Bonds owned or held by or for the account of the Authority shall not be deemed Outstanding for the purpose of any consent or other action or any calculation of Outstanding Bonds provided in this Article, and shall not be entitled to consent to or take any other action provided in this Article. SECTION 9.03 Endorsement or Replacement of Bonds After Amendment. After the effective date of any action taken as hereinabove provided, the Authority may determine that 45 OHSUSA:761763646 the Bonds may bear a notation by endorsement in form approved by the Authority as to such action, and in that case upon demand of the Bondholder of any Outstanding Bonds and presentation of his Bond for such purpose at the office of the Trustee a suitable notation as to such action shall be made on such Bond. If the Authority shall so determine, new Bonds so modified as, in the opinion of the Authority, shall be necessary to conform to such action shall be prepared and executed, and in that case upon demand of the Bondholder of any Outstanding Bond a new Bond or Bonds shall be exchanged at the office of the Trustee without cost to each Bondholder for its Bond or Bonds then Outstanding upon surrender of such Outstanding Bonds. SECTION 9.04 Notice to and Consent of Bondholders. If consent of the Bondholders is required under the terms of this Trust Agreement for the amendment of this Trust Agreement or for any other similar purpose, the Authority shall cause notice of the proposed amendment to be given by first-class mail to the Owners of the Outstanding Bonds then shown on the registration books for the Bonds. Such notice shall briefly set forth the nature of the proposed amendment or other action and shall state that copies of any such amendment are on file at the office of the Authority and the Principal Office of the Trustee for inspection by all Bondholders. If, within sixty (60) days or such longer period as shall be prescribed by the Authority following the mailing of such notice, the Owners of the requisite principal amount of the Bonds Outstanding by instruments filed with the Authority shall have consented to the amendment or other proposed action, then the Authority may adopt or execute, as appropriate, such amendment or take such proposed action and the consent of the Bondholders shall thereby be conclusively presumed. Such instruments filed with the Authority may include documents, including Certificates of the Authority, stating that Owners of Bonds have consented to an amendment by purchasing such Bonds if the official statement or other disclosure document related to such purchase disclosed that the purchase of the Bonds was deemed to mean that the Owners consented to the amendment. SECTION 9.05 Amendment by Mutual Consent. The provisions of this Article shall not prevent any Bondholder from accepting any amendment as to the particular Bonds held by him, provided that due notation thereof is made on such Bonds. ARTICLE X DEFEASANCE SECTION 10.01 Discharge of Bonds. (a) If the Authority shall pay or cause to be paid or there shall otherwise be paid to the Bondholders of all or any portion of the Outstanding Bonds the interest thereon and principal thereof and redemption premiums, if any, thereon at the times and in the manner stipulated herein and therein, and the Authority shall pay in full all other amo unts due hereunder and under the Facilities Lease, then the Bondholders of such Bonds shall cease to be entitled to the pledge of and charge and lien upon the Revenues as provided herein, and all agreements, covenants and other obligations of the Authority to the Bondholders of such Bonds hereunder shall thereupon cease, terminate and become void and be discharged and satisfied. In such event, the Trustee shall execute and deliver to the Authority all such instruments as may be necessary or desirable to evidence such discharge and satisfaction, the Trustee shall pay over or deliver to the 46 OHSUSA:761763646 Authority all money or securities held by it pursuant hereto which are not required for the payment of the interest on and principal of and redemption premiums, if any, on such Bonds and for the payment of all other amounts due hereunder and under the Facilities Lease. (b) Any Outstanding Bonds shall prior to the maturity date or redemption date thereof be deemed to have been paid within the meaning of and with the effect expressed in subsection (a) of this Section if (1) in case any of such Bonds are to be redeemed on any date prior to their maturity date, the Authority shall have given to the Trustee in form satisfactory to it irrevocable instructions to provide notice in accordance with Section 4.05, (2) there shall have been deposited with the Trustee (A) cash in an amount which shall be sufficient and/or (B) noncallable Government Securities, the interest on and principal of which when paid will provide cash which, together with the cash, if any, deposited with the Trustee at the same time, shall be sufficient, in the opinion of an Independent Certified Public Accountant, to pay when due the interest to become due on such Bonds on and prior to the maturity date or redemption date thereof, as the case may be, and the principal of and redemption premiums, if any, on such Bonds, and (3) in the event such Bonds are not by their terms subject to redemption within the next succeeding sixty (60) days, the Authority shall have given the Trustee in form satisfactory to it irrevocable instructions to mail as soon as practicable, a notice to the Bondholders of such Bonds that the deposit required by clause (2) above has been made with the Trustee and that such Bonds are deemed to have been paid in accordance with this Section and stating the maturity date or redemption date upon which money is to be available for the payment of the principal of and redemption premiums, if any, on such Bonds. (c) In the event of an advance refunding (i) the Authority shall cause to be delivered, on the deposit date and upon any reinvestment of the defeasance amount, a report of an Independent Certified Public Accountant verifying the sufficiency of the escrow established to pay the Bonds in full on the maturity date or redemption date (“Verification”) (which Verification shall verify the mathematical accuracy of the computations relating to the adequacy of cash plus Government Securities to be held in escrow to pay debt service requirements (principal, interest and redemption price, including premium, to the applicable redemption or maturity dates) when due on the Bonds to be refunded), (ii) the escrow agreement shall provide that no (A) substitution of a Government Security shall be permitted except with another Government Security and upon delivery of a new Verification and (B) reinvestment of a Government Security shall be permitted except as contemplated by the original Verification or upon delivery of a new Verification, and (iii) there shall be delivered an Opinion of Bond Counsel to the effect that the Bonds are no longer “Outstanding” under the Trust Agreement; each Verification and opinion shall be addressed to the Authority and the Trustee. SECTION 10.02 Unclaimed Money. Anything contained herein to the contrary notwithstanding, any money held by the Trustee in trust for the payment and discharge of any of the Bonds or interest thereon which remains unclaimed for two (2) years after the date when such Bonds or interest thereon have become due and payable, either at their stated maturity dates or by call for redemption prior to maturity, if such money was held by the Trustee at such date, or for two (2) years after the date of deposit of such money if deposited with the Tru stee after the date when such Bonds have become due and payable, shall be repaid by the Trustee to the Authority as its absolute property free from trust, and the Trustee shall thereupon be released and 47 OHSUSA:761763646 discharged with respect thereto and the Bondholders shall not look to the Trustee for the payment of such Bonds. ARTICLE XI MISCELLANEOUS SECTION 11.01 Liability of Authority Limited to Revenues. Notwithstanding anything contained herein, the Authority shall not be required to advance any money derived from any source other than the Revenues as provided herein for the payment of the interest on or principal of or redemption premiums, if any, on the Bonds or for the performance of any agreements or covenants herein contained. The Authority may, however, advance funds for any such purpose so long as such funds are derived from a source legally available for such purpose. The Bonds are limited obligations of the Authority and are payable, as to interest thereon, principal thereof and any premiums upon the redemption of any thereof, solely from the Revenues as provided herein, and the Authority is not obligated to pay them except from the Revenues. All the Bonds are equally secured by a pledge of and charge and lien upon the Revenues, and the Revenues constitute a trust fund for the security and payment of the interest on and principal of and redemption premiums, if any, on the Bonds as provided herein. The Bonds are not a debt of the County, the State or any of its political subdivisions, and neither the County, the State nor any of its political subdivisions is liable thereon, nor in any event shall the Bonds be payable out of any funds or properties other than those of the Authority as provided herein. The Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory limitation or restriction. SECTION 11.02 Benefits of this Trust Agreement Limited to Parties and Third Party Beneficiaries. Nothing contained herein, expressed or implied, is intended to give to any person other than the Authority, the Trustee, and the Bondholders any right, remedy or claim under or by reason hereof. Any agreement or covenant required herein to be performed by or on behalf of the Authority or any member, officer or employee thereof shall be for the sole and exclusive benefit of the Authority, the Trustee and the Bondholders. SECTION 11.03 Successor Is Deemed Included in All References to Predecessor. Whenever herein either the Authority or any member, officer or employee thereof or of the State is named or referred to, such reference shall be deemed to include the successor to the powers, duties and functions with respect to the Project that are presently vested in the Authority or such member, officer or employee, and all agreements and covenants required hereby to be performed by or on behalf of the Authority or any member, officer or employee thereof shall bind and inure to the benefit of the respective successors thereof whether so expressed or not. SECTION 11.04 Execution of Documents by Bondholders. Any declaration, request or other instrument which is permitted or required herein to be executed by Bondholders may be in one or more instruments of similar tenor and may be executed by Bondholders in person or by their attorneys appointed in writing. The fact and date of the execution by any Bondholder or his attorney of any declaration, request or other instrument or of any writing appointing such attorney may be proved by the certificate of any notary public or other officer 48 OHSUSA:761763646 authorized to make acknowledgments of deeds to be recorded in the state or territory in which he purports to act that the person signing such declaration, request or other instrument or writing acknowledged to him the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer. The ownership of any Bonds and the amount, maturity, number and date of holding the same may be proved by the registration books relating to the Bonds at the Principal Office of the Trustee. Any declaration, request, consent or other instrument or writing of the Bondholder of any Bond shall bind all future Bondholders of such Bond with respect to anything done or suffered to be done by the Trustee or the Authority in good faith and in accordance therewith. SECTION 11.05 Waiver of Personal Liability. No member, officer or employee of the Authority or the County shall be individually or personally liable for the payment of the interest on or principal of or redemption premiums, if any, on the Bonds by reason of their issuance, but nothing herein contained shall relieve any such member, officer or employee from the performance of any official duty provided by the Act or any other applicable provisions of law or hereby. SECTION 11.06 Destruction of Cancelled Bonds. Whenever provision is made for the return to the Authority of any Bonds which have been cancelled pursuant to the provisions hereof, the Authority may, by a Written Request of the Authority, direct the Trustee to destroy such Bonds and furnish to the Authority a certificate of such destruction. SECTION 11.07 Accounts and Funds. Any account or fund required herein to be established and maintained by the Trustee may be established and maintained in the accounting records of the Trustee either as an account or a fund, and may, for the purposes of such accounting records, any audits thereof and any reports or statements with respect thereto, be treated either as an account or a fund; but all such records with respect to all such accounts and funds shall at all times be maintained in accordance with corporate trust industry standards and with due regard for the protection of the security of the Bonds and the rights of the Bondholders. SECTION 11.08 Business Day. When any action is provided for herein to be done on a day named or within a specified time period, and the day or the last day of the period falls on a day which is not a Business Day, such action may be performed on the next ensuing Business Day with the same effect as though performed on the appointed day or within the specified period. SECTION 11.09 Notices; Notices to Rating Agencies. All written notices to be given hereunder shall be given by mail to the party entitled thereto at the addresses se t forth below, or at such other addresses as such parties may provide to the other party in writing from time to time, namely: If to the Authority: County of Contra Costa Public Financing Authority c/o County Administrator County of Contra Costa County Administration Building 49 OHSUSA:761763646 651 Pine Street Martinez, California 94553 If to the Trustee: Wells Fargo Bank, National Association 333 Market Street, 18th Floor San Francisco, California 94105 Attention: Corporate Trust Services If to the County: County of Contra Costa c/o Clerk of the Board of Supervisors County of Contra Costa County Administration Building 651 Pine Street Martinez, California 94553 The Trustee shall give written notice to Moody’s and S&P of the redemption or defeasance of any Bonds, the amendment of the Facilities Lease or Trust Agreement, and any change in the Trustee in accordance herewith. SECTION 11.10 Article and Section Headings and References. The headings or titles of the several articles and sections hereof and the table of contents appended hereto shall be solely for convenience of reference and shall not affect the meaning, construction or effect hereof. All references herein to “Articles,” “Sections” and other subdivisions or clauses are to the corresponding articles, sections, subdivisions or clauses hereof; and the words “hereby,” “herein,” “hereof,” “hereto,” “herewith,” “hereunder” and other words of similar import refer to this Trust Agreement as a whole and not to any particular article, section, subdivision or clause hereof. SECTION 11.11 Partial Invalidity. If any one or more of the agreements or covenants or portions thereof required hereby to be performed by or on the part of the Authority or the Trustee shall be contrary to law, then such agreement or agreements, such covenant or covenants or such portions thereof shall be null and void and shall be deemed separable from the remaining agreements and covenants or portions thereof and shall in no way affect the validity hereof or of the Bonds, and the Bondholders shall retain all the benefit, protection and security afforded to them under the Act or any other applicable provisions of law. The Authority and the Trustee hereby declare that they would have executed and delivered this Trust Agreement and each and every other article, section, paragraph, subdivision, sentence, clause and phrase hereof and would have authorized the issuance of the Bonds pursuant hereto irrespective of the fact that any one or more articles, sections, paragraphs, subdivisions, sentences, clauses or phrases hereof or the application thereof to any person or circumstance may be held to be unconstitutional, unenforceable or invalid. SECTION 11.12 Governing Law. This Trust Agreement shall be governed exclusively by the provisions hereof and by the laws of the State as the same from time to time exist. 50 OHSUSA:761763646 SECTION 11.13 Execution in Several Counterparts. This Trust Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original; and all such counterparts, or as many of them as the Authority and the Trustee shall preserve undestroyed, shall together constitute but one and the same instrument. 51 OHSUSA:761763646 IN WITNESS WHEREOF, the COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY has caused this Trust Agreement to be signed in its name by its Executive Director and Secretary, and WELLS FARGO BANK, NATIONAL ASSOCIATION., in token of its acceptance of the trusts created hereunder, has caused this Trust Agreement to be signed by one of the officers thereunder duly authorized, all as of the day and year first above written. COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY By: Executive Director and Secretary Attest: By: Deputy Executive Director and Assistant Secretary WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee By: Authorized Officer Acknowledged: COUNTY OF CONTRA COSTA By: Finance Director A-1 OHSUSA:761763646 EXHIBIT A [FORM OF 2015 SERIES [A/B] BOND] No. _____ $__________ COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY LEASE REVENUE BONDS (REFUNDING AND CAPITAL PROJECTS), 2015 SERIES [A/B] 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 Rate Maturity Date Dated Date CUSIP ____ % June 1, ____ _______, 2015 REGISTERED OWNER: 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 A-2 OHSUSA:761763646 Bond (unless this Bond is registered as of an interest payment date or during the peri od from the 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 on or before November 15, 2015, 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, 2015, and semiannually thereafter on each June 1 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 $1,000,000 or more in aggregate principal amount of Bonds of the Series of which this Bond is a part received by the Trustee (defined hereinafter) prior to the applicable record date, interest shall be paid by wire transfer in immediately available funds. The principal hereof is payable in lawful money of the United States of America upon presentation of this Bond at the Principal Office of the Trustee. Capitalized terms used herein and not otherwise defined herein have the meanings ascribed thereto in the Trust Agreement. This Bond is one of a duly authorized issue of bonds of the Authority designated as its “County of Contra Costa Public Financing Authority Lease Revenue Bonds” (the “Bonds”) unlimited as to principal amount and is one of a duly authorized series of such Bonds known as “(Refunding and Capital Projects), 2015 Series [A/B]” (the “2015 Series [A/B] Bonds”) issued in an aggregate principal amount of __________________________________________ dollars ($[par 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 1 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 July 1, 2015 (as amended from time to time, the “Trust Agreement”), between the Authority and Wells Fargo Bank, National Association, as 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 2015 Series [A/B] Bonds are issued to provide funds to finance and refinance the acquisition, installation, implementation and construction of certain capital projects of the County, and related costs and expenses, 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 Facilities Lease, dated as of July 1, 2015 (as amended from time to time, the “Facilities 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 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 and the County are A-3 OHSUSA:761763646 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 2015 Series [A/B] 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 prior to maturity on the dates, at the redemption prices, and upon such notice as set forth in the Trust Agreement. 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 Principal 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 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 su m or sums so paid. This Bond 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. A-4 OHSUSA:761763646 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. A-5 OHSUSA:761763646 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 [SEAL] Countersigned: ________________________________________ Secretary A-6 OHSUSA:761763646 [FORM OF CERTIFICATE OF AUTHENTICATION TO APPEAR ON 2015 SERIES [A/B] BONDS] This is one of the Bonds described in the within-mentioned Trust Agreement which has been registered and authenticated on _____________, 2015. WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee By Authorized Signatory [DTC LEGEND] Unless this Bond is presented by an authorized representative of The Depository Trust Company to the issuer or its agent for registration of transfer, exchange or payment, and any Bond issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein. A-7 OHSUSA:761763646 [FORM OF ASSIGNMENT TO APPEAR ON 2015 SERIES [A/B] 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. B-1 OHSUSA:761763646 EXHIBIT B FORM OF REQUISITION – PROJECT FUND Date: ____________, 20__ No. __ Wells Fargo Bank, National Association 333 Market Street, 18th Floor San Francisco, CA 94105 Re: County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects), 2015 Series A (Written Request of the County - 2015 Series A Project Account) Ladies and Gentlemen: This letter is our authorization to you to disburse from the 2015 Series A Project Account within the Project Fund provided for in Section 3.02 of the Trust Agreement dated as of July 1, 2015 (the “Trust Agreement”) between the County of Contra Costa Public Financing Authority (the “Authority”) and Wells Fargo Bank, National Association, as trustee, the amount indicated on Schedule A attached hereto to the therein-named individuals, firms and corporations for the payment of project costs relating to the completion of the Capital Projects (as said term is defined in the Trust Agreement). The obligations in the stated amount have been incurred by the County, and each item thereof is a proper charge against the 2015 Series A Project Account within the Project Fund. There has not been filed with or served upon the County notice of any lien, right to lien or attachment upon, or claim affecting the right to receive payment of, any of the moneys payable to any of the persons named herein below, which has not been released or will not be released simultaneously with the payment of such obligation, other than materialmen’s or mechanics’ liens accruing by mere operation of law.  If checked here you are hereby authorized to close the 2015 Series A Project Account within the Project Fund and transfer any remaining balance (after payment of any amounts indicated in Schedule A) to the Revenue Fund. Very truly yours, COUNTY OF CONTRA COSTA By Authorized Officer B-2 OHSUSA:761763646 SCHEDULE A Item No. Payee Amount Purpose __ ____________ $_________ _____________ C-1 OHSUSA:761763646 EXHIBIT C FORM OF REQUISITION – COSTS OF ISSUANCE Date: _______________ No. __ Wells Fargo Bank, National Association 333 Market Street, 18th Floor San Francisco, CA 94105 Attention: Corporate Trust Services Re: County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects), 2015 Series A and 2015 Series B (Written Request of the Authority – Costs of Issuance Fund) Ladies and Gentlemen: This letter is our authorization to you to disburse from the Costs of Issuance Fund provided for in Section 3.01 of the Trust Agreement dated as of July 1, 2015 (the “Trust Agreement”) between the County of Contra Costa Public Financing Authority (the “Authority”) and Wells Fargo Bank, National Association, as trustee, the not to exceed 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 Costs of Issuance Fund. If checked here you are hereby authorized to close the Costs of Issuance Fund and transfer any remaining balance (after payment of any amounts indicated in Schedule A) to the Authority for deposit to the 2015 Series A Project Account within the Project Fund. Very truly yours, COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY By Authorized Officer C-2 OHSUSA:761763646 SCHEDULE A Item No. Payee Amount Purpose TABLE OF CONTENTS Page -i- OHSUSA:761763646 ARTICLE I DEFINITIONS; EQUAL SECURITY ............................................................ 3 SECTION 1.01 Definitions...................................................................................... 3 SECTION 1.02 Equal Security .............................................................................. 13 SECTION 1.03 Interpretation ................................................................................ 13 ARTICLE II THE BONDS ................................................................................................. 14 SECTION 2.01 Authorization of Bonds; 2015 Bonds .......................................... 14 SECTION 2.02 Terms of the 2015 Bonds ............................................................. 15 SECTION 2.03 Form of 2015 Bonds .................................................................... 17 SECTION 2.04 Execution of Bonds ...................................................................... 17 SECTION 2.05 Transfer and Payment of Bonds ................................................... 17 SECTION 2.06 Exchange of Bonds ...................................................................... 18 SECTION 2.07 Bond Registration Books ............................................................. 18 SECTION 2.08 Mutilated, Destroyed, Stolen or Lost Bonds; Temporary Bonds ........................................................................................... 18 SECTION 2.09 Special Covenants as to Book-Entry Only System for 2015 Bonds ........................................................................................... 19 ARTICLE III ISSUANCE OF 2015 BONDS ...................................................................... 21 SECTION 3.01 Procedure for the Issuance of 2015 Bonds .................................. 21 SECTION 3.02 Project Fund ................................................................................. 21 SECTION 3.03 Conditions for the Issuance of Additional Bonds ........................ 22 SECTION 3.04 Proceedings for Authorization of Additional Bonds ................... 23 SECTION 3.05 Limitations on the Issuance of Obligations Payable From Revenues ...................................................................................... 25 ARTICLE IV REDEMPTION OF BONDS ......................................................................... 25 SECTION 4.01 Extraordinary Redemption ........................................................... 25 SECTION 4.02 Optional Redemption ................................................................... 25 SECTION 4.03 Mandatory Sinking Fund Redemption ......................................... 26 SECTION 4.04 Selection of Bonds for Redemption ............................................. 26 SECTION 4.05 Notice of Redemption; Cancellation; Effect of Redemption ....... 26 ARTICLE V REVENUES ................................................................................................... 27 SECTION 5.01 Pledge of Revenues ...................................................................... 27 SECTION 5.02 Receipt and Deposit of Revenues in the Revenue Fund .............. 27 TABLE OF CONTENTS Page -ii- OHSUSA:761763646 SECTION 5.03 Establishment and Maintenance of Accounts for Use of Money in the Revenue Fund; Reserve Fund ................................ 28 SECTION 5.04 Application of Insurance Proceeds .............................................. 31 SECTION 5.05 Deposit and Investments of Money in Accounts and Funds ....... 31 ARTICLE VI COVENANTS OF THE AUTHORITY ........................................................ 32 SECTION 6.01 Punctual Payment and Performance ............................................ 32 SECTION 6.02 Against Encumbrances................................................................. 32 SECTION 6.03 Rebate Fund ................................................................................. 33 SECTION 6.04 Tax Covenants ............................................................................. 33 SECTION 6.05 Accounting Records and Reports................................................. 34 SECTION 6.06 Prosecution and Defense of Suits ................................................ 34 SECTION 6.07 Further Assurances....................................................................... 34 SECTION 6.08 Maintenance of Revenues ............................................................ 34 SECTION 6.09 Amendments to Facilities Lease and Site Lease .......................... 35 SECTION 6.10 Leasehold Estate .......................................................................... 36 SECTION 6.11 Compliance With Continuing Disclosure Agreement ................. 36 ARTICLE VII EVENTS OF DEFAULT AND REMEDIES OF BONDHOLDERS ........... 37 SECTION 7.01 Events of Default and Acceleration of Maturities ....................... 37 SECTION 7.02 Application of Funds Upon Acceleration .................................... 38 SECTION 7.03 Institution of Legal Proceedings by Trustee ................................ 38 SECTION 7.04 Non-Waiver.................................................................................. 39 SECTION 7.05 Remedies Not Exclusive .............................................................. 39 SECTION 7.06 Limitation on Bondholders’ Right to Sue .................................... 39 ARTICLE VIII THE TRUSTEE ............................................................................................. 40 SECTION 8.01 The Trustee .................................................................................. 40 SECTION 8.02 Liability of Trustee ...................................................................... 41 SECTION 8.03 Compensation and Indemnification of Trustee ............................ 43 ARTICLE IX AMENDMENT OF THE TRUST AGREEMENT ....................................... 43 SECTION 9.01 Amendment of the Trust Agreement ........................................... 43 SECTION 9.02 Disqualified Bonds....................................................................... 44 SECTION 9.03 Endorsement or Replacement of Bonds After Amendment ........ 44 SECTION 9.04 Notice to and Consent of Bondholders ........................................ 45 TABLE OF CONTENTS Page -iii- OHSUSA:761763646 SECTION 9.05 Amendment by Mutual Consent .................................................. 45 ARTICLE X DEFEASANCE.............................................................................................. 45 SECTION 10.01 Discharge of Bonds ...................................................................... 45 SECTION 10.02 Unclaimed Money ........................................................................ 46 ARTICLE XI MISCELLANEOUS ...................................................................................... 47 SECTION 11.01 Liability of Authority Limited to Revenues ................................. 47 SECTION 11.02 Benefits of this Trust Agreement Limited to Parties and Third Party Beneficiaries ............................................................. 47 SECTION 11.03 Successor Is Deemed Included in All References to Predecessor .................................................................................. 47 SECTION 11.04 Execution of Documents by Bondholders ................................... 47 SECTION 11.05 Waiver of Personal Liability ........................................................ 48 SECTION 11.06 Destruction of Cancelled Bonds .................................................. 48 SECTION 11.07 Accounts and Funds ..................................................................... 48 SECTION 11.08 Business Day ................................................................................ 48 SECTION 11.09 Notices; Notices to Rating Agencies ........................................... 48 SECTION 11.10 Article and Section Headings and References ............................. 49 SECTION 11.11 Partial Invalidity........................................................................... 49 SECTION 11.12 Governing Law ............................................................................ 49 SECTION 11.13 Execution in Several Counterparts............................................... 50 Exhibit A Form of 2015 Series [A/B] Bond ....................................................................... A-1 Exhibit B Form of Requisition – Project Fund................................................................... B-1 Exhibit C Form of Requisition – Costs of Issuance .......................................................... C-1 TABLE OF CONTENTS Page -iv- OHSUSA:761763646 OH&S Draft 7/13/2015 OHSUSA:761762700.4 Recording requested by and return to: COUNTY OF CONTRA COSTA c/o Orrick, Herrington & Sutcliffe LLP The Orrick Building 405 Howard Street San Francisco, California 94105-2669 Attention: Mary A. Collins, Esq. SITE LEASE by and between the COUNTY OF CONTRA COSTA and the COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY Related to $____________ County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects), 2015 Series A and 2015 Series B Dated as of July 1, 2015 THIS TRANSACTION IS EXEMPT FROM FILING FEES PURSUANT TO CALIFORNIA GOVERNMENT CODE SECTION 6103 AND TRANSFER TAXES PURSUANT TO CALIFORNIA REVENUE AND TAXATION CODE SECTION 11928 OHSUSA:761762700.4 SITE LEASE This Site Lease, dated as of July 1, 2015 (this “Site Lease”), by and 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, a public entity and agency, duly organized and existing pursuant to an Agreement entitled “Joint Exercise of Powers Agreement” by and between the County of Contra Costa and the Contra Costa County Redevelopment Agency (the “Authority”), as lessee; W I T N E S S E T H: WHEREAS, the County has determined that it is in its best interests to finance certain capital improvements for the County; WHEREAS, the Authority has agreed to issue $[A par amount] principal amount of its Lease Revenue Bonds (Refunding and Capital Projects), 2015 Series A (the “2015 Series A Bonds”) and $[B par amount] principal amount of its Lease Revenue Bonds (Refunding and Capital Projects), 2015 Series B (the “2015 Series B Bonds” and together with the 2015 Series A Bonds, the “2015 Bonds”), pursuant to a Trust Agreement, dated as of July 1, 2015 (as amended from time to time, the “Trust Agreement”) by and between the Authority and Wells Fargo Bank, National Association, as trustee (together with any successor thereto, the “Trustee”), for the purpose of financing and refinancing certain capital improvements for the County (the “Capital Projects”) and refunding the Refunded Bonds which were issued to finance certain capital improvements for the County; WHEREAS, the County, pursuant hereto, will lease certain Facilities (as hereinafter defined) of the County to the Authority and the Authority will use the proceeds of the 2015 Bonds [and certain other funds] to pay to the County the rental due hereunder for the Facilities, and the County will use the proceeds of the 2015 Bonds to refund and defease the Refunded Bonds and to make deposits to the Project Fund and the Costs of Issuance Fund, as established in the Trust Agreement; WHEREAS, the Authority will lease back the Facilities to the County pursuant to the Facilities Lease, dated as of July 1, 2015 (the “Facilities Lease”), between the Authority, as lessor, and the County, as lessee; and WHEREAS, under the Facilities Lease, the County will be obligated to make base rental payments to the Authority for the lease of the Facilities and the Authority will pledge such base rental payments to the Trustee for payments of the Bonds (capitalized terms used herein and not otherwise defined herein have the meanings assigned thereto in the Facilities Lease or the Trust Agreement, as applicable); 2 OHSUSA:761762700.4 NOW, THEREFORE, IT IS HEREBY MUTUALLY AGREED as follows: SECTION 1. Lease of Facilities The County hereby leases to the Authority and the Authority hereby hires from the County, on the terms and conditions hereinafter set forth, the real property situated in the County of Contra Costa, State of California, together with the improvements thereon, as described in Exhibit A attached hereto and made a part hereof, and any additional real property added thereto by any supplement or amendment hereto, or any real property substituted for all or any portion of such property in accordance with this Site Lease and the Trust Agreement (the “Facilities”); subject, however, to any conditions, reservations, and easements of record or known to the County. No merger shall be effected by the County’s lease of the Facilities to the Authority under this Site Lease, and the Authority’s sublease of the Facilities back to the County under the Facilities Lease. SECTION 2. Term The term of this Site Lease as to the Facilities shall commence on the date of recordation of this Site Lease in the office of the County Recorder of the County of Contra Costa, State of California, or on ____________, 2015 whichever is earlier, and shall end on the respective dates identified in Exhibit B hereto, as applicable to the related Facility, unless such term is extended or sooner terminated as hereinafter provided. If on such dates the Base Rental Payments attributable to the related Facility and all other amounts then due under the Facilities Lease with respect to such Facility shall not be fully paid, or if the rental or other amounts payable under the Facilities Lease with respect to such Facility shall have been abated at any time and for any reason, then the term of this Site Lease with respect to such Facility shall be extended until ten (10) days after the Base Rental Payments attributable to such Facility and all other amounts then due under the Facilities Lease with respect to such Facility, shall be fully paid, except that the term of this Site Lease as to the respective Facility shall in no event be extended beyond ten (10) years after the date identified with respect thereto. If prior to such date the Base Rental Payments attributable to the related Facility and all other amounts then due under the Facilities Lease with respect to such Facility shall be fully paid, the term of this Site Lease with respect to such Facility shall end ten (10) days thereafter or upon written notice by the County to the Authority, whichever is earlier. SECTION 3. Rental The Authority shall pay to the County from the proceeds of the 2015 Bonds as and for rental hereunder an amount, not less than $____________, which amount the County finds and determines is full and fair rental for the Facilities on the date hereof and which amount the County further agrees will be deposited in the Project Fund as set forth in the Trust Agreement and applied along with other proceeds of the 2015 Bonds to finance or refinance the Capital Projects. SECTION 4. Purpose The Authority shall use the Facilities solely for the purpose of leasing the Facilities to the County pursuant to the Facilities Lease and for such purposes as may be 3 OHSUSA:761762700.4 incidental thereto; provided, that in the event of default by the County under the Facilities Lease, the Authority may exercise the remedies provided in the Facilities Lease. SECTION 5. Environmental Law and Regulations (a) Definitions used in this Section 5 and in Section 6. “Asbestos Containing Materials” shall mean material in friable form containing more than one percent (1%) of the asbestiform varieties of (a) chrysotile (serpentine); (b) crocidolite (ricbeckite); (c) amosite (cummington-itegrinerite); (d) anthophyllite; (e) tremolite; and (f) antinolite. “Asbestos Operations and Maintenance Plan” shall mean that written plan for the Facilities relating to monitoring and maintaining all Asbestos Containing Materials used or located on the Facilities. “Environmental Regulations” shall mean all Laws and Regulations, now or hereafter in effect, with respect to Hazardous Materials, including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act, as amended (42 U.S.C. Section 9601, et seq.) (together with the regulations promulgated thereunder, “CERCLA”), the Resource Conservation and Recovery Act, as amended (42 U.S.C. Section 6901, et seq.) (together with the regulations promulgated thereunder, “RCRA”), the Emergency Planning and Community Right-to-Know Act, as amended (42 U.S.C. Section 11001, et seq.) (together with the regulations promulgated thereunder, “Title III”), the Clean Water Act, as amended (33 U.S.C. Section 1251, et seq.) (together with the regulations promulgated thereunder, “CWA”), the Clean Air Act, as amended (42 U.S.C. Section 7401, et seq.) (together with the regulations promulgated thereunder, “CAA”), the Toxic Substances Control Act, as amended (15 U.S.C. Section 2601, et seq.) (together with the regulations promulgated thereunder, “TSCA”), the Occupational Safety and Health Act, as amended (29 U.S.C. Section 651 et seq.) (together with regulations promulgated thereunder, “OSHA”) and any similar federal, state or local laws and regulations and any so -called local, state or federal “superfund” or “superlien” law. “Hazardous Materials” shall mean any material amount of flammable explosives, polychlorinated biphenyl compounds, heavy metals, chlorinated solvents, cyanide, radon, petroleum products, asbestos or any Asbestos Containing Materials, methane, radioactive materials, pollutants, hazardous materials, hazardous wastes, hazardous, toxic, or regulated substances or related materials, as characterized, regulated or defined in CERCLA, RCRA, CWA, CAA, TSCA, OSHA and Title III, and the regulations promulgated pursuant thereto, and in any other Environmental Regulations applicable to the County, any of the Facilities or the business operations conducted by the County therein. “Laws and Regulations” shall mean any applicable law, regulation, code, order, rule, judgment or consent agreement, including, without limitation, those relating to zoning, building, use and occupancy, fire safety, health, sanitation, air pollution, ecological matters, environmental protection, hazardous or toxic materials, substances or wastes, conservation, 4 OHSUSA:761762700.4 parking, architectural barriers to the handicapped, or restrictive covenants or other agreements affecting title to the Facilities. (b) No portion of the Facilities is located in an area of high potential incidence of radon which has an unventilated basement or subsurface portion which is occupied or used for any purpose other than the foundation or support of the improvements to such Facilities. (c) The County has not received any notice from any insurance company which has issued a policy with respect to the Facilities or from the applicable state or local government agency responsible for insurance standards (or any other body exercising similar functions) requiring the performance of any repairs, alterations or other work, which repairs, alterations or other work have not been completed at the Facilities. The County has not received any notice of default or breach which has not been cured under any covenant, condition, restriction, right-of-way, reciprocal easement agreement or other easement affecting the Facilities which is to be performed or complied with by it. SECTION 6. Environmental Compliance (a) Neither the County nor the Authority shall use or permit the Facilities or any part thereof to be used to generate, manufacture, refine, treat, store, handle, transport or dispose of, transfer, produce or process Hazardous Materials, except, and only to the extent, if necessary to maintain the Facilities and then, only in compliance with all Environmental Regulations, nor shall it permit, as a result of any intentional or unintentional act or omission on its part or by any tenant, subtenant, licensee, guest, invitee, contractor, employee and agent, the storage, transportation, disposal or use of Hazardous Materials or the pumping, spilling, leaking, disposing of, emptying, discharging or releasing (hereinafter collectively referred to as “Release”) or threat of Release of Hazardous Materials on, from or beneath the Facilities or onto any other real property excluding, however, those Hazardous Materials in those amounts ordinarily found in the inventory of an office building, the use, storage, treatment, transportation and disposal of which shall be in compliance with all Environmental Regulations. Upon the occurrence of any Release or threat of Release, or presence, of Hazardous Materials, the Co unty shall promptly commence and perform, or cause to be commenced and performed promptly, without cost to the Trustee or the Authority, all investigations, studies, sampling and testing, and all remedial, removal and other actions necessary to clean up and remove all Hazardous Materials so Released or present, on, from or beneath the Facilities, in compliance with all Environmental Regulations. Notwithstanding anything to the contrary contained herein, underground storage tanks shall only be permitted subject to compliance with subsection (d) and only to the extent necessary to maintain the Facilities. (b) The County and the Authority shall comply with, and shall cause its tenants, subtenants, licensees, guests, invitees, contractors, employees and agents to comply with, all Environmental Regulations, and shall keep the Facilities free and clear of any liens imposed pursuant thereto (provided, however, that any such liens, if not discharged, may be bonded). The County and the Authority shall cause each tenant, and use its best efforts to cause all of such tenant’s subtenants, agents, licensees, employees, contractors, guests and invitees and the guests and invitees of all of the foregoing to comply with all Environmental Regulations with respect to the Facilities; provided, however, that notwithstanding that a portion of this covenant 5 OHSUSA:761762700.4 is limited to the County and the Authority’s use of its best efforts, the Authority and the County shall remain solely responsible for ensuring such compliance and such limitation shall not diminish or affect in any way the County and the Authority’s obligations contained in subsection (c) hereof as provided in subsection (c) hereof. Upon receipt of any notice from any individual or Person with regard to the presence of, or Release of Hazardous Materials on, from or beneath the Facilities, the County and the Authority shall give prompt written notice thereof to the Trustee (and, in any event, prior to the expiration of any period in which to respond to such notice under any Environmental Regulation). (c) Irrespective of whether any representation or warranty contained in Section 5 is not true or correct, the County and the Authority shall, to the extent permitted by law, defend, indemnify and hold harmless the Bondholders and the Trustee, its partners, depositors and each of its and their employees, agents, officers, directors, trustees, successors and assigns, from and against any claims, demands, penalties, fines, attorneys’ fees (including, without limitation, attorneys’ fees incurred to enforce the indemnification contained in this Section 6), consultants’ fees, investigation and laboratory fees, liabilities, settlements (five (5) Business Days’ prior notice of which the Authority or the Trustee, as appropriate, shall have delivered to the County and the Authority), court costs, damages, losses, costs or expenses of whatever kind or nature, known or unknown, contingent or otherwise, occurring in whole or in part, arising out of, or in any way related to, (i) the presence, disposal, Release, threat of Release, removal, discharge, storage or transportation of any Hazardous Materials on, from or beneath the Facilities, (ii) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to such Hazardous Materials, (iii) any lawsuit brought or threatened, settlement reached (five (5) Business Days’ prior notice of which the Authority or the Trustee, as appropriate, shall have delivered to the County and the Authority), or governmental order relating to Hazardous Materials on, from or beneath any of the Facilities, (iv) any violation of Environmental Regulations or subsection (a) or (b) hereof by it or any of its agents, tenants, employees, contractors, licensees, guests, subtenants or invitees, and (v) the imposition of any governmental lien for the recovery of environmental cleanup or removal costs. To the extent that the Authority or the County is strictly liable under any Environmental Regulation, its obligation to the Trustee and the Bondholders and the other indemnitees under the foregoing indemnification shall likewise be without regard to fault on its part with respect to the violation of any Environmental Regulation which results in liability to any indemnitee. Its obligations and liabilities under this Section 6(c) shall survive any termination of the Facilities Lease or exercise of any remedies thereunder, and the satisfaction of all Bonds. (d) The County and the Authority shall conform to and carry out a reasonable program of maintenance and inspection of all underground storage tanks, and shall maintain, repair, and replace such tanks only in accordance with Laws and Regulations, including but not limited to Environmental Regulations. SECTION 7. Owner in Fee The County covenants that it is the owner in fee of the Facilities. The County further covenants and agrees that if for any reason this covenant proves to be incorrect, the County will either institute eminent domain proceedings to condemn the property or i nstitute a quiet title action to clarify the County’s title, and will diligently pursue such action to 6 OHSUSA:761762700.4 completion. The County further covenants and agrees that it will hold the Authority and the Bondowners harmless from any loss, cost or damages resulting from any breach by the County of the covenants contained in this Section. SECTION 8. Assignments and Subleases Unless the County shall be in default under the Facilities Lease, the Authority may not assign its rights under this Site Lease or sublet the Facilities, except pursuant to the Facilities Lease, without the written consent of the County, which consent may be withheld in the County’s sole and absolute discretion. Upon the occurrence of a default by the Co unty under the Facilities Lease, the Authority may assign or sell its rights under this Site Lease or sublet the Facilities, without the consent of the County. SECTION 9. Right of Entry; Easements The County reserves the right for any of its duly authorized representatives to enter upon the Facilities at any reasonable time to inspect the same or to make any repairs, improvements or changes necessary for the preservation thereof. The County agrees, upon written request from the Authority, to grant to the Authority a nonexclusive easement of ingress and egress for persons, vehicles and utilities, twenty (20) feet wide, from each parcel of the Facilities not having access to a public street, and appurtenant to such parcel, over property owned by the County to a public street. The County may, at any time, satisfy its obligation contained in the preceding sentence as to any such parcel of the Facilities by granting to the Authority an easement complying with the requirements of the preceding sentence from such parcel of the Facilities to a public street. SECTION 10. Termination The Authority agrees, upon the termination of this Site Lease, to quit and surrender the Facilities in the same good order and condition as the same were in at the time of commencement of the term hereunder, reasonable wear and tear excepted, and the Authority further agrees that the Facilities and any other permanent improvements and structures existing upon the Facilities at the time of the termination of this Site Lease shall remain thereon and title thereto shall vest in the County. Upon the exercise of the option to purchase set forth in Section 7.03 of the Facilities Lease and upon payment of the option price required by said section, the term of this Site Lease shall terminate as to the portion of the Facilities being so purchased, including the real property upon which portion is situated. SECTION 11. Default In the event the Authority shall be in default in the performance of any obligation on its part to be performed under the terms of this Site Lease, which default continues for one hundred and eighty (180) days following notice and demand for correction thereof to the Authority and the Trustee, the County may exercise any and all remedies granted by law, except that no merger of this Site Lease and of the Facilities Lease shall be deemed to occur as a result 7 OHSUSA:761762700.4 thereof; provided, however, that the County shall have no power to terminate this Site Lease by reason of any default on the part of the Authority if such termination would affect or impair any assignment of the Facilities Lease of all or any part of the Facilities then in effect between the Authority and any assignee or subtenant of the Authority (other than the County under the Facilities Lease) or the rights of the Trustee with respect thereto. So long as any such assignee or subtenant of the Authority (or the Trustee) shall duly perform the terms and conditions of this Site Lease, such assignee or subtenant (or the Trustee) shall be deemed to be and shall become the tenant of the County hereunder and shall be entitled to all of the rights and privileges granted under any such assignment or subrogation; provided, further, that so long as any Bonds are outstanding and unpaid in accordance with the terms thereof, the rentals or any part thereof payable to the Authority or Trustee shall continue to be paid to the Trustee on behalf of the Bondowners. SECTION 12. Quiet Enjoyment The Authority at all times during the term of this Site Lease, shall peaceably and quietly have, hold and enjoy all of the Facilities then leased hereunder. SECTION 13. Waiver of Personal Liability All liabilities under this Site Lease on the part of the Authority shall be solely liabilities of the Authority, as a public entity and agency, and the County hereby releases each and every member, director, officer, agent or employee of t he Authority of and from any personal or individual liability under this Site Lease. No member, director, officer, agent or employee of the Authority shall at any time or under any circumstances be individually or personally liable under this Site Lease to the County or to any other party whomsoever for anything done or omitted to be done by the Authority hereunder. The Authority and its members, directors, officers, agents, employees and assignees shall not be liable to the County or to any other party whomsoever for any death, injury or damage that may result to any person or property by or from any cause whatsoever in, on or about the Facilities. The County, to the extent permitted by law, shall indemnify and hold the Authority and its members, directors, officers, agents, employees and assignees, harmless from, and defend each of them against, any and all claims, liens and judgments arising from the operation of the Facilities or the Project, including, without limitation, death of or injury to any person or damage to property whatsoever occurring in, on or about the Facilities or the Project regardless of responsibility for negligence, but excepting the active negligence of the person or entity seeking indemnity. SECTION 14. Taxes The County covenants and agrees to pay any and all assessments of any kind or character and also all taxes, including possessory interest taxes, levied or assessed upon the Facilities. SECTION 15. Eminent Domain 8 OHSUSA:761762700.4 In the event the whole or any part of the Facilities is taken by eminent domain proceedings, the interest of the Authority shall be recognized and is hereby determined to be the amount of the then unpaid or outstanding Bonds and all other amounts due under the Trust Agreement and the Facilities Lease attributable to such part of the Facilities and shall be paid to the Trustee, and the balance of the award, if any, shall be paid to the County. SECTION 16. Nondiscrimination The Authority herein covenants by and for itself, its heirs, executors, administrators, and assigns, and all person claiming under or through itself, and this Site Lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or groups of persons, on account of any basis listed in subdivision (a) or (d) of Section 12955 of the California Government Code, as those basis are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the California Government Code, in leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the Authority, or any person claiming under or through the Authority, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublesses, subtenants, or vendees in the premises herein leased. SECTION 17. Partial Invalidity If any one or more of the terms, provisions, covenants or conditions of this Site Lease shall to any extent be declared invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, the finding or order or decree of which becomes final, none of the remaining terms, provisions, covenants and conditions of this Site Lease shall be affected thereby, and each provision of this Site Lease shall be valid and enforceable to the fullest extent permitted by law. SECTION 18. Notices All notices, statements, demands, consents, approvals, authorizations, offers, designations, requests or other communications hereunder by either party to the other shall be in writing and shall be sufficiently given and served upon the other party if delivered personally or if mailed by United States registered or certified mail, return receipt requested, postage prepaid, and, if to the County, addressed to the County in care of the Clerk of the Board of Supervisors, County Administration Building, 651 Pine Street, Martinez, California 94553, or if to the Authority, addressed to the County in care of the County Administrator, County Administration Building, 651 Pine Street, Martinez, California 94553, in all cases with a copy to the Trustee at the address specified in the Trust Agreement, or to such other addresses as the respective parties may from time to time designate by notice in writing. SECTION 19. Section Headings All section headings contained herein are for convenience of reference only and are not intended to define or limit the scope of any provision of this Site Lease. 9 OHSUSA:761762700.4 SECTION 20. Amendment The Authority and the County may at any time agree to the amendment of this Site Lease; provided, however, that the Authority and the County agree and recognize that this Site Lease is entered into as contemplated by the terms of the Trust Agreement, and accordingly, that any such amendment shall only be made or effected in accordance with and subject to the terms of the Trust Agreement. SECTION 21. Definitions Capitalized terms not otherwise defined herein shall have the meanings assigned to them in the Facilities Lease or, if not defined therein, the Trust Agreement. SECTION 22. Execution This Site 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 Lease. It is also agreed that separate counterparts of this Site Lease may separately b e executed by the County and the Authority, all with the same force and effect as though the same counterpart had been executed by both the County and the Authority. 10 OHSUSA:761762700.4 IN WITNESS WHEREOF, the County and the Authority have caused this 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 By John M. Gioia Chair of the Board of Supervisors [SEAL] Attest: By ______________________________ David J. Twa Clerk of the Board of Supervisors and County Administrator COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY, Lessee By John M. Gioia Chair Attest: By ______________________________ David J. Twa Executive Director and Secretary A-1 OHSUSA:761762700.4 EXHIBIT A Description of Facilities B-1 OHSUSA:761762700.4 EXHIBIT B Lease Term Facility Term Maximum Extension OHSUSA:761762700.4 CERTIFICATE OF ACCEPTANCE (Government Code Section 27281) This is to certify that the interest in real property conveyed by the foregoing Site Lease from the County of Contra Costa Public Financing Authority to the County of Contra Costa, a political subdivision of the State of California (the “County”), is hereby accepted by order of the undersigned officer on behalf of the Authority on ________________, 2015, [pursuant to authority conferred by Resolution No.________ of the Authority adopted on ___________, 2015,] and the Authority consents to recordation thereof by its duly authorized officer. COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY, as Lessee By John M. Gioia Chair Attest: By David Twa Executive Director and Secretary TABLE OF CONTENTS Page -i- OHSUSA:761762700.4 SECTION 1. Lease of Facilities .................................................................................................. 2 SECTION 2. Term ....................................................................................................................... 2 SECTION 3. Rental ..................................................................................................................... 2 SECTION 4. Purpose ................................................................................................................... 2 SECTION 5. Environmental Law and Regulations ..................................................................... 3 SECTION 6. Environmental Compliance ................................................................................... 4 SECTION 7. Owner in Fee .......................................................................................................... 5 SECTION 8. Assignments and Subleases ................................................................................... 6 SECTION 9. Right of Entry; Easements ..................................................................................... 6 SECTION 10. Termination ............................................................................................................ 6 SECTION 11. Default.................................................................................................................... 6 SECTION 12. Quiet Enjoyment .................................................................................................... 7 SECTION 13. Waiver of Personal Liability .................................................................................. 7 SECTION 14. Taxes ...................................................................................................................... 7 SECTION 15. Eminent Domain .................................................................................................... 7 SECTION 16. Nondiscrimination.................................................................................................. 8 SECTION 17. Partial Invalidity..................................................................................................... 8 SECTION 18. Notices ................................................................................................................... 8 SECTION 19. Section Headings ................................................................................................... 8 SECTION 20. Amendment ............................................................................................................ 9 SECTION 21. Definitions.............................................................................................................. 9 SECTION 22. Execution ............................................................................................................... 9 EXHIBIT A Description of Facilities ....................................................................................... A-1 EXHIBIT B Lease Terms ......................................................................................................... B-1 OH&S Draft 7/6/2015 OHSUSA:761781617.5 Recording requested by and return to: COUNTY OF CONTRA COSTA c/o Orrick, Herrington & Sutcliffe LLP The Orrick Building 405 Howard Street San Francisco, California 94105-2669 Attention: Mary A. Collins, Esq. FACILITIES LEASE by and between COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY and the COUNTY OF CONTRA COSTA Related to $_____________ County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects) 2015 Series A and 2015 Series B Dated as of July 1, 2015 THIS TRANSACTION IS EXEMPT FROM FILING FEES PURSUANT TO CALIFORNIA GOVERNMENT CODE SECTION 6103 AND TRANSFER TAXES PURSUANT TO CALIFORNIA REVENUE AND TAXATION CODE SECTION 11928. OHSUSA:761781617.5 FACILITIES LEASE This Facilities Lease, dated as of July 1, 2015, by and between the COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY (the “Authority”), a joint exercise powers authority duly organized and existing under and by virtue of the laws of the State of California, as sublessor, and the COUNTY OF CONTRA COSTA (the “County”), a body corporate and politic and a political subdivision of the State of California, as sublessee; W I T N E S S E T H: WHEREAS, the Authority, at the request of the County, is refunding outstanding bonds (the “2015 Refunded Bonds”) issued pursuant to the Trust Agreement dated as of February 1, 1999 (as supplemented and amended, the “1999 Trust Agreement”) and releasing encumbrances on certain facilities the rental payments for which secured the 2015 Refunded Bonds; WHEREAS, the County has determined to finance and refinance the construction, renovation and acquisition of various capital projects of the County as set forth in Exhibit D hereto, as the same may be changed from time to time (the “Capital Projects”); WHEREAS, the Authority intends to assist the County in financing and refinancing the Capital Projects and refunding the 2015 Refunded Bonds by issuing the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects), 2015 Series A and 2015 Series B (collectively, the “2015 Bonds”); WHEREAS, the County will lease to the Authority certain capital assets of the County (as further defined herein, the “Facilities”) pursuant to a Site Lease, dated as of July 1, 2015; WHEREAS, the County will lease back the Facilities from the Authority pursuant to the terms of this Facilities Lease; and WHEREAS, under this Facilities Lease, the County will be obligated to make base rental payments to the Authority for the lease of the Facilities and such other facilities as may from time to time be leased hereunder; NOW, THEREFORE, in consideration of the mutual covenants herein, the parties hereto agree as follows: 2 OHSUSA:761781617.5 ARTICLE I DEFINITIONS SECTION 1.01. Definitions. Unless the context otherwise requires, the terms defined in this Section shall, for all purposes of this Facilities Lease, have the meanings herein specified, which meanings shall be equally applicable to both the singular and plural forms of any of the terms herein defined. Capitalized terms not otherwise defined herein shall have the meanings assigned to such terms in the Trust Agreement. “Additional Payments” means all amounts payable to the Authority or the Trustee or any other person from the County as Additional Payments pursuant to Section 3.02 hereof. “Architects” means the architects, engineers or designers of the Capital Projects or any portion thereof, and any successor or successors to any thereof. “Authority” means the County of Contra Costa Public Financing Authority, acting as sublessor hereunder and any surviving, resulting or transferee entity. “Base Rental” and “Base Rental Payments” means all amounts payable to the Authority from the County as Base Rental Payments pursuant to Section 3.01 hereof. “Base Rental Payment Schedule” means the schedule of Base Rental Payments payable to the Authority from the County pursuant to Section 3.01 hereof and attached hereto as Exhibit B. “Bonds” means, collectively, the 2015 Bonds and any other bonds issued by the Authority and payable from the Base Rental. “Capital Projects” means the various public capital improvements and projects, including, but not limited to the acquisition, installation, implementation and construction of the 2015 Project, as set forth in Exhibit D hereto, as the same may be amended from time to time by a Certificate of the County delivered to the Trustee, to be financed or refinanced by a portion of the proceeds of the Bonds. “Code” means the Internal Revenue Code of 1986, as the same shall be hereafter amended, and any regulations heretofore issued or which shall be hereafter issued by the United States Department of the Treasury thereunder. “Contractors” means the construction contractor for any portion of the Capital Projects and any successor or successors to any thereof. “County” means the County of Contra Costa, California, a body corporate and politic and a political subdivision of the State of California. 3 OHSUSA:761781617.5 “Event of Default” shall have the meaning specified in Section 6.01 hereof. “Facilities” shall mean the real property and the improvements thereon as described in Exhibit A hereto, or any County buildings, other improvements and facilities, added thereto or substituted therefor, or any portion thereof, in accordance with this Facilities Lease and the Trust Agreement. “Facilities Lease” means this Facilities Lease, as originally executed and recorded or as it may from time to time be supplemented, modified or amended pursuant to the provisions hereof and of the Trust Agreement. “Medical Clinic” means the 12,000-square-foot, behavioral health facility and expansion of a medical clinic (approximately 10,000 square feet) to be located on an approximately 0.93- acre parcel, adjacent and connected to the County’s West County Health Center, located at 13601 San Pablo Avenue in San Pablo, California. “Rental Payment Period” means the twelve month period commencing June 1 of each year and ending the following May 31, and the initial period commencing on the effective date hereof and ending the following May 31. “Solar Panels” means the solar photovoltaic panels installed on canopies located on six sites within the County, specifically: Juvenile Hall (202 Glacier Drive in Martinez, California); the Sheriff Coroner-Forensic Science Center (1960 Muir Road, in Martinez, California); the Office of Emergency Services (50 Glacier Drive, in Martinez, California); the Sheriff Patrol and Investigation Facility (1980 Muir Road, in Martinez, California); the Public Works Department Administrative office building (255 Glacier Road, in Martinez, California); and the West County Health Center (13601 San Pablo Avenue in San Pablo, California). “Trust Agreement” means the Trust Agreement, dated as of July 1, 2015, by and between the Trustee and the Authority and acknowledged by the County, as originally executed or as it may from time to time be supplemented, modified or amended by a Supplemental Trust Agreement entered into pursuant to the provisions thereof. “2015 Project” means the acquisition, installation, implementation and construction of certain projects of the County, specifically the Medical Clinic and the Solar Panels, and payment of any costs associated with financing of said projects, as set forth in Exhibit D hereto, as the same may be changed from time to time, in accordance with Section 3.07 hereof, by a Certificate of the County delivered to the Trustee. “2015 Refunded Bonds” means 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), 2002 Series A, the County of Contra Costa Public Financing Authority Lease R evenue Bonds (Refunding and Various Capital Projects), 2002 Series B, the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Various Capital Projects), 2003 Series A and a portion of the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects), 2007 Series A identified in the Escrow Agreement, all issued under the 1999 Trust Agreement. 4 OHSUSA:761781617.5 ARTICLE II LEASE OF FACILITIES; TERM SECTION 2.01. Lease of Facilities. The Authority hereby leases to the County and the County hereby leases from the Authority the Facilities, subject, however, to all easements, encumbrances, and restrictions that exist at the time of the commencement of the term of this Facilities Lease, as defined in Section 2.02 hereof. The County hereby agrees and covenants during the term of this Facilities Lease that, except as hereinafter provided, it will use the Facilities for public and County purposes so as to afford the public the benefits contemplated by this Facilities Lease. SECTION 2.02. Term; Occupancy; and Release of Existing Facilities. The term of this Facilities Lease shall commence on the date of recordation of this Facilities Lease in the office of the County Recorder of Contra Costa County, State of California, or on ___________, 2015, whichever is earlier, and shall end for the respective Facilities on the dates specified in Exhibit C hereto, unless such term is extended or sooner terminated as hereinafter provided. If on such dates, the Base Rental Payments attributable to the related Facility and all other amounts then due hereunder with respect to such Facility shall not be fully paid, or if the rental payable hereunder with respect to such Facility shall have been abated at any time and for any reason, then the term of this Facilities Lease with respect to such Facility shall be extended until the Base Rental Payments attributable to such Facility and all other amounts then due hereunder with respect to such Facility shall be fully paid, except that the term of this Facilities Lease as to the respective Facility shall in no event be extended beyond ten (10) years after the date identified with respect thereto. If prior to such date, the Base Rental Payments attributable to the related Facility or the proportionate amount of Bonds payable therefrom and all other amounts then due hereunder with respect to such Facility shall be fully paid, or provision therefor made, the term of this Facilities Lease with respect to such Facility shall end ten (10) days thereafter or upon written notice by the County to the Authority, whichever is earlier. Upon the expiration of the term of this Facilities Lease with respect to a particular Facility pursuant to the preceding paragraph, the respective Facility shall be released from this Facilities Lease without compliance with the release requirements set forth in Section 2.03. SECTION 2.03. Substitution; Release; Addition of Property. The County and the Authority may add, substitute or release real property as part of the Facilities, but only after the County shall have filed with the Authority and the Trustee, with written notice to each rating agency then providing a rating for the Bonds, all of the following: (a) Executed copies of the Facilities Lease or amendments thereto containing the amended description of the Facilities. (b) A Certificate of the County with copies of the Facilities Lease or the Site Lease, if needed, 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. 5 OHSUSA:761781617.5 (c) A Certificate of the County, supported by expert knowledge (which may be that of the Real Estate Manager of the County) or construction cost information evidencing that the fair market value or the insured value of the Facilities that will constitute the Facilities after such addition, substitution or release will be at least equal to the aggregate outstanding principal amount of the Base Rental Payments after such addition, substitution or release, and that the annual fair rental value of the Facilities after such addition, substitution or release will be at least equal to the maximum annual Base Rental Payments coming due and payable hereunder after such addition, substitution or release, and that the useful life of such Facilities will at least extend to the final Base Rental Payment date. (d) In connection with any addition or substitution of property, a leasehold owner’s title insurance policy or policies or a commitment for such policy or policies or an amendment or endorsement to an existing title insurance policy or policies resulting in title insurance with respect to the Facilities after such addition or substitution in an amount at least equal to the aggregate principal amount of Bonds Outstanding at the time of substitution or addition of Facilities. (e) A Certificate of the County stating that (i) such addition, substitution or release does not adversely affect the County’s use and occupancy o f the Facilities (as such term will be defined following the addition, substitution or release) and (ii) no Event of Default has occurred and is continuing hereunder. (f) In connection with any substitution or release of property, a Certificate of the County stating that the substitution or release will not cause the County to violate its covenants, representations and warranties hereunder. (g) In connection with any substitution of property, a Certificate of the County stating that the Facility to be added is of approximately the same or greater degree of essentiality to the County as the Facility being replaced. (h) An Opinion of Counsel stating that such amendment or modification (i) complies with the terms of the Constitution and laws of the State and of the Trust Agreement; (ii) will, upon the execution and delivery thereof, be valid and binding upon the Authority and the County; and (iii) will not cause the interest on the Bonds to be included in gross income for federal income tax purposes. ARTICLE III RENTAL PAYMENTS; USE OF PROCEEDS SECTION 3.01. Base Rental Payments. The County agrees to pay to the Authority, as Base Rental Payments for the use and occupancy of the Facilities (subject to the provisions of Sections 3.04, 3.06 and 7.01 of this Facilities Lease) annual rental payments with principal and interest components, the interest components being payable semi-annually, in accordance with the Base Rental Payment Schedule attached hereto as Exhibit B and made a part hereof. The County is hereby directed to pay all such Base Rental Payments directly to the Trustee for application as provided in the Trust Agreement. Base Rental Payments shall be 6 OHSUSA:761781617.5 calculated on an annual basis, for each Rental Payment Period, and each annual Base Rental shall be divided into two interest components, due on December 1 and June 1, and one principal component, due on June 1, except that the first Rental Payment Period commences on the date of recordation of this Facilities Lease and ends on ___________, 20__. Each Base Rental Payment installment shall be payable on the third Business Day immediately preceding its due date. The interest components of the Base Rental Payments shall be paid by the County as and constitute interest paid on the principal components of the Base Rental Payments to be paid by the County hereunder, computed on the basis of a 360-day year composed of twelve 30-day months. Each annual payment of Base Rental (to be payable in installments as aforesaid) shall be for the use of the Facilities. If the term of this Facilities Lease shall have been extended pursuant to Section 2.02 hereof, Base Rental Payment installments shall continue to be due on December 1 and June 1 in each year, and payable prior thereto as hereinabove described, continuing to and including the date of termination of this Facilities Lease. Upon such extension of this Facilities Lease, the County shall deliver to the Trustee a Certificate setting forth the extended rental payment schedule, which schedule shall establish the principal and interest components of the Base Rental Payments so that the principal components will in the aggregate be sufficient to pay all unpaid principal components with interest components sufficient to pay all unpaid interest components plus interest. If at any time the Base Rental shall not have been paid by the County when due, for any reason whatsoever, and no other source of funds shall have been available to make the payments of principal and interest on the Bonds, the principal and interest components of the Base Rental shall be recalculated by the County to reflect interest on the unpaid Base Rental Payments as provided in Section 3.04. Upon request by the Authority or the Trustee, a revised Exhibit B to this Facilities Lease shall be prepared by the County and supplied to the Authority and the Trustee reflecting such recalculation. SECTION 3.02. Additional Payments. The County shall also pay such amounts (herein called the “Additional Payments”) as shall be required by the Authority for the payment of all costs and expenses incurred by the Authority in connection with the execution, performance or enforcement of this Facilities Lease, or any pledge of Base Rental payable hereunder, the Trust Agreement, its interest in the Facilities and the lease of the Facilities to the County, including but not limited to payment of all fees, costs and expenses and all administrative costs of the Authority related to the Facilities, including, without limiting the generality of the foregoing, salaries and wages of employees, all expenses, compensation and indemnification of the Trustee payable by the Authority under the Trust Agreement, fees of auditors, accountants, attorneys or architects, and all other necessary administrative costs of the Authority or charges required to be paid by it in order to maintain its existence or to comply with the terms of the Bonds or of the Trust Agreement; but not including in Additional Payments amounts required to pay the principal of or interest on the Bonds. Such Additional Payments shall be billed to the County by the Authority or the Trustee from time to time, together with a statement certifying that the amount billed has been paid by the Authority or by the Trustee on behalf of the Authority, for one or more of the items above described, or that such amount is then payable by the Authority or the Trustee for such 7 OHSUSA:761781617.5 items. Amounts so billed shall be paid by the County to the billing party within 30 days after receipt of the bill by the County. The County reserves the right to audit billings for Additional Payments although exercise of such right shall in no way affect the duty of the County to make full and timely payment for all Additional Payments. The Authority has issued and may in the future issue bonds and has entered into and may in the future enter into leases to finance capital improvements other than the Capital Project. The administrative costs of the Authority shall be allocated among the facilities subject to such other lease agreements and the Facilities, as hereinafter in this paragraph provided. The fees of the Trustee under the Trust Agreement, and any other expenses directly attributable to the Facilities shall be included in the Additional Payments payable hereunder. The fees of any trustee or paying agent under any indenture securing bonds of the Authority or any trust agreement other than the Trust Agreement, and any other expenses directly attributable to any facilities other than the Facilities, shall not be included in the administrative costs of the Facilities and shall not be paid from the Additional Payments payable hereunder. Any expenses of the Authority not directly attributable to any particular lease of the Authority shall be equitably allocated among all such leases, including this Facilities Lease, in accordance with sound accounting practice. In the event of any question or dispute as to such allocation, the written opinion of an independent firm of certified public accountants, employed by the Authority to consider the question and render an opinion thereon, shall be a final and conclusive determination as to such allocation. The Trustee may conclusively rely upon the Written Request of the Authority, with the approval of the County Administrator or the Count y Finance Director, or a duly authorized representative of the County, endorsed thereon, in making any determination that costs are payable as Additional Payments hereunder, and shall not be required to make any investigation as to whether or not the items so requested to be paid are expenses related to the lease of the Facilities. SECTION 3.03. Fair Rental Value. Such payments of Base Rental Payments and Additional Payments for each rental period during the term of this Facilities Lease shall constitute the total rental for said Rental Payment Period and shall be paid by the County in each Rental Payment Period for and in consideration of the right of use and occupancy of, and continued quiet use and enjoyment of, the Facilities during each such period for which said rental is to be paid. The parties hereto have agreed and determined that such total rental payable for each Rental Payment Period represents the fair rental value of the Facilities for each such period. In making such determination, consideration has been given to the value of the Facilities, costs of acquisition, design, construction and financing of the Facilities, other obligations of the parties under this Facilities Lease, the uses and purposes which may be served by the Facilities and the benefits therefrom which will accrue to the County and the general public. SECTION 3.04. Payment Provisions. Each installment of rental payable hereunder shall be paid in lawful money of the United States of America to or upon the order of the Authority at the principal office of the Trustee in San Francisco, California, or such other place as the Authority shall designate. Any such installment of rental accruing hereunder which shall not be paid when due and payable under the terms of this Facilities Lease shall bear interest at the rate of twelve percent (12%) per annum, or such lesser rate of interest as may be permitted by law, from the date when the same is due hereunder until the same shall be paid. Notwithstanding any dispute between the Authority and the County, the Coun ty shall make all 8 OHSUSA:761781617.5 rental payments when due without deduction or offset of any kind and shall not withhold any rental payments pending the final resolution of such dispute. In the event of a determination that the County was not liable for said rental payments or any portion thereof, said payments or excess of payments, as the case may be, shall be credited against subsequent rental payments due hereunder or refunded at the time of such determination. Amounts required to be deposited by the County with the Trustee pursuant to this Section on any date shall be reduced to the extent that amounts on deposit in the Revenue Fund, the Interest Account or the Principal Account are available therefor. All payments received shall be applied first to the interest components of the Base Rental Payments due hereunder, then to the principal components of the Base Rental Payments due hereunder and thereafter to all Additional Payments due hereunder, but no such application of any payments which are less than the total rental due and owing shall be deemed a waiver of any default hereunder. Rental is subject to abatement as provided in Section 3.06. Nothing contained in this Facilities Lease shall prevent the County from making from time to time contributions or advances to the Authority for any purpose now or hereafter authorized by law, including the making of repairs to, or the restoration of, the Facilities in the event of damage to or the destruction of the Facilities. SECTION 3.05. Appropriations Covenant. The County covenants to take such action as may be necessary to include all such Base Rental Payments and Additional Payments due hereunder in its annual budgets, to make necessary annual appropriations for all such Base Rental Payments and Additional Payments as shall be required to provide funds in such year for such Base Rental Payments and Additional Payments. [The County will deliver to the Authority and the Trustee within sixty (60) days of adoption of the final County budget a Certificate of the County (in the form set forth in Exhibit E attached hereto) stating that the budget as adopted appropriates all moneys necessary for the payment of Base Rental Payments and Additional Payments hereunder.] The covenants on the part of the County herein contained shall be deemed to be and shall be construed to be duties imposed by law and it shall be the duty of each and every public official 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 t he County to carry out and perform the covenants and agreements in this Facilities Lease agreed to be carried out and performed by the County. The Authority and the County understand and intend that the obligation of the County to pay Base Rental Payments and Additional Payments hereunder shall constitute a current expense of the County and shall not in any way be construed to be a debt of the County in contravention of any applicable constitutional or statutory limitation or requirement concerning the creation of indebtedness by the County, nor shall anything contained herein constitute a pledge of the general tax revenues, funds or moneys of the County. Base Rental Payments and Additional Payments due hereunder shall be payable only from current funds which are budgeted and appropriated or otherwise legally available for the purpose of paying Base Rental Payments and Additional Payments or other payments due hereunder as consideration for use of the Facilities. This Facilities Lease shall not create an immediate 9 OHSUSA:761781617.5 indebtedness for any aggregate payments which may become due hereunder in the event that the term of the Facilities Lease is continued. The County has not pledged the full faith and credit of the County, the State of California or any agency or department thereof to the payment of the Base Rental Payments and Additional Payments or any other payments due hereunder. SECTION 3.06. Rental Abatement. The Base Rental Payments and Additional Payments shall be abated proportionately, during any period in which by reason of any damage or destruction (other than by condemnation which is hereinafter provided for) there is substantial interference with the use and occupancy of the Facilities by the County, in the proportion in which the cost of that portion of the Facilities rendered unusable bears to the cost of the whole of the Facilities. Such abatement shall continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. In the event of any such damage or destruction, this Facilities Lease shall continue in full force and effect and the County waives any right to terminate this Facilities Lease by virtue of any such damage or destruction. SECTION 3.07. Use of Proceeds. The parties hereto agree that the proceeds of the Bonds will be used to finance or refinance the Capital Projects, to refund the 2015 Refunded Bonds and to pay the costs of issuing the Bonds and incidental and related expenses. The County hereby agrees to construct the Capital Projects from the proceeds of the 2015 Bonds provided to the County by the Authority in consideration for the leasehold interest in the real property comprising the Facilities. The Authority and the County agree that the Capital Projects will be constructed in accordance with the plans and specifications prepared by the designers of the Capital Projects and approved by the County. The County may alter the 2015 Project or issue change orders altering the construction contract plans and specifications during the course of construction, and the Authority agrees to cooperate fully with the County to cause such alterations or change orders to be implemented. Failure of the County to complete the 2015 Project shall not cause an abatement of Base Rental hereunder. ARTICLE IV MAINTENANCE; ALTERATIONS AND ADDITIONS SECTION 4.01. Maintenance and Utilities. During such time as the County is in possession of the Facilities, all maintenance and repair, both ordinary and extraordinary, of the Facilities shall be the responsibility of the County, which shall at all times maintain or otherwise arrange for the maintenance of the Facilities in first class condition, and the County shall pay for or otherwise arrange for the payment of all utility services supplied to the Facilities, which may include, without limitation, janitor service, security, power, gas, telephone, light, heating, ventilation, air conditioning, water and all other utility services, and shall pay for or otherwise arrange for payment of the cost of the repair and replacement of the Facilities resulting from ordinary wear and tear or want of care on the part of the County or any assignee or sublessee thereof or any other cause and shall pay for or otherwise arrange for the payment of all 10 OHSUSA:761781617.5 insurance policies required to be maintained with respect to the Facilities. In exchange for the rental herein provided, the Authority agrees to provide only the Facilities. SECTION 4.02. Changes to the Facilities. Subject to Section 8.02 hereof, the County shall, at its own expense, have the right to remodel the Facilities or to make additions, modifications and improvements to the Facilities. All such additions, modifications and improvements shall thereafter comprise part of the Facilities and be subject to the provisions of this Facilities Lease. Such additions, modifications and improvements shall not in any way damage the Facilities or cause them to be used for purposes other than those authorized under the provisions of state and federal law; and the Facilities, upon completion of any additions, modifications and improvements made pursuant to this Section, shall be of a value which is at least equal to the value of the Facilities immediately prior to the making of such additions, modifications and improvements. SECTION 4.03. Installation of County’s Equipment. The County and any sublessee may at any time and from time to time, in it s sole discretion and at its own expense, install or permit to be installed other items of equipment or other personal property in or upon the Facilities. All such items shall remain the sole property of such party, in which neither the Authority nor the Trustee shall have any interest, and may be modified or removed by such party at any time provided that such party shall repair and restore any and all damage to the Facilities resulting from the installation, modification or removal of any such items. Nothing in this Facilities Lease shall prevent the County from purchasing items to be installed pursuant to this Section under a conditional sale or lease purchase contract, or subject to a vendor’s lien or security agreement as security for the unpaid portion of the purchase price thereof, provided that no such lien or security interest shall attach to any part of the Facilities. ARTICLE V INSURANCE SECTION 5.01. Fire and Extended Coverage Insurance. The County shall procure or cause to be procured and maintain or cause to be maintained, throughout the term of this Facilities 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. Said extended coverage insurance shall, as nearly as practicable, cover loss or damage by explosion, windstorm, flood, riot and ri ot attending a strike, aircraft, vehicle damage, hail, smoke and such other hazards as are normally covered by such insurance. Such insurance shall 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 insurance), or, in the alternative, shall be in an amount and in a form sufficient (together with moneys held under the Trust Agreement), in the event of total or partial loss, to enable the County to prepay all or any part of the Base Rental Payments then unpaid, pursuant to Section 7.02 hereof and to redeem outstanding Bonds. 11 OHSUSA:761781617.5 In the event of any damage to or destruction of any part of the Facilities, caused by the perils covered by such insurance, the Authority, except as hereinafter provided, shall cause the proceeds of such insurance to be utilized for the repair, reconstruction or replacement of the damaged or destroyed portion of the Facilities, and the Trustee shall hold said proceeds separate and apart from all other funds, in a special fund to be designated the “Insurance and Condemnation Fund,” to the end that such proceeds shall be applied to the repair, reconstruction or replacement of the Facilities to at least the same good order, repair and condition as they were in prior to the damage or destruction, insofar as the same may be accomplished by the use of said proceeds. The Trustee shall permit withdrawals of said proceeds from time to time upon receiving the Written Request of the Authority, stating that the Authority has expended moneys or incurred liabilities in an amount equal to the amount therein requested to be paid over to it for the purpose of repair, reconstruction or replacement, and specifying the items for which such moneys were expended, or such liabilities were incurred. Any balance of said proceeds not required for such repair, reconstruction or replacement shall be treated by the Trustee as Base Rental Payments and applied in the manner provided by Section 5.02 of the Trust Agreement, provided, however, that if the insurance proceeds were paid to cover damage to property of the County that does not constitute part of the Facilities, as defined herein, including, but not limited to furniture and office equipment, then such proceeds shall be paid to the County. Alternatively, the Authority, at its option, and if the proceeds of such insurance together with any other moneys then available for the purpose are at least sufficient to redeem an aggregate principal amount of outstanding Bonds, equal to the amount of Base Rental attributable to the portion of the Facilities so destroyed or damaged (determined by reference to the proportion which the cost of such portion of the Facilities bears to the cost of the Facilities), may elect not to repair, reconstruct or replace the damaged or destroyed portion of the Facilities and thereupon shall cause said proceeds to be used for the redemption of outstanding Bonds pursuant to the provisions of the Trust Agreement. The Authority and the County shall promptly apply for Federal disaster aid or State of California disaster aid in the event that the Facilities are damaged or destroyed as a result of an earthquake occurring at any time. Any proceeds received as a result of such disaster aid shall be used to repair, reconstruct, restore or replace the damaged or destroyed portions of the Facilities, or, at the option of the County and the Authority, to enable the County to prepay all or any part of the Base Rental Payments then unpaid, pursuant to Section 7.02 h ereof, and to redeem outstanding Bonds if such use of such disaster aid is permitted. As an alternative to providing the insurance required by the first paragraph of this Section, or any portion thereof, the County may provide a self insurance method or plan of protection if and to the extent such self insurance method or plan of protection shall afford reasonable coverage for the risks required to be insured against, in light of all circumstances, giving consideration to cost, availability and similar plans or methods of protection adopted by public entities in the State of California other than the County. So long as such method or plan is being provided to satisfy the requirements of this Facilities Lease, there shall be filed annually with the Trustee a statement of an actuary, insurance consultant or other qualified person (which may be the Risk Manager of the County), stating that, in the opinion of the signer, the substitute method or plan of protection is in accordance with the requirements of this Section and, when effective, would afford reasonable coverage for the risks required to be insured against. There shall also be filed a Certificate of the County setting forth the details of such substitute method or 12 OHSUSA:761781617.5 plan. In the event of loss covered by any such self insurance method, the liability of the County hereunder shall be limited to the amounts in the self insurance reserve fund or funds created under such method. SECTION 5.02. Liability Insurance. Except as hereinafter provided, the County shall procure or cause to be procured and maintain or cause to be maintained, throughout the term of this Facilities Lease, a standard comprehensive general liability insurance policy or policies in protection of the Authority and its members, directors, officers, agents and employees and the Trustee, indemnifying said parties against all direct or contingent loss or liability for damages for personal injury, death or property damage occasioned by reason of the operation of the Facilities, with minimum liability limits of $1,000,000 for personal injury or death of each person and $3,000,000 for personal injury or deaths of two or more persons in each accident or event, and in a minimum amount of $200,000 for damage to property resulting from each accident or event. Such public liability and property damage insurance may, however, be in the form of a single limit policy in the amount of $3,000,000 covering all such risks. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance carried by the County. As an alternative to providing the insurance required by the first paragraph of this Section, or any portion thereof, the County may provide a self insurance method or plan of protection if and to the extent such self insurance method or plan of protection shall afford reasonable protection to the Authority, its members, directors, officers, agents and employees and the Trustee, in light of all circumstances, giving consideration to cost, availability and similar plans or methods of protection adopted by public entities in the State of California other than the County. So long as such method or plan is being provided to satisfy the requirements of this Facilities Lease, there shall be filed annually with the Trustee a statement of an actuary, independent insurance consultant or other qualified person (which may be the Risk Manager of the County), stating that, in the opinion of the signer, the substitute method or plan of protection is in accordance with the requirements of this Section and, when effective, would afford reasonable protection to the Authority, its members, directors, officers, agents and employees and the Trustee against loss and damage from the hazards and risks covered thereby. There shall also be filed a Certificate of the County setting forth the details of such substitute method or plan. SECTION 5.03. Rental Interruption or Use and Occupancy Insurance. The County shall procure or cause to be procured and maintain or cause to be maintained, rental interruption or use and occupancy insurance to cover loss, total or partial, of the rental income from or the use of the Facilities as the result of any of the hazards covered by the insurance required by Section 5.01 hereof (provided with respect to earthquake insurance, only if available on the open market from reputable insurance companies at a reasonable cost, as determined by the County), in an amount sufficient to pay the part of the total rent hereunder attributable to the portion of the Facilities rendered unusable (determined by reference to the proportion which the cost of such portion bears to the cost of the Facilities) for a period of at least two years, except that such insurance may be subject to a deductible clause of not to exceed two hundred and fifty thousand dollars ($250,000) or a comparable amount adjusted for inflation (or more in the case of earthquake coverage), and with the additional exception that with respect to coverage for terrorism related loss, the period may be only one year, provided that the County use its best 13 OHSUSA:761781617.5 efforts to obtain such coverage for a period of at least two years assuming it is available on the open market from reputable insurance companies at a reasonable cost, as determined by the County. Any proceeds of such insurance shall be used by the Trustee to reimburse to the County any rental theretofore paid by the County under this Facilities Lease attributable to such structure for a period of time during which the payment of rental under this Facilities Lease is abated, and any proceeds of such insurance not so used shall be applied as provided in Section 3.01 (to the extent required for the payment of Base Rental) and in Section 3.02 (to the extent required for the payment of Additional Payments) and any remainder shall be treated as Revenu e under the Trust Agreement. The County shall not be entitled to self-insure for rental interruption insurance. SECTION 5.04. Worker’s Compensation. The County shall also maintain worker’s compensation insurance issued by a responsible carrier authorized under the laws of the State of California to insure its employees against liability for compensation under the Worker’s Compensation Insurance and Safety Act now in force in California, or any act hereafter enacted as an amendment or supplement thereto. As an alternative, such insurance may be maintained as part of or in conjunction with any other insurance carried by the County. Such insurance may be maintained by the County in the form of self-insurance. SECTION 5.05. Title Insurance. The County shall obtain, for the benefit of the Authority, upon the execution and delivery of this Facilities Lease, title insurance on the Facilities, in an amount equal to the aggregate principal amount of the Bonds, issued by a company of recognized standing duly authorized to issue the same, subject only to Permitted Encumbrances. SECTION 5.06. Insurance Proceeds; Form of Policies. All policies of insurance required by Sections 5.01 and 5.03 hereof shall name the County, the Authority and the Trustee as insured and shall contain a lender’s loss payable endorsement in favor of the Trustee substantially in accordance with the form approved by the Insurance Services Office and the California Bankers Association. The Trustee shall, to the extent practicable, collect, adjust and receive all moneys which may become due and payable under any such policies, may compromise any and all claims thereunder and shall apply the proceeds of such insurance as provided in Sections 5.01 and 5.03. All policies of insurance required by this Facilities Lease shall provide that the Trustee shall be given thirty (30) days notice of each expiration thereof or any intended cancellation thereof or reduction of the coverage provided thereby. The Trustee shall not be responsible for the sufficiency of any insurance herein required and shall be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss agreed to by the County. The County shall pay when due the premiums for all insurance policies required by this Facilities Lease. SECTION 5.07. Annual Certificates. The County will deliver to the Authority and the Trustee on or before September 15 in each year a written Certificate of an officer of the County (in the form set forth in Exhibit F attached hereto) stating whether such policies satisfy the requirements of this Facilities Lease, setting forth the insurance policies then in force pursuant to this Article, the names of the insurers which have issued the policies, the amounts thereof and the property and risks covered thereby, and, if any self -insurance program is being provided, the annual report of an actuary, independent insurance consultant or other 14 OHSUSA:761781617.5 qualified person containing the information required for such self-insurance program and described in Sections 5.01, 5.02 and 5.04. Delivery to the Trustee of the certificate under the provisions of this Section shall not confer responsibility upon the Trustee as to the sufficiency of coverage or amounts of such policies. If so requested in writing by the Trustee, the County shall also deliver to the Trustee certificates or duplicate originals or certified copies of each insurance policy described in such schedule. Any policies of insurance provided by a commercial insurer to satisfy the requirements of Sections 5.01, 5.02 or 5.03 hereof shall be provided by a commercial insurer rated in one of the two highest rating categories by S&P and by Moody’s. ARTICLE VI DEFAULTS AND REMEDIES SECTION 6.01. Defaults and Remedies. (a) If the County shall fail to pay any rental payable hereunder when the same becomes due, time being expressly declared to be of the essence of this Facilities Lease or the County shall fail to keep, observe or perform any other term, covenant or condition contained herein to be kept or performed by the County for a period of sixty (60) days after notice of the same has been given to the County by the Authority or the Trustee or for such additional time as is reasonably required, in the sole discretion of th e Authority, to correct the same, or upon the happening of any of the events specified in subsection (b) of this Section (any such case above being an “Event of Default”), the County shall be deemed to be in default hereunder and it shall be lawful for the Authority to exercise any and all remedies available pursuant to law or granted pursuant to this Facilities Lease. Upon any such default, the Authority, in addition to all other rights and remedies it may have at law, shall have the option to do any of the following: (1) To terminate this Facilities Lease in the manner hereinafter provided on account of default by the County, notwithstanding any re-entry or re-letting of the Facilities as hereinafter provided for in subparagraph (2) hereof, and to re-enter the Facilities and remove all persons in possession thereof and all personal property whatsoever situated upon the Facilities and place such personal property in storage in any warehouse or other suitable place located within the County of Contra Costa, California. In the event of such termination, the County agrees to surrender immediately possession of the Facilities, without let or hindrance, and to pay the Authority all damages recoverable at law that the Authority may incur by reason of default by the County, including, without limitation, any costs, loss or damage whatsoever arising out of, in connection with, or incident to any such re-entry upon the Facilities and removal and storage of such property by the Authority or its duly authorized agents in accordance with the provisions herein contained. Neither notice to pay rent or to deliver up possession of the Facilities given pursuant to law nor any entry or re-entry by the Authority nor any proceeding in unlawful detainer, or otherwise, brought by the Authority for the purpose of effecting such re-entry or obtaining possession of the Facilities nor the appointment of a receiver upon initiative of the Authority to protect the Authority’s interest under this Facilities Lease shall of itself operate to terminate this Facilities Lease, and no termination of this Facilities Lease on account of default by the County shall be or become effective by operation of law or acts of the parties hereto, or otherwise, unless and until the Authority shall have given written notice to the 15 OHSUSA:761781617.5 County of the election on the part of the Authority to terminate this Facilities Lease. The County covenants and agrees that no surrender of the Facilities or of the remainder of the term hereof or any termination of this Facilities Lease shall be valid in any manner or for any purpose whatsoever unless stated or accepted by the Authority by such written notice. (2) Without terminating this Facilities Lease, (i) to collect each installment of rent as it becomes due and enforce any other terms or provision hereof to be kept or performed by the County, regardless of whether or not the County has abandoned the Facilities, or (ii) to exercise any and all rights of entry and re-entry upon the Facilities. In the event the Authority does not elect to terminate this Facilities Lease in the manner provided for in subparagraph (1) hereof, the County shall remain liable and agrees to keep or perform all covenants and conditions herein contained to be kept or performed by the County and, if the Facilities are not re-let, to pay the full amount of the rent to the end of the term of this Facilities Lease or, in the event that the Facilities are re-let, to pay any deficiency in rent that results therefrom; and further agrees to pay said rent and/or rent deficiency punctually at the same time and in the same manner as hereinabove provided for the payment of rent hereunder (without acceleration), notwithstanding the fact that the Authority may have received in previous years or may receive thereafter in subsequent years rental in excess of the rental herein specified, and notwithstanding any entry or re-entry by the Authority or suit in unlawful detainer, or otherwise, brought by the Authority for the purpose of effecting such entry or re-entry or obtaining possession of the Facilities. Should the Authority elect to enter or re-enter as herein provided, the County hereby irrevocably appoints the Authority as the agent and attorney-in-fact of the County to re-let the Facilities, or any part thereof, from time to time, either in the Authority’s name or otherwise, upon such terms and conditions and for such use and period as the Authority may deem advisable, and to remove all persons in possession thereof and all personal property whatsoever situated upon the Facilities and to place such personal property in storage in any warehouse or other suitable place located in the County of Contra Costa, California, for, to the extent permitted by law, the account of and at the expense of the County, and the County, to the extent permitted by law, hereby exempts and agrees to save harmless the Authority from any costs, loss or damage whatsoever arising out of, in connection with, or incident to any such re- entry upon and re-letting of the Facilities and removal and storage of such property by the Authority or its duly authorized agents in accordance with the provisions herein contained. The County agrees that the terms of this Facilities Lease constitute full and sufficient notice of the right of the Authority to re-let the Facilities and to do all other acts to maintain or preserve the Facilities as the Authority deems necessary or desirable in the event of such re-entry without effecting a surrender of this Facilities Lease, and further agrees that no acts of the Authority in effecting such re-letting shall constitute a surrender or termination of this Facilities Lease irrespective of the use or the term for which such re-letting is made or the terms and conditions of such re-letting, or otherwise, but that, on the contrary, in the event of such default by the County the right to terminate this Facilities Lease shall vest in the Authority to be effected in the sole and exclusive manner provided for in sub-paragraph (1) hereof. The County further waives the right to any rental obtained by the Authority in excess of the rental herein specified and hereby conveys and releases such excess to the Authority as compensation to the Authority for its services in re-letting the Facilities or any part thereof. The County further a grees, to the extent permitted by law, to pay the Authority the reasonable cost of any alterations or additions to the Facilities necessary to place the Facilities in condition for re-letting immediately upon notice to the County of the completion and installation of such additions or alterations. 16 OHSUSA:761781617.5 The County hereby waives any and all claims for damages caused or which may be caused by the Authority in re-entering and taking possession of the Facilities as herein provided and all claims for damages that may result from the destruction of or injury to the Facilities and all claims for damages to or loss of any property belonging to the County, or any other person, that may be in or upon the Facilities. (b) If (1) the County’s interest in this Facilities Lease or any part thereof be assigned or transferred, either voluntarily or by operation of law or otherwise, without the written consent of the Authority, as hereinafter provided for, or (2) the County or any assignee shall file any petition or institute any proceeding under any act or acts, state or federal, dealing with or relating to the subject or subjects of bankruptcy or insolvency, or under any amendment of such act or acts, either as a bankrupt or as an insolvent, or as a debtor, or in any similar capacity, wherein or whereby the County asks or seeks or prays to be adjudicated a bankrupt, or is to be discharged from any or all of the County’s debts or obligations, or offers to the County’s creditors to effect a composition or extension of time to pay the County’s debts or asks, seeks or prays for reorganization or to effect a plan of reorganization, or for a readjustment of the County’s debts, or for any other similar relief, or if any such petition or any such proceedings of the same or similar kind or character be filed or be instituted or taken against the County, or if a receiver of the business or of the property or assets of the County shall be appointed by any court, except a receiver appointed at the instance or request of the Authority, or if the C ounty shall make a general or any assignment for the benefit of the County’s creditors, or (3) the County shall abandon or vacate the Facilities, or (4) any representation or warranty made by the County herein proves to have been false, incorrect, misleading or breached in any material respect on the date when made, then the County shall be deemed to be in default hereunder. (c) The Authority shall in no event be in default in the performance of any of its obligations hereunder or imposed by any statute or rule of law unless and until the Authority shall have failed to perform such obligations within sixty (60) days or such additional time as is reasonably required to correct any such default after notice by the County to the Authority properly specifying wherein the Authority has failed to perform any such obligation. In the event of default by the Authority, the County shall be entitled to pursue any remedy provided by law. (d) In addition to the other remedies set forth in this Section, upon the occurrence of an event of default as described in this Section, the Authority shall be entitled to proceed to protect and enforce the rights vested in the Authority by this Facilities Lease or by law. The provisions of this Facilities Lease and the duties of the County and of its trustees, officers or employees shall be enforceable by the Authority by mandamus or other appropriate suit, action or proceeding in any court of competent jurisdiction. Without limiting the generality of the foregoing, the Authority shall have the right to bring the following actions: (1) Accounting. By action or suit in equity to require the County and its trustees, officers and employees and its assigns to account as the trustee of an express trust. (2) Injunction. By action or suit in equity to enjoin any acts or things which may be unlawful or in violation of the rights of the Authority. 17 OHSUSA:761781617.5 (3) Mandamus. By mandamus or other suit, action or proceeding at law or in equity to enforce the Authority’s rights against the County (and its bo ard, officers and employees) and to compel the County to perform and carry out its duties and obligations under the law and its covenants and agreements with the County as provided herein. The exercise of any rights or remedies under this Facilities Lease shall not permit acceleration of Base Rental Payments. Each and all of the remedies given to the Authority hereunder or by any law now or hereafter enacted are cumulative and the single or partial exercise of any right, power or privilege hereunder shall not impair the right of the Authority to other or further exercise thereof or the exercise of any or all other rights, powers or privileges. The term “re-let” or “re-letting” as used in this Section shall include, but not be limited to, re-letting by means of the operation by the Authority of the Facilities. If any statute or rule of law validly shall limit the remedies given to the Authority hereunder, the Authority nevertheless shall be entitled to whatever remedies are allowable under any statute or rule of law. In the event the Authority shall prevail in any action brought to enforce any of the terms and provisions of this Facilities Lease, the County agrees to pay a reasonable amount as and for attorney’s fees incurred by the Authority in attempting to enforce any of the remedies available to the Authority hereunder, whether or not a lawsuit has been filed and whether or not any lawsuit culminates in a judgment. SECTION 6.02. Waiver. Failure of the Authority to take advantage of any default on the part of the Count y shall not be, or be construed as, a waiver thereof, nor shall any custom or practice which may grow up between the parties in the course of administering this instrument be construed to waive or to lessen the right of the Authority to insist upon performance by the County of any term, covenant or condition hereof, or to exercise any rights given the Authority on account of such default. A waiver of a particular default shall not be deemed to be a waiver of the same or any subsequent default. The accept ance of rent hereunder shall not be, or be construed to be, a waiver of any term, covenant or condition of this Facilities Lease. ARTICLE VII EMINENT DOMAIN; PREPAYMENT SECTION 7.01. Eminent Domain. If the whole of the Facilities or so much thereof as to render the remainder unusable for the purposes for which it was used by the County shall be taken under the power of eminent domain, the term of this Facilities Lease shall cease as of the day that possession shall be so taken. If less than the whole of the Facilities shall be taken under the power of eminent domain and the remainder is usable for the purposes for which it was used by the County at the time of such taking, then this Facilities Lease shall continue in full force and effect as to such remainder, and the parties waive the benefits of any law to the contrary, and in such event there shall be a partial abatement of the rental due hereunder in an amount equivalent to the amount by which the annual payments of principal and interest on the Outstanding Bonds will be reduced by the application of the award in eminent domain to the 18 OHSUSA:761781617.5 redemption of outstanding Bonds. So long as any of the Bonds shall be outstanding, any award made in eminent domain proceedings for taking the Facilities or any portion thereof shall be paid to the Trustee and applied to the prepayment of the Base Rental Payments as provided in Section 7.02. Any such award made after all of the Base Rental Payments and Additional Payments have been fully paid, or provision therefor made, shall be paid to the to the County. SECTION 7.02. Prepayment. (a) The County shall prepay on any date from insurance (including proceeds of title insurance) and eminent domain proceeds, to the extent provided in Sections 5.01 and 7.01 hereof (provided, however, that in the event of partial damage to or destruction of the Facilities caused by perils covered by insurance, if in the judgment of the Authority the insurance proceeds are sufficient to repair, reconstruct or replace the damaged or destroyed portion of the Facilities, such proceeds shall be held by the Trustee and used to repair, reconstruct or replace the damaged or destroyed portion of the Facilities, pursuant to the procedure set forth in Section 5.01 for proceeds of insurance), all or any part of Base Rental Payments then unpaid so that the aggregate annual amounts of Base Rental Payments which shall be payable after such prepayment date shall be as nearly proportional as practicable to the aggregate annual amounts of Base Rental Payments unpaid prior to the prepayment date (taking into account the reduction in Base Rental allocable to future interest on the Bonds that are redeemed), at a prepayment amount equal to the redemption payment of the maximum amount of Bonds, including the principal thereof and the interest thereon to the date of redemption, plus any applicable premium redeemable from such proceeds. (b) The County may prepay, from any source of available funds, all or any portion of Base Rental Payments by depositing with the Trustee moneys or securities as provided in Article X of the Trust Agreement sufficient to defease Bonds corresponding to such Base Rental Payments when due; provided that the County furnishes the Trustee with an Opinion of Counsel that such deposit will not cause interest on the Bonds to be includable in gross income for federal income tax purposes. The County agrees that if following such prepayment the Facilities are damaged or destroyed or taken by eminent domain, it is not entitled to, and by such prepayment waives the right of, abatement of such prepaid Base Rental Payments and shall not be entitled to any reimbursement of such Base Rental Payments. (c) Before making any prepayment pursuant to this article, the County shall, within five (5) days following the event creating such right or obligation to prepay, give written notice to the Authority and the Trustee describing such event and specifying the date on which the prepayment will be made, which date shall be not less than forty-five (45) days from the date such notice is given. (d) When (1) there shall have been deposited with the Trustee at or prior to the due dates of the Base Rental Payments or date when the County may exercise its option to purchase the Facilities or any portion or item thereof, in trust for the benefit of the Owners of the Bonds and irrevocably appropriated and set aside to the payment of the Base Rental Payments or option price, sufficient moneys and Permitted Investments described in subsection (1) of the definition thereof in the Trust Agreement, not redeemable prior to maturity, the principal of and interest on which when due will provide money sufficient to pay all principal, premium, if any, and interest on the Bonds to the due date of the Bonds or date when the County may exercise its option to purchase the Facilities, as the case may be; (2) all requirements of Section 10.01 of the 19 OHSUSA:761781617.5 Trust Agreement have been satisfied; and (3) an agreement shall have been entered into with the Trustee for the payment of its fees and expenses so long as any of the Bonds shall remain unpaid, then and in that event the right, title and interest of the Authority herein and the obligations of the County hereunder shall thereupon cease, terminate, become void and be completely discharged and satisfied (except for the right of the Authority and the obligation of the County to have such moneys and such Permitted Investments applied to the payment of the Base Rental Payments or option price) and the Authority’s interest in and title to the Facilities or applicable portion or item thereof shall be transferred and conveyed to the County. In such event, the Authority shall cause an accounting for such period or periods as may be requested by the County to be prepared and filed with the Authority and evidence such discharge and satisfaction, and the Authority shall pay over to the County as an overpayment of Base Rental Payments all such moneys or Permitted Investments held by it pursuant hereto other than such moneys and such Permitted Investments as are required for the payment or prepayment of the Base Rental Payments or the option price and the fees and expenses of the Trustee, which moneys and Permitted Investments shall continue to be held by the Trustee in trust for the payment of Base Rental Payments or the option price and the fees and expenses of the Trustee, and shall be applied by the Authority to the payment of the Base Rental Payments or the option price and the fees and expenses of the Trustee. SECTION 7.03. Option to Purchase; Sale of Personal Property. The County shall have the option to purchase the Authority’s interest in any part of Facilities upon payment of an option price consisting of moneys or securities of the category specified in clause (1) of the definition of the term Permitted Investments contained in Section 1.01 of the Trust Agreement (not callable by the issuer thereof prior to maturity) in an amount sufficient (together with the increment, earnings and interest on such securities) to provide funds to pay the aggregate amount for the entire remaining term of this Facilities Lease of the part of the total rent hereunder attributable to such part of the Facilities (determined by reference to the proportion which the cost of such part of the Facilities bears to the cost of all of the Facilities). Any such payment shall be made to the Trustee and shall be treated as rental payments and shall be applied by the Trustee to pay the principal of the Bonds and interest on the Bonds and to redeem Bonds if such Bonds are subject to redemption pursuant to the terms of the Trust Agreement. Upon the making of such payment to the Trustee and the satisfaction of all requirements set forth in Section 10.01 of the Trust Agreement, (a) the Base Rental thereafter payable under this Facilities Lease shall be reduced by the amount thereof attributable to such part of the Facilities and theretofore paid pursuant to this Section, (b) Section 3.06 and this Section of this Facilities Lease shall not thereafter be applicable to such part of the Facilities, (c) the insurance required by Sections 5.01, 5.02 and 5.03 of this Facilities Lease need not be maintained as to such part of the Facilities, and (d) title to such part of the Facilities shall vest in the County and the term of this Facilities Lease shall end as to such Facilities. The County, in its discretion, may request the Authority to sell or exchange any personal property which may at any time constitute a part of the Facilities, and to release said personal property from this Facilities Lease, if (a) in the opinion of the County the property so sold or exchanged is no longer required or useful in connection with the operation of the Facilities, (b) the consideration to be received from the property is of a value substantially equal to the value of the property to be released, and (c) if the value of an y such property shall, in the opinion of the Authority, exceed the amount of $100,000, the Authority shall have been 20 OHSUSA:761781617.5 furnished a certificate of an independent engineer or other qualified independent professional consultant (satisfactory to the Authority) certifying the value thereof and further certifying that such property is no longer required or useful in connection with the operation of the Facilities. In the event of any such sale, the full amount of the money or consideration received for the personal property so sold and released shall be paid to the Authority. Any money so paid to the Authority may, so long as the County is not in default under any of the provisions of this Facilities Lease, be used upon the Written Request of the County to purchase personal property, which property shall become a part of the Facilities leased hereunder. The Authority may require such opinions, certificates and other documents as it may deem necessary before permitting any sale or exchange of personal property subject to this Facilities Lease or before releasing for the purchase of new personal property money received by it for personal property so sold. ARTICLE VIII COVENANTS SECTION 8.01. Right of Entry. The Authority and its assignees shall have the right to enter upon and to examine and inspect the Facilities during reasonable business hours (and in emergencies at all times) (a) to inspect the same, (b) for any purpose connected with the Authority’s or the County’s rights or obligations under this Facilities Lease, and (c) for all other lawful purposes. SECTION 8.02. Liens. In the event the County shall at any time during the term of this Facilities Lease cause any changes, alterations, additions, improvements, or other work to be done or performed or materials to be supplied, in or upon the Facilities, the County shall pay, when due, all sums of money that may become due for, or purporting to be for, any labor, services, materials, supplies or equipment furnished or alleged to have been furnished to or for the County in, upon or about the Facilities and shall keep the Facilities free of any and all mechanics’ or materialmen’s liens or other liens against the Facilities or the Authority’s interest therein. In the event any such lien attaches to or is filed against the Facilities or the Authority’s interest therein, the County shall cause each such lien to be fully discharged and released at the time the performance of any obligation secured by any such lien matures or becomes due, except that if the County desires to contest any such lien it may do so in good faith. If any such lien shall be reduced to final judgment and such judgment or such process as may be issued for the enforcement thereof is not promptly stayed, or if so stayed and said stay thereafter expires, the County shall forthwith pay and discharge said judgment. The County agrees to and shall, to the maximum extent permitted by law, indemnify and hold the Authority and the Trustee and their respective members, directors, agents, successors and assigns, harmless from and against, and defend each of them against, any claim, demand, loss, damage, liability or expense (including attorney’s fees) as a result of any such lien or claim of lien against the Faci lities or the Authority’s interest therein. SECTION 8.03. Quiet Enjoyment. The parties hereto mutually covenant that the County, by keeping and performing the covenants and agreements herein contained and not in default hereunder, shall at all times during the term of this Facilities Lease peaceably and quietly have, hold and enjoy the Facilities without suit, trouble or hindrance from the Authority. 21 OHSUSA:761781617.5 SECTION 8.04. Authority Not Liable. The Authority and its members, directors, officers, agents and employees shall not be liable to the County or to any other party whomsoever for any death, injury or damage that may result to any person or property by or from any cause whatsoever in, on or about the Facilities. The County, to the extent permitted by law, shall indemnify and hold the Authority and its members, directors, officers, agents and employees, harmless from, and defend each of them against, any and all claims, liens and judgments arising from the operation of the Facilities, including, without limitation, death of or injury to any person or damage to property whatsoever occurring in, on or about the Facilities regardless of responsibility for negligence, but excepting the active negligence of the person or entity seeking indemnity. SECTION 8.05. Assignment and Subleasing. Neither this Facilities Lease nor any interest of the County hereunder shall be mortgaged, pledged, assigned, sublet or transferred by the County by voluntary act or by operation of law or otherwise, except with the prior written consent of the Authority, which, in the case of subletting, shall not be unreasonably withheld; provided such subletting shall not affect the tax -exempt status of the interest on the Bonds. No such mortgage, pledge, assignment, sublease or transfer shall in any event affect or reduce the obligation of the County to make the Base Rental Payments and Additional Payments required hereunder. SECTION 8.06. Title to Facilities. During the term of this Facilities Lease, the Authority shall hold a leasehold estate to the Facilities and any and all additions which comprise fixtures, repairs, replacement or modifications thereof, except for those fixtures, repairs, replacements or modifications which are added thereto by the County and which may be removed without damaging the Facilities, and except for any items added to the Facilities by the County pursuant to Section 4.02 hereof. This provision shall not operate to the benefit of any insurance company if there is rental interruption covered by insurance pursuant to Section 5.03 hereof. Upon the termination or expiration of this Facilities Lease upon payment in full of the Base Rental Payments attributed to the Facilities and all amounts owing on the Bonds, the Authority’s interest in the title to the Facilities shall vest in the County and the Authority shall execute such conveyances, deeds and other documents as may be necessary to evidence the ownership of the Facilities by the County and to clarify the title of the County on the record thereof. SECTION 8.07. Tax Covenants. (a) The County and the Authority shall at all times do and perform all acts and things permitted by law which are necessary or desirable in order to assure that the interest on the Bonds will be excluded from gross income for federal income tax purposes under Section 103 of the Code and shall take no action that would result in such interest not being excluded from gross income for federal income tax purposes. Without limiting the generality of the foregoing, the Authority and the County covenant that they will comply with the requirements of the Tax Certificate, which is incorporated herein as if fully set forth herein. (b) If at any time the County or the Authority is of the opinion that for purposes of this Section it is necessary to restrict or limit the yield on or change in any way the 22 OHSUSA:761781617.5 investment of any moneys held by the Trustee or the County or the Authority under this Facilities Lease or the Trust Agreement, the County or the Authority shall so instruct the Trustee or the appropriate officials of the County in writing, and the Trustee or th e appropriate officials of the County, as the case may be, shall take such actions as may be necessary in accordance with such instructions. (c) In furtherance of the covenants of the County and the Authority set forth above, the County will comply with the Tax Certificate and will instruct the Trustee in writing as necessary to comply with the Tax Certificate. The Trustee and the Authority may conclusively rely on any such written instructions, and the County hereby agrees to hold harmless the Trustee and the Authority for any loss, claim, damage, liability or expense incurred by the Authority and the Trustee for any actions taken by the Authority or the Trustee in accordance with such instructions. (d) This covenant shall survive payment in full or defeasance of the Bonds. SECTION 8.08. Continuing Disclosure. The County hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Agreement. Notwithstanding any other provision of this Facilities Lease, failure of the County to comply with the Continuing Disclosure Agreement shall not be considered an event of default hereunder; however, any Bondholder or Beneficial Owner may, and the Trustee at the request of any Participating Underwriter (as defined in the Continuing Disclosure Agreement) or the Holders of at least 25% aggregate principal amount of Bonds Outstanding and provided satisfactory indemnification is provided to the Trustee, shall, 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 8.08. SECTION 8.09. Taxes. The County shall pay or cause to be paid all taxes and assessments of any type or nature charged to the Authority or affecting the Facilities or the respective interests or estates therein; provided that with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the County shall be obligated to pay only such installments as are required to be paid during the term of this Facilities Lease as and when the same become due. The County shall also pay directly such amounts, if any, in each year as shall be required by the Authority for the payment of all license and registration fees and all taxes (including, without limitation, income, excise, license, franchise, capital stock, recording, sales, use, value-added, property, occupational, excess profits and stamp taxes), levies, imposts, duties, charges, withholdings, assessments and governmental charges of any nature whatsoever, together with any additions to tax, penalties, fines or interest thereon, including, without limitation, penalties, fines or interest arising out of any delay or failure by the County to pay a ny of the foregoing or failure to file or furnish to the Authority or the Trustee for filing in a timely manner any returns, hereinafter levied or imposed against the Authority or the Facilities, the rentals and other payments required hereunder or any parts thereof or interests of the County or the Authority or the Trustee therein by any governmental authority. 23 OHSUSA:761781617.5 The County may, at the County’s expense and in its name, in good faith contest any such taxes, assessments and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Authority or the Trustee shall notify the County that, in the opinion of independent counsel, by nonpayment of any such items, the interest of the Authority in the Facilities will be materially endangered or the Facilities, or any part thereof, will be subject to loss or forfeiture, in which event the County shall promptly pay such taxes, assessments or charges or provide the Authority with full security against any loss which may result from nonpayment, in form satisfactory to the Authority and the Trustee. SECTION 8.10. Authority’s Purpose. The Authority covenants that, prior to the discharge of this Facilities Lease, it will not engage in any activities inconsistent with the purposes for which the Authority is organized. SECTION 8.11. Purpose of Facilities Lease. The County covenants that during the term of this Facilities Lease, except as hereinafter provided, (a) it will use, or cause the use of, the Facilities for public purposes and for the purposes for which the Facilities are customarily used, (b) it will not vacate or abandon the Facilities or any part thereof, and (c) it will not make any use of the Facilities which would jeopardize in any way the insurance coverage required to be maintained pursuant to Article V hereof. SECTION 8.12. Essential Use. The Facilities are essential to the proper, efficient and economic operation of the County and serve an essential governmental function of the County. SECTION 8.13. Nondiscrimination. The County herein covenants by and for itself, its heirs, executors, administrators, and assigns, and all person claiming under or through itself, and this Facilities Lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or groups of persons, on account of any basis listed in subdivision (a) or (d) of Section 12955 of the California Government Code, as those basis are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the California Government Code, in leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the County, or any person claiming under or through the County, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublesses, subtenants, or vendees in the premises herein leased. ARTICLE IX DISCLAIMER OF WARRANTIES; VENDOR’S WARRANTIES; USE OF THE FACILITIES SECTION 9.01. Disclaimer of Warranties. THE AUTHORITY MAKES NO AGREEMENT, WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY, FITNESS FOR PARTICULAR PURPOSE OR FITNESS FOR USE OF THE FACILITIES OR THE 24 OHSUSA:761781617.5 PROJECT OR WARRANTY WITH RESPECT THERETO. THE COUNTY ACKNOWLEDGES THAT THE AUTHORITY IS NOT A MANUFACTURER OF THE FACILITIES OR THE PROJECT OR A DEALER THEREIN, THAT THE COUNTY LEASES THE FACILITIES AS-IS, IT BEING AGREED THAT ALL OF THE AFOREMENTIONED RISKS ARE TO BE BORNE BY THE COUNTY. In no event shall the Authority be liable for any incidental, indirect, special or consequential damage in connection with or arising out of this Facilities Lease or the Project or the existence, furnishing, functioning or the County’s use of any item or products or services provided for in this Facilities Lease. SECTION 9.02. Vendor’s Warranties. The Authority hereby irrevocably appoints the County its agent and attorney-in-fact during the term of this Facilities Lease, so long as the County shall not be in default hereunder, to assert from time to time whatever claims and rights, including warranties of the Facilities, which the Authority may have against the manufacturers, vendors and contractors of the Facilities. The County’s sole remedy for the breach of such warranty, indemnification or representation shall be against the manufacturer or vendor or contractor of the Facilities, and the Project, as applicable, and not against the Authority, nor shall such matter have any effect whatsoever on the rights and obligations of the Authority with respect to this Facilities Lease, including the right to receive full and timely payments hereunder. The County expressly acknowledges that the Authority makes, and has made, no representation or warranties whatsoever as to the existence or availability of such warranties of the manufacturer, vendor or contractor with respect to the Facilities and the Project. SECTION 9.03. Use of the Facilities. The County will not install, use, operate or maintain the Facilities improperly, carelessly, in violation of any applicable law or in a manner contrary to that contemplated by this Facilities Lease. The County shall provide all permits and licenses, if any, necessary for the installation and operation of the Facilities. In addition, the County agrees to comply in all respects (including, without limitation, with respect to the use, maintenance and operation of the Facilities) with all laws of the jurisdictions in which its operations may extend and any legislative, executive, administrative or judicial body exercising any power or jurisdiction over the Facilities; provided, however, that the County may contest in good faith the validity or application of any such law or rule in any reasonable manner which does not, in the opinion of the Authority, adversely affect the estate of the Authority in and to the Facilities or its interest or rights under this Facilities Lease. ARTICLE X MISCELLANEOUS SECTION 10.01. Law Governing. This Facilities Lease shall be governed exclusively by the provisions hereof and by the laws of the State of California as the same from time to time exist. SECTION 10.02. Notices. All notices, statements, demands, consents, approvals, authorizations, offers, designations, requests, agreements or promises or other communications hereunder by either party to the other shall be in writing and shall be sufficiently given and served upon the other party if delivered personally or if mailed by United States registered mail, return receipt requested, postage prepaid: 25 OHSUSA:761781617.5 If to the County: County of Contra Costa c/o Clerk of the Board of Supervisors County Administration Building 651 Pine Street Martinez, CA 94553 cc: County Finance Director County of Contra Costa 651 Pine Street, 10th Floor Martinez, CA 94553 With respect to insurance matters: County of Contra Costa Risk Manager Risk Management Department 2530 Arnold Drive Martinez, CA 94553 cc: General Service Administration 1220 Morello Avenue, Suite 100 Martinez, CA 94553 cc: County Finance Director County of Contra Costa 651 Pine Street, 10th Floor Martinez, CA 94553 If to the Authority: County of Contra Costa Public Financing Authority c/o County Administrator County Administration Building 651 Pine Street Martinez, CA 94553 If to the Trustee: Wells Fargo Bank, National Association MAC _______________ 333 Market Street, 18th Floor San Francisco, CA 94105 or to such other addresses as the respective parties may from time to time designate by notice in writing. A copy of any such notice or other document herein referred to shall also be delivered to the Trustee. SECTION 10.03. Validity and Severability. If for any reason this Facilities Lease shall be held by a court of competent jurisdiction to be void, voidable, or unenforceable by the Authority or by the County, or if for any reason it is held by such a court that any of the 26 OHSUSA:761781617.5 covenants and conditions of the County hereunder, including the covenant to pay rentals hereunder, is unenforceable for the full term hereof, then and in such event this Facilities Lease is and shall be deemed to be a lease under which the rentals are to be paid by the County annually in consideration of the right of the County to possess, occupy and use the Facilities, and all of the rental and other terms, provisions and conditions of this Facilities Lease, except to the extent that such terms, provisions and conditions are contrary to or inconsistent with such holding, shall remain in full force and effect. SECTION 10.04. Net-Net-Net Lease. This Facilities Lease shall be deemed and construed to be a “net-net-net lease” and the County hereby agrees that the rentals provided for herein shall be an absolute net return to the Authority, free and clear of any expenses, charges or set-offs whatsoever. SECTION 10.05. Section Headings. All section headings contained herein are for convenience of reference only and are not intended to define or limit the scope of any provision of this Facilities Lease. SECTION 10.06. Amendment or Termination. The Authority and the County may at any time agree to the amendment or termination of this Facilities Lease; provided, however, that the Authority and the County agree and recognize that this Facilities Lease is entered into in accordance with the terms of the Trust Agreement, and accordingly, that any such amendment or termination shall only be made or effected in accordance with and subject to the terms of the Trust Agreement. SECTION 10.07. Execution. This Facilities 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 Facilities Lease. It is also agreed that separate counterparts of this Facilities 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. OHSUSA:761781617.5 IN WITNESS WHEREOF, the Authority and the County have caused this Facilities 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 PUBLIC FINANCING AUTHORITY, as Sublessor By: John M. Gioia, Chair ATTEST: By: David J. Twa Executive Director and Secretary COUNTY OF CONTRA COSTA, as Sublessee [SEAL] By John M. Gioia Chair of the Board of Supervisors County of Contra Costa, State of California ATTEST: By David J. Twa, Clerk of the Board of Supervisors and County Administrator A-1 OHSUSA:761781617.5 EXHIBIT A Description of the Facilities All that certain real property situated in the County of Contra Costa, State of California, described as follows: B-1 OHSUSA:761781617.5 EXHIBIT B Base Rental Payment Schedule [Add Separate Schedules] Base Rental Payment Date* Principal Interest Total Fiscal Year Total Total: ____________________________ * [Payable three Business Days before due date]. C-1 OHSUSA:761781617.5 EXHIBIT C Lease Terms Facility Term Maximum Extension D-1 OHSUSA:761781617.5 EXHIBIT D Capital Projects “Capital Projects” means the various public capital improvements and projects, including, but not limited to the acquisition, installation, implementation and construction of certain projects of the County, specifically the Medical Clinic and the Solar Panels. E-1 OHSUSA:761781617.5 EXHIBIT E Form of Budget Certificate County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects) 2015 Series A and 2015 Series B Certificate of Final Annual Budget for the Period __/__/20__ through __/__/20__ The undersigned, as an Authorized Representative of the County of Contra Costa (the “County”), hereby certifies that the following have been budgeted for the above-referenced period with respect to the annual appropriations for all Base Rental Payments and Additional Payments, as required in Section 3.05 of the Facilities Lease, dated as of July 1, 2015, between the County of Contra Costa Public Financing Authority and the County: 2015 Series A 2015 Series B Total Budgeted Base Rental Payment Additional Payment COUNTY OF CONTRA COSTA By ___________________________________ Authorized Representative F-1 OHSUSA:761781617.5 EXHIBIT F Form of Insurance Certificate County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects) 2015 Series A and 2015 Series B Annual Insurance Certificate for the Period __/__/20__ through __/__/20__ The undersigned, as an Authorized Representative of the County of Contra Costa (the “County”), hereby certifies that the insurance requirements as set forth in Section 5.07 of the Facilities Lease, dated as of July 1, 2015, between the County of Contra Costa Public Financing Authority and the County have been satisfied as evidenced by the attached list of insurance policies, names of insurers issuing such policies, the property covered and the amount of coverage. COUNTY OF CONTRA COSTA By ___________________________________ Authorized Representative F-1 OHSUSA:761781617.5 [Attach List of Insurance Coverage] OHSUSA:761781617.5 CERTIFICATE OF ACCEPTANCE (Government Code Section 27281) This is to certify that the interest in real property conveyed by the foregoing Facilities Lease from the County of Contra Costa Public Financing Authority to the County of Contra Costa, a political subdivision of the State of California (the “County”), is hereby accepted by order of the Board of Supervisors of the County of Contra Costa on _______________________, and the County consents to recordation thereof by its duly authorized officer. COUNTY OF CONTRA COSTA, as Lessee [SEAL] By John M. Gioia Chair, Board of Supervisors County of Contra Costa, State of California Attest: By David Twa Clerk of the Board of Supervisors and County Administrator OHSUSA:761781617.5 ARTICLE I DEFINITIONS .......................................................................................................... 2 SECTION 1.01. Definitions. ......................................................................................... 2 ARTICLE II LEASE OF FACILITIES; TERM ............................................................................ 4 SECTION 2.01. Lease of Facilities ............................................................................... 4 SECTION 2.02. Term; Occupancy; and Release of Existing Facilities ........................ 4 SECTION 2.03. Substitution; Release; Addition of Property ....................................... 4 ARTICLE III RENTAL PAYMENTS; USE OF PROCEEDS ..................................................... 5 SECTION 3.01. Base Rental Payments ......................................................................... 5 SECTION 3.02. Additional Payments ........................................................................... 6 SECTION 3.03. Fair Rental Value ................................................................................ 7 SECTION 3.04. Payment Provisions ............................................................................ 7 SECTION 3.05. Appropriations Covenant .................................................................... 8 SECTION 3.06. Rental Abatement ............................................................................... 9 SECTION 3.07. Use of Proceeds .................................................................................. 9 ARTICLE IV MAINTENANCE; ALTERATIONS AND ADDITIONS ..................................... 9 SECTION 4.01. Maintenance and Utilities ................................................................... 9 SECTION 4.02. Changes to the Facilities ................................................................... 10 SECTION 4.03. Installation of County’s Equipment .................................................. 10 ARTICLE V INSURANCE ......................................................................................................... 10 SECTION 5.01. Fire and Extended Coverage Insurance ............................................ 10 SECTION 5.02. Liability Insurance ............................................................................ 12 SECTION 5.03. Rental Interruption or Use and Occupancy Insurance ...................... 12 SECTION 5.04. Worker’s Compensation ................................................................... 13 SECTION 5.05. Title Insurance .................................................................................. 13 SECTION 5.06. Insurance Proceeds; Form of Policies ............................................... 13 SECTION 5.07. Annual Certificates ........................................................................... 13 ARTICLE VI DEFAULTS AND REMEDIES ........................................................................... 14 SECTION 6.01. Defaults and Remedies ..................................................................... 14 SECTION 6.02. Waiver ............................................................................................... 17 ARTICLE VII EMINENT DOMAIN; PREPAYMENT ............................................................. 17 SECTION 7.01. Eminent Domain ............................................................................... 17 SECTION 7.02. Prepayment ....................................................................................... 18 SECTION 7.03. Option to Purchase; Sale of Personal Property ................................. 19 ARTICLE VIII COVENANTS.................................................................................................... 20 SECTION 8.01. Right of Entry ................................................................................... 20 SECTION 8.02. Liens ................................................................................................. 20 SECTION 8.03. Quiet Enjoyment ............................................................................... 20 SECTION 8.04. Authority Not Liable ......................................................................... 21 SECTION 8.05. Assignment and Subleasing .............................................................. 21 SECTION 8.06. Title to Facilities ............................................................................... 21 3 OHSUSA:761781617.5 SECTION 8.07. Tax Covenants .................................................................................. 21 SECTION 8.08. Continuing Disclosure ...................................................................... 22 SECTION 8.09. Taxes ................................................................................................. 22 SECTION 8.10. Authority’s Purpose .......................................................................... 23 SECTION 8.11. Purpose of Facilities Lease ............................................................... 23 SECTION 8.12. Essential Use ..................................................................................... 23 SECTION 8.13. Nondiscrimination ............................................................................ 23 ARTICLE IX DISCLAIMER OF WARRANTIES; VENDOR’S WARRANTIES; USE OF THE FACILITIES ..................................................................................... 23 SECTION 9.01. Disclaimer of Warranties .................................................................. 23 SECTION 9.02. Vendor’s Warranties ......................................................................... 24 SECTION 9.03. Use of the Facilities .......................................................................... 24 ARTICLE X MISCELLANEOUS .............................................................................................. 24 SECTION 10.01. Law Governing ................................................................................. 24 SECTION 10.02. Notices .............................................................................................. 24 SECTION 10.03. Validity and Severability .................................................................. 25 SECTION 10.04. Net-Net-Net Lease ............................................................................ 26 SECTION 10.05. Section Headings .............................................................................. 26 SECTION 10.06. Amendment or Termination ............................................................. 26 SECTION 10.07. Execution .......................................................................................... 26 EXHIBIT A Description of the Facilities ................................................................................. A-1 EXHIBIT B Base Rental Payment Schedule ............................................................................ B-1 EXHIBIT C Lease Terms ......................................................................................................... C-1 EXHIBIT D Capital Projects .................................................................................................... D-1 EXHIBIT E Form of Budget Certificate ................................................................................... D-1 EXHIBIT F Form of Insurance Certificate ............................................................................... D-1 OH&S Draft 7/13/2015 OHSUSA:761765595.5 Recording requested by and return to: COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY c/o Orrick, Herrington & Sutcliffe LLP The Orrick Building 405 Howard Street San Francisco, CA 94105-2669 Attn: Mary A. Collins Exempt from Recording Fee Pursuant to Government Code Section 27383 EIGHTH 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, 2015 (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 June 1, 2002, the Fourth Amendment to Master Site Lease dated as of July 1, 2002, the Fifth Amendment to Master Site Lease dated as of July 1, 2003, the Sixth Amendment to Master Site Lease dated as of March 1, 2007 and the Seventh Amendment to Master Site Lease dated as of December 1, 2013) OHSUSA:761765595.5 EIGHTH AMENDMENT TO MASTER SITE LEASE This Eighth Amendment to Master Site Lease, dated as of July 1, 2015 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; W I T N E S S E T H WHEREAS, this Eighth 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. 2001 - 0017620, 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. 2001-0123402, 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 Recorde r’s Instrument No. 2002-0224906, 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. 2002-0311941, the Fifth Amendment to Master Site Lease, dated as of July 1, 2003 and recorded on August 14, 2003 in the office of the County Recorder of the County under Recorder’s Instrument No. 2003-0402053, the Sixth Amendment to Master Site Lease dated as of March 1, 2007 and recorded on March 13, 2007 in the office of the County Recorder of the County under Recorder’s Instrument No. 2007-73304 and the Seventh Amendment to Master Site Lease dated as of December 1, 2013 and recorded on December 3, 2013 in the office of the County Recorder of the County under Recorder’s Instrument No. 2013- 0280631 (together, the “Master Site Lease”); WHEREAS, the County proposes to further amend the Master Site Lease pursuant to this Eighth Amendment to Master Site Lease to release certain parcels of real property and the improvements thereon (the “2015 Released Property”) to reflect the prepayment of base rental by the County under the Facility Lease dated as of February 1, 1999 (as amended, the “Facility Lease”) and the purchase of the Authority’s leasehold interest in the 2015 Released Property; and WHEREAS, this Eighth Amendment vests the 2015 Released Property in the County free from the encumbrance of the Master Site Lease and the Facility Lease; NOW, THEREFORE, the parties hereto agree as follows: 2 OHSUSA:761765595.5 Section 1. This Eighth 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, or on _________, 2015, whichever is earlier, and such date shall be hereinafter referred to as the “effective date.” Section 2. From and after the effective date of this instrument, the real property leased pursuant to the Master Site Lease is amended to read as set forth in Exhibit A attached to this Eighth Amendment to Master Site Lease. The parcels of real property heretofore described in the Facility Lease but not described in Exhibit A, such property being the 2015 Released Property described in Exhibit B attached to this Eighth Amendment to Master Site Lease, shall no longer be subject to or encumbered by the Master Site Lease and references to Facilities in the Master Site Lease shall hereafter exclude such parcels of real property, including all improvements thereon, and references to the Demised Premises in the Master Site Lease shall hereafter exclude the real property described in Exhibit B to this Eighth Amendment to Master Site Lease. Section 3. Except as in this Eighth Amendment to Master Site Lease expressly provided, the Master Site Lease shall continue in full force and effect in accordance with the terms and provisions thereof, as amended hereby. Section 4. If one or more of the terms, provisions, covenants or conditions of this Eighth Amendment to Master Site Lease shall to any extent be declared invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, the finding or order or decree of which becomes final, none of the remaining terms, provisions, covenants and conditions of this Eighth Amendment to Master Site Lease shall be affected thereby, and each provision of this Eighth Amendment to Master Site Lease shall be valid and enforceable to the fullest extent permitted by law. Section 5. This Eighth Amendment to Master Site Lease 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. OHSUSA:761765595.5 IN WITNESS WHEREOF, the County and the Authority have caused this Eighth 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 John M. Gioia Chair of the Board of Supervisors Attest: By David Twa Clerk of the Board of Supervisors and County Administrator COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY, as Lessee By John M. Gioia Chair Attest: By David Twa Executive Director and Secretary A-1 OHSUSA:761765595.5 EXHIBIT A Demised Premises All that certain real property situated in the County of Contra Costa, State of California, described as follows: A-2 OHSUSA:761765595.5 A-3 OHSUSA:761765595.5 A-4 OHSUSA:761765595.5 Employment and Human Services Building A-5 OHSUSA:761765595.5 Family Law Center Public Defender’s Building A-6 OHSUSA:761765595.5 West County Animal Shelter A-7 OHSUSA:761765595.5 Adolescent Residential Treatment Facility A-8 OHSUSA:761765595.5 Martinez Health Center Clinic and Contra Costa Regional Medical Center A-9 OHSUSA:761765595.5 A-10 OHSUSA:761765595.5 A-11 OHSUSA:761765595.5 A-12 OHSUSA:761765595.5 B-1 OHSUSA:761765595.5 EXHIBIT B Released Property B-2 OHSUSA:761765595.5 B-3 OHSUSA:761765595.5 B-4 OHSUSA:761765595.5 2002 Series B Facilities B-5 OHSUSA:761765595.5 B-6 OHSUSA:761765595.5 B-7 OHSUSA:761765595.5 B-8 OHSUSA:761765595.5 B-9 OHSUSA:761765595.5 Juvenile Justice Detention Facility B-10 OHSUSA:761765595.5 OHSUSA:761765595.5 CERTIFICATE OF ACCEPTANCE (Government Code Section 27281) This is to certify that the interest in real property conveyed by the foregoing Eighth Amendment to Master Site Lease from the County of Contra Costa Public Financing Authority to the County of Contra Costa, a political subdivision of the State of California (the “County”), is hereby accepted by order of the undersigned officer on behalf of the Authority on ________________, 2015, [pursuant to authority conferred by Resolution No.________ of the Authority adopted on ___________, 2015,] and the Authority consents to recordation thereof by its duly authorized officer. COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY, as Lessee By John M. Gioia Chair Attest: By David Twa Executive Director and Secretary OHSUSA:761765595.5 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 Eighth Amendment to Master Site Lease dated as of July 1, 2015, between the County of Contra Costa (the “County”) and the Authority, relating to 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 June 1, 2002, the Fourth Amendment to Master Site Lease, dated as of July 1, 2002, the Fifth Amendment to Master Site Lease, dated as of July 1, 2003, the Sixth Amendment to Master Site Lease, dated as of March 1, 2007 and the Seventh Amendment to Master Site Lease, dated as of December 1, 2013, between the County and the Authority. WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee By: Authorized Officer OHSUSA:761765595 CONSENT OF BOND INSURER The undersigned, as successor insurer (the “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 (as supplemented, the “Trust Agreement”), between the County of Contra Costa Public Financing Authority (the “Authority”) and Wells Fargo Bank, National Association as successor 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 (Refunding and Various Capital Projects), 2002 Series B issued pursuant to the Fourth Supplemental Trust Agreement dated as of July 1, 2002, and as Insurer of the Authority’s Lease Revenue Bonds (Various Capital Projects), 2003 Series A issued pursuant to the Fifth Supplemental Trust Agreement dated as of July 1, 2003, and as Insurer of the Authority’s Lease Revenue Bonds (Refunding of Various Capital Projects) 2007 Series A, issued pursuant to the Sixth Supplemental Trust Agreement dated as of March 1, 2007, and as Insurer of the Authority’s Lease Revenue Bonds (Medical Center Refunding) 2007 Series B, issued pursuant to the Seventh Supplemental Trust Agreement dated as of August 1, 2007, hereby consents, pursuant to Section 6.08 of the Trust Agreement, to the execution and delivery of the Eighth Amendment to Master Site Lease dated as of July 1, 2015, 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, the Fourth Amendment to Master Site Lease, dated as of July 1, 2002, the Fifth Amendment to Master Site Lease, dated as of July 1, 2003, the Sixth Amendment to Master Site Lease, dated as of March 1, 2007 and the Seventh Amendment to Master Site Lease, dated as of December 1, 2013. NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION By Authorized Officer OH&S Draft 7/6/2015 OHSUSA:761781617.5 Recording requested by and return to: COUNTY OF CONTRA COSTA c/o Orrick, Herrington & Sutcliffe LLP The Orrick Building 405 Howard Street San Francisco, California 94105-2669 Attention: Mary A. Collins, Esq. FACILITIES LEASE by and between COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY and the COUNTY OF CONTRA COSTA Related to $_____________ County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects) 2015 Series A and 2015 Series B Dated as of July 1, 2015 THIS TRANSACTION IS EXEMPT FROM FILING FEES PURSUANT TO CALIFORNIA GOVERNMENT CODE SECTION 6103 AND TRANSFER TAXES PURSUANT TO CALIFORNIA REVENUE AND TAXATION CODE SECTION 11928. OHSUSA:761781617.5 FACILITIES LEASE This Facilities Lease, dated as of July 1, 2015, by and between the COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY (the “Authority”), a joint exercise powers authority duly organized and existing under and by virtue of the laws of the State of California, as sublessor, and the COUNTY OF CONTRA COSTA (the “County”), a body corporate and politic and a political subdivision of the State of California, as sublessee; W I T N E S S E T H: WHEREAS, the Authority, at the request of the County, is refunding outstanding bonds (the “2015 Refunded Bonds”) issued pursuant to the Trust Agreement dated as of February 1, 1999 (as supplemented and amended, the “1999 Trust Agreement”) and releasing encumbrances on certain facilities the rental payments for which secured the 2015 Refunded Bonds; WHEREAS, the County has determined to finance and refinance the construction, renovation and acquisition of various capital projects of the County as set forth in Exhibit D hereto, as the same may be changed from time to time (the “Capital Projects”); WHEREAS, the Authority intends to assist the County in financing and refinancing the Capital Projects and refunding the 2015 Refunded Bonds by issuing the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects), 2015 Series A and 2015 Series B (collectively, the “2015 Bonds”); WHEREAS, the County will lease to the Authority certain capital assets of the County (as further defined herein, the “Facilities”) pursuant to a Site Lease, dated as of July 1, 2015; WHEREAS, the County will lease back the Facilities from the Authority pursuant to the terms of this Facilities Lease; and WHEREAS, under this Facilities Lease, the County will be obligated to make base rental payments to the Authority for the lease of the Facilities and such other facilities as may from time to time be leased hereunder; NOW, THEREFORE, in consideration of the mutual covenants herein, the parties hereto agree as follows: 2 OHSUSA:761781617.5 ARTICLE I DEFINITIONS SECTION 1.01. Definitions. Unless the context otherwise requires, the terms defined in this Section shall, for all purposes of this Facilities Lease, have the meanings herein specified, which meanings shall be equally applicable to both the singular and plural forms of any of the terms herein defined. Capitalized terms not otherwise defined herein shall have the meanings assigned to such terms in the Trust Agreement. “Additional Payments” means all amounts payable to the Authority or the Trustee or any other person from the County as Additional Payments pursuant to Section 3.02 hereof. “Architects” means the architects, engineers or designers of the Capital Projects or any portion thereof, and any successor or successors to any thereof. “Authority” means the County of Contra Costa Public Financing Authority, acting as sublessor hereunder and any surviving, resulting or transferee entity. “Base Rental” and “Base Rental Payments” means all amounts payable to the Authority from the County as Base Rental Payments pursuant to Section 3.01 hereof. “Base Rental Payment Schedule” means the schedule of Base Rental Payments payable to the Authority from the County pursuant to Section 3.01 hereof and attached hereto as Exhibit B. “Bonds” means, collectively, the 2015 Bonds and any other bonds issued by the Authority and payable from the Base Rental. “Capital Projects” means the various public capital improvements and projects, including, but not limited to the acquisition, installation, implementation and construction of the 2015 Project, as set forth in Exhibit D hereto, as the same may be amended from time to time by a Certificate of the County delivered to the Trustee, to be financed or refinanced by a portion of the proceeds of the Bonds. “Code” means the Internal Revenue Code of 1986, as the same shall be hereafter amended, and any regulations heretofore issued or which shall be hereafter issued by the United States Department of the Treasury thereunder. “Contractors” means the construction contractor for any portion of the Capital Projects and any successor or successors to any thereof. “County” means the County of Contra Costa, California, a body corporate and politic and a political subdivision of the State of California. 3 OHSUSA:761781617.5 “Event of Default” shall have the meaning specified in Section 6.01 hereof. “Facilities” shall mean the real property and the improvements thereon as described in Exhibit A hereto, or any County buildings, other improvements and facilities, added thereto or substituted therefor, or any portion thereof, in accordance with this Facilities Lease and the Trust Agreement. “Facilities Lease” means this Facilities Lease, as originally executed and recorded or as it may from time to time be supplemented, modified or amended pursuant to the provisions hereof and of the Trust Agreement. “Medical Clinic” means the 12,000-square-foot, behavioral health facility and expansion of a medical clinic (approximately 10,000 square feet) to be located on an approximately 0.93- acre parcel, adjacent and connected to the County’s West County Health Center, located at 13601 San Pablo Avenue in San Pablo, California. “Rental Payment Period” means the twelve month period commencing June 1 of each year and ending the following May 31, and the initial period commencing on the effective date hereof and ending the following May 31. “Solar Panels” means the solar photovoltaic panels installed on canopies located on six sites within the County, specifically: Juvenile Hall (202 Glacier Drive in Martinez, California); the Sheriff Coroner-Forensic Science Center (1960 Muir Road, in Martinez, California); the Office of Emergency Services (50 Glacier Drive, in Martinez, California); the Sheriff Patrol and Investigation Facility (1980 Muir Road, in Martinez, California); the Public Works Department Administrative office building (255 Glacier Road, in Martinez, California); and the West County Health Center (13601 San Pablo Avenue in San Pablo, California). “Trust Agreement” means the Trust Agreement, dated as of July 1, 2015, by and between the Trustee and the Authority and acknowledged by the County, as originally executed or as it may from time to time be supplemented, modified or amended by a Supplemental Trust Agreement entered into pursuant to the provisions thereof. “2015 Project” means the acquisition, installation, implementation and construction of certain projects of the County, specifically the Medical Clinic and the Solar Panels, and payment of any costs associated with financing of said projects, as set forth in Exhibit D hereto, as the same may be changed from time to time, in accordance with Section 3.07 hereof, by a Certificate of the County delivered to the Trustee. “2015 Refunded Bonds” means 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), 2002 Series A, the County of Contra Costa Public Financing Authority Lease R evenue Bonds (Refunding and Various Capital Projects), 2002 Series B, the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Various Capital Projects), 2003 Series A and a portion of the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects), 2007 Series A identified in the Escrow Agreement, all issued under the 1999 Trust Agreement. 4 OHSUSA:761781617.5 ARTICLE II LEASE OF FACILITIES; TERM SECTION 2.01. Lease of Facilities. The Authority hereby leases to the County and the County hereby leases from the Authority the Facilities, subject, however, to all easements, encumbrances, and restrictions that exist at the time of the commencement of the term of this Facilities Lease, as defined in Section 2.02 hereof. The County hereby agrees and covenants during the term of this Facilities Lease that, except as hereinafter provided, it will use the Facilities for public and County purposes so as to afford the public the benefits contemplated by this Facilities Lease. SECTION 2.02. Term; Occupancy; and Release of Existing Facilities. The term of this Facilities Lease shall commence on the date of recordation of this Facilities Lease in the office of the County Recorder of Contra Costa County, State of California, or on ___________, 2015, whichever is earlier, and shall end for the respective Facilities on the dates specified in Exhibit C hereto, unless such term is extended or sooner terminated as hereinafter provided. If on such dates, the Base Rental Payments attributable to the related Facility and all other amounts then due hereunder with respect to such Facility shall not be fully paid, or if the rental payable hereunder with respect to such Facility shall have been abated at any time and for any reason, then the term of this Facilities Lease with respect to such Facility shall be extended until the Base Rental Payments attributable to such Facility and all other amounts then due hereunder with respect to such Facility shall be fully paid, except that the term of this Facilities Lease as to the respective Facility shall in no event be extended beyond ten (10) years after the date identified with respect thereto. If prior to such date, the Base Rental Payments attributable to the related Facility or the proportionate amount of Bonds payable therefrom and all other amounts then due hereunder with respect to such Facility shall be fully paid, or provision therefor made, the term of this Facilities Lease with respect to such Facility shall end ten (10) days thereafter or upon written notice by the County to the Authority, whichever is earlier. Upon the expiration of the term of this Facilities Lease with respect to a particular Facility pursuant to the preceding paragraph, the respective Facility shall be released from this Facilities Lease without compliance with the release requirements set forth in Section 2.03. SECTION 2.03. Substitution; Release; Addition of Property. The County and the Authority may add, substitute or release real property as part of the Facilities, but only after the County shall have filed with the Authority and the Trustee, with written notice to each rating agency then providing a rating for the Bonds, all of the following: (a) Executed copies of the Facilities Lease or amendments thereto containing the amended description of the Facilities. (b) A Certificate of the County with copies of the Facilities Lease or the Site Lease, if needed, 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. 5 OHSUSA:761781617.5 (c) A Certificate of the County, supported by expert knowledge (which may be that of the Real Estate Manager of the County) or construction cost information evidencing that the fair market value or the insured value of the Facilities that will constitute the Facilities after such addition, substitution or release will be at least equal to the aggregate outstanding principal amount of the Base Rental Payments after such addition, substitution or release, and that the annual fair rental value of the Facilities after such addition, substitution or release will be at least equal to the maximum annual Base Rental Payments coming due and payable hereunder after such addition, substitution or release, and that the useful life of such Facilities will at least extend to the final Base Rental Payment date. (d) In connection with any addition or substitution of property, a leasehold owner’s title insurance policy or policies or a commitment for such policy or policies or an amendment or endorsement to an existing title insurance policy or policies resulting in title insurance with respect to the Facilities after such addition or substitution in an amount at least equal to the aggregate principal amount of Bonds Outstanding at the time of substitution or addition of Facilities. (e) A Certificate of the County stating that (i) such addition, substitution or release does not adversely affect the County’s use and occupancy o f the Facilities (as such term will be defined following the addition, substitution or release) and (ii) no Event of Default has occurred and is continuing hereunder. (f) In connection with any substitution or release of property, a Certificate of the County stating that the substitution or release will not cause the County to violate its covenants, representations and warranties hereunder. (g) In connection with any substitution of property, a Certificate of the County stating that the Facility to be added is of approximately the same or greater degree of essentiality to the County as the Facility being replaced. (h) An Opinion of Counsel stating that such amendment or modification (i) complies with the terms of the Constitution and laws of the State and of the Trust Agreement; (ii) will, upon the execution and delivery thereof, be valid and binding upon the Authority and the County; and (iii) will not cause the interest on the Bonds to be included in gross income for federal income tax purposes. ARTICLE III RENTAL PAYMENTS; USE OF PROCEEDS SECTION 3.01. Base Rental Payments. The County agrees to pay to the Authority, as Base Rental Payments for the use and occupancy of the Facilities (subject to the provisions of Sections 3.04, 3.06 and 7.01 of this Facilities Lease) annual rental payments with principal and interest components, the interest components being payable semi-annually, in accordance with the Base Rental Payment Schedule attached hereto as Exhibit B and made a part hereof. The County is hereby directed to pay all such Base Rental Payments directly to the Trustee for application as provided in the Trust Agreement. Base Rental Payments shall be 6 OHSUSA:761781617.5 calculated on an annual basis, for each Rental Payment Period, and each annual Base Rental shall be divided into two interest components, due on December 1 and June 1, and one principal component, due on June 1, except that the first Rental Payment Period commences on the date of recordation of this Facilities Lease and ends on ___________, 20__. Each Base Rental Payment installment shall be payable on the third Business Day immediately preceding its due date. The interest components of the Base Rental Payments shall be paid by the County as and constitute interest paid on the principal components of the Base Rental Payments to be paid by the County hereunder, computed on the basis of a 360-day year composed of twelve 30-day months. Each annual payment of Base Rental (to be payable in installments as aforesaid) shall be for the use of the Facilities. If the term of this Facilities Lease shall have been extended pursuant to Section 2.02 hereof, Base Rental Payment installments shall continue to be due on December 1 and June 1 in each year, and payable prior thereto as hereinabove described, continuing to and including the date of termination of this Facilities Lease. Upon such extension of this Facilities Lease, the County shall deliver to the Trustee a Certificate setting forth the extended rental payment schedule, which schedule shall establish the principal and interest components of the Base Rental Payments so that the principal components will in the aggregate be sufficient to pay all unpaid principal components with interest components sufficient to pay all unpaid interest components plus interest. If at any time the Base Rental shall not have been paid by the County when due, for any reason whatsoever, and no other source of funds shall have been available to make the payments of principal and interest on the Bonds, the principal and interest components of the Base Rental shall be recalculated by the County to reflect interest on the unpaid Base Rental Payments as provided in Section 3.04. Upon request by the Authority or the Trustee, a revised Exhibit B to this Facilities Lease shall be prepared by the County and supplied to the Authority and the Trustee reflecting such recalculation. SECTION 3.02. Additional Payments. The County shall also pay such amounts (herein called the “Additional Payments”) as shall be required by the Authority for the payment of all costs and expenses incurred by the Authority in connection with the execution, performance or enforcement of this Facilities Lease, or any pledge of Base Rental payable hereunder, the Trust Agreement, its interest in the Facilities and the lease of the Facilities to the County, including but not limited to payment of all fees, costs and expenses and all administrative costs of the Authority related to the Facilities, including, without limiting the generality of the foregoing, salaries and wages of employees, all expenses, compensation and indemnification of the Trustee payable by the Authority under the Trust Agreement, fees of auditors, accountants, attorneys or architects, and all other necessary administrative costs of the Authority or charges required to be paid by it in order to maintain its existence or to comply with the terms of the Bonds or of the Trust Agreement; but not including in Additional Payments amounts required to pay the principal of or interest on the Bonds. Such Additional Payments shall be billed to the County by the Authority or the Trustee from time to time, together with a statement certifying that the amount billed has been paid by the Authority or by the Trustee on behalf of the Authority, for one or more of the items above described, or that such amount is then payable by the Authority or the Trustee for such 7 OHSUSA:761781617.5 items. Amounts so billed shall be paid by the County to the billing party within 30 days after receipt of the bill by the County. The County reserves the right to audit billings for Additional Payments although exercise of such right shall in no way affect the duty of the County to make full and timely payment for all Additional Payments. The Authority has issued and may in the future issue bonds and has entered into and may in the future enter into leases to finance capital improvements other than the Capital Project. The administrative costs of the Authority shall be allocated among the facilities subject to such other lease agreements and the Facilities, as hereinafter in this paragraph provided. The fees of the Trustee under the Trust Agreement, and any other expenses directly attributable to the Facilities shall be included in the Additional Payments payable hereunder. The fees of any trustee or paying agent under any indenture securing bonds of the Authority or any trust agreement other than the Trust Agreement, and any other expenses directly attributable to any facilities other than the Facilities, shall not be included in the administrative costs of the Facilities and shall not be paid from the Additional Payments payable hereunder. Any expenses of the Authority not directly attributable to any particular lease of the Authority shall be equitably allocated among all such leases, including this Facilities Lease, in accordance with sound accounting practice. In the event of any question or dispute as to such allocation, the written opinion of an independent firm of certified public accountants, employed by the Authority to consider the question and render an opinion thereon, shall be a final and conclusive determination as to such allocation. The Trustee may conclusively rely upon the Written Request of the Authority, with the approval of the County Administrator or the Count y Finance Director, or a duly authorized representative of the County, endorsed thereon, in making any determination that costs are payable as Additional Payments hereunder, and shall not be required to make any investigation as to whether or not the items so requested to be paid are expenses related to the lease of the Facilities. SECTION 3.03. Fair Rental Value. Such payments of Base Rental Payments and Additional Payments for each rental period during the term of this Facilities Lease shall constitute the total rental for said Rental Payment Period and shall be paid by the County in each Rental Payment Period for and in consideration of the right of use and occupancy of, and continued quiet use and enjoyment of, the Facilities during each such period for which said rental is to be paid. The parties hereto have agreed and determined that such total rental payable for each Rental Payment Period represents the fair rental value of the Facilities for each such period. In making such determination, consideration has been given to the value of the Facilities, costs of acquisition, design, construction and financing of the Facilities, other obligations of the parties under this Facilities Lease, the uses and purposes which may be served by the Facilities and the benefits therefrom which will accrue to the County and the general public. SECTION 3.04. Payment Provisions. Each installment of rental payable hereunder shall be paid in lawful money of the United States of America to or upon the order of the Authority at the principal office of the Trustee in San Francisco, California, or such other place as the Authority shall designate. Any such installment of rental accruing hereunder which shall not be paid when due and payable under the terms of this Facilities Lease shall bear interest at the rate of twelve percent (12%) per annum, or such lesser rate of interest as may be permitted by law, from the date when the same is due hereunder until the same shall be paid. Notwithstanding any dispute between the Authority and the County, the Coun ty shall make all 8 OHSUSA:761781617.5 rental payments when due without deduction or offset of any kind and shall not withhold any rental payments pending the final resolution of such dispute. In the event of a determination that the County was not liable for said rental payments or any portion thereof, said payments or excess of payments, as the case may be, shall be credited against subsequent rental payments due hereunder or refunded at the time of such determination. Amounts required to be deposited by the County with the Trustee pursuant to this Section on any date shall be reduced to the extent that amounts on deposit in the Revenue Fund, the Interest Account or the Principal Account are available therefor. All payments received shall be applied first to the interest components of the Base Rental Payments due hereunder, then to the principal components of the Base Rental Payments due hereunder and thereafter to all Additional Payments due hereunder, but no such application of any payments which are less than the total rental due and owing shall be deemed a waiver of any default hereunder. Rental is subject to abatement as provided in Section 3.06. Nothing contained in this Facilities Lease shall prevent the County from making from time to time contributions or advances to the Authority for any purpose now or hereafter authorized by law, including the making of repairs to, or the restoration of, the Facilities in the event of damage to or the destruction of the Facilities. SECTION 3.05. Appropriations Covenant. The County covenants to take such action as may be necessary to include all such Base Rental Payments and Additional Payments due hereunder in its annual budgets, to make necessary annual appropriations for all such Base Rental Payments and Additional Payments as shall be required to provide funds in such year for such Base Rental Payments and Additional Payments. [The County will deliver to the Authority and the Trustee within sixty (60) days of adoption of the final County budget a Certificate of the County (in the form set forth in Exhibit E attached hereto) stating that the budget as adopted appropriates all moneys necessary for the payment of Base Rental Payments and Additional Payments hereunder.] The covenants on the part of the County herein contained shall be deemed to be and shall be construed to be duties imposed by law and it shall be the duty of each and every public official 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 t he County to carry out and perform the covenants and agreements in this Facilities Lease agreed to be carried out and performed by the County. The Authority and the County understand and intend that the obligation of the County to pay Base Rental Payments and Additional Payments hereunder shall constitute a current expense of the County and shall not in any way be construed to be a debt of the County in contravention of any applicable constitutional or statutory limitation or requirement concerning the creation of indebtedness by the County, nor shall anything contained herein constitute a pledge of the general tax revenues, funds or moneys of the County. Base Rental Payments and Additional Payments due hereunder shall be payable only from current funds which are budgeted and appropriated or otherwise legally available for the purpose of paying Base Rental Payments and Additional Payments or other payments due hereunder as consideration for use of the Facilities. This Facilities Lease shall not create an immediate 9 OHSUSA:761781617.5 indebtedness for any aggregate payments which may become due hereunder in the event that the term of the Facilities Lease is continued. The County has not pledged the full faith and credit of the County, the State of California or any agency or department thereof to the payment of the Base Rental Payments and Additional Payments or any other payments due hereunder. SECTION 3.06. Rental Abatement. The Base Rental Payments and Additional Payments shall be abated proportionately, during any period in which by reason of any damage or destruction (other than by condemnation which is hereinafter provided for) there is substantial interference with the use and occupancy of the Facilities by the County, in the proportion in which the cost of that portion of the Facilities rendered unusable bears to the cost of the whole of the Facilities. Such abatement shall continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. In the event of any such damage or destruction, this Facilities Lease shall continue in full force and effect and the County waives any right to terminate this Facilities Lease by virtue of any such damage or destruction. SECTION 3.07. Use of Proceeds. The parties hereto agree that the proceeds of the Bonds will be used to finance or refinance the Capital Projects, to refund the 2015 Refunded Bonds and to pay the costs of issuing the Bonds and incidental and related expenses. The County hereby agrees to construct the Capital Projects from the proceeds of the 2015 Bonds provided to the County by the Authority in consideration for the leasehold interest in the real property comprising the Facilities. The Authority and the County agree that the Capital Projects will be constructed in accordance with the plans and specifications prepared by the designers of the Capital Projects and approved by the County. The County may alter the 2015 Project or issue change orders altering the construction contract plans and specifications during the course of construction, and the Authority agrees to cooperate fully with the County to cause such alterations or change orders to be implemented. Failure of the County to complete the 2015 Project shall not cause an abatement of Base Rental hereunder. ARTICLE IV MAINTENANCE; ALTERATIONS AND ADDITIONS SECTION 4.01. Maintenance and Utilities. During such time as the County is in possession of the Facilities, all maintenance and repair, both ordinary and extraordinary, of the Facilities shall be the responsibility of the County, which shall at all times maintain or otherwise arrange for the maintenance of the Facilities in first class condition, and the County shall pay for or otherwise arrange for the payment of all utility services supplied to the Facilities, which may include, without limitation, janitor service, security, power, gas, telephone, light, heating, ventilation, air conditioning, water and all other utility services, and shall pay for or otherwise arrange for payment of the cost of the repair and replacement of the Facilities resulting from ordinary wear and tear or want of care on the part of the County or any assignee or sublessee thereof or any other cause and shall pay for or otherwise arrange for the payment of all 10 OHSUSA:761781617.5 insurance policies required to be maintained with respect to the Facilities. In exchange for the rental herein provided, the Authority agrees to provide only the Facilities. SECTION 4.02. Changes to the Facilities. Subject to Section 8.02 hereof, the County shall, at its own expense, have the right to remodel the Facilities or to make additions, modifications and improvements to the Facilities. All such additions, modifications and improvements shall thereafter comprise part of the Facilities and be subject to the provisions of this Facilities Lease. Such additions, modifications and improvements shall not in any way damage the Facilities or cause them to be used for purposes other than those authorized under the provisions of state and federal law; and the Facilities, upon completion of any additions, modifications and improvements made pursuant to this Section, shall be of a value which is at least equal to the value of the Facilities immediately prior to the making of such additions, modifications and improvements. SECTION 4.03. Installation of County’s Equipment. The County and any sublessee may at any time and from time to time, in it s sole discretion and at its own expense, install or permit to be installed other items of equipment or other personal property in or upon the Facilities. All such items shall remain the sole property of such party, in which neither the Authority nor the Trustee shall have any interest, and may be modified or removed by such party at any time provided that such party shall repair and restore any and all damage to the Facilities resulting from the installation, modification or removal of any such items. Nothing in this Facilities Lease shall prevent the County from purchasing items to be installed pursuant to this Section under a conditional sale or lease purchase contract, or subject to a vendor’s lien or security agreement as security for the unpaid portion of the purchase price thereof, provided that no such lien or security interest shall attach to any part of the Facilities. ARTICLE V INSURANCE SECTION 5.01. Fire and Extended Coverage Insurance. The County shall procure or cause to be procured and maintain or cause to be maintained, throughout the term of this Facilities 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. Said extended coverage insurance shall, as nearly as practicable, cover loss or damage by explosion, windstorm, flood, riot and ri ot attending a strike, aircraft, vehicle damage, hail, smoke and such other hazards as are normally covered by such insurance. Such insurance shall 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 insurance), or, in the alternative, shall be in an amount and in a form sufficient (together with moneys held under the Trust Agreement), in the event of total or partial loss, to enable the County to prepay all or any part of the Base Rental Payments then unpaid, pursuant to Section 7.02 hereof and to redeem outstanding Bonds. 11 OHSUSA:761781617.5 In the event of any damage to or destruction of any part of the Facilities, caused by the perils covered by such insurance, the Authority, except as hereinafter provided, shall cause the proceeds of such insurance to be utilized for the repair, reconstruction or replacement of the damaged or destroyed portion of the Facilities, and the Trustee shall hold said proceeds separate and apart from all other funds, in a special fund to be designated the “Insurance and Condemnation Fund,” to the end that such proceeds shall be applied to the repair, reconstruction or replacement of the Facilities to at least the same good order, repair and condition as they were in prior to the damage or destruction, insofar as the same may be accomplished by the use of said proceeds. The Trustee shall permit withdrawals of said proceeds from time to time upon receiving the Written Request of the Authority, stating that the Authority has expended moneys or incurred liabilities in an amount equal to the amount therein requested to be paid over to it for the purpose of repair, reconstruction or replacement, and specifying the items for which such moneys were expended, or such liabilities were incurred. Any balance of said proceeds not required for such repair, reconstruction or replacement shall be treated by the Trustee as Base Rental Payments and applied in the manner provided by Section 5.02 of the Trust Agreement, provided, however, that if the insurance proceeds were paid to cover damage to property of the County that does not constitute part of the Facilities, as defined herein, including, but not limited to furniture and office equipment, then such proceeds shall be paid to the County. Alternatively, the Authority, at its option, and if the proceeds of such insurance together with any other moneys then available for the purpose are at least sufficient to redeem an aggregate principal amount of outstanding Bonds, equal to the amount of Base Rental attributable to the portion of the Facilities so destroyed or damaged (determined by reference to the proportion which the cost of such portion of the Facilities bears to the cost of the Facilities), may elect not to repair, reconstruct or replace the damaged or destroyed portion of the Facilities and thereupon shall cause said proceeds to be used for the redemption of outstanding Bonds pursuant to the provisions of the Trust Agreement. The Authority and the County shall promptly apply for Federal disaster aid or State of California disaster aid in the event that the Facilities are damaged or destroyed as a result of an earthquake occurring at any time. Any proceeds received as a result of such disaster aid shall be used to repair, reconstruct, restore or replace the damaged or destroyed portions of the Facilities, or, at the option of the County and the Authority, to enable the County to prepay all or any part of the Base Rental Payments then unpaid, pursuant to Section 7.02 h ereof, and to redeem outstanding Bonds if such use of such disaster aid is permitted. As an alternative to providing the insurance required by the first paragraph of this Section, or any portion thereof, the County may provide a self insurance method or plan of protection if and to the extent such self insurance method or plan of protection shall afford reasonable coverage for the risks required to be insured against, in light of all circumstances, giving consideration to cost, availability and similar plans or methods of protection adopted by public entities in the State of California other than the County. So long as such method or plan is being provided to satisfy the requirements of this Facilities Lease, there shall be filed annually with the Trustee a statement of an actuary, insurance consultant or other qualified person (which may be the Risk Manager of the County), stating that, in the opinion of the signer, the substitute method or plan of protection is in accordance with the requirements of this Section and, when effective, would afford reasonable coverage for the risks required to be insured against. There shall also be filed a Certificate of the County setting forth the details of such substitute method or 12 OHSUSA:761781617.5 plan. In the event of loss covered by any such self insurance method, the liability of the County hereunder shall be limited to the amounts in the self insurance reserve fund or funds created under such method. SECTION 5.02. Liability Insurance. Except as hereinafter provided, the County shall procure or cause to be procured and maintain or cause to be maintained, throughout the term of this Facilities Lease, a standard comprehensive general liability insurance policy or policies in protection of the Authority and its members, directors, officers, agents and employees and the Trustee, indemnifying said parties against all direct or contingent loss or liability for damages for personal injury, death or property damage occasioned by reason of the operation of the Facilities, with minimum liability limits of $1,000,000 for personal injury or death of each person and $3,000,000 for personal injury or deaths of two or more persons in each accident or event, and in a minimum amount of $200,000 for damage to property resulting from each accident or event. Such public liability and property damage insurance may, however, be in the form of a single limit policy in the amount of $3,000,000 covering all such risks. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance carried by the County. As an alternative to providing the insurance required by the first paragraph of this Section, or any portion thereof, the County may provide a self insurance method or plan of protection if and to the extent such self insurance method or plan of protection shall afford reasonable protection to the Authority, its members, directors, officers, agents and employees and the Trustee, in light of all circumstances, giving consideration to cost, availability and similar plans or methods of protection adopted by public entities in the State of California other than the County. So long as such method or plan is being provided to satisfy the requirements of this Facilities Lease, there shall be filed annually with the Trustee a statement of an actuary, independent insurance consultant or other qualified person (which may be the Risk Manager of the County), stating that, in the opinion of the signer, the substitute method or plan of protection is in accordance with the requirements of this Section and, when effective, would afford reasonable protection to the Authority, its members, directors, officers, agents and employees and the Trustee against loss and damage from the hazards and risks covered thereby. There shall also be filed a Certificate of the County setting forth the details of such substitute method or plan. SECTION 5.03. Rental Interruption or Use and Occupancy Insurance. The County shall procure or cause to be procured and maintain or cause to be maintained, rental interruption or use and occupancy insurance to cover loss, total or partial, of the rental income from or the use of the Facilities as the result of any of the hazards covered by the insurance required by Section 5.01 hereof (provided with respect to earthquake insurance, only if available on the open market from reputable insurance companies at a reasonable cost, as determined by the County), in an amount sufficient to pay the part of the total rent hereunder attributable to the portion of the Facilities rendered unusable (determined by reference to the proportion which the cost of such portion bears to the cost of the Facilities) for a period of at least two years, except that such insurance may be subject to a deductible clause of not to exceed two hundred and fifty thousand dollars ($250,000) or a comparable amount adjusted for inflation (or more in the case of earthquake coverage), and with the additional exception that with respect to coverage for terrorism related loss, the period may be only one year, provided that the County use its best 13 OHSUSA:761781617.5 efforts to obtain such coverage for a period of at least two years assuming it is available on the open market from reputable insurance companies at a reasonable cost, as determined by the County. Any proceeds of such insurance shall be used by the Trustee to reimburse to the County any rental theretofore paid by the County under this Facilities Lease attributable to such structure for a period of time during which the payment of rental under this Facilities Lease is abated, and any proceeds of such insurance not so used shall be applied as provided in Section 3.01 (to the extent required for the payment of Base Rental) and in Section 3.02 (to the extent required for the payment of Additional Payments) and any remainder shall be treated as Revenu e under the Trust Agreement. The County shall not be entitled to self-insure for rental interruption insurance. SECTION 5.04. Worker’s Compensation. The County shall also maintain worker’s compensation insurance issued by a responsible carrier authorized under the laws of the State of California to insure its employees against liability for compensation under the Worker’s Compensation Insurance and Safety Act now in force in California, or any act hereafter enacted as an amendment or supplement thereto. As an alternative, such insurance may be maintained as part of or in conjunction with any other insurance carried by the County. Such insurance may be maintained by the County in the form of self-insurance. SECTION 5.05. Title Insurance. The County shall obtain, for the benefit of the Authority, upon the execution and delivery of this Facilities Lease, title insurance on the Facilities, in an amount equal to the aggregate principal amount of the Bonds, issued by a company of recognized standing duly authorized to issue the same, subject only to Permitted Encumbrances. SECTION 5.06. Insurance Proceeds; Form of Policies. All policies of insurance required by Sections 5.01 and 5.03 hereof shall name the County, the Authority and the Trustee as insured and shall contain a lender’s loss payable endorsement in favor of the Trustee substantially in accordance with the form approved by the Insurance Services Office and the California Bankers Association. The Trustee shall, to the extent practicable, collect, adjust and receive all moneys which may become due and payable under any such policies, may compromise any and all claims thereunder and shall apply the proceeds of such insurance as provided in Sections 5.01 and 5.03. All policies of insurance required by this Facilities Lease shall provide that the Trustee shall be given thirty (30) days notice of each expiration thereof or any intended cancellation thereof or reduction of the coverage provided thereby. The Trustee shall not be responsible for the sufficiency of any insurance herein required and shall be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss agreed to by the County. The County shall pay when due the premiums for all insurance policies required by this Facilities Lease. SECTION 5.07. Annual Certificates. The County will deliver to the Authority and the Trustee on or before September 15 in each year a written Certificate of an officer of the County (in the form set forth in Exhibit F attached hereto) stating whether such policies satisfy the requirements of this Facilities Lease, setting forth the insurance policies then in force pursuant to this Article, the names of the insurers which have issued the policies, the amounts thereof and the property and risks covered thereby, and, if any self -insurance program is being provided, the annual report of an actuary, independent insurance consultant or other 14 OHSUSA:761781617.5 qualified person containing the information required for such self-insurance program and described in Sections 5.01, 5.02 and 5.04. Delivery to the Trustee of the certificate under the provisions of this Section shall not confer responsibility upon the Trustee as to the sufficiency of coverage or amounts of such policies. If so requested in writing by the Trustee, the County shall also deliver to the Trustee certificates or duplicate originals or certified copies of each insurance policy described in such schedule. Any policies of insurance provided by a commercial insurer to satisfy the requirements of Sections 5.01, 5.02 or 5.03 hereof shall be provided by a commercial insurer rated in one of the two highest rating categories by S&P and by Moody’s. ARTICLE VI DEFAULTS AND REMEDIES SECTION 6.01. Defaults and Remedies. (a) If the County shall fail to pay any rental payable hereunder when the same becomes due, time being expressly declared to be of the essence of this Facilities Lease or the County shall fail to keep, observe or perform any other term, covenant or condition contained herein to be kept or performed by the County for a period of sixty (60) days after notice of the same has been given to the County by the Authority or the Trustee or for such additional time as is reasonably required, in the sole discretion of th e Authority, to correct the same, or upon the happening of any of the events specified in subsection (b) of this Section (any such case above being an “Event of Default”), the County shall be deemed to be in default hereunder and it shall be lawful for the Authority to exercise any and all remedies available pursuant to law or granted pursuant to this Facilities Lease. Upon any such default, the Authority, in addition to all other rights and remedies it may have at law, shall have the option to do any of the following: (1) To terminate this Facilities Lease in the manner hereinafter provided on account of default by the County, notwithstanding any re-entry or re-letting of the Facilities as hereinafter provided for in subparagraph (2) hereof, and to re-enter the Facilities and remove all persons in possession thereof and all personal property whatsoever situated upon the Facilities and place such personal property in storage in any warehouse or other suitable place located within the County of Contra Costa, California. In the event of such termination, the County agrees to surrender immediately possession of the Facilities, without let or hindrance, and to pay the Authority all damages recoverable at law that the Authority may incur by reason of default by the County, including, without limitation, any costs, loss or damage whatsoever arising out of, in connection with, or incident to any such re-entry upon the Facilities and removal and storage of such property by the Authority or its duly authorized agents in accordance with the provisions herein contained. Neither notice to pay rent or to deliver up possession of the Facilities given pursuant to law nor any entry or re-entry by the Authority nor any proceeding in unlawful detainer, or otherwise, brought by the Authority for the purpose of effecting such re-entry or obtaining possession of the Facilities nor the appointment of a receiver upon initiative of the Authority to protect the Authority’s interest under this Facilities Lease shall of itself operate to terminate this Facilities Lease, and no termination of this Facilities Lease on account of default by the County shall be or become effective by operation of law or acts of the parties hereto, or otherwise, unless and until the Authority shall have given written notice to the 15 OHSUSA:761781617.5 County of the election on the part of the Authority to terminate this Facilities Lease. The County covenants and agrees that no surrender of the Facilities or of the remainder of the term hereof or any termination of this Facilities Lease shall be valid in any manner or for any purpose whatsoever unless stated or accepted by the Authority by such written notice. (2) Without terminating this Facilities Lease, (i) to collect each installment of rent as it becomes due and enforce any other terms or provision hereof to be kept or performed by the County, regardless of whether or not the County has abandoned the Facilities, or (ii) to exercise any and all rights of entry and re-entry upon the Facilities. In the event the Authority does not elect to terminate this Facilities Lease in the manner provided for in subparagraph (1) hereof, the County shall remain liable and agrees to keep or perform all covenants and conditions herein contained to be kept or performed by the County and, if the Facilities are not re-let, to pay the full amount of the rent to the end of the term of this Facilities Lease or, in the event that the Facilities are re-let, to pay any deficiency in rent that results therefrom; and further agrees to pay said rent and/or rent deficiency punctually at the same time and in the same manner as hereinabove provided for the payment of rent hereunder (without acceleration), notwithstanding the fact that the Authority may have received in previous years or may receive thereafter in subsequent years rental in excess of the rental herein specified, and notwithstanding any entry or re-entry by the Authority or suit in unlawful detainer, or otherwise, brought by the Authority for the purpose of effecting such entry or re-entry or obtaining possession of the Facilities. Should the Authority elect to enter or re-enter as herein provided, the County hereby irrevocably appoints the Authority as the agent and attorney-in-fact of the County to re-let the Facilities, or any part thereof, from time to time, either in the Authority’s name or otherwise, upon such terms and conditions and for such use and period as the Authority may deem advisable, and to remove all persons in possession thereof and all personal property whatsoever situated upon the Facilities and to place such personal property in storage in any warehouse or other suitable place located in the County of Contra Costa, California, for, to the extent permitted by law, the account of and at the expense of the County, and the County, to the extent permitted by law, hereby exempts and agrees to save harmless the Authority from any costs, loss or damage whatsoever arising out of, in connection with, or incident to any such re- entry upon and re-letting of the Facilities and removal and storage of such property by the Authority or its duly authorized agents in accordance with the provisions herein contained. The County agrees that the terms of this Facilities Lease constitute full and sufficient notice of the right of the Authority to re-let the Facilities and to do all other acts to maintain or preserve the Facilities as the Authority deems necessary or desirable in the event of such re-entry without effecting a surrender of this Facilities Lease, and further agrees that no acts of the Authority in effecting such re-letting shall constitute a surrender or termination of this Facilities Lease irrespective of the use or the term for which such re-letting is made or the terms and conditions of such re-letting, or otherwise, but that, on the contrary, in the event of such default by the County the right to terminate this Facilities Lease shall vest in the Authority to be effected in the sole and exclusive manner provided for in sub-paragraph (1) hereof. The County further waives the right to any rental obtained by the Authority in excess of the rental herein specified and hereby conveys and releases such excess to the Authority as compensation to the Authority for its services in re-letting the Facilities or any part thereof. The County further a grees, to the extent permitted by law, to pay the Authority the reasonable cost of any alterations or additions to the Facilities necessary to place the Facilities in condition for re-letting immediately upon notice to the County of the completion and installation of such additions or alterations. 16 OHSUSA:761781617.5 The County hereby waives any and all claims for damages caused or which may be caused by the Authority in re-entering and taking possession of the Facilities as herein provided and all claims for damages that may result from the destruction of or injury to the Facilities and all claims for damages to or loss of any property belonging to the County, or any other person, that may be in or upon the Facilities. (b) If (1) the County’s interest in this Facilities Lease or any part thereof be assigned or transferred, either voluntarily or by operation of law or otherwise, without the written consent of the Authority, as hereinafter provided for, or (2) the County or any assignee shall file any petition or institute any proceeding under any act or acts, state or federal, dealing with or relating to the subject or subjects of bankruptcy or insolvency, or under any amendment of such act or acts, either as a bankrupt or as an insolvent, or as a debtor, or in any similar capacity, wherein or whereby the County asks or seeks or prays to be adjudicated a bankrupt, or is to be discharged from any or all of the County’s debts or obligations, or offers to the County’s creditors to effect a composition or extension of time to pay the County’s debts or asks, seeks or prays for reorganization or to effect a plan of reorganization, or for a readjustment of the County’s debts, or for any other similar relief, or if any such petition or any such proceedings of the same or similar kind or character be filed or be instituted or taken against the County, or if a receiver of the business or of the property or assets of the County shall be appointed by any court, except a receiver appointed at the instance or request of the Authority, or if the C ounty shall make a general or any assignment for the benefit of the County’s creditors, or (3) the County shall abandon or vacate the Facilities, or (4) any representation or warranty made by the County herein proves to have been false, incorrect, misleading or breached in any material respect on the date when made, then the County shall be deemed to be in default hereunder. (c) The Authority shall in no event be in default in the performance of any of its obligations hereunder or imposed by any statute or rule of law unless and until the Authority shall have failed to perform such obligations within sixty (60) days or such additional time as is reasonably required to correct any such default after notice by the County to the Authority properly specifying wherein the Authority has failed to perform any such obligation. In the event of default by the Authority, the County shall be entitled to pursue any remedy provided by law. (d) In addition to the other remedies set forth in this Section, upon the occurrence of an event of default as described in this Section, the Authority shall be entitled to proceed to protect and enforce the rights vested in the Authority by this Facilities Lease or by law. The provisions of this Facilities Lease and the duties of the County and of its trustees, officers or employees shall be enforceable by the Authority by mandamus or other appropriate suit, action or proceeding in any court of competent jurisdiction. Without limiting the generality of the foregoing, the Authority shall have the right to bring the following actions: (1) Accounting. By action or suit in equity to require the County and its trustees, officers and employees and its assigns to account as the trustee of an express trust. (2) Injunction. By action or suit in equity to enjoin any acts or things which may be unlawful or in violation of the rights of the Authority. 17 OHSUSA:761781617.5 (3) Mandamus. By mandamus or other suit, action or proceeding at law or in equity to enforce the Authority’s rights against the County (and its bo ard, officers and employees) and to compel the County to perform and carry out its duties and obligations under the law and its covenants and agreements with the County as provided herein. The exercise of any rights or remedies under this Facilities Lease shall not permit acceleration of Base Rental Payments. Each and all of the remedies given to the Authority hereunder or by any law now or hereafter enacted are cumulative and the single or partial exercise of any right, power or privilege hereunder shall not impair the right of the Authority to other or further exercise thereof or the exercise of any or all other rights, powers or privileges. The term “re-let” or “re-letting” as used in this Section shall include, but not be limited to, re-letting by means of the operation by the Authority of the Facilities. If any statute or rule of law validly shall limit the remedies given to the Authority hereunder, the Authority nevertheless shall be entitled to whatever remedies are allowable under any statute or rule of law. In the event the Authority shall prevail in any action brought to enforce any of the terms and provisions of this Facilities Lease, the County agrees to pay a reasonable amount as and for attorney’s fees incurred by the Authority in attempting to enforce any of the remedies available to the Authority hereunder, whether or not a lawsuit has been filed and whether or not any lawsuit culminates in a judgment. SECTION 6.02. Waiver. Failure of the Authority to take advantage of any default on the part of the Count y shall not be, or be construed as, a waiver thereof, nor shall any custom or practice which may grow up between the parties in the course of administering this instrument be construed to waive or to lessen the right of the Authority to insist upon performance by the County of any term, covenant or condition hereof, or to exercise any rights given the Authority on account of such default. A waiver of a particular default shall not be deemed to be a waiver of the same or any subsequent default. The accept ance of rent hereunder shall not be, or be construed to be, a waiver of any term, covenant or condition of this Facilities Lease. ARTICLE VII EMINENT DOMAIN; PREPAYMENT SECTION 7.01. Eminent Domain. If the whole of the Facilities or so much thereof as to render the remainder unusable for the purposes for which it was used by the County shall be taken under the power of eminent domain, the term of this Facilities Lease shall cease as of the day that possession shall be so taken. If less than the whole of the Facilities shall be taken under the power of eminent domain and the remainder is usable for the purposes for which it was used by the County at the time of such taking, then this Facilities Lease shall continue in full force and effect as to such remainder, and the parties waive the benefits of any law to the contrary, and in such event there shall be a partial abatement of the rental due hereunder in an amount equivalent to the amount by which the annual payments of principal and interest on the Outstanding Bonds will be reduced by the application of the award in eminent domain to the 18 OHSUSA:761781617.5 redemption of outstanding Bonds. So long as any of the Bonds shall be outstanding, any award made in eminent domain proceedings for taking the Facilities or any portion thereof shall be paid to the Trustee and applied to the prepayment of the Base Rental Payments as provided in Section 7.02. Any such award made after all of the Base Rental Payments and Additional Payments have been fully paid, or provision therefor made, shall be paid to the to the County. SECTION 7.02. Prepayment. (a) The County shall prepay on any date from insurance (including proceeds of title insurance) and eminent domain proceeds, to the extent provided in Sections 5.01 and 7.01 hereof (provided, however, that in the event of partial damage to or destruction of the Facilities caused by perils covered by insurance, if in the judgment of the Authority the insurance proceeds are sufficient to repair, reconstruct or replace the damaged or destroyed portion of the Facilities, such proceeds shall be held by the Trustee and used to repair, reconstruct or replace the damaged or destroyed portion of the Facilities, pursuant to the procedure set forth in Section 5.01 for proceeds of insurance), all or any part of Base Rental Payments then unpaid so that the aggregate annual amounts of Base Rental Payments which shall be payable after such prepayment date shall be as nearly proportional as practicable to the aggregate annual amounts of Base Rental Payments unpaid prior to the prepayment date (taking into account the reduction in Base Rental allocable to future interest on the Bonds that are redeemed), at a prepayment amount equal to the redemption payment of the maximum amount of Bonds, including the principal thereof and the interest thereon to the date of redemption, plus any applicable premium redeemable from such proceeds. (b) The County may prepay, from any source of available funds, all or any portion of Base Rental Payments by depositing with the Trustee moneys or securities as provided in Article X of the Trust Agreement sufficient to defease Bonds corresponding to such Base Rental Payments when due; provided that the County furnishes the Trustee with an Opinion of Counsel that such deposit will not cause interest on the Bonds to be includable in gross income for federal income tax purposes. The County agrees that if following such prepayment the Facilities are damaged or destroyed or taken by eminent domain, it is not entitled to, and by such prepayment waives the right of, abatement of such prepaid Base Rental Payments and shall not be entitled to any reimbursement of such Base Rental Payments. (c) Before making any prepayment pursuant to this article, the County shall, within five (5) days following the event creating such right or obligation to prepay, give written notice to the Authority and the Trustee describing such event and specifying the date on which the prepayment will be made, which date shall be not less than forty-five (45) days from the date such notice is given. (d) When (1) there shall have been deposited with the Trustee at or prior to the due dates of the Base Rental Payments or date when the County may exercise its option to purchase the Facilities or any portion or item thereof, in trust for the benefit of the Owners of the Bonds and irrevocably appropriated and set aside to the payment of the Base Rental Payments or option price, sufficient moneys and Permitted Investments described in subsection (1) of the definition thereof in the Trust Agreement, not redeemable prior to maturity, the principal of and interest on which when due will provide money sufficient to pay all principal, premium, if any, and interest on the Bonds to the due date of the Bonds or date when the County may exercise its option to purchase the Facilities, as the case may be; (2) all requirements of Section 10.01 of the 19 OHSUSA:761781617.5 Trust Agreement have been satisfied; and (3) an agreement shall have been entered into with the Trustee for the payment of its fees and expenses so long as any of the Bonds shall remain unpaid, then and in that event the right, title and interest of the Authority herein and the obligations of the County hereunder shall thereupon cease, terminate, become void and be completely discharged and satisfied (except for the right of the Authority and the obligation of the County to have such moneys and such Permitted Investments applied to the payment of the Base Rental Payments or option price) and the Authority’s interest in and title to the Facilities or applicable portion or item thereof shall be transferred and conveyed to the County. In such event, the Authority shall cause an accounting for such period or periods as may be requested by the County to be prepared and filed with the Authority and evidence such discharge and satisfaction, and the Authority shall pay over to the County as an overpayment of Base Rental Payments all such moneys or Permitted Investments held by it pursuant hereto other than such moneys and such Permitted Investments as are required for the payment or prepayment of the Base Rental Payments or the option price and the fees and expenses of the Trustee, which moneys and Permitted Investments shall continue to be held by the Trustee in trust for the payment of Base Rental Payments or the option price and the fees and expenses of the Trustee, and shall be applied by the Authority to the payment of the Base Rental Payments or the option price and the fees and expenses of the Trustee. SECTION 7.03. Option to Purchase; Sale of Personal Property. The County shall have the option to purchase the Authority’s interest in any part of Facilities upon payment of an option price consisting of moneys or securities of the category specified in clause (1) of the definition of the term Permitted Investments contained in Section 1.01 of the Trust Agreement (not callable by the issuer thereof prior to maturity) in an amount sufficient (together with the increment, earnings and interest on such securities) to provide funds to pay the aggregate amount for the entire remaining term of this Facilities Lease of the part of the total rent hereunder attributable to such part of the Facilities (determined by reference to the proportion which the cost of such part of the Facilities bears to the cost of all of the Facilities). Any such payment shall be made to the Trustee and shall be treated as rental payments and shall be applied by the Trustee to pay the principal of the Bonds and interest on the Bonds and to redeem Bonds if such Bonds are subject to redemption pursuant to the terms of the Trust Agreement. Upon the making of such payment to the Trustee and the satisfaction of all requirements set forth in Section 10.01 of the Trust Agreement, (a) the Base Rental thereafter payable under this Facilities Lease shall be reduced by the amount thereof attributable to such part of the Facilities and theretofore paid pursuant to this Section, (b) Section 3.06 and this Section of this Facilities Lease shall not thereafter be applicable to such part of the Facilities, (c) the insurance required by Sections 5.01, 5.02 and 5.03 of this Facilities Lease need not be maintained as to such part of the Facilities, and (d) title to such part of the Facilities shall vest in the County and the term of this Facilities Lease shall end as to such Facilities. The County, in its discretion, may request the Authority to sell or exchange any personal property which may at any time constitute a part of the Facilities, and to release said personal property from this Facilities Lease, if (a) in the opinion of the County the property so sold or exchanged is no longer required or useful in connection with the operation of the Facilities, (b) the consideration to be received from the property is of a value substantially equal to the value of the property to be released, and (c) if the value of an y such property shall, in the opinion of the Authority, exceed the amount of $100,000, the Authority shall have been 20 OHSUSA:761781617.5 furnished a certificate of an independent engineer or other qualified independent professional consultant (satisfactory to the Authority) certifying the value thereof and further certifying that such property is no longer required or useful in connection with the operation of the Facilities. In the event of any such sale, the full amount of the money or consideration received for the personal property so sold and released shall be paid to the Authority. Any money so paid to the Authority may, so long as the County is not in default under any of the provisions of this Facilities Lease, be used upon the Written Request of the County to purchase personal property, which property shall become a part of the Facilities leased hereunder. The Authority may require such opinions, certificates and other documents as it may deem necessary before permitting any sale or exchange of personal property subject to this Facilities Lease or before releasing for the purchase of new personal property money received by it for personal property so sold. ARTICLE VIII COVENANTS SECTION 8.01. Right of Entry. The Authority and its assignees shall have the right to enter upon and to examine and inspect the Facilities during reasonable business hours (and in emergencies at all times) (a) to inspect the same, (b) for any purpose connected with the Authority’s or the County’s rights or obligations under this Facilities Lease, and (c) for all other lawful purposes. SECTION 8.02. Liens. In the event the County shall at any time during the term of this Facilities Lease cause any changes, alterations, additions, improvements, or other work to be done or performed or materials to be supplied, in or upon the Facilities, the County shall pay, when due, all sums of money that may become due for, or purporting to be for, any labor, services, materials, supplies or equipment furnished or alleged to have been furnished to or for the County in, upon or about the Facilities and shall keep the Facilities free of any and all mechanics’ or materialmen’s liens or other liens against the Facilities or the Authority’s interest therein. In the event any such lien attaches to or is filed against the Facilities or the Authority’s interest therein, the County shall cause each such lien to be fully discharged and released at the time the performance of any obligation secured by any such lien matures or becomes due, except that if the County desires to contest any such lien it may do so in good faith. If any such lien shall be reduced to final judgment and such judgment or such process as may be issued for the enforcement thereof is not promptly stayed, or if so stayed and said stay thereafter expires, the County shall forthwith pay and discharge said judgment. The County agrees to and shall, to the maximum extent permitted by law, indemnify and hold the Authority and the Trustee and their respective members, directors, agents, successors and assigns, harmless from and against, and defend each of them against, any claim, demand, loss, damage, liability or expense (including attorney’s fees) as a result of any such lien or claim of lien against the Faci lities or the Authority’s interest therein. SECTION 8.03. Quiet Enjoyment. The parties hereto mutually covenant that the County, by keeping and performing the covenants and agreements herein contained and not in default hereunder, shall at all times during the term of this Facilities Lease peaceably and quietly have, hold and enjoy the Facilities without suit, trouble or hindrance from the Authority. 21 OHSUSA:761781617.5 SECTION 8.04. Authority Not Liable. The Authority and its members, directors, officers, agents and employees shall not be liable to the County or to any other party whomsoever for any death, injury or damage that may result to any person or property by or from any cause whatsoever in, on or about the Facilities. The County, to the extent permitted by law, shall indemnify and hold the Authority and its members, directors, officers, agents and employees, harmless from, and defend each of them against, any and all claims, liens and judgments arising from the operation of the Facilities, including, without limitation, death of or injury to any person or damage to property whatsoever occurring in, on or about the Facilities regardless of responsibility for negligence, but excepting the active negligence of the person or entity seeking indemnity. SECTION 8.05. Assignment and Subleasing. Neither this Facilities Lease nor any interest of the County hereunder shall be mortgaged, pledged, assigned, sublet or transferred by the County by voluntary act or by operation of law or otherwise, except with the prior written consent of the Authority, which, in the case of subletting, shall not be unreasonably withheld; provided such subletting shall not affect the tax -exempt status of the interest on the Bonds. No such mortgage, pledge, assignment, sublease or transfer shall in any event affect or reduce the obligation of the County to make the Base Rental Payments and Additional Payments required hereunder. SECTION 8.06. Title to Facilities. During the term of this Facilities Lease, the Authority shall hold a leasehold estate to the Facilities and any and all additions which comprise fixtures, repairs, replacement or modifications thereof, except for those fixtures, repairs, replacements or modifications which are added thereto by the County and which may be removed without damaging the Facilities, and except for any items added to the Facilities by the County pursuant to Section 4.02 hereof. This provision shall not operate to the benefit of any insurance company if there is rental interruption covered by insurance pursuant to Section 5.03 hereof. Upon the termination or expiration of this Facilities Lease upon payment in full of the Base Rental Payments attributed to the Facilities and all amounts owing on the Bonds, the Authority’s interest in the title to the Facilities shall vest in the County and the Authority shall execute such conveyances, deeds and other documents as may be necessary to evidence the ownership of the Facilities by the County and to clarify the title of the County on the record thereof. SECTION 8.07. Tax Covenants. (a) The County and the Authority shall at all times do and perform all acts and things permitted by law which are necessary or desirable in order to assure that the interest on the Bonds will be excluded from gross income for federal income tax purposes under Section 103 of the Code and shall take no action that would result in such interest not being excluded from gross income for federal income tax purposes. Without limiting the generality of the foregoing, the Authority and the County covenant that they will comply with the requirements of the Tax Certificate, which is incorporated herein as if fully set forth herein. (b) If at any time the County or the Authority is of the opinion that for purposes of this Section it is necessary to restrict or limit the yield on or change in any way the 22 OHSUSA:761781617.5 investment of any moneys held by the Trustee or the County or the Authority under this Facilities Lease or the Trust Agreement, the County or the Authority shall so instruct the Trustee or the appropriate officials of the County in writing, and the Trustee or th e appropriate officials of the County, as the case may be, shall take such actions as may be necessary in accordance with such instructions. (c) In furtherance of the covenants of the County and the Authority set forth above, the County will comply with the Tax Certificate and will instruct the Trustee in writing as necessary to comply with the Tax Certificate. The Trustee and the Authority may conclusively rely on any such written instructions, and the County hereby agrees to hold harmless the Trustee and the Authority for any loss, claim, damage, liability or expense incurred by the Authority and the Trustee for any actions taken by the Authority or the Trustee in accordance with such instructions. (d) This covenant shall survive payment in full or defeasance of the Bonds. SECTION 8.08. Continuing Disclosure. The County hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Agreement. Notwithstanding any other provision of this Facilities Lease, failure of the County to comply with the Continuing Disclosure Agreement shall not be considered an event of default hereunder; however, any Bondholder or Beneficial Owner may, and the Trustee at the request of any Participating Underwriter (as defined in the Continuing Disclosure Agreement) or the Holders of at least 25% aggregate principal amount of Bonds Outstanding and provided satisfactory indemnification is provided to the Trustee, shall, 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 8.08. SECTION 8.09. Taxes. The County shall pay or cause to be paid all taxes and assessments of any type or nature charged to the Authority or affecting the Facilities or the respective interests or estates therein; provided that with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the County shall be obligated to pay only such installments as are required to be paid during the term of this Facilities Lease as and when the same become due. The County shall also pay directly such amounts, if any, in each year as shall be required by the Authority for the payment of all license and registration fees and all taxes (including, without limitation, income, excise, license, franchise, capital stock, recording, sales, use, value-added, property, occupational, excess profits and stamp taxes), levies, imposts, duties, charges, withholdings, assessments and governmental charges of any nature whatsoever, together with any additions to tax, penalties, fines or interest thereon, including, without limitation, penalties, fines or interest arising out of any delay or failure by the County to pay a ny of the foregoing or failure to file or furnish to the Authority or the Trustee for filing in a timely manner any returns, hereinafter levied or imposed against the Authority or the Facilities, the rentals and other payments required hereunder or any parts thereof or interests of the County or the Authority or the Trustee therein by any governmental authority. 23 OHSUSA:761781617.5 The County may, at the County’s expense and in its name, in good faith contest any such taxes, assessments and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Authority or the Trustee shall notify the County that, in the opinion of independent counsel, by nonpayment of any such items, the interest of the Authority in the Facilities will be materially endangered or the Facilities, or any part thereof, will be subject to loss or forfeiture, in which event the County shall promptly pay such taxes, assessments or charges or provide the Authority with full security against any loss which may result from nonpayment, in form satisfactory to the Authority and the Trustee. SECTION 8.10. Authority’s Purpose. The Authority covenants that, prior to the discharge of this Facilities Lease, it will not engage in any activities inconsistent with the purposes for which the Authority is organized. SECTION 8.11. Purpose of Facilities Lease. The County covenants that during the term of this Facilities Lease, except as hereinafter provided, (a) it will use, or cause the use of, the Facilities for public purposes and for the purposes for which the Facilities are customarily used, (b) it will not vacate or abandon the Facilities or any part thereof, and (c) it will not make any use of the Facilities which would jeopardize in any way the insurance coverage required to be maintained pursuant to Article V hereof. SECTION 8.12. Essential Use. The Facilities are essential to the proper, efficient and economic operation of the County and serve an essential governmental function of the County. SECTION 8.13. Nondiscrimination. The County herein covenants by and for itself, its heirs, executors, administrators, and assigns, and all person claiming under or through itself, and this Facilities Lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or groups of persons, on account of any basis listed in subdivision (a) or (d) of Section 12955 of the California Government Code, as those basis are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the California Government Code, in leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the County, or any person claiming under or through the County, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublesses, subtenants, or vendees in the premises herein leased. ARTICLE IX DISCLAIMER OF WARRANTIES; VENDOR’S WARRANTIES; USE OF THE FACILITIES SECTION 9.01. Disclaimer of Warranties. THE AUTHORITY MAKES NO AGREEMENT, WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY, FITNESS FOR PARTICULAR PURPOSE OR FITNESS FOR USE OF THE FACILITIES OR THE 24 OHSUSA:761781617.5 PROJECT OR WARRANTY WITH RESPECT THERETO. THE COUNTY ACKNOWLEDGES THAT THE AUTHORITY IS NOT A MANUFACTURER OF THE FACILITIES OR THE PROJECT OR A DEALER THEREIN, THAT THE COUNTY LEASES THE FACILITIES AS-IS, IT BEING AGREED THAT ALL OF THE AFOREMENTIONED RISKS ARE TO BE BORNE BY THE COUNTY. In no event shall the Authority be liable for any incidental, indirect, special or consequential damage in connection with or arising out of this Facilities Lease or the Project or the existence, furnishing, functioning or the County’s use of any item or products or services provided for in this Facilities Lease. SECTION 9.02. Vendor’s Warranties. The Authority hereby irrevocably appoints the County its agent and attorney-in-fact during the term of this Facilities Lease, so long as the County shall not be in default hereunder, to assert from time to time whatever claims and rights, including warranties of the Facilities, which the Authority may have against the manufacturers, vendors and contractors of the Facilities. The County’s sole remedy for the breach of such warranty, indemnification or representation shall be against the manufacturer or vendor or contractor of the Facilities, and the Project, as applicable, and not against the Authority, nor shall such matter have any effect whatsoever on the rights and obligations of the Authority with respect to this Facilities Lease, including the right to receive full and timely payments hereunder. The County expressly acknowledges that the Authority makes, and has made, no representation or warranties whatsoever as to the existence or availability of such warranties of the manufacturer, vendor or contractor with respect to the Facilities and the Project. SECTION 9.03. Use of the Facilities. The County will not install, use, operate or maintain the Facilities improperly, carelessly, in violation of any applicable law or in a manner contrary to that contemplated by this Facilities Lease. The County shall provide all permits and licenses, if any, necessary for the installation and operation of the Facilities. In addition, the County agrees to comply in all respects (including, without limitation, with respect to the use, maintenance and operation of the Facilities) with all laws of the jurisdictions in which its operations may extend and any legislative, executive, administrative or judicial body exercising any power or jurisdiction over the Facilities; provided, however, that the County may contest in good faith the validity or application of any such law or rule in any reasonable manner which does not, in the opinion of the Authority, adversely affect the estate of the Authority in and to the Facilities or its interest or rights under this Facilities Lease. ARTICLE X MISCELLANEOUS SECTION 10.01. Law Governing. This Facilities Lease shall be governed exclusively by the provisions hereof and by the laws of the State of California as the same from time to time exist. SECTION 10.02. Notices. All notices, statements, demands, consents, approvals, authorizations, offers, designations, requests, agreements or promises or other communications hereunder by either party to the other shall be in writing and shall be sufficiently given and served upon the other party if delivered personally or if mailed by United States registered mail, return receipt requested, postage prepaid: 25 OHSUSA:761781617.5 If to the County: County of Contra Costa c/o Clerk of the Board of Supervisors County Administration Building 651 Pine Street Martinez, CA 94553 cc: County Finance Director County of Contra Costa 651 Pine Street, 10th Floor Martinez, CA 94553 With respect to insurance matters: County of Contra Costa Risk Manager Risk Management Department 2530 Arnold Drive Martinez, CA 94553 cc: General Service Administration 1220 Morello Avenue, Suite 100 Martinez, CA 94553 cc: County Finance Director County of Contra Costa 651 Pine Street, 10th Floor Martinez, CA 94553 If to the Authority: County of Contra Costa Public Financing Authority c/o County Administrator County Administration Building 651 Pine Street Martinez, CA 94553 If to the Trustee: Wells Fargo Bank, National Association MAC _______________ 333 Market Street, 18th Floor San Francisco, CA 94105 or to such other addresses as the respective parties may from time to time designate by notice in writing. A copy of any such notice or other document herein referred to shall also be delivered to the Trustee. SECTION 10.03. Validity and Severability. If for any reason this Facilities Lease shall be held by a court of competent jurisdiction to be void, voidable, or unenforceable by the Authority or by the County, or if for any reason it is held by such a court that any of the 26 OHSUSA:761781617.5 covenants and conditions of the County hereunder, including the covenant to pay rentals hereunder, is unenforceable for the full term hereof, then and in such event this Facilities Lease is and shall be deemed to be a lease under which the rentals are to be paid by the County annually in consideration of the right of the County to possess, occupy and use the Facilities, and all of the rental and other terms, provisions and conditions of this Facilities Lease, except to the extent that such terms, provisions and conditions are contrary to or inconsistent with such holding, shall remain in full force and effect. SECTION 10.04. Net-Net-Net Lease. This Facilities Lease shall be deemed and construed to be a “net-net-net lease” and the County hereby agrees that the rentals provided for herein shall be an absolute net return to the Authority, free and clear of any expenses, charges or set-offs whatsoever. SECTION 10.05. Section Headings. All section headings contained herein are for convenience of reference only and are not intended to define or limit the scope of any provision of this Facilities Lease. SECTION 10.06. Amendment or Termination. The Authority and the County may at any time agree to the amendment or termination of this Facilities Lease; provided, however, that the Authority and the County agree and recognize that this Facilities Lease is entered into in accordance with the terms of the Trust Agreement, and accordingly, that any such amendment or termination shall only be made or effected in accordance with and subject to the terms of the Trust Agreement. SECTION 10.07. Execution. This Facilities 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 Facilities Lease. It is also agreed that separate counterparts of this Facilities 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. OHSUSA:761781617.5 IN WITNESS WHEREOF, the Authority and the County have caused this Facilities 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 PUBLIC FINANCING AUTHORITY, as Sublessor By: John M. Gioia, Chair ATTEST: By: David J. Twa Executive Director and Secretary COUNTY OF CONTRA COSTA, as Sublessee [SEAL] By John M. Gioia Chair of the Board of Supervisors County of Contra Costa, State of California ATTEST: By David J. Twa, Clerk of the Board of Supervisors and County Administrator A-1 OHSUSA:761781617.5 EXHIBIT A Description of the Facilities All that certain real property situated in the County of Contra Costa, State of California, described as follows: B-1 OHSUSA:761781617.5 EXHIBIT B Base Rental Payment Schedule [Add Separate Schedules] Base Rental Payment Date* Principal Interest Total Fiscal Year Total Total: ____________________________ * [Payable three Business Days before due date]. C-1 OHSUSA:761781617.5 EXHIBIT C Lease Terms Facility Term Maximum Extension D-1 OHSUSA:761781617.5 EXHIBIT D Capital Projects “Capital Projects” means the various public capital improvements and projects, including, but not limited to the acquisition, installation, implementation and construction of certain projects of the County, specifically the Medical Clinic and the Solar Panels. E-1 OHSUSA:761781617.5 EXHIBIT E Form of Budget Certificate County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects) 2015 Series A and 2015 Series B Certificate of Final Annual Budget for the Period __/__/20__ through __/__/20__ The undersigned, as an Authorized Representative of the County of Contra Costa (the “County”), hereby certifies that the following have been budgeted for the above-referenced period with respect to the annual appropriations for all Base Rental Payments and Additional Payments, as required in Section 3.05 of the Facilities Lease, dated as of July 1, 2015, between the County of Contra Costa Public Financing Authority and the County: 2015 Series A 2015 Series B Total Budgeted Base Rental Payment Additional Payment COUNTY OF CONTRA COSTA By ___________________________________ Authorized Representative F-1 OHSUSA:761781617.5 EXHIBIT F Form of Insurance Certificate County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects) 2015 Series A and 2015 Series B Annual Insurance Certificate for the Period __/__/20__ through __/__/20__ The undersigned, as an Authorized Representative of the County of Contra Costa (the “County”), hereby certifies that the insurance requirements as set forth in Section 5.07 of the Facilities Lease, dated as of July 1, 2015, between the County of Contra Costa Public Financing Authority and the County have been satisfied as evidenced by the attached list of insurance policies, names of insurers issuing such policies, the property covered and the amount of coverage. COUNTY OF CONTRA COSTA By ___________________________________ Authorized Representative F-1 OHSUSA:761781617.5 [Attach List of Insurance Coverage] OHSUSA:761781617.5 CERTIFICATE OF ACCEPTANCE (Government Code Section 27281) This is to certify that the interest in real property conveyed by the foregoing Facilities Lease from the County of Contra Costa Public Financing Authority to the County of Contra Costa, a political subdivision of the State of California (the “County”), is hereby accepted by order of the Board of Supervisors of the County of Contra Costa on _______________________, and the County consents to recordation thereof by its duly authorized officer. COUNTY OF CONTRA COSTA, as Lessee [SEAL] By John M. Gioia Chair, Board of Supervisors County of Contra Costa, State of California Attest: By David Twa Clerk of the Board of Supervisors and County Administrator OHSUSA:761781617.5 ARTICLE I DEFINITIONS .......................................................................................................... 2 SECTION 1.01. Definitions. ......................................................................................... 2 ARTICLE II LEASE OF FACILITIES; TERM ............................................................................ 4 SECTION 2.01. Lease of Facilities ............................................................................... 4 SECTION 2.02. Term; Occupancy; and Release of Existing Facilities ........................ 4 SECTION 2.03. Substitution; Release; Addition of Property ....................................... 4 ARTICLE III RENTAL PAYMENTS; USE OF PROCEEDS ..................................................... 5 SECTION 3.01. Base Rental Payments ......................................................................... 5 SECTION 3.02. Additional Payments ........................................................................... 6 SECTION 3.03. Fair Rental Value ................................................................................ 7 SECTION 3.04. Payment Provisions ............................................................................ 7 SECTION 3.05. Appropriations Covenant .................................................................... 8 SECTION 3.06. Rental Abatement ............................................................................... 9 SECTION 3.07. Use of Proceeds .................................................................................. 9 ARTICLE IV MAINTENANCE; ALTERATIONS AND ADDITIONS ..................................... 9 SECTION 4.01. Maintenance and Utilities ................................................................... 9 SECTION 4.02. Changes to the Facilities ................................................................... 10 SECTION 4.03. Installation of County’s Equipment .................................................. 10 ARTICLE V INSURANCE ......................................................................................................... 10 SECTION 5.01. Fire and Extended Coverage Insurance ............................................ 10 SECTION 5.02. Liability Insurance ............................................................................ 12 SECTION 5.03. Rental Interruption or Use and Occupancy Insurance ...................... 12 SECTION 5.04. Worker’s Compensation ................................................................... 13 SECTION 5.05. Title Insurance .................................................................................. 13 SECTION 5.06. Insurance Proceeds; Form of Policies ............................................... 13 SECTION 5.07. Annual Certificates ........................................................................... 13 ARTICLE VI DEFAULTS AND REMEDIES ........................................................................... 14 SECTION 6.01. Defaults and Remedies ..................................................................... 14 SECTION 6.02. Waiver ............................................................................................... 17 ARTICLE VII EMINENT DOMAIN; PREPAYMENT ............................................................. 17 SECTION 7.01. Eminent Domain ............................................................................... 17 SECTION 7.02. Prepayment ....................................................................................... 18 SECTION 7.03. Option to Purchase; Sale of Personal Property ................................. 19 ARTICLE VIII COVENANTS.................................................................................................... 20 SECTION 8.01. Right of Entry ................................................................................... 20 SECTION 8.02. Liens ................................................................................................. 20 SECTION 8.03. Quiet Enjoyment ............................................................................... 20 SECTION 8.04. Authority Not Liable ......................................................................... 21 SECTION 8.05. Assignment and Subleasing .............................................................. 21 SECTION 8.06. Title to Facilities ............................................................................... 21 3 OHSUSA:761781617.5 SECTION 8.07. Tax Covenants .................................................................................. 21 SECTION 8.08. Continuing Disclosure ...................................................................... 22 SECTION 8.09. Taxes ................................................................................................. 22 SECTION 8.10. Authority’s Purpose .......................................................................... 23 SECTION 8.11. Purpose of Facilities Lease ............................................................... 23 SECTION 8.12. Essential Use ..................................................................................... 23 SECTION 8.13. Nondiscrimination ............................................................................ 23 ARTICLE IX DISCLAIMER OF WARRANTIES; VENDOR’S WARRANTIES; USE OF THE FACILITIES ..................................................................................... 23 SECTION 9.01. Disclaimer of Warranties .................................................................. 23 SECTION 9.02. Vendor’s Warranties ......................................................................... 24 SECTION 9.03. Use of the Facilities .......................................................................... 24 ARTICLE X MISCELLANEOUS .............................................................................................. 24 SECTION 10.01. Law Governing ................................................................................. 24 SECTION 10.02. Notices .............................................................................................. 24 SECTION 10.03. Validity and Severability .................................................................. 25 SECTION 10.04. Net-Net-Net Lease ............................................................................ 26 SECTION 10.05. Section Headings .............................................................................. 26 SECTION 10.06. Amendment or Termination ............................................................. 26 SECTION 10.07. Execution .......................................................................................... 26 EXHIBIT A Description of the Facilities ................................................................................. A-1 EXHIBIT B Base Rental Payment Schedule ............................................................................ B-1 EXHIBIT C Lease Terms ......................................................................................................... C-1 EXHIBIT D Capital Projects .................................................................................................... D-1 EXHIBIT E Form of Budget Certificate ................................................................................... D-1 EXHIBIT F Form of Insurance Certificate ............................................................................... D-1 OH&S Draft 6/2/2015 OHSUSA:762038915.3 ESCROW AGREEMENT by and between COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY and WELLS FARGO BANK, NATIONAL ASSOCIATION Dated as of July 1, 2015 relating to the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects), 1999 Series A County of Contra Costa Public Financing Authority Lease Revenue Bonds (Various Capital Projects), 2002 Series A County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects), 2002 Series B County of Contra Costa Public Financing Authority Lease Revenue Bonds (Various Capital Projects), 2003 Series A County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects), 2007 Series A TABLE OF CONTENTS Page -i- OHSUSA:762038915.3 SECTION 1. DEFINITIONS .................................................................................................. 2 SECTION 2. CREATION AND PURPOSE OF ESCROW .................................................. 3 SECTION 3. BONDHOLDER NOTICES ............................................................................. 4 SECTION 4. ACCOUNTING FOR ESCROW; SUBSTITUTIONS ..................................... 4 SECTION 5. INVESTMENTS AND REINVESTMENTS ................................................... 4 SECTION 6. SUFFICIENCY OF ESCROW ......................................................................... 5 SECTION 7. TRANSFERS FOR PAYMENT OF REFUNDED BONDS ............................ 5 SECTION 8. TERMINATION OF ESCROW AGREEMENT; WRITTEN REQUEST OF AUTHORITY .......................................................................... 5 SECTION 9. FEES AND COSTS .......................................................................................... 5 SECTION 10. REPORTS ......................................................................................................... 5 SECTION 11. CHARACTER OF DEPOSIT ........................................................................... 6 SECTION 12. EXCULPATORY PROVISIONS ..................................................................... 6 SECTION 13. TIME OF ESSENCE ........................................................................................ 7 SECTION 14. AMENDMENTS .............................................................................................. 7 SECTION 15. SUCCESSORS .................................................................................................. 8 SECTION 16. NOTICES .......................................................................................................... 8 SECTION 17. SEVERABILITY .............................................................................................. 8 SECTION 18. LAW GOVERNING ......................................................................................... 9 SECTION 19. COUNTERPARTS ........................................................................................... 9 EXHIBIT A REFUNDING REQUIREMENTS ........................................................................ A-1 EXHIBIT B ESCROWED SECURITIES ................................................................................. B-1 EXHIBIT C NOTICE OF DEFEASANCE ............................................................................... C-1 EXHIBIT D FEE SCHEDULE .................................................................................................. D-1 OHSUSA:762038915.3 ESCROW AGREEMENT (1999A, 2002A, 2002B, 2003A and 2007A Bonds) THIS ESCROW AGREEMENT, dated as of July 1, 2015, is entered into 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 Financing Authority Joint Exercise of Powers Agreement,” by and between the County of Contra Costa and the Contra Co sta County Redevelopment Agency, and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association duly organized and existing under and by virtue of the laws of the United States of America, as trustee and as escrow bank (the “Escrow Agent”). W I T N E S S E T H: WHEREAS, Wells Fargo Bank, National Association, as successor trustee (the “Prior Trustee”), and the Authority have heretofore executed a 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, the Fourth Supplemental Trust Agreement, dated as of July 1, 2002, the Fifth Supplemental Trust Agreement, dated as of July 1, 2003, the Sixth Supplemental Trust Agreement, dated as of March 1, 2007 and the Seventh Supplemental Trust Agreement, dated as of August 1, 2007 (as amended and supplemented, the “Prior Trust Agreement”); WHEREAS, the Authority has heretofore issued its County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects), 1999 Series A (the “1999A Bonds”), the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Various Capital Projects), 2002 Series A (the “2002A Bonds”), the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects), 2002 Series B (the “2002B Bonds”), the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Various Capital Projects), 2003 Series A (the “2003A Bonds”) and the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects), 2007 Series A (the “2007A Bonds”), pursuant to the Prior Trust Agreement; WHEREAS, the Authority has determined that it is in the Authority’s best interests to defease and redeem the 1999A Bonds, the 2002A Bonds, the 2002B Bonds, the 2003A Bonds and a portion of the 2007A Bonds (together, the “Refunded Bonds”) and to issue the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects), 2015 Series A and 2015 Series B (the “Refunding Bonds”) pursuant to a trust agreement, dated as of July 1, 2015 (the “Trust Agreement”), between the Authority and Wells Fargo Bank, National Association, as trustee (the “Trustee), for such purpose; WHEREAS, Section 3.01 of the Trust Agreement provides for the transfer and deposit of certain proceeds of the Refunding Bonds to the Escrow Fund created hereunder to defease and redeem the Refunded Bonds, and such proceeds shall be in such amount and shall be 2 OHSUSA:762038915.3 invested in Government Securities under the Prior Trust Agreement so as to insure the full and timely payment of the Refunding Requirements (as hereinafter defined); and, NOW, THEREFORE, in consideration of the mutual agreements herein contained, in order to secure the payment of the Refunding Requirements as heretofore provided, the parties hereto mutually undertake, promise and agree for themselves, their respective representatives, successors and assigns, as follows: Section 1. Definitions. As used in this Escrow Agreement the following terms have the following meanings: “Escrow Agent” means Wells Fargo Bank, National Association, or any successor thereto appointed under this Escrow Agreement. “Escrow Fund” means the fund by that name created pursuant to Section 2 hereof. “Escrowed Securities” means any of those certain Government Securities listed in Exhibit B to this Escrow Agreement. “Government Securities” has the meaning assigned to such term in the Prior Trust Agreement. “Independent Certified Public Accountant” means an independent firm of nationally recognized certified public accountants. “Prior Trustee” means Wells Fargo Bank, National Association, as successor trustee for the Refunded Bonds. “Refunded Bonds” means the 1999A Bonds, the 2002A Bonds, the 2002B Bonds, the 2003A Bonds and a portion of the 2007A Bonds, further defined in Exhibit A hereto. “Refunding Bonds” means the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects), 2015 Series A and 2015 Series B, issued pursuant to the Trust Agreement. “Refunding Requirements” means all installments of principal and interest on the Refunded Bonds, as such payments become due on and prior to the redemption date for the respective series of Refunded Bonds and the principal and redemption premium on the respective redemption dates thereof, as shown in Exhibit A to this Escrow Agreement. “State” means the State of California. “Trustee” means Wells Fargo Bank, National Association, as trustee for the Refunding Bonds. 3 OHSUSA:762038915.3 All other capitalized terms used but not defined herein shall have the respective meanings given to such terms in the Prior Trust Agreement. Section 2. Creation and Purpose of Escrow. A. There is hereby created and established with the Escrow Agent a special and irrevocable trust fund designated as the “County of Contra Costa Public Financing Authority Escrow Fund” (the “Escrow Fund”). The Escrow Agent shall keep the Es crow Fund separate and apart from all other funds and moneys held by it and shall hold the Escrow Fund in trust for the purposes described herein. B. On the date of delivery of the Refunding Bonds to the underwriters thereof, the Trustee, pursuant to Section 3.01 of the Trust Agreement, will deposit with the Escrow Agent in escrow, to be held and accounted for in the Escrow Fund and paid out as provided in this Escrow Agreement and in the Prior Trust Agreement, moneys representing a portion of the proceeds from the sale of the Refunding Bonds, in the amount of $_________ [Add any other deposits]. Such moneys shall be sufficient for the purchase of the Escrowed Securities and to make the cash deposit to the Escrow Fund and shall be used by the Escrow Agent to purchase the Escrowed Securities and make such cash deposit on such date. The amount of initial cash deposit and amount of funds allocated to the purchase of the Escrowed Securities for the Escrow Fund are as follows: Escrow Fund: Beginning Cash: $_________ Purchase of Escrowed Securities: $_________ The principal of and interest on the Escrowed Securities and any uninvested cash held hereunder in the Escrow Fund shall be applied by the Escrow Agent to the payment of the Refunding Requirements related to the Escrow Fund. C. The funds held in the Escrow Fund shall not be subject to withdrawal other than to satisfy the Refunding Requirements. D. The Authority has determined, as verified by the report of an Independent Certified Public Accountant, dated _________, 2015 (the “Verification Report”), that the Escrowed Securities are such that, if interest thereon and principal thereof are paid when due, the proceeds from the collection of such interest and principal, together with any uninvested cash held hereunder, will be sufficient to meet the Refunding Requirements. E. The Escrow Agent shall hold all Escrowed Securities, whether acquired as initial investments, subsequent investments or reinvestments hereunder, and the money received from time to time as principal and interest thereon, in trust, to secure and for the payment of the Refunding Requirements and shall collect the principal of and interest on the Escrowed Securities held by it hereunder promptly as such principal and interest become due. 4 OHSUSA:762038915.3 F. Pursuant hereto, the Escrow Agent as Prior Trustee has received, in form satisfactory to it, irrevocable instructions to provide notice of redemptions in accordance with Section 4.05 of the Prior Trust Agreement. Section 3. Bondholder Notices. The Escrow Agent is hereby irrevocably instructed to mail, as soon as practicable, a notice of the defeasance of the Refunded Bonds in the form attached hereto as Exhibit C in accordance with Section 4.05 of the Prior Trust Agreement and to give, not more than 60 or less than 30 days prior to the redemption date of such Series of Bonds, notice of redemption of such Series of Bonds as required by the Prior Trust Agreement. Section 4. Accounting for Escrow; Substitutions. A. The moneys and the Escrowed Securities from time to time accounted for in the Escrow Fund shall not be subject to withdrawal by the Authority nor otherwise subject to their order except as otherwise provided in Sections 2 and 8 hereof. B. The Authority may from time to time direct the Escrow Agent to sell, exchange or substitute Escrowed Securities for other Government Securities; provided that there shall be no sale, exchange or substitution of the Escrowed Securities, unless the following are received: (i) the written direction of the Authority, (ii) receipt by the Authority and the Escrow Agent of a new Verification Report, prepared by an Independent Certified Public Accountant, verifying the sufficiency of the escrow to pay all Refunding Requirements when due in full on their respective due dates and (iii) receipt of an unqualified legal opinion of nationally recognized bond counsel that such investment will not adversely affect the tax-exempt status of interest on the Refunded Bonds or the Refunding Bonds under Section 103 of the Internal Revenue Code of 1986 and the regulations of the United States Department of the Treasury issued thereunder. Section 5. Investments and Reinvestments. The Escrow Agent shall have no other obligation by virtue of this Escrow Agreement, general trust law or otherwise, to make any investment or reinvestment of any moneys in escrow at any time except as expressly directed by the Authority and upon receipt, but only in case of such Authority direction that securities must be reinvested in Government Securities, of (i) the written direction of the Authority, (ii) receipt by the Authority and the Escrow Agent of a new Verification Report, prepared by an Independent Certified Public Accountant, verifying the sufficiency of the escrow to pay all Refunding Requirements when due on their respective due dates and (iii) receipt of an opinion of nationally recognized bond counsel that such investment will not adversely affect the validity of the Refunding Bonds or the Refunded Bonds under State law. 5 OHSUSA:762038915.3 Section 6. Sufficiency of Escrow. Moneys deposited in the Escrow Fund, including the investment earnings thereon and any uninvested cash, shall be in an amount, as determined by the Authority, which at all times shall be sufficient to meet the Refunding Requirements not theretofore met. Section 7. Transfers for Payment of Refunded Bonds. The Escrow Agent shall make from time to time such transfers to the Prior Trustee as will assure, to the extent of moneys in the Escrow Fund, the payment of the Refunding Requirements when due, as provided herein and in the Prior Trust Agreement. Section 8. Termination of Escrow Agreement; Written Request of Authority. When the Escrow Agent shall have transferred, pursuant to Section 7 hereof, such moneys as are required to pay in full and discharge all of the Refunded Bonds, the Escrow Agent, after payment of all fees and expenses of the Escrow Agent, shall immediately pay o ver to the Authority or its order the moneys, if any, then remaining in the Escrow Fund and shall make forthwith a final report to the Authority, and this Escrow Agreement shall terminate. The Prior Trustee shall pay to the Authority any and all unclaimed moneys as provided in Section 10.02 of the Prior Trust Agreement and this shall constitute the Written Request of the Authority for such purpose. Section 9. Fees and Costs. A. The Escrow Agent’s fees, expenses and reimbursement for costs incurred for and in carrying out the provisions of this Escrow Agreement have been fixed as set forth in Exhibit D. The Escrow Agent shall also be entitled to additional fees, expenses and reimbursement for costs incurred, including but not limited to, legal and accounting services in connection with any litigation or other proceedings which may at any time be instituted involving this Escrow Agreement not due to the negligence or willful misconduct of the Escrow Agent. Under no circumstances shall any fees, expenses or reimbursement of costs of the Escrow Agent or any other party (including without limitation, the cost of any required Verification Report) be paid out of amounts held in the Escrow Fund. B. Payments to the Escrow Agent pursuant to this Section 9 shall not be for deposit in the Escrow Fund, and the fees of and the costs incurred by the Escrow Agent shall not be a charge on and in no event shall be deducted from the Escrow Fund. Section 10. Reports. A. Each month until the termination of this Escrow Agreement, the Escrow Agent shall submit to the Authority a report covering all money it shall have received and all payments it shall have made or caused to be made hereunder during the preceding one-month period. Such report shall be subject to audit by the Authority or by such Independent Certified Public Accountant, as may be designated by the Authority. 6 OHSUSA:762038915.3 B. The last report shall be made at the time provided in Section 8 hereof. C. Each such report shall also list all Escrowed Securities and the amount of money accounted for in the Escrow Fund on the date of such report, except for the last report. Section 11. Character of Deposit. A. It is recognized that title to the Escrowed Securities and moneys accounted for in the Escrow Fund from time to time be vested in the Escrow Agent but subject always to the prior trust, charge and lien thereon of this Escrow Agreement in favor of the owners of the Refunded Bonds and the use thereof required to be made by the provisions hereof. B. The Escrow Agent shall hold all such securities and moneys in the Escrow Fund as special trust funds separate and wholly segregated from all other securities and funds of the Escrow Agent or deposited therein, and shall never commingle such securities or moneys with other securities or moneys. C. No money paid into and accounted for in the Escrow Fund shall ever be considered as a banking deposit and the Escrow Agent shall have no right or title with respect thereto except in its capacity as Escrow Agent hereunder. Section 12. Exculpatory Provisions. A. The duties and responsibilities of the Escrow Agent are limited to those expressly and specifically stated in this Escrow Agreement. B. The Escrow Agent shall not be liable or responsible for any loss resulting from any investment or reinvestment made pursuant to this Escrow Agreement and made in compliance with the provisions hereof. The Escrow Agent shall not be liable or responsible for the accuracy of any calculations or the sufficiency of any Escrowed Securities, the Escrow Fund or any moneys held by it to meet the Refunding Requirements. C. No provision of this Escrow Agreement shall be construed to relieve the Escrow Agent from liability for its own negligent failure to act or its own willful misconduct. D. The Escrow Agent shall be under no obligation to inquire into or be in any way responsible for the performance or nonperformance by the Authority of any of its obligations, nor shall it be responsible in any manner for the recitals or statements contained herein or in the Refunded Bonds or any proceedings taken in connection therewith, such recitals and statements being made solely by the Authority. The Escrow Agent may conclusively rely on any opinion, written request, certificate, written direction or report of the Authority, any certified public accountant, financial advisor or investment bank delivered to it and received in good faith in connection with the transactions contemplated hereby. E. Nothing in this agreement shall be construed to create any obligations or liabilities on the part of the Escrow Agent to anyone other than the Authority and the holders of the Refunded Bonds. 7 OHSUSA:762038915.3 F. The Escrow Agent may at any time resign by giving thirty (30) days written notice to the Authority of such resignation. The Authority may remove the Escrow Agent at any time by giving thirty (30) days written notice to the Escrow Agent of such removal. The Authority shall promptly appoint a successor Escrow Agent by the resignation or removal date. Resignation or removal of the Escrow Agent will be effective only upon acceptance of appointment by a successor Escrow Agent and the transfer of escrowed assets over to the successor Escrow Agent. If the Authority does not appoint a successor, the Escrow Agent may petition any court of competent jurisdiction for the appointment of a successor Escrow Agent, which court may thereupon, after such notice, if any, as it may deem prop er and prescribe and as may be required by law, appoint a successor Escrow Agent. After receiving a notice of resignation or giving notice of removal of an Escrow Agent, the Authority may appoint a temporary Escrow Agent to replace the resigning or removed Escrow Agent until the Authority appoints a successor Escrow Agent. Any such temporary Escrow Agent so appointed by the Authority shall immediately and without further act be superseded by the successor Escrow Agent so appointed; provided, that the successor Escrow Agent accepts such appointment and the escrowed assets are transferred over to the successor Escrow Agent. G. The Authority, to the extent permitted by law, agrees to indemnify the Escrow Agent, its agents and its officers or employees for and hold the Escrow Agent, its agents, officers or employees harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, reasonable fees and disbursements of counsel for the Escrow Agent) which may be imposed on, incurred by, or asserted against the Escrow Agent at any time by reason of the performance of its duties as Escrow Agent hereunder, in any transaction arising out of this Escrow Agreement or the Trust Agreement or any of the transactions contemplated herein or in the Trust Agreement, unless due to the Escrow Agent’s or its officers’ or employees’ or agents’ negligence or willful misconduct. Such indemnity shall survive the termination of this Escrow Agreement or resignation of the Escrow Agent. H. The Escrow Agent may consult with counsel, who may be counsel of or to the Authority, with regard to legal questions and the opinion of such counsel shall be full and complete authorization in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. Section 13. Time of Essence. Time shall be of the essence in the performance of the obligations from time to time imposed upon the Escrow Agent by this Escrow Agreement. Section 14. Amendments. This Escrow Agreement may not be revoked or amended by the parties hereto unless there shall first have been filed with the Authority and the Escrow Agent (i) a written opinion of nationally recognized bond counsel stating that such amendment will not adversely affect the tax-exempt status of interest on the Refunded Bonds or the Refunding Bonds under Section 103 of the Internal Revenue Code of 1986 and the regulations of the United States Department of the Treasury issued thereunder and (ii) unless such amendment is limited to 8 OHSUSA:762038915.3 (1) insertion of unintentionally omitted material, correction of mistakes or clarification of ambiguities, (2) pledging of additional legal security to the Refunded Bonds, or (3) providing for the deposit of additional cash and/or securities in the Escrow Fund, the written consent of all the owners of the Refunded Bonds then outstanding. Section 15. Successors. A. Whenever herein the Authority or the Escrow Agent is named or is referred to, such provision shall be deemed to include any successor of the Authority or the Escrow Agent, respectively, immediate or intermediate, whether so expressed or not. The successor Escrow Agent must be in place and the escrowed assets transferred over to it before the predecessor Escrow Agent is released. B. All of the stipulations, obligations and agreements by or on behalf of, and other provisions for the benefit of, the Authority or the Escrow Agent contained herein: (1) Shall bind and inure to the benefit of any such successor; and (2) Shall bind and shall inure to the benefit of any officer, board, authority, agent or instrumentality to whom or to which there shall be transferred by or in accordance with law any right, power or duty of the Authority or the Escrow Agent, respectively, or of its successor. Section 16. Notices. All notices and communications hereunder shall be in writing and shall be deemed to be duly given if received or sent by first class mail to the following addresses or to such other address as the recipient thereof shall request in writing to the other party hereto: If to the Authority: County of Contra Costa Public Financing Authority County Administrator’s Office 651 Pine Street, 10th Floor Martinez, CA 94553-0063 Attn: Senior Deputy County Administrator/Debt Manager If to the Escrow Agent: Wells Fargo Bank, National Association _________________________ _________________________ Attn: Corporate Trust Section 17. Severability. If any section, paragraph, clause or provision of this Escrow Agreement shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such section, paragraph, clause or provision shall not affect any of the remaining provisions of this Escrow Agreement. 9 OHSUSA:762038915.3 Section 18. Law Governing. This Escrow Agreement is made in the State of California and is to be construed under the Constitution and laws of such State. Section 19. Counterparts. This Escrow 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. 10 OHSUSA:762038915.3 IN WITNESS WHEREOF, the COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY has caused this Escrow Agreement to be signed in its name by its duly authorized officer, and WELLS FARGO BANK, NATIONAL ASSOCIATION, has caused this Escrow Agreement to be signed in its name by its duly authorized officer, all as of the day and year first above written. COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY By: Deputy Executive Director WELLS FARGO BANK, NATIONAL ASSOCIATION, as Escrow Agent By: Authorized Officer A-1 OHSUSA:762038915.3 EXHIBIT A REFUNDING REQUIREMENTS B-1 OHSUSA:762038915.3 EXHIBIT B ESCROWED SECURITIES The following securities will be deposited into the Escrow Fund on [Closing Date]: Initial Cash Deposit: $__________ C-1 OHSUSA:762038915.3 EXHIBIT C NOTICE OF DEFEASANCE Notice to the Holders of County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects), 1999 Series A, 2002 Series B and 2007 Series A and County of Contra Costa Public Financing Authority Lease Revenue Bonds (Various Capital Projects), 2002 Series A and 2003 Series A NOTICE IS HEREBY GIVEN that the COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY (the “Authority”) has on [Closing Date], from the proceeds of the sale of the County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects), 2015 Series A and 2015 Series B, irrevocably set aside in an Escrow Fund created for such purpose and held by Wells Fargo Bank, National Association, as escrow agent (the “Escrow Agent”), moneys which the Authority has determined, when added to the investment earnings therefrom, shall be sufficient to pay the principal of and interest on certain of the outstanding bonds identified below (the “Bonds”), as such payments become due up to and including the respective redemption dates for the Bonds: $___________ Contra Costa County Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects) 1999 Series A Dated Date: March 4, 1999 Maturity Date (_____1) Amount Interest Rate CUSIP (21226P)† Redemption Date (________) Redemption Price C-2 OHSUSA:762038915.3 $___________ Contra Costa County Public Financing Authority Lease Revenue Bonds (Various Capital Projects) 2002 Series A Dated Date: June 27, 2002 Maturity Date (_____1) Amount Interest Rate CUSIP (21226P)† Redemption Date (_______) Redemption Price $_____________ Contra Costa County Public Financing Authority Lease Revenue Bonds ((Refunding and Various Capital Projects)) 2002 Series B Dated Date: June 27, 2002 Maturity Date (____ 1) Amount Interest Rate CUSIP (21226P)† Redemption Date (_______) Redemption Price C-3 OHSUSA:762038915.3 $____________ Contra Costa County Public Financing Authority Lease Revenue Bonds (Various Capital Projects) 2003 Series A Dated Date: August 14, 2003 Maturity Date (_____1) Amount Interest Rate CUSIP (21226P)† Redemption Date (_______) Redemption Price $____________ Contra Costa County Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects) 2007 Series A Dated Date: March 14, 2007 Maturity Date (_____1) Amount Interest Rate CUSIP (21226P)† Redemption Date (______1) Redemption Price _______________ † CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by S&P Capital IQ. Copyright© 2015 CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. Neither the Authority or the Escrow Agent takes any responsibility for the accuracy of such numbers. The moneys so deposited in escrow (including the earnings derived from the investment thereof) are irrevocably pledged to the payment of principal, premium and interest on certain of the Bonds. Said moneys have been invested in permitted investments pursuant to the Trust Agreement defined in the next paragraph, which bear interest and mature on such dates as C-4 OHSUSA:762038915.3 to insure the payment of interest on the outstanding Bonds as such interest becomes due and to pay the principal and premium on the Bonds on each redemption date therefor, to and including the respective redemption dates for the Bonds. As a consequence of the foregoing actions and in accordance with the trust agreement, dated as of February 1, 1999 (as supplemented and amended the “Trust Agreement”), between the Authority and Wells Fargo Bank, National Association, as successor trustee, providing for the issuance of the Bonds, the Bonds designated by the CUSIP number provided above and chosen for defeasance are deemed paid in accordance with Section 10.01 of the Trust Agreement. Certain maturities of the 2007A Bonds will be refunded in part. In order to distinguish the refunded portion of the 2007A Bonds from the unrefunded portion of such Bonds, new CUSIP numbers have been assigned to each such maturity. The principal amount and the new CUSIP number for the refunded portion of the 2007A Bonds and the principal amount and the new CUSIP number for the unrefunded portion of such series and maturity are as follows: $____________ Contra Costa County Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects) 2007 Series A Dated Date: March 14, 2007 Maturity Date (_____ 1) Interest Rate Original CUSIP Number (21226P)† Principal Amount Refunded CUSIP Number for Refunded Bonds (21226P)† Unrefunded Principal Balance CUSIP Number for Unrefunded Bonds (21226P)† Additional information regarding the foregoing actions may be obtained from Wells Fargo Bank, National Association D-1 OHSUSA:762038915.3 EXHIBIT D FEE SCHEDULE ONE-TIME ESCROW AGENT FEE/per escrow Refunding of 1999A Bonds Refunding of 2002A and 2002B Bonds Refunding of 2003A Bonds Refunding of 2007A Bonds 45340-0001\pos-7 SH DRAFT #7 07/16/15 PRELIMINARY OFFICIAL STATEMENT DATED JULY 21, 2015 NEW ISSUE - BOOK ENTRY ONLY RATINGS: S&P: ___ [DAC Logo] Moody’s: ___ See “RATINGS” In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the Authority, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the 2015 Bonds 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. In the further opinion of Bond Counsel, interest on the 2015 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 calculating corporate alternative minimum taxable income. Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the 2015 Bonds. See “TAX MATTERS.” $__,___,000* COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY LEASE REVENUE BONDS (REFUNDING AND CAPITAL PROJECTS), 2015 SERIES A AND 2015 SERIES B comprised of: $___,___,000* 2015 Series A $___,___,000* 2015 Series B Dated: Date of Delivery Due: June 1, as shown on inside cover The County of Contra Costa Public Financing Authority (the “Authority”) is issuing $__,___,000* aggregate principal amount of County of Contra Costa Public Financing Authority Lease Revenue Bonds, comprised of: $__,___,000* principal amount of County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects), 2015 Series A (the “2015 Series A Bonds”) and $__,___,000* principal amount of County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects), 2015 Series B (the “2015 Series B Bonds” and together with the 2015 Series A Bonds, the “2015 Bonds”). The 2015 Bonds are being issued to: (i) finance the acquisition and installation of solar photovoltaic panels to be located at multiple locations within the County, and the construction, acquisition, installation and equipping of a behavioral health and medical clinic (together, the “2015 Project”) within the County of Contra Costa (the “County”); (ii) depending upon market conditions on the sale date of the 2015 Bonds, refund all or a portion of $59,880,000* aggregate principal amount of outstanding County of Contra Costa Public Financing Authority Lease Revenue Bonds described herein (collectively the “Prior Bonds”); and (iii) purchase a surety bond policy as security for the 2015 Bonds; and (iv) pay certain costs associated with the issuance of the 2015 Bonds. See “PLAN OF FINANCE” and “ESTIMATED SOURCES AND USES OF FUNDS.” 45340-0001\pos-7 The 2015 Bonds are issued pursuant to a Trust Agreement, dated as of July 1, 2015 (the “Trust Agreement”), by and between the Authority and the Trustee and acknowledged by the County. The 2015 Bonds are limited obligations of the Authority and are payable, as to interest thereon, principal thereof and any premiums upon the redemption of any thereof, solely from the Revenues as provided herein, and the Authority is not obligated to pay them except from the Revenues. Revenues consist primarily of Base Rental Payments (as defined herein) to be made by the County to the Authority for the use and occupancy of the Facilities (defined herein) pursuant to the Facilities Lease, dated as of July 1, 2015 (the “Facilities Lease”) by and between the Authority and the County. The County covenants in the Facilities Lease to take such action as may be necessary to include all such Base Rental Payments and Additional Payments in its annual budgets and to make the necessary annual appropriations therefor. The obligation of the County to make Base Rental Payments is subject to proportional abatement during any period in which by reason of any damage or destruction (other than by condemnation) there is substantial interference with the use and occupancy of the Facilities by the County, except as otherwise described herein. See “SECURITY AND SOURCES OF PAYMENT FOR THE 2015 BONDS.” The principal of the 2015 Bonds is payable on June 1 of each year as set forth on the inside cover page. Interest on the 2015 Bonds is payable on June 1 and December 1 in each year, commencing December 1, 2015. The 2015 Bonds will be initially delivered in book-entry form, registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). Principal of, redemption premium, if any, and interest on each Series of 2015 Bonds will be paid by Wells Fargo Bank, National Association, as trustee (the “Trustee”), to DTC. DTC is obligated to remit such principal and interest to its DTC Participants for disbursement to the beneficial owners of the 2015 Bonds. See APPENDIX H–“DTC AND THE BOOK-ENTRY ONLY SYSTEM.” The 2015 Bonds are subject to optional, extraordinary and mandatory redemption as described herein. See “2015 BONDS–Redemption Provisions.” THE 2015 BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM REVENUES 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 AUTHORITY OR THE COUNTY IS PLEDGED FOR THE PAYMENT OF THE INTEREST ON OR PRINCIPAL OF THE 2015 BONDS. NEITHER THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE 2015 BONDS NOR THE OBLIGATION TO MAKE BASE RENTAL PAYMENTS UNDER THE FACILITIES LEASE CONSTITUTES A DEBT, LIABILITY OR OBLIGATION OF THE AUTHORITY, THE COUNTY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISION FOR WHICH EITHER ENTITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH ANY ENTITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE 2015 BONDS DO NOT CONSTITUTE AN INDEBTEDNESS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION OR RESTRICTION. THE AUTHORITY HAS NO TAXING POWER. This cover page contains certain information for general reference only. It is not intended to be a summary of the security or terms of this issue. Investors are advised to read the entire Official Statement to obtain information essential to the making of an informed investment decision. An investment in the 2015 Bonds involves risk. For a discussion of certain risk factors associated with investment in the 2015 Bonds, see “CERTAIN RISK FACTORS” as well as other factors discussed throughout this Official Statement. 45340-0001\pos-7 The 2015 Bonds are offered when, as and if issued by the Authority and received by the Underwriter, subject to approval as to their validity by Orrick, Herrington & Sutcliffe LLP, San Francisco, California, Bond Counsel to the Authority. Certain other legal matters will be passed upon for the County and the Authority by County Counsel and by Schiff Hardin LLP, San Francisco, California, Disclosure Counsel and for the Underwriter by Nossaman LLP, Irvine, California. It is anticipated that the 2015 Bonds in book-entry form, will be available for delivery through the facilities of DTC in New York, New York on or about August __, 2015. PIPER JAFFRAY Date of Official Statement: ________, 2015. ________________ * Preliminary, subject to change. 45340-0001\pos-7 MATURITY SCHEDULE $__,___,000* COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY LEASE REVENUE BONDS (REFUNDING AND CAPITAL PROJECTS), 2015 SERIES A AND 2015 SERIES B comprised of: $___,___,000* 2015 Series A Maturity Date (June 1) Principal Amount Interest Rate Price Yield CUSIP No.† $___,___,000* 2015 Series B Maturity Date (June 1) Principal Amount Interest Rate Price Yield CUSIP No.† ________________ * Preliminary, subject to change. † Copyright, American Bankers Association. CUSIP data herein is provided by Standard and Poor’s, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Service. CUSIP numbers are provided for convenience of reference only. None of the Authority or the Underwriter take any responsibility for the accuracy of such CUSIP numbers. The CUSIP number for a specific maturity is subject to being changed after the issuance of the 2015 Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity. 45340-0001\pos-7 i 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 2015 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 2015 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 County maintains a website. Unless specifically indicated otherwise, the information presented on that website is not incorporated by reference as part of this Official Statement and should not be relied upon in making investment decisions with respect to the 2015 Bonds. The information set forth herein has been obtained from the County 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 2015 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 Facilities Lease. This Official Statement, including any supplement or amendment hereto, is intended to be deposited with the Electronic Municipal Market Access site maintained by the Municipal Securities Rulemaking Board. Any statement made in this Official Statement involving any forecast or matter of estimates or opinion, whether or not expressly stated, is intended solely as such and not as a representation of fact. Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended (the “Securities Act”). Such forward-looking statements are generally identified by use of the words “plan,” “project,” “expect,” “estimate,” “budget” or other similar words. 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 involve 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. Neither the County nor the Authority plans to issue updates or revisions to such forward-looking statements if or when the expectations, 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 2015 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 2015 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. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. In connection with this offering, the Underwriter may overallot or effect transactions which stabilize or maintain the market prices of a Series of 2015 Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter may offer and sell Series of 2015 Bonds to certain dealers and banks at prices lower than the initial public offering prices and at yields higher than stated on the inside pages and such initial public offering prices and yields may be changed from time to time by the Underwriter. 45340-0001\pos-7 ii COUNTY OF CONTRA COSTA, CALIFORNIA BOARD OF SUPERVISORS OF THE COUNTY John M. Gioia (District 1) Chair Candace Anderson (District 2) Vice Chair Mary N. Piepho (District 3) Karen Mitchoff (District 4) Federal D. Glover (District 5) COUNTY OFFICIALS David J. Twa Clerk of the Board and County Administrator Robert R. Campbell Auditor-Controller Russell V. Watts Treasurer-Tax Collector Sharon L. Anderson County Counsel Gus S. Kramer Assessor Joe Canciamilla County Clerk-Recorder Lisa Driscoll County Finance Director SPECIAL SERVICES Orrick, Herrington & Sutcliffe LLP San Francisco, California Bond Counsel Schiff Hardin LLP San Francisco, California Disclosure Counsel Montague DeRose and Associates, LLC Walnut Creek, California Financial Advisor Wells Fargo Bank, National Association San Francisco, California Trustee Grant Thornton LLP San Francisco, California Verification Agent 45340-0001\pos-7 iii TABLE OF CONTENTS Page Page INTRODUCTION .............................................. 1  General; Purpose .............................................. 1  Authority for Issuance ..................................... 2  Security and Sources of Payment .................... 2  Reserve Fund ................................................... 3  Certain Risk Factors ........................................ 3  Continuing Disclosure ..................................... 3  Reference to Documents .................................. 3  PLAN OF FINANCE .......................................... 4  2015 Project ..................................................... 4  Refunding ........................................................ 4  THE FACILITIES .............................................. 7  ESTIMATED SOURCES AND USES OF FUNDS ..................................................... 11  2015 BONDS .................................................... 11  General .......................................................... 11  Redemption Provisions .................................. 12  Redemption Procedures ................................. 13  SECURITY AND SOURCES OF PAYMENT FOR THE 2015 BONDS ....... 14  General .......................................................... 14  Pledge of Revenues ....................................... 15  Base Rental Payments ................................... 15  Flow of Funds ................................................ 16  Reserve Fund ................................................. 17  Insurance ........................................................ 17  Additional Bonds ........................................... 20  Addition; Substitution and Release of Property .................................................. 20  Option to Purchase ......................................... 21  Sale of Personal Property .............................. 21  Abatement ...................................................... 21  DEBT SERVICE SCHEDULE ......................... 22  CERTAIN RISK FACTORS ............................ 23  Limited Obligation ........................................ 23  Base Rental Payments Not a Debt of the County; Other County Obligations ............................................. 23  Valid and Binding Covenant to Budget and Appropriate ......................... 23  Abatement ...................................................... 24  Bankruptcy .................................................... 24  Limited Recourse on Default; No Acceleration of Base Rental Payments ................................................ 26  Limitations on Remedies ............................... 26  Military Conflicts and Terrorist Activities ................................................ 27  Risk of Earthquake and Other Natural Disasters ................................................. 27  Drought .......................................................... 28  Hazardous Substances .................................... 28  Limited Liability of Authority to the Owners .................................................... 28  State Funding of Counties .............................. 29  Loss of Tax Exemption .................................. 29  IRS Examination ............................................ 29  Pension and Other Post-Employment Benefit Liability ..................................... 29  Changes in Law .............................................. 30  Secondary Market .......................................... 30  CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES, REVENUES AND APPROPRIATIONS ................................. 30  Article XIII A of the California Constitution ............................................ 30  Legislation Implementing Article XIII A ..................................................... 31  Article XIII B of the California Constitution ............................................ 31  Article XIII C and Article XIII D of the California Constitution ..................... 32  Proposition 62 ................................................ 33  Proposition 1A ................................................ 34  Proposition 22 ................................................ 35  Proposition 26 ................................................ 35  Future Initiatives ............................................ 36  THE AUTHORITY ........................................... 36  THE COUNTY .................................................. 37  RATINGS .......................................................... 37  LITIGATION MATTERS ................................. 37  TAX MATTERS ............................................... 38  LEGAL MATTERS .......................................... 40  FINANCIAL ADVISOR ................................... 40  CONTINUING DISCLOSURE ........................ 40  UNDERWRITING ............................................ 41  2015 Series A Bonds ...................................... 41  2015 Series B Bonds ...................................... 41  VERIFICATION OF MATHEMATICAL COMPUTATIONS FOR THE 2015 SERIES B BONDS .................................... 42  MISCELLANEOUS INFORMATION ............. 42  45340-0001\pos-7 iv APPENDICES Page APPENDIX A – GENERAL COUNTY ECONOMIC AND DEMOGRAPHIC INFORMATION ...................................................................................................... A-1 APPENDIX B – COUNTY FINANCIAL INFORMATION ............................................................. B-1 APPENDIX C – COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30, 2014 ............................. C-1 APPENDIX D – COUNTY INVESTMENT POLICY ....................................................................... D-1 APPENDIX E – SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS ......................................................................................................... E-1 APPENDIX F – PROPOSED FORM OF BOND COUNSEL OPINION ........................................... F-1 APPENDIX G – PROPOSED FORM OF CONTINUING DISCLOSURE AGREEMENT .............. G-1 APPENDIX H – DTC AND THE BOOK-ENTRY ONLY SYSTEM ................................................ H-1 LIST OF TABLES Page Table 1 - Estimated Value of the Facilities .............................................................................................. 7 Table 2 - Estimated Sources and Uses of Funds ..................................................................................... 10 Table 3 - Debt Service Schedule ............................................................................................................. 21 45340-0001\pos-7 $__,___,000* COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY LEASE REVENUE BONDS (REFUNDING AND CAPITAL PROJECTS), 2015 SERIES A AND 2015 SERIES B comprised of: $___,___,000* 2015 Series A $___,___,000* 2015 Series B INTRODUCTION This Introduction contains only a brief summary of the terms of the 2015 Bonds being offered and a brief description of this Official Statement. A full review should be made of the entire Official Statement, including the inside cover through the Appendices. All statements contained in this Introduction are qualified in their entirety by reference to the entire Official Statement. All capitalized terms used in this Official Statement and not otherwise defined herein have the meanings given to such terms as set forth in the Trust Agreement (defined below). See APPENDIX E–“SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS–CERTAIN DEFINITIONS.” General; Purpose This Official Statement, which includes the cover page through the Appendices hereto (the “Official Statement”), provides certain information concerning the issuance by the County of Contra Costa Public Financing Authority (the “Authority”) of $__,___,000* aggregate principal amount of County of Contra Costa Public Financing Authority Lease Revenue Bonds, comprised of: $__,___,000* principal amount of County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects), 2015 Series A (the “2015 Series A Bonds”) and $__,___,000* principal amount of County of Contra Costa Public Financing Authority Lease Revenue Bonds (Refunding and Capital Projects), 2015 Series B (the “2015 Series B Bonds” and together with the 2015 Series A Bonds, the “2015 Bonds”). The 2015 Bonds are being issued to: (i) finance the acquisition and installation of solar photovoltaic panels to be located at multiple locations within the County, and the construction, acquisition, installation and equipping of a behavioral health and medical clinic (together, the “2015 Project”) within the County of Contra Costa (the “County”); (ii) depending upon market conditions on the sale date of the 2015 Bonds, refund all or a portion of $59,880,000* aggregate principal amount of outstanding County of Contra Costa Public Financing Authority Lease Revenue Bonds described herein (collectively, the “Prior Bonds”); and (iii) purchase a surety bond policy as security for the 2015 Bonds; and (iv) pay certain costs associated with the issuance of the 2015 Bonds. See “PLAN OF FINANCE” and “ESTIMATED SOURCES AND USES OF FUNDS.” The 2015 Bonds are limited obligations of the Authority payable as to the interest thereon, principal thereof and any redemption premium solely from Revenues, consisting primarily of base rental payments (the “Base Rental Payments”) to be made by the County and paid to the Authority for the use and occupancy of certain real property and improvements (each a “Facility” and together, the “Facilities”). The Authority is not obligated to make payments on the 2015 Bonds except from Revenues. The Facilities will be leased by the County to the Authority pursuant to the terms and conditions of a Site Lease with respect to 2015 Bonds, dated as of July 1, 2015 (the “Site Lease”), between the County, as lessor, and the Authority, as lessee. See “THE FACILITIES.” Pursuant to the terms and conditions of a Facilities Lease, dated as of July 1, 2015 (the “Facilities Lease”), between the Authority, as lessor and the County, as lessee, the Authority will let each of the Facilities to the County. See “SECURITY AND SOURCES OF PAYMENT FOR THE 2015 BONDS.” ______________ * Preliminary, subject to change. 45340-0001\pos-7 2 THE 2015 BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM REVENUES 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 AUTHORITY OR THE COUNTY IS PLEDGED FOR THE PAYMENT OF THE INTEREST ON OR PRINCIPAL OF THE 2015 BONDS. NEITHER THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE 2015 BONDS NOR THE OBLIGATION TO MAKE BASE RENTAL PAYMENTS UNDER THE FACILITIES LEASE CONSTITUTES A DEBT, LIABILITY OR OBLIGATION OF THE AUTHORITY, THE COUNTY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISION FOR WHICH EITHER ENTITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH ANY ENTITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE 2015 BONDS DO NOT CONSTITUTE AN INDEBTEDNESS WITHIN THE MEANING OF ANY CONSTITUTIONAL DEBT LIMITATION OR RESTRICTION. THE AUTHORITY HAS NO TAXING POWER. Authority for Issuance The 2015 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 and a Trust Agreement, dated as of July 1, 2015 (the “Trust Agreement”), between the Authority and Wells Fargo Bank, National Association, as trustee (the “Trustee”) and acknowledged by the County. Security and Sources of Payment General. Pursuant to the Trust Agreement, the Authority pledges to the Trustee, for the benefit of the Bondholders, all of the “Revenues,” defined as all Base Rental Payments and other payments paid by the County and received by the Authority pursuant to the Facilities Lease (excluding Additional Payments); and all interest or other income from any investment of any money held in any fund or account (other than the Rebate Fund) established pursuant to the Trust Agreement or the Facilities Lease. The County covenants under the Facilities Lease that so long as the each Facility is available for use and occupancy by the County, it will take such action as may be necessary to include the Base Rental Payments and Additional Payments with respect to the Facilities Lease in its annual budgets and to make the necessary annual appropriations therefor. Base Rental Payments are included in and allocated to individual department budgets. See “SECURITY AND SOURCES OF PAYMENT FOR THE 2015 BONDS.” The Base Rental Payments made by the County pursuant to the Facilities Lease are subject to complete or partial abatement in the event of substantial interference with the use and occupancy by the County of the Facilities caused by damage to or destruction (other than by condemnation) of such Facilities. See “CERTAIN RISK FACTORS” and “SECURITY AND SOURCES OF PAYMENT FOR THE 2015 BONDS–Pledge of Revenues.” Abatement of Base Rental Payments under the Facilities Lease could result in the Bondholders of such Series of 2015 Bonds receiving less than the full amount of principal of and interest on the 2015 Bonds, except to the extent proceeds of insurance or moneys in the Reserve Fund (as described herein) are available to make payments of principal of or interest on the 2015 Bonds (or the relevant portion thereof) during periods of abatement of the Base Rental. Abatement of Base Rental Payments with respect to one Facility under the Facilities Lease will not result in the abatement of Base Rental Payments for another Facility. 45340-0001\pos-7 3 Additional Parity Bonds. The Authority may only issue additional bonds under the Trust Agreement (“Additional Bonds”) secured on a parity with the 2015 Bonds for the sole purpose of acquiring or constructing facilities to be added to the Facilities or for the refunding of Outstanding 2015 Bonds. See “SECURITY AND SOURCES OF PAYMENT FOR THE 2015 BONDS–Additional Bonds.” The 2015 Bonds, together with any Additional Bonds issued pursuant to the Trust Agreement, are herein referred to as the “Bonds.” Reserve Fund Pursuant to the Trust Agreement, a reserve fund (the “Reserve Fund”) is established for the benefit of the Bondholders of the 2015 Bonds in an amount equal to the Reserve Fund Requirement (as defined herein). See “SECURITY AND SOURCES OF PAYMENT FOR THE 2015 BONDS–Reserve Fund.” Certain Risk Factors An investment in the 2015 Bonds involves risk. For a discussion of certain risk factors associated with investment in the 2015 Bonds, see “CERTAIN RISK FACTORS” as well as other factors discussed throughout this Official Statement. Continuing Disclosure The County has covenanted for the benefit of the beneficial owners of the 2015 Bonds to provide certain financial information and operating data relating to the County by no later than nine months after the end of each fiscal year (which fiscal year currently ends June 30), commencing with the report due for the Fiscal Year ended June 30, 2015 (each an “Annual Report”), and to provide notices of the occurrence of certain enumerated events. The Annual Report and notices of specified events will be filed by the County or Digital Assurance Certification, L.L.C., as dissemination agent, through the Electronic Municipal Market Access site maintained by the Municipal Securities Rulemaking Board (the “MSRB”). The specific nature of the information to be contained in the Annual Report or the notices of specified events is set forth in APPENDIX G–“PROPOSED FORM OF CONTINUING DISCLOSURE AGREEMENT.” These covenants have been made in order to assist the Underwriter in complying with S.E.C. Rule 15c2-12(b)(5). Reference to Documents The summaries and descriptions in this Official Statement of the Trust Agreement, the Facilities Lease, the Site Lease, the Continuing Disclosure Agreement, and other agreements relating to the 2015 Bonds are qualified in their entirety by reference to such documents, and the descriptions herein of the 2015 Bonds are qualified in their entirety by the form thereof and the information with respect thereto included in such documents. All capitalized terms used herein, unless noted otherwise, shall have the meanings prescribed in the Trust Agreement and the Facilities Lease. See APPENDIX E–“SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS–CERTAIN DEFINITIONS.” 45340-0001\pos-7 4 PLAN OF FINANCE 2015 Project The 2015 Project consists of the acquisition and installation of solar photovoltaic panels to be located on multiple locations within the County, and the construction, acquisition, installation and equipping of a behavioral health and medical clinic. Solar Photovoltaic Panels. This component of the 2015 Project consists of the acquisition and installation of solar photovoltaic panels that will have an aggregate capacity of approximately 1,742 kilowatts and generate an estimated 2,952,000 kilowatt-hours per year. The solar photovoltaic panels will be installed on canopies located on six sites within the County, currently identified as: the Juvenile Hall (202 Glacier Drive in Martinez, California); the Sheriff Coroner-Forensic Science Center (1960 Muir Road, in Martinez, California); the Office of Emergency Services (50 Glacier Drive, in Martinez, California); the Sheriff Patrol and Investigation Facility (1980 Muir Road, in Martinez, California); the Public Works Department Administrative office building (255 Glacier Road, in Martinez, California); and the West County Health Center (13601 San Pablo Avenue in San Pablo, California). It is expected that installation of the solar photovoltaic panels will result in energy savings to the County of 51% for the six sites during the first year of operations. The solar photovoltaic panels have an expected useful life of 25 years. Behavioral Health and Medical Clinic Expansion. This component of the 2015 Project consists of the construction, acquisition, installation and equipping of an approximately 12,000 square foot behavioral health facility and expansion of a medical clinic (approximately 10,000 square feet) to be located on an approximately 0.93 acre parcel in San Pablo, California (the “Behavioral Health and Medical Expansion”). This Facility will be located adjacent and connected to the County’s West County Health Center, located at 13601 San Pablo Avenue in San Pablo, California. Construction of the Behavioral Health and Medical Expansion is expected to commence in February 2016 and is expected to be completed in August 2017. Refunding The Authority issued the Prior Bonds pursuant to a 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, the Fourth Supplemental Trust Agreement, dated as of July 1, 2002, the Fifth Supplemental Trust Agreement, dated as of July 1, 2003, the Sixth Supplemental Trust Agreement, dated as of March 1, 2007 and the Seventh Supplemental Trust Agreement, dated as of August 1, 2007 (as previously amended and supplemented, the “Prior Trust Agreement”), by and between the Authority and BNY Western Trust Company, as succeeded by Wells Fargo Bank, National Association, as successor trustee (the “Prior Trustee”), and acknowledged by the County. The Prior Bonds were delivered to finance and refinance the costs of acquiring, constructing and renovating certain County facilities and to provide funds to acquire and install other capital improvements for the County. The portion of the Prior Bonds being refunded by the 2015 Bonds are referred to as the “Refunded Bonds.” A portion of the proceeds of the 2015 Series B Bonds will be deposited with the Prior Trustee which, together with certain moneys on deposit under the Prior Trust Agreement with respect to the Refunded Bonds, will be sufficient and will be used to redeem the Refunded Bonds at a redemption price equal to the principal amount thereof, plus accrued and unpaid interest through the redemption date. 45340-0001\pos-7 5 Depending upon market conditions on the sale date of the 2015 Bonds, the Refunded Bonds are expected to consist of all or a portion of the following: $11,240,000* Contra Costa County Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects) 1999 Series A Dated Date: March 4, 1999 Redemption Date: August 25, 2015 Redemption Price: 100% Maturity Date Interest CUSIP (June 1) Amount Rate (21226P)† 2016 $1,580,000 5.25% JC3 2017 610,000 4.75 JD1 2018 635,000 4.75 JE9 2019 665,000 5.00 JF6 2028†† 7,750,000 5.00 JG4 $575,000* Contra Costa County Public Financing Authority Lease Revenue Bonds (Various Capital Projects) 2002 Series A Dated Date: June 27, 2002 Redemption Date: August 25, 2015 Redemption Price: 100% Maturity Date Interest CUSIP (June 1) Amount Rate (21226P)† 2016 $575,000 4.50% EH7 _______________ * Preliminary, subject to change. † Copyright, American Bankers Association. CUSIP data herein is provided by Standard and Poor’s, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Service. CUSIP numbers are provided for convenience of reference only. None of the Authority or the Underwriter take any responsibility for the accuracy of such numbers. †† Term bond. 45340-0001\pos-7 6 $5,350,000* Contra Costa County Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects) 2002 Series B Dated Date: June 27, 2002 Redemption Date: August 25, 2015 Redemption Price: 100% Maturity Date Interest CUSIP (June 1) Amount Rate (21226P)† 2016 $1,225,000 4.50% FJ2 2017 1,300,000 4.40 FK9 2018 1,360,000 4.50 FL7 2019 1,465,000 4.60 FM5 $1,565,000* Contra Costa County Public Financing Authority Lease Revenue Bonds (Various Capital Projects) 2003 Series A Dated Date: August 14, 2003 Redemption Date: August 25, 2015 Redemption Price: 100% Maturity Date Interest CUSIP (June 1) Amount Rate (21226P)† 2016 $770,000 4.30% FZ6 2017 795,000 4.50 GA0 _______________ * Preliminary, subject to change. † Copyright, American Bankers Association. CUSIP data herein is provided by Standard and Poor’s, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Service. CUSIP numbers are provided for convenience of reference only. None of the Authority or the Underwriter take any responsibility for the accuracy of such numbers. 45340-0001\pos-7 7 $41,150,000* Contra Costa County Public Financing Authority Lease Revenue Bonds (Refunding and Various Capital Projects) 2007 Series A Dated Date: March 14, 2007 Redemption Date: June 1, 2017 Redemption Price: 100% Maturity Date Interest CUSIP (June 1) Amount Rate (21226P)† 2018 $3,880,000 4.00% GQ5 2019 5,285,000 4.00 GR3 2020 5,495,000 5.00 GS1 2021 5,770,000 5.00 GT9 2022 5,195,000 5.00 GU6 2023 1,715,000 4.50 GW2 2023 3,735,000 4.75 GV4 2024 2,300,000 4.50 GX0 2025 2,410,000 4.75 GY8 2026 2,520,000 4.50 GZ5 2027 2,225,000 4.50 HA9 2028 620,000 4.50 HB7 _______________ * Preliminary, subject to change. † Copyright, American Bankers Association. CUSIP data herein is provided by Standard and Poor’s, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Service. CUSIP numbers are provided for convenience of reference only. None of the Authority or the Underwriter take any responsibility for the accuracy of such numbers. Upon the deposit of cash into an escrow fund (the “Refunded Bonds Escrow Fund”) established pursuant to an Escrow Agreement, dated as of July 1, 2015 (the “2015 Escrow Agreement”) by and between the Authority and the Prior Trustee, the Refunded Bonds will no longer be deemed outstanding under the Prior Trust Agreement. The amount on deposit in the Refunded Bonds Escrow Fund will be sufficient to redeem the Refunded Bonds at a redemption price equal to the principal amount thereof, plus accrued and unpaid interest to the respective redemption dates. The mathematical computations used to determine the sufficiency of the escrow deposit to defease the Refunded Bonds will be verified by Grant Thornton LLP (the “Verification Agent”) who will deliver a report to such effect upon delivery of the 2015 Bonds. See “VERIFICATION OF MATHEMATICAL COMPUTATIONS FOR THE 2015 SERIES B BONDS.” THE FACILITIES The County will lease the first five Facilities summarized in Table 1 and, if all of the Prior Bonds are refunded, the last two Facilities will also be leased to the Authority pursuant to the Site Lease, and the Authority will lease back each of those Facilities to the County pursuant to the Facilities Lease. The Facilities consist of a number of County properties and the sites thereof. The Facilities include site development, landscaping, utilities, equipment, furnishings, improvements and appurtenant, and related facilities located on the real property, including any future improvements made to such Facilities. 45340-0001\pos-7 8 The County covenants in the Facilities Lease to use the Facility for County and public purposes and so long as each such Facility is available for its use and occupancy, the County covenants to take such actions as may be necessary to include all Base Rental Payments and Additional Payments with respect to each Facility in its annual budgets and to make the necessary annual appropriations therefor. See “SECURITY AND SOURCES OF PAYMENT FOR THE 2015 BONDS.” The current insured value of each Facility included in the following table is based upon an independent appraisal originally completed in 2009. Each August, the insurer reviews third quarter factors for the western section of the country developed by a national provider of real estate information, analytics, and services to update County real property and content values for insurance purposes. The actual market value of each Facility may differ materially from the estimated insured value summarized in Table 1. The Authority has only a leasehold interest in each Facility and is not authorized to sell any Facility. The County represents and agrees that the annual Base Rental Payments do not exceed the annual fair rental value of the related Facilities. See also “CERTAIN RISK FACTORS–Base Rental Payments Not a Debt of the County; Other County Obligations.” Department of Information Technology Building. This Facility is an approximately 44,840 gross square foot, two-story, wood frame, wood fascia building located on an approximately 1.7 acre site at 30 Douglas Drive in Martinez, California. This Facility was constructed in 1989, and includes a 128- surface parking lot for employees, department vehicles, and the public. The offices of administration, technical services and data processing support for the County are located in this Facility. Forensic Science Building. This Facility is an approximately 21,160 gross square foot, two- story, noncombustible steel frame, stucco building located on an approximately 0.8 acre site at 1960 Muir Road in Martinez, California. This Facility was constructed in 1991, and includes a 37-space surface parking lot for employees, department vehicles, and the public. The County forensic laboratory, including offices, laboratories and morgue are located in this Facility. Health Services Building. This Facility is an approximately 42,057 square foot, three-story, noncombustible steel frame brick and glass building located on an approximately 1.6 acre site at 595 Center Avenue in Martinez, California. This Facility was constructed in 1985, and includes a 131-space surface parking lots for employees, department vehicles, and the public. John A. Davis Juvenile Hall Detention Facility. This Facility is an approximately 122,480 square foot, two-story, masonry frame, concrete building located on an approximately 22.3 acre site at 202 Glacier Drive in Martinez, California. This Facility opened in June 2005 and is a 209-bed, maximum security detention facility for juvenile offenders up to the age of 18. This Facility includes 10 housing units, a large kitchen, laundry area, fully accredited year-round school, a library, a complete medical wing and a surface parking lot for employees, department vehicles, and the public. East County Social Services Building. This Facility is an approximately 54,067 square foot, two-story, engineered wood frame, stucco, glass and wood building located on an approximately 4.9 acre site at 4545 Delta Fair Boulevard in Antioch, California. This Facility was constructed in 1988, and a 321-space surface parking lot for employees and the public. The County Employment and Human Services Division is located in this Facility. If all of the Prior Bonds are refunded, the following two Facilities will also be leased: 45340-0001\pos-7 9 Animal Services Building. This Facility is an approximately 38,633 square foot, single-story, engineered wood frame construction building located on an approximately 9.4 acre site at 4800 Imhoff Place in Martinez, California. This Facility was constructed in 2005, and includes a 67-space surface parking lot for employees and the public. Sheriff’s Patrol and Investigation Facility. This Facility is an approximately 25,932 square foot, two-story, noncombustible steel moment frame, stucco building located on an approximately 12.7 acre site at 1980 Muir Road in Martinez, California. This Facility was constructed in 1989, and includes a 105-space surface parking lot for employees and the public. (Remainder of this Page Intentionally Left Blank) Table 1 Estimated Value of the Facilities Facilities Address Original Completion Year Approx. Acreage of Site Approx. Building Square Footage Term of Facilities Lease* Insured Value ($ millions)† Data Processing Building 30 Douglas Drive, Martinez 1989 1.7 44,840 20 $5.992 Forensic Science Center 1960 Muir Road, Martinez 1991 0.8 21,160 10 6.365 Health Services Building 595 Center Avenue, Martinez 19851.6 42,057 20 10.072 Juvenile Detention Facility 202 Glacier Drive, Martinez 2005 22.3 122,480 13 37.654 East County Social Services Building 4545 Delta Fair Blvd, Antioch 1988 4.9 54,067 13 10.075 Animal Services Building 4800 Imhoff Place, Martinez 2005 9.4 38,633 13 14.716 Sheriff’s Patrol and Investigation Facility 1980 Muir Road, Martinez 1989 12.7 25,932 4 6.079 TOTAL FACILITIES: $90.953 ________________ * Preliminary, subject to change. † As of July 1, 2015, based upon a comprehensive appraisal originally prepared in 2009 by an independent appraiser and updated annually as described above. Source: County Administrator’s Office. Pursuant to the terms of the Facilities Lease, the County and the Authority may substitute other properties for the Facilities or portions thereof upon the satisfaction of certain conditions. See “SECURITY AND SOURCES OF PAYMENT FOR THE 2015 BONDS–Addition; Substitution and Release of Property.” 10 45340-0001\pos-7 11 ESTIMATED SOURCES AND USES OF FUNDS The following table sets forth the estimated sources and uses of funds related to the issuance of the 2015 Bonds and available funds associated with the Refunded Bonds. Table 2 Estimated Sources and Uses of Funds SOURCES: 2015 Series A Bonds 2015 Series B Bonds Total Principal Amount of 2015 Bonds ............................... Net Original Issue Premium/(Discount) ..................... TOTAL SOURCES .................................................. USES: Deposit to Project Fund ............................................. Deposit to Refunded Bonds Escrow Account ............ Costs of Issuance† ...................................................... Underwriter’s Discount .............................................. TOTAL USES ........................................................ ________________ † Includes legal and professional fees, rating agency, surety bond policy and title insurance fees, printing costs and other miscellaneous costs of issuance. 2015 BONDS General The 2015 Bonds of each Series are limited obligations of the Authority payable solely from Revenues, consisting primarily of Base Rental Payments to be made by the County under the Facilities Lease. The 2015 Bonds of each Series will be dated their date of issuance, issued as fully registered bonds and, when delivered, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository of the 2015 Bonds. Ownership interests in the 2015 Bonds may be purchased in book-entry form only, in the denominations hereinafter set forth. Purchasers will not receive physical certificates representing their beneficial ownership interest in the 2015 Bonds. So long as a Series of 2015 Bonds are registered in the name of Cede & Co., payment of principal of premium, if any and interest on such Series of 2015 Bonds will be payable to DTC. See APPENDIX H–“DTC AND THE BOOK-ENTRY ONLY SYSTEM.” Ownership interests in each Series of 2015 Bonds will be in Authorized Denominations of $5,000 or any integral multiple thereof. The 2015 Bonds will mature on the dates and in the principal amounts, and the interest payable thereon will be computed at the rates, all as set forth on the inside cover page of this Official Statement. 45340-0001\pos-7 12 Interest on the 2015 Bonds is payable on June 1 and December 1 (each an “Interest Payment Date”) of each year, commencing December 1, 2015 calculated from their date of issuance on the basis of a 360-day year composed of twelve 30-day months. Redemption Provisions Optional Redemption for 2015 Series A Bonds. The 2015 Series A Bonds maturing on or prior to June 1, 20__ are not subject to optional redemption. The 2015 Series A Bonds maturing on or after June 1, 20__, 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, 20__, at a redemption price equal to 100% of the principal amount of the 2015 Series A Bonds called for redemption, plus accrued interest to the date fixed for redemption, without premium. Optional Redemption for 2015 Series B Bonds. The 2015 Series B Bonds maturing on or prior to June 1, 20__ are not subject to optional redemption. The 2015 Series B Bonds maturing on or after June 1, 20__, 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, 20__, at a redemption price equal to 100% of the principal amount of the 2015 Series B Bonds called for redemption, plus accrued interest to the date fixed for redemption, without premium. Mandatory Sinking Fund Redemption. Upon notice given as provided in the Trust Agreement, the 2015 Series A Bonds maturing on June 1, 20__ and the 2015 Series B Bonds on June 1, 20__, together, the “2015 Term Bonds”) are subject to mandatory sinking fund redemption prior to maturity, in part on June 1 of each year on the Mandatory Sinking Account Payment Dates specified in the Trust Agreement, by lot, from and in the amount of the mandatory sinking account payments set forth below at a redemption price equal to the sum of the principal amount thereof plus accrued interest thereon to the redemption date, without premium. 2015 Series A 20__ Sinking Account Mandatory Sinking Account Mandatory Sinking Payment Date (June 1) Account Payments 2015 Series B 20__ Sinking Account Mandatory Sinking Account Mandatory Sinking Payment Date (June 1) Account Payments All money in each of such accounts shall be held in trust by the Trustee and shall be applied, used and withdrawn only for the purposes hereinafter authorized in this Section. On each Principal Payment Date, following payment of principal of and interest on the Bonds, any excess amount on deposit in the 45340-0001\pos-7 13 Revenue Fund shall be transferred to the Reserve Fund to the extent necessary to increase the amount therein to the Reserve Fund Requirement for all Bonds that have a Reserve Fund Requirement and any excess shall be returned to the County as an excess payment of Base Rental Payments. Extraordinary Redemption. The 2015 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 in integral multiples of Authorized Denominations, from prepayments made by the County pursuant to the Facilities 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. Redemption Procedures Selection of 2015 Bonds for Redemption. The Authority shall designate which maturities of 2015 Bonds of a Series and the principal amount of 2015 Bonds which are to be redeemed (other than 2015 Bonds of a Series subject to mandatory sinking fund redemption). If less than all Outstanding 2015 Bonds of the same Series maturing by their terms on any one date are to be redeemed at any one time, the Trustee is required to select the 2015 Bonds of such maturity date to be redeemed by lot and shall promptly notify the Authority in writing of the numbers of the 2015 Bonds so selected for redemption. For purposes of such selection, 2015 Bonds shall be deemed to be composed of multiples of minimum Authorized Denominations and any such multiple may be separately redeemed. In the event 2015 Term Bonds are designated for redemption, the Authority may designate which sinking account payments are allocated to such redemption. Notice of Redemption. Notice of redemption will be mailed by first-class mail by the Trustee, not less than 20 nor more than 60 days prior to the redemption date to the respective Bondholders of the Bonds designated for redemption at their addresses appearing on the registration books of the Trustee. Each notice of redemption is required state the date of such notice, the date of issue of the Bonds, the Series, the redemption date, the Redemption Price, the place or places of redemption (including the name and appropriate address of the Trustee), the CUSIP number (if any) of the maturity date or maturities, and, if less than all of any such maturity is to be redeemed, the distinctive certificate numbers of the Bonds of such maturity, to be redeemed and, in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice is also required also state that on said date there will become due and payable on each of said Bonds the Redemption Price thereof, together with interest accrued thereon to the redemption date, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then surrendered at the address of the Trustee specified in the redemption notice. Failure to receive such notice shall not invalidate any of the proceedings taken in connection with such redemption. Conditional Notice of Redemption. The Trustee may give a conditional notice of redemption prior to the receipt of all funds or satisfaction of all conditions necessary to effect the redemption, provided that no redemption shall occur unless and until all conditions have been satisfied and the Trustee has on deposit and available or, if applicable, has received, all of the funds necessary to effect the redemption; otherwise, such redemption is required to be cancelled by the Trustee and the Trustee is required to mail notice of such cancellation to the recipients of the notice of redemption being cancelled. 45340-0001\pos-7 14 Cancellation of Notice of Redemption. The Authority may, at its option, on or prior to the date fixed for redemption in any notice of optional redemption, rescind and cancel such notice of redemption by Written Request to the Trustee and the Trustee is required to mail notice of such cancellation to the recipients of the notice of redemption being cancelled. Effect of Redemption. If notice of redemption has been given as required in the Trust Agreement and money for the payment of the Redemption Price of the 2015 Bonds called for redemption plus accrued interest to the redemption date is held by the Trustee, then on the redemption date designated in such notice the 2015 Bonds so called for redemption will become due and payable, and from and after the date so designated interest on such 2015 Bonds will cease to accrue, and the Bondholders of such 2015 Bonds will have no rights in respect thereof except to receive payment of the Redemption Price thereof plus accrued interest to the Redemption Date. SECURITY AND SOURCES OF PAYMENT FOR THE 2015 BONDS General Pursuant to the Facilities Lease, the Authority leases the Facilities to the County. As rental for the use and occupancy of the Facilities, the County covenants to pay Base Rental Payments to the Authority, which payments are pledged to the Trustee for the benefit of the Owners of the 2015 Bonds. The Base Rental Payments, which are subject to abatement, are calculated to generate sufficient Revenues to pay principal of and interest on the 2015 Bonds when due. See also “–Abatement” and “CERTAIN RISK FACTORS–Abatement.” The County covenants in the Facilities Lease to take such action as may be necessary to include all Base Rental Payments and Additional Payments due under the Facilities Lease in its annual budgets and to make the necessary annual appropriations therefor. By the third Business Day immediately preceding each Interest Payment Date, the County must pay to the Trustee Base Rental Payments (to the extent required under the Facilities Lease) which scheduled Base Rental Payments are sufficient to pay, when due, the principal of and interest on the 2015 Bonds. Base Rental Payments are not subject to acceleration. Under the Facilities Lease, the County agrees to pay Additional Payments for the payment of all expenses and all costs of the Authority and the Trustee related to the lease of the Facilities, including expenses of the Trustee payable by the Authority under the Trust Agreement, and fees of accountants, attorneys and consultants. The County is responsible for repair and maintenance of each of the related Facilities during the term of the Facilities Lease. The Base Rental Payments will be abated proportionately during any period in which by reason of any damage to or destruction (other than by condemnation), there is substantial interference with the use and occupancy of such Facilities by the County, in the proportion in which the cost of that portion of the Facilities rendered unusable bears to the cost of the whole of the Facilities. During any such period of abatement, except to the extent that proceeds of insurance or amounts held by the Trustee in the Revenue Fund or the Reserve Fund are otherwise available to pay the related Series of 2015 Bonds, Base Rental Payments from the County will not be available to pay the related Series of 2015 Bonds. See “– Abatement.” If the whole of a Facility under a Facilities Lease or so much thereof as to render the remainder unusable is taken under power of eminent domain, the term of the Facilities Lease will cease as of the day possession is so taken. If less than the whole of the related Facilities under a Facilities Lease is taken by 45340-0001\pos-7 15 eminent domain, there will be a partial abatement of the rental due under the Facilities Lease in an amount equivalent to the amount by which the annual payments of principal of and interest on the related Series of 2015 Bonds then Outstanding will be reduced by the application of the award in eminent domain to the redemption of the related Series of 2015 Bonds Outstanding. If the County defaults under a Facilities Lease, the Authority may (i) terminate the Facilities Lease and take possession of the Facility for the term of such Site Lease or (ii) retain the Facilities 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 E–“SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS–FACILITIES LEASE–Defaults and Remedies.” Base Rental Payments and Additional Payments may not be accelerated. See “CERTAIN RISK FACTORS.” Pledge of Revenues The Revenues consist primarily of the Base Rental Payments made by the County to the Authority under the Facilities Lease. In accordance with the Trust Agreement, all Revenues are irrevocably pledged and assigned by the Authority to the payment of interest and premium, if any, on and principal of the 2015 Bonds and will not be used for any other purpose while any of the 2015 Bonds remain Outstanding; provided, however, that out of the Revenues there 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. Pursuant to the Facilities Lease, the Authority has directed the County to pay all Base Rental Payments directly to the Trustee to be held in trust in the Revenue Fund established under the Trust Agreement (the “Revenue Fund”) for the benefit of the Bondholders. The County covenants under the Facilities Lease that as long as the related 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 Facilities Lease in its annual budgets and to make the necessary annual appropriations therefor. 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 1 and December 1, and one principal component, due on June 1. Each Base Rental Payment with respect to the 2015 Bonds will be payable by the County to the Authority on the third Business Day immediately preceding its due date. The interest components of the Base Rental Payments shall be paid by the County as and constitute interest paid on the principal components of the Base Rental Payments to be paid by the County hereunder, computed on the basis of a 360-day year composed of twelve 30-day months. Each annual payment of Base Rental (to be payable in installments as aforesaid) shall be for the use of the Facilities. Pursuant to the Facilities Lease, the County is required to make all Base Rental Payments to the Trustee for deposit in the interest or principal accounts established for the 2015 Bonds within the Revenue Fund (the “Interest Account” and the “Principal Account” together, the “Principal Accounts”). In accordance with the Trust Agreement, the Trustee will transfer such amounts as are necessary to the related Interest Account or the related Principal Account, as the case may be, to pay principal of and interest on the 2015 Bonds as the same become due and payable. On each Principal Payment Date, following the payment of principal of and interest on the 2015 Bonds, any excess amount in the Revenue Fund will be transferred to Reserve Fund, to the extent necessary to increase the amount on deposit 45340-0001\pos-7 16 therein to the related Reserve Fund Requirement or to pay any related Reserve Facility costs then due and owing, and thereafter returned to the County as an excess payment of Base Rental Payments. Upon the expiration of the term of the Facilities Lease with respect to a particular Facility pursuant to the Facilities Lease, the respective Facility will be released from the Facilities Lease without compliance with the release requirements set forth in the Facilities Lease. See also “–Addition; Substitution, and Release of Property.” The County represents that it has not failed to include Base Rental Payments in its annual budgets. See APPENDIX E–“SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS– TRUST AGREEMENT–Revenue Fund.” Flow of Funds All Revenues and all other amounts pledged under the Trust Agreement when and as received are required to be transferred by the Authority to the Trustee for deposit in the Revenue Fund. All money in the Revenue Fund is required to be set aside by the Trustee in the following respective special accounts or funds within the Revenue Fund in the following order of priority: First: Interest Account - On or before each Interest Payment Date, the Trustee is required to set aside from the Revenue Fund and deposit in the Interest Account that amount of money which is equal to the amount of interest becoming due and payable on all Outstanding 2015 Bonds on such Interest Payment Date, and Second: Principal Account - On or before each June 1, commencing June 1, 2016, the Trustee is required to set aside from the Revenue Fund and deposit in the Principal Account an amount of money equal to the amount of all sinking fund payments required to be made on such June 1 into the respective sinking fund accounts for all Outstanding Term Bonds and the principal amount of all Outstanding Serial Bonds maturing on such June 1. On or before each Redemption Date, the Trustee is required to set aside from the Revenue Fund and deposit in the Principal Account an amount of money equal to the Redemption Price required to be paid on such Redemption Date. THE 2015 BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM REVENUES 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 AUTHORITY OR THE COUNTY IS PLEDGED FOR THE PAYMENT OF THE INTEREST ON OR PRINCIPAL OF THE 2015 BONDS. NEITHER THE PAYMENT OF THE PRINCIPAL OF OR INTEREST ON THE 2015 BONDS NOR THE OBLIGATION TO MAKE BASE RENTAL PAYMENTS UNDER THE FACILITIES LEASE CONSTITUTES A DEBT, LIABILITY OR OBLIGATION OF THE AUTHORITY, THE COUNTY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISION FOR WHICH EITHER ENTITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH ANY ENTITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE 2015 BONDS DO NOT CONSTITUTE AN INDEBTEDNESS WITHIN THE MEANING OF ANY CONSTITUTIONAL 45340-0001\pos-7 17 OR STATUTORY LIMITATION OR RESTRICTION. THE AUTHORITY HAS NO TAXING POWER. Reserve Fund The Trust Agreement requires that the Reserve Fund for the 2015 Bonds is funded in an amount equal to the related Reserve Fund Requirement. The Reserve Fund Requirement is defined in the Trust Agreement to mean, with respect to all Outstanding 2015 Bonds, an amount equal to the lesser of: (i) the maximum annual debt service attributable to the Outstanding 2015 Bonds, (ii) 125% of average annual debt service attributable to the Outstanding 2015 Bonds, and (iii) 10% of the proceeds of the 2015 Bonds. The Trust Agreement permits the Reserve Fund to be funded with cash, permitted investments, a surety bond, an insurance policy, or a letter of credit, or any combination thereof, as described therein. The Reserve Fund Requirement for the 2015 Bonds will be equal to $________. The County will use a portion of the proceeds of the 2015 Bonds to purchase a surety bond policy in the amount of the Reserve Fund Requirement. Moneys in the Reserve Fund are required to be used and withdrawn by the Trustee solely for the purposes of paying principal of and interest on the 2015 Bonds when such principal and interest are due if insufficient moneys for the payment thereof are on deposit in the Principal Account and the Interest Account or (together with any other moneys available therefor) for the payment of principal and interest on all such 2015 Bonds then Outstanding when due whether upon maturity or earlier redemption or, for the payment of the final principal and interest payment of all such 2015 Bonds that are Outstanding. So long as the Authority is not in default under the Trust Agreement, any cash amounts in the Reserve Fund in excess of the Reserve Fund Requirement is required to be withdrawn from the Reserve Fund and transferred to the Revenue Fund on each Interest Payment Date, following the payment of any amounts due on such date. Insurance Fire and Extended Coverage Insurance. The Facilities Lease requires the County to procure or cause to be procured and maintain or cause to be maintained, throughout the term of the Facilities 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. Said extended coverage insurance is required to, as nearly as practicable, cover loss or damage by explosion, windstorm, flood, riot and riot attending a strike, aircraft, vehicle damage, hail, smoke and such other hazards as are normally covered by such insurance. Such insurance shall 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 insurance), or, in the alternative, be in an amount and in a form sufficient (together with moneys held under the Trust Agreement), in the event of total or partial loss, to enable the County to prepay all or any part of the Base Rental Payments then unpaid, pursuant to the Facilities Lease and to redeem outstanding 2015 Bonds. In the event of any damage to or destruction of any part of the Facilities, caused by the perils covered by such insurance, the Authority is required to cause the proceeds of such insurance to be used for the repair, reconstruction or replacement of the damaged or destroyed portion of the Facilities, and the Trustee is required to hold said proceeds separate and apart from all other funds, in a special fund to be 45340-0001\pos-7 18 designated the “Insurance and Condemnation Fund,” to the end that such proceeds are required to be applied to the repair, reconstruction or replacement of the Facilities to at least the same good order, repair and condition as they were in prior to the damage or destruction, insofar as the same may be accomplished by the use of said proceeds. The Trustee is required to permit withdrawals of said proceeds from time to time upon receiving the Written Request of the Authority, stating that the Authority has expended moneys or incurred liabilities in an amount equal to the amount therein requested to be paid over to it for the purpose of repair, reconstruction or replacement, and specifying the items for which such moneys were expended, or such liabilities were incurred. Any balance of said proceeds not required for such repair, reconstruction or replacement is required to be treated by the Trustee as Base Rental Payments and deposited into the Revenue Fund applied in the manner provided, however, that if the insurance proceeds were paid to cover damage to property of the County that does not constitute part of the Facilities, including, but not limited to furniture and office equipment, then such proceeds are required to be paid to the County. Alternatively, the Authority, at its option, and if the proceeds of such insurance together with any other moneys then available for the purpose are at least sufficient to redeem an aggregate principal amount of outstanding 2015 Bonds, equal to the amount of Base Rental attributable to the portion of the Facilities so destroyed or damaged (determined by reference to the proportion which the cost of such portion of the Facilities bears to the cost of the Facilities), may elect not to repair, reconstruct or replace the damaged or destroyed portion of the Facilities and cause said proceeds to be used for the redemption of outstanding 2015 Bonds pursuant to the provisions of the Trust Agreement. The Authority and the County covenant to promptly apply for Federal disaster aid or State disaster aid in the event that the Facilities are damaged or destroyed as a result of an earthquake occurring at any time. Any proceeds received as a result of such disaster aid are required to be used to repair, reconstruct, restore or replace the damaged or destroyed portions of the Facilities, or, at the option of the County and the Authority, to enable the County to prepay all or any part of the Base Rental Payments then unpaid, pursuant to the Facilities Lease, and to redeem outstanding 2015 Bonds if such use of such disaster aid is permitted. As an alternative to providing the fire and extended coverage insurance, or any portion thereof, the County may provide a self-insurance method or plan of protection if and to the extent such self- insurance method or plan of protection affords reasonable coverage for the risks required to be insured against, in light of all circumstances, giving consideration to cost, availability and similar plans or methods of protection adopted by public entities in the State other than the County. So long as such method or plan is being provided to satisfy the requirements of the Facilities Lease, there is required to be filed annually with the Trustee a statement of an actuary, insurance consultant or other qualified person (which may be the Risk Manager of the County), stating that, in the opinion of the signer, the substitute method or plan of protection is in accordance with the requirements of the Facilities Lease and, when effective, would afford reasonable coverage for the risks required to be insured against. A Certificate of the County setting forth the details of such substitute method or plan is also required to be filed with the Trustee. In the event of loss covered by any such self-insurance method, the liability of the County will be limited to the amounts in the self-insurance reserve fund or funds created under such method. Liability Insurance. The Facilities Lease requires the County to procure or cause to be procured and maintain or cause to be maintained, throughout the term of the Facilities Lease, a standard comprehensive general liability insurance policy or policies in protection of the Authority and its members, directors, officers, agents and employees and the Trustee, indemnifying said parties against all direct or contingent loss or liability for damages for personal injury, death or property damage occasioned by reason of the operation of the Facilities, with minimum liability limits of $1,000,000 for personal injury or death of each person and $3,000,000 for personal injury or deaths of two or more persons in each accident or event, and in a minimum amount of $200,000 for damage to property resulting from each accident or event. Such public liability and property damage insurance may, however, be in the form of a 45340-0001\pos-7 19 single limit policy in the amount of $3,000,000 covering all such risks. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance carried by the County. As an alternative to providing the standard comprehensive general liability insurance required by the Facilities Lease, or any portion thereof, the County may provide a self-insurance method or plan of protection if and to the extent such self-insurance method or plan of protection affords reasonable protection to the Authority, its members, directors, officers, agents and employees and the Trustee, in light of all circumstances, giving consideration to cost, availability and similar plans or methods of protection adopted by public entities in the State other than the County. So long as such method or plan is being provided to satisfy the requirements of the Facilities Lease, there is required to be filed annually with the Trustee a statement of an actuary, independent insurance consultant or other qualified person (which may be the Risk Manager of the County), stating that, in the opinion of the signer, the substitute method or plan of protection is in accordance with the requirements of the Facilities Lease and, when effective, would afford reasonable protection to the Authority, its members, directors, officers, agents and employees and the Trustee against loss and damage from the hazards and risks covered thereby. A Certificate of the County setting forth the details of such substitute method or plan is also required to be filed with the Trustee. Rental Interruption or Use and Occupancy Insurance. The Facilities Lease requires the County to procure or cause to be procured and maintain or cause to be maintained, rental interruption or use and occupancy insurance to cover loss, total or partial, of the rental income from or the use of the Facilities as the result of any of the hazards covered by the insurance required by the Facilities Lease (provided with respect to earthquake insurance, only if available on the open market from reputable insurance companies at a reasonable cost, as determined by the County), in an amount sufficient to pay the part of the total rent hereunder attributable to the portion of the Facilities rendered unusable (determined by reference to the proportion which the cost of such portion bears to the cost of the Facilities) for a period of at least two years, except that such insurance may be subject to a deductible clause of not to exceed $250,000 or a comparable amount adjusted for inflation (or more in the case of earthquake coverage), and with the additional exception that with respect to coverage for terrorism related loss, the period may be only one year, provided that the County use its best efforts to obtain such coverage for a period of at least two years assuming it is available on the open market from reputable insurance companies at a reasonable cost, as determined by the County. Any proceeds of such insurance is required to be used by the Trustee to reimburse to the County any rental paid by the County under the Facilities Lease attributable to such structure for a period of time during which the payment of Base Rental under the Facilities Lease is abated, and any proceeds of such insurance not so used is required to be applied as provided in the Facilities Lease (to the extent required for the payment of Base Rental and Additional Payments) and any remainder is required to be treated as Revenue under the Trust Agreement. The County may not self- insure for rental interruption insurance. Worker’s Compensation Insurance. The County is also required to maintain worker’s compensation insurance issued by a responsible carrier authorized under the laws of the State to insure its employees against liability for compensation under the Worker’s Compensation Insurance and Safety Act now in force in the State, or any act hereafter enacted as an amendment or supplement thereto. As an alternative, such insurance may be maintained as part of or in conjunction with any other insurance carried by the County. Such insurance may be maintained by the County in the form of self-insurance. Title Insurance. The County is also required to obtain, for the benefit of the Authority, title insurance on the Facilities, in an amount equal to the aggregate principal amount of the 2015 Bonds, issued by a company of recognized standing duly authorized to issue the same, subject only to Permitted Encumbrances. 45340-0001\pos-7 20 For a description of insurance and self-insurance programs of the County, see APPENDIX B– “COUNTY FINANCIAL INFORMATION–Insurance and Self-Insurance Programs.” Additional Bonds The Authority may only issue additional bonds under the Trust Agreement (“Additional Bonds”) secured on a parity with the 2015 Bonds for the sole purpose of acquiring (by purchase or lease) or constructing facilities to be added to the Facilities or for the refunding of Outstanding Bonds. APPENDIX E–“SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS–TRUST AGREEMENT–Conditions for the Issuance of Additional Bonds.” Addition; Substitution and Release of Property The County and the Authority may add, substitute or release real property as part of the Facilities, but only after the County files with the Authority and the Trustee, with written notice to each rating agency then providing a rating for the 2015 Bonds, all of the following: (i) Executed copies of the Facilities Lease or amendments thereto containing the amended description of the Facilities. (ii) A Certificate of the County with copies of the Facilities Lease or the Site Lease, if needed 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. (iii) A Certificate of the County, supported by expert knowledge (which may be that of the Real Estate Manager of the County) or construction cost information evidencing that the fair market value or the insured value of the Facilities that will constitute the Facilities after such addition, substitution or release will be at least equal to the aggregate outstanding principal amount of the Base Rental Payments after such addition, substitution or release and that the annual fair rental value of the Facilities after such addition, substitution, or release will be at least equal to the maximum annual Base Rental Payments coming due and payable under the Facilities Lease, and that the useful life of such Facilities will at least extend to the final Base Rental Payment date. (iv) In connection with any addition or substitution of property, a leasehold owner’s title insurance policy or policies or a commitment for such policy or policies or an amendment or endorsement to an existing title insurance policy or policies resulting in title insurance with respect to the Facilities after such addition or substitution in an amount at least equal to the aggregate principal amount of Bonds Outstanding at the time of such addition or substitution. (v) A Certificate of the County stating that (i) such addition, substitution or release does not adversely affect the County’s use and occupancy of such Facilities (as such term will be defined following the addition, substitution or release), and (ii) no event of default under the Facilities Lease has occurred and is continuing. (vi) In connection with any substitution or release of property, a Certificate of the County stating that the substitution or release will not cause the County to violate its covenants, representations and warranties under the Facilities Lease. 45340-0001\pos-7 21 (vii) In connection with any substitution of property, a Certificate of the County stating that the Facility to be added is of approximately the same or greater degree of essentiality to the County as the Facility being replaced. (viii) An Opinion of Bond Counsel stating that such amendment or modification (A) complies with the terms of the Constitution and laws of the State and of the Trust Agreement; (B) will, upon the execution and delivery thereof, be valid and binding upon the Authority and the County; and (C) if the Series of 2015 Bonds Outstanding with respect thereto were issued on a tax-exempt basis, will not cause the interest on such Series of 2015 Bonds to be included in gross income for federal income tax purposes. There is no requirement under the Facilities Lease that any substitute Facilities be of the same or a similar nature or function as the then-existing Facilities. Option to Purchase Pursuant to the Facilities Lease, the County has the option to purchase the interest of the Authority in any part of the Facilities upon payment of an option price consisting of moneys or securities satisfying the requirements specified in the Trust Agreement (and which securities are not callable by the issuer thereof prior to maturity) in an amount sufficient (together with the increment, earnings and interest on such securities) to provide funds to pay the aggregate amount for the entire remaining term of the Facilities Lease of the part of the total rent thereunder attributable to such part of the Facilities (determined by reference to the proportion which the cost of such part of the Facilities bears to the cost of all of the Facilities). Payment of the option price is required to be made to the Trustee, will be treated as rental payments and is required to be applied by the Trustee to pay the principal of the Series of 2015 Bonds and interest on such 2015 Bonds and to redeem 2015 Bonds if such 2015 Bonds are subject to redemption pursuant to the terms of the Trust Agreement. Sale of Personal Property The County, in its discretion, may request the Authority to sell or exchange any personal property which may at any time constitute a part of the Facilities, and to release said personal property from the Facilities Lease, if (i) in the opinion of the County the property so sold or exchanged is no longer required or useful in connection with the operation of the Facilities, (ii) the consideration to be received from the property is of a value substantially equal to the value of the property to be released, and (iii) if the value of any such property is, in the opinion of the Authority, exceeds the amount of $100,000, the Authority is required to have been furnished with a certificate of an independent engineer or other qualified independent professional consultant (satisfactory to the Authority) certifying the value thereof and further certifying that such property is no longer required or useful in connection with the operation of the Facilities. In the event of any such sale, the full amount of the money or consideration received for the personal property so sold and released is required to be paid to the Authority. Any money so paid to the Authority may, so long as the County is not in default under any of the provisions of the Facilities Lease, be used upon the Written Request of the County to purchase personal property, which property shall become a part of the Facilities leased under the Facilities Lease. Abatement Base Rental Payments and Additional Payments will be abated proportionately, during any period in which by reason of any damage or destruction (other than by condemnation) there is substantial 45340-0001\pos-7 22 interference with the use and occupancy of the Facilities by the County, in the proportion in which the cost of that portion of the Facilities rendered unusable bears to the cost of the whole of the Facilities. Such abatement will continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. In the event of any such damage or destruction, the Facilities Lease will continue in full force and effect and the County waives any right to terminate the Facilities Lease by virtue of any such damage or destruction. DEBT SERVICE SCHEDULE The following table shows the debt service schedule relating to the Bonds. Table 3 Debt Service Schedule 2015 Series A Bonds 2015 Series B Bonds Fiscal Year Ended June 30 Principal Interest Total Principal Interest Total Total Fiscal Year Debt Service 45340-0001\pos-7 23 CERTAIN RISK FACTORS The following factors, along with the other information in this Official Statement, should be considered by potential investors in evaluating the purchase of the 2015 Bonds. However, the following does not purport to be an exhaustive listing of risks and other considerations, which may be relevant to investing in the 2015 Bonds. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks. Limited Obligation The 2015 Bonds are not County debt and are limited obligations of the Authority. Neither the full faith and credit of the Authority nor the County is pledged for the payment of the interest on or principal of the 2015 Bonds nor for the payment of Base Rental Payments. The Authority has no taxing power. The obligation of the County to pay Base Rental Payments when due is an obligation payable from amounts in the General Fund of the County. The obligation of the County to make Base Rental Payments under the Facilities Lease does not constitute an obligation of the County for which the County is obligated to levy or pledge any form of taxation or for which the County has levied or pledged any form of taxation. Neither the 2015 Bonds nor the obligation of the County to make Base Rental Payments under the Facilities Lease constitute a debt or indebtedness of the Authority, the County, the State or any of its political subdivisions, within the meaning of any constitutional or statutory debt limitation or restrictions. Base Rental Payments Not a Debt of the County; Other County Obligations The Base Rental Payments due under the Facilities Lease (and insurance costs, payment of costs of repair and maintenance of the Facilities, taxes and other governmental charges and assessments levied against the Facilities) are not secured by any pledge of taxes or any other revenues of the County but are payable from any funds lawfully available to the County. The County may incur other obligations in the future payable from the same sources as the Base Rental Payments. In the event the County’s revenue sources are less than its total obligations, the County could choose to fund other municipal services before making Base Rental Payments. The same result could occur if, because of State constitutional limits on expenditures, the County is not permitted to appropriate and spend all of its available revenues. The County’s appropriations, however, have never exceeded the limitations on appropriations under Article XIII B of the California Constitution. For information on the County’s current limitations on appropriations, see “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES, REVENUES AND APPROPRIATIONS–Article XIII B of the California Constitution.” Valid and Binding Covenant to Budget and Appropriate Pursuant to the Facilities Lease, the County covenants to take such action as may be necessary to include the related 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 2015 Bonds, Bond Counsel will render its opinion (substantially in the form of APPENDIX F– “PROPOSED FORM OF BOND COUNSEL OPINION”) to the effect that, subject to the limitations and qualifications described therein, the Facilities 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 “–Limitations on Remedies.” 45340-0001\pos-7 24 Abatement During any period there is loss or substantial interference in the use and occupancy of a Facility by the County caused by damage or destruction (other than by condemnation) Base Rental Payments will be abated proportionately in the proportion in which the cost of that portion of the Facilities rendered unusable bears to the cost of the whole Facilities, the related Base Rental Payments are subject to abatement. In the event that any Facility 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, reconstruction or replacement of the Facilities or redemption of the related Series of 2015 Bonds, there could be insufficient funds to make payments to Owners of the related Series of 2015 Bonds in full. See APPENDIX E–“SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS–FACILITIES LEASE–Rental 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. It may be that the fair rental value of a Facility could be substantially higher or lower than its value at the time of issuance of the related Series of 2015 Bonds. Abatement, therefore, could have an uncertain and material adverse effect on the security for and payment of the 2015 Bonds. Bankruptcy The rights and obligations of the County and the Authority under the 2015 Bonds, the Facilities Lease, the Site Lease, the Trust Agreement, and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, receivership, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against joint powers authorities and counties in the State. The County is a political subdivision of the State permitted, under certain circumstances, to file for municipal bankruptcy under chapter 9 (“Chapter 9”) of the United States Bankruptcy Code (the “Bankruptcy Code”). Chapter 9 permits only a voluntary filing by the County, not involuntary filings. Among the adverse effects of such a bankruptcy might be: (a) the application of the automatic stay provisions of the Bankruptcy Code, which, until relief is granted, would prevent collection of payments from the County or the commencement of any judicial or other action for the purpose of recovering or collecting a claim against the County; (b) the avoidance of preferential transfers occurring during the relevant period prior to the filing of a bankruptcy petition; (c) the occurrence of unsecured or court-approved secured debt which may be secured by a lien with priority over the lien of the Trust Agreement or the release of Revenues to the County, free and clear of the lien of the Trust Agreement, in each case provided that the bankruptcy court determines that the rights of the Trustee and the Holders of the 2015 Bonds will be adequately protected; or (d) the possibility of the adoption of a plan for the adjustment of a county’s debt without the consent of all creditors, which plan may restructure, delay, compromise or reduce the amount of the claim of the Holders of the 2015 Bonds if the bankruptcy court finds that such a plan is fair and equitable. The County may also be able, without the consent and over the objection of the Trustee and the Holders of the 2015 Bonds, to alter the priority, interest rate, payment terms, collateral, maturity dates, payment sources, covenants (including tax-related covenants), and other terms or provisions of the Trust Agreement and the 2015 Bonds, provided that the bankruptcy court determines that the alterations are fair and equitable. 45340-0001\pos-7 25 Such adverse effects may result in the parties (including the Holders of the 2015 Bonds) being prohibited from taking any action to collect any amount from the County or to enforce any obligation of the County, unless the permission of the bankruptcy court is obtained. These restrictions may also prevent the Trustee from making payments to the holders of the 2015 Bonds from funds in the Trustee’s possession. There may also be delays in payments on the 2015 Bonds while the court considers any of these issues. There may be other possible effects of a bankruptcy of the County that could result in delays or reductions in payments on the 2015 Bonds, or result in losses to the Holders of the 2015 Bonds. Regardless of any specific adverse determinations in a County bankruptcy proceeding, the fact of a County bankruptcy proceeding could have an adverse effect on the liquidity and value of the 2015 Bonds. A bankruptcy filing by the County could also limit remedies under the Facilities Lease or permit the County to assign the Facilities Lease to a third party without complying with any relevant provisions of the transaction documents. Among other limitations, a debtor in bankruptcy may choose to assume or reject executory contracts and leases. It is not clear whether a bankruptcy court would treat the Facilities Lease as an unexpired lease or executory contract (defined below) under Section 365 (“Section 365”) of the Bankruptcy Code (a “True Lease”) or a loan or other financing arrangement (a “Financing Arrangement”). The Bankruptcy Code specifies different consequences for True Leases and Financing Arrangements. Were a bankruptcy court to find that the Facilities Lease is a True Lease, the Bankruptcy Code permits the County to reject the Facilities Lease and return possession of the Facilities to the lessor, leaving the Trustee, on behalf of Holders of the 2015 Bonds, with a general, unsecured claim that would likely be limited by the cap on landlord claims provided in the Bankruptcy Code, i.e., to the rent payable under the Facilities Lease (without acceleration) for the greater of one year or 15% of the remaining term of the Facilities Lease, but not to exceed three years, following the earlier of (a) the date the bankruptcy petition was filed, and (b) the date on which the Authority repossessed or the County surrendered the leased property, plus any unpaid rentals under the Facilities Lease (without acceleration) on the earlier of such dates. Thus, if the Facilities Lease is treated as a True Lease under Section 365 and rejected in a County bankruptcy, any damage claim could be severely limited, resulting in reduced funds available to pay the 2015 Bonds. On the other hand, if a bankruptcy court found that the Facilities Lease was a Financing Arrangement, the Trustee, on behalf of Holders of the 2015 Bonds, may have a secured claim only up to the value of the economic value of the secured interest in the Facilities. Such value would be subject to determination by the bankruptcy court. Any portion of the claim of the Trustee, on behalf of the Holders of the 2015 Bonds that exceeded such value would likely be treated as unsecured. Pension Issues in Bankruptcy. In a bankruptcy of the County, if a material unpaid liability is owed to the Contra Costa County Employees’ Retirement Association (“CCCERA”) or any other pension system (collectively the “Pension Systems”) on the filing date, or accrues thereafter, such circumstances could create additional uncertainty as to the County’s ability to make Base Rental Payments or other Lease Payments. Given that municipal pension systems in the State are usually administered pursuant to State constitutional provisions and, as applicable, other state, county and/or city law, the Pension Systems may take the position, among other possible arguments, that their claims enjoy a higher priority than all other claims, that Pension Systems have the right to enforce payment by injunction or other proceedings outside of a County bankruptcy case, and that Pension System claims cannot be the subject of adjustment or other impairment under the Bankruptcy Code because that would purportedly constitute a violation of state statutory, constitutional and/or municipal law. It is uncertain how a bankruptcy judge in a County bankruptcy would rule on these matters. Issues of pension underfunding claim priority, pension contribution enforcement, and related bankruptcy plan treatment of such claims (among other pension- related matters) have recently been or are presently the subject of litigation in the Chapter 9 cases and related appeals of, including those of Stockton, California and San Bernardino, California. 45340-0001\pos-7 26 Limited Recourse on Default; No Acceleration of Base Rental Payments 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 any of the Facilities, and has no right to terminate the Facilities 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 Facilities Lease and the Authority may exercise any and all remedies available pursuant to law or granted pursuant to the Facilities Lease. Upon any such default, including a failure to pay Base Rental Payments, the Authority may either (1) terminate the Facilities Lease and seek to recover certain damages or (2) without terminating the Facilities Lease, (i) continue to collect rent from the County on an annual basis by seeking a separate judgment each year for that year’s related defaulted Base Rental Payments and/or (ii) reenter the related Facilities and relet them. In the event of default, there is no right to accelerate the total Base Rental Payments due over the term of the Facilities Lease, and the Trustee has no possessory interest in the Facility and is not empowered to sell the Facilities or any of the Facilities. Events of default under the Facilities Lease include: (i) the failure of the County to pay any rental payment under the Facilities Lease when the same become due (ii) the failure of the County to keep, observe or perform any term, covenant or condition of the Facilities Lease required to be kept or performed by the County for a period of 60 days after notice of the same has been given to the County by the Authority or the Trustee or for such additional time as reasonably required in the sole discretion of the Authority, to correct the same and (iii) assignment or transfer of the County’s interest in the Facilities Lease, either voluntarily or by operation of law or otherwise, without the written consent of the Authority; (iv) the County or any assignee files any petition or institutes any proceeding under any act or acts, State or federal, dealing with or relating to the subject or subjects of the bankruptcy or insolvency or under any amendment of such act or acts, either as a bankrupt or as an insolvent, or as a debtor, or in any similar capacity, wherein or whereby the County asks or seeks or prays to be adjudicated a bankrupt, or is to be discharged from any or all of its debts or obligations, or offers to its creditors to effect a composition or extension of time to pay the debts of the County or asks, seeks or prays for reorganization or to effect a plan of reorganization, or for a readjustment of the debts of the County, or for any other similar relief, or if any such petition or any such proceedings of the same or similar kind or character be filed or be instituted or taken against the County, or if a receiver of the business or of the property or assets of the County is appointed by any court, except a receiver appointed at the instance or request of the Authority, or if the County makes a general or any assignment for the benefit of the County’s creditors, (v) the County abandons or vacates the related Facilities, or (vi) any representation or warranty made by the County in the Facilities Lease proves to have been false, incorrect, misleading or breached in any material respect on the date when made. Upon a default, the Trustee may elect to proceed against the County to recover damages pursuant to the Facilities Lease. Any suit for money damages would be subject to statutory and judicial limitations on lessors’ remedies under real property leases, other terms of the Facilities Lease and limitations on legal remedies against counties in the State, including a limitation on enforcement of judgments against funds needed to serve the public welfare and interest. Limitations on Remedies The rights of the Bondholders are subject to the limitations on legal remedies against counties in the State, including applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of creditors’ rights generally, now or hereafter in effect, and to the application of general principles of equity, including concepts of materiality, reasonableness, good faith and fair dealing and the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law. 45340-0001\pos-7 27 Under Chapter 9 of the Bankruptcy Code (Title 11, United States Code), which governs the bankruptcy proceedings for public agencies such as the County, there are no involuntary petitions in bankruptcy. If the County were to file a petition under Chapter 9 of the Bankruptcy Code, the Bondholders, the Trustee and the Authority could be prohibited from taking any steps to enforce their rights under the Facilities Lease, and from taking any steps to collect amounts due from the County under the Facilities Lease. All legal opinions with respect to the enforcement of the Facilities Lease and the Trust Agreement will be expressly subject to a qualification that such agreements may be limited by bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting creditors’ rights generally and by applicable principles of equity if equitable remedies are sought. Military Conflicts and Terrorist Activities Military conflicts and terrorist activities may adversely impact the finances of the County. The County is unable to determine the effect of future terrorist events, if any, on, among other things, the County’s current and future budgets, tax revenues, available reserves and additional public safety expenditures. The County conducted a review of certain existing safety and security measures after the events of September 11, 2001 and participates in additional security and public safety precautions taken in conjunction with “code” designations (i.e., red, orange, yellow) announced by the federal government. Such precautions include coordination of safety and medical personnel, although specific anti-terrorist programs are not divulged publicly. The County does not guarantee that such actions will be adequate in the event that terrorist activities are directed against the County or its residents. The County cannot guarantee that additional safety or security related precautions taken by or affecting the County will not have a material adverse financial impact on the County. Although, the County maintains various insurance coverages on its properties, including 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 B–“COUNTY FINANCIAL INFORMATION–Insurance and Self-Insurance Programs.” There are three petroleum refineries located within the County, and during the past five Fiscal Years, the owners of these refineries were among the top 10 principal property taxpayers in the County. A terrorist act against any of these refineries or any principal taxpayer resulting in damage or destruction to facilities or infrastructure could have a material impact on revenues of the County. See also APPENDIX B–“COUNTY FINANCIAL INFORMATION–Largest Property 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 2015 Project, buildings, roads, bridges, and property within the County in the event of an earthquake. Past experiences, including the 1989 Loma Prieta earthquake, measuring 6.9 on the moment magnitude scale (7.1 on the Richter scale) with an epicenter approximately 60 miles south of the County and the 2014 Napa earthquake, measuring 6.0 on the moment magnitude scale with an epicenter approximately 33 miles northwest of the County, resulted in some structural damage to the infrastructure and property in the County, the repair of which was covered by insurance. 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. 45340-0001\pos-7 28 The Facilities Lease does not require the County to maintain insurance on the Facilities against earthquake risk 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 on March 31, 2016 to cover all County property, including the Facilities. The County currently expects this insurance will be renewed. See “SECURITY AND SOURCES OF PAYMENT FOR THE 2015 BONDS–Insurance” and APPENDIX B–“COUNTY FINANCIAL INFORMATION–Insurance and Self-Insurance Programs.” Drought The State of California is currently in the fourth year of “exceptional drought conditions” (the most severe drought classification) according to the U.S. Drought Monitor. On January 17, 2014, California Governor Edmund G. Brown proclaimed a drought emergency in the State and asked Californians to voluntarily reduce water use by 20%. In addition, eight of the last nine years, including water year 2015 (October 1 through September 30) have been below average runoff, which has resulted in chronic and significant shortages to municipal, industrial, agricultural and wildlife refuge supplies, and historically low groundwater levels. In April of 2014, the Governor formed a task force to respond to the drought. On April 1, 2015, the Governor signed an Executive Order (the “April 2015 Executive Order”) that, among other measures, requires the State of California Water Resources Control Board (the “SWRCB”) to implement mandatory reduction in cities and towns across the State to reduce water use by 25% as compared to 2013 through February 2016. The County does not expect that compliance with the April 2015 Executive Order will have a material adverse impact on County finances or on the ability of the County to make Base Rental Payments. 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 and certain other chemicals on or near the Facilities, the County knows of no existing hazardous substances which require remedial action on or near the Facilities. However, it is possible that such substances do currently or potentially exist and that the County is not aware of them. Limited Liability of Authority to the Owners Except as expressly provided in the Trust Agreement, the Authority will not have any obligation or liability to the Owners of the 2015 Bonds with respect to the payment when due of the Base Rental Payments by the County, or with respect to the performance by the County of other agreements and covenants required to be performed by it contained in the Facilities Lease, or with respect to the 45340-0001\pos-7 29 performance by the Trustee of any right or obligation required to be performed by it contained in the Trust Agreement. State Funding of Counties The County receives a significant portion of its funding from subventions by the State. In Fiscal Year 2015-16, approximately 22% of the Recommended General Fund Budget is expected to consist of payments from the State. For Fiscal Year 2014-15, approximately 23% of the Recommended General Fund Budget consisted of payments from the State. As a result, decreases in the revenues received by the State can affect subventions made by the State to the County and other counties in the State. The potential impact of State budget actions on the County in particular, and other counties in the State generally, in this and future fiscal years is uncertain at this time but is expected to be materially adverse. For a discussion of the potential impact of State budget actions on the County in particular, and counties in the State generally, see APPENDIX B–“COUNTY FINANCIAL INFORMATION–State Budget Acts.” Loss of Tax Exemption As discussed under “TAX MATTERS,” interest on the 2015 Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date of issuance, as a result of acts or omissions of the Authority or the County subsequent to the issuance of the 2015 Bonds in violation of the covenants contained in the Trust Agreement or the Facilities Lease. The Trust Agreement does not contain a special redemption provision triggered by the occurrence of an event of taxability. As a result, if interest on the 2015 Bonds were to become includable in gross income for purposes of the federal income tax, the 2015 Bonds would continue to remain outstanding until maturity or unless earlier redeemed pursuant to optional or mandatory redemption. IRS Examination The IRS has an ongoing program of examining tax and revenue anticipation notes, other working capital financings and other tax-exempt obligations to determine whether, in the view of the IRS, interest on such obligations is properly excluded from gross income for federal income tax purposes. It is possible that the 2015 Bonds or other tax-exempt obligations of the County may be selected for examination under such program. There is no assurance that an IRS examination of the 2015 Bonds or other tax-exempt obligations of the County will not adversely affect the market value of the 2015 Bonds. See “TAX MATTERS.” Pension and Other Post-Employment Benefit Liability Many factors influence the amount of the pension and other post employment benefit liabilities of the County, including, without limitation, inflationary factors, changes in laws, changes in the levels of benefits provided or in the contribution rates of the County, increases or decreases in the number of covered employees, changes in actuarial assumptions or methods (including but not limited to the assumed rate of return), and differences between actual and anticipated investment experience of the plans. Any of these factors could give rise to additional liability of the County as a result of which the County would be obligated to make additional payments in order to fully fund its obligations. See APPENDIX B–“COUNTY FINANCIAL INFORMATION–Pension Plan” and “–Other Post-Employment Benefits.” 45340-0001\pos-7 30 Changes in Law Initiative measures have been proposed or adopted which affect the ability of local governments to increase taxes and rates. Article XIII A, Article XIII B, Article XIII C, Article XIII D, and Propositions 218, 1A, 22 and 26, were each adopted as measures that qualified for the ballot through the State’s initiative process. From time to time, other initiative measures could be adopted, which may place further limitations on the ability of the State and the County to increase revenues or to increase appropriations which may affect the revenues available to make the Base Rental Payments or the ability of the County to expend its revenues. There is no assurance that the electorate or the State Legislature will not at some future time approve additional limitations which could affect the ability of the County to make payments under the Facilities Lease and adversely affect the security for the 2015 Bonds. Secondary Market There can be no guarantee that there will be a secondary market for the 2015 Bonds or, if a secondary market exists, that any 2015 Bonds can be sold for any particular price. Prices of municipal securities for which a market is being made will depend upon then-prevailing circumstances. Such prices could be substantially different from the original purchase price. No assurance can be given that the market price for the 2015 Bonds will not be affected by the introduction or enactment of any future legislation, or changes in interpretation of existing law. CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES, REVENUES AND APPROPRIATIONS Described below are certain measures which have impacted or may in the future impact the County’s General Fund Budget. Article XIII A of the California Constitution In 1978, California voters approved Proposition 13, adding Article XIII A to the California Constitution. Article XIII A was subsequently amended on several occasions in various respects. Article XIII A limits the amount of any ad valorem tax on real property to 1% of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service on indebtedness approved by the voters prior to July 1, 1978 and on bonded indebtedness for the acquisition or improvement of real property which has been approved on or after July 1, 1978 by two-thirds of the voters voting on such indebtedness and or bonded indebtedness incurred by a school district, community college district or county office of education for the construction, reconstruction, rehabilitation or replacement of school facilities, including the furnishing and equipping of school facilities, or the acquisition or lease of real property for school facilities approved by 55% of the voters voting on the proposition. Article XIII A defines full cash value to mean “the county assessor’s valuation of real property as shown on the 1975-76 tax bill under “full cash” or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment.” This full cash value may be increased at a rate not to exceed 2% per year to account for inflation. Article XIII A has been amended to permit reduction of the “full cash value” base in the event of declining property values caused by damage, destruction or other factors, and to provide that there would be no increase in the “full cash value” base in the event of reconstruction of property damaged or destroyed in a disaster or in the event of certain transfers to children or spouses or of the elderly or disabled to new residences. 45340-0001\pos-7 31 Legislation Implementing Article XIII A Legislation has been enacted and amended a number of times since 1978 to implement Article XIII A. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter-approved indebtedness). The 1% property tax is automatically levied by the County and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1979. Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the 2% annual adjustment are allocated among the various jurisdictions in the “taxing area” based upon their respective “situs.” Any such allocation made to a local agency continues as part of its allocation in future years. See APPENDIX B–“COUNTY FINANCIAL INFORMATION– Ad Valorem Property Taxes.” Article XIII B of the California Constitution On October 6, 1979, California voters approved Proposition 4, known as the Gann Initiative, which added Article XIII B to the California Constitution. Propositions 98 and 111, approved by the California voters in 1988 and 1990, respectively, substantially modified Article XIII B. The principal effect of Article XIII B is to limit 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 for changes in the cost of living and population. The initial version of Article XIII B provided that the “base year” for establishing an appropriations limit was the 1978-79 fiscal year, which was then adjusted annually to reflect changes in population, consumer prices and certain increases in the cost of services provided by these public agencies. Proposition 111 revised the method for making annual adjustments to the appropriations limit by redefining changes in the cost of living and in population. It also required that beginning in Fiscal Year 1990-91 each appropriations limit must be recalculated using the actual 1986-87 appropriations limit and making the applicable annual adjustments as if the provisions of Proposition 111 had been in effect. Appropriations subject to limitations of a local government under Article XIII B include generally any authorization to expend during a fiscal year the proceeds of taxes levied by or for that entity and the proceeds of certain State subventions to that entity, exclusive of refunds of taxes. Proceeds of taxes include, but are not limited to all tax revenues plus the proceeds to an entity of government from (1) regulatory licenses, user charges and user fees (but only to the extent such proceeds exceed the cost of providing the service or regulation), (2) the investment of tax revenues, and (3) certain subventions received from the State. Article XIII B permits any government entity to change the appropriations limit by a vote of the electors in conformity with statutory and constitutional voting effective for a maximum of four years. As amended by Proposition 111, Article XIII B provides for testing of appropriations limits over consecutive two-year periods. If an entity’s revenues in any two-year period exceed the amounts permitted to be spent over such period, the excess has to be returned by revising tax rates or fee schedules over the subsequent two years. As amended by Proposition 98, Article XIII B provides for the payment of a portion of any excess revenues to a fund established to assist in financing certain school needs. Appropriations for “qualified capital outlays” are excluded from the limits of Proposition 111. 45340-0001\pos-7 32 The Article XIII B limits for the County for the last two Fiscal Years and estimated for Fiscal Year 2015-16 are set forth below. Fiscal Year Article XIII A Limit Budget Amount 2013-14 $17,608,851,516 $316,407,959 2014-15 17,753,244,098 337,859,611 2015-16 18,674,637,467 371,342,066 _____________ Source: County Auditor-Controller. The County has never exceeded its Article XIII B appropriations limit and does not anticipate having any difficulty in operating within the appropriations limit. Article XIII C and Article XIII D of the California Constitution 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 State Constitution, which contain a number of provisions affecting the ability of a local agency 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 a local agency require a majority vote and taxes for specific purposes, even if deposited in the general fund, require a two-thirds vote. Further, any general purpose tax which the local agency imposed, extended or increased without voter approval after December 31, 1994 may continue to be imposed only if approved by a majority vote in an election held prior to November 5, 1998. The voter approval requirements of Article XIII C reduce a local agency’s flexibility to deal with fiscal problems by raising revenue through new or extended or increased taxes and no assurance can be given that the County will be able to impose, extend or increase taxes in the future to meet increased expenditure requirements. Article XIII D contains several provisions making it generally more difficult for local agencies to levy and maintain “assessments” for municipal services and programs. “Assessment” in this Article is defined to mean any levy or charge upon real property for a special benefit conferred upon the real property. Article XIII D also contains several provisions affecting a “fee” or “charge,” 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 agency 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) with respect to any parcel or person, exceed the proportional cost of the service attributable to the parcel, (iv) are for a service not actually used by, or immediately available to, the owner of the property in question, or (v) are used for general governmental services, including police, fire or library services, where the service is available to the public at large in substantially the same manner as it is to property owners. Further, before any property related fee or charge may be imposed or increased, written notice must be given to the record owner of each parcel of land affected by such fee or charge. The local agency must then hold a hearing upon the proposed imposition or increase, and if written protests against the proposal are presented by a majority of the owners of the identified parcels, the local agency may not impose or increase the fee or charge. Moreover, except for fees or charges for sewer, water and refuse collection services (or fees for electrical and gas service, which are not treated as “property related” for purposes of Article XIII D), no property related fee or charge may be imposed or increased without majority approval by the property owners subject to the fee or charge or, at the option of the local agency, two-thirds voter approval by the electorate residing in the affected area. 45340-0001\pos-7 33 The County does not believe that it is currently collecting fees, charges or assessments in violation of Article XIII D. The County has two enterprise funds that are self-supporting from fees and charges, which could, depending upon judicial interpretation of Proposition 218, ultimately be determined to be property related for purposes of Article XIII D. In the event that fees and charges cannot be appropriately increased, or are reduced pursuant to exercise of the initiative power (described in the following paragraph), the County may have to decide whether to support any deficiencies in these enterprise funds with moneys from the general fund or to curtail service, or both. In addition to the provisions described above, Article XIII C also removes prohibitions and limitations on the initiative power in matters of any “local tax, assessment, fee or charge.” Consequently, the voters of the County could, by future initiative, repeal, reduce or prohibit the future imposition or increase of any local tax, assessment, fee or charge. “Assessment,” “fee” and “charge,” are not defined in Article XIII C and it is not clear whether the definitions of these terms in Article XIII D (which are generally property-related as described above) would limit the scope of the initiative power set forth in Article XIII C. If the Article XIII D definitions are not held to limit the scope of Article XIII C initiative powers, then the Article XIII C initiative power could potentially apply to revenue sources that currently constitute a substantial portion of general fund revenues. No assurance can be given that the voters of the County will not, in the future, approve initiatives that repeal, reduce or prohibit the future imposition or increase of local taxes, assessments, fees or charges. Proposition 62 On November 4, 1986, California voters adopted Proposition 62, an initiative statute that, among other things, requires (i) that any new or increased general purpose tax be approved by a two-thirds vote of the local governmental entity’s legislative body and by a majority vote of the voters voting in an election on the issue, (ii) that any new or increased special purpose tax be approved by a two-thirds vote of the local governmental entity’s legislative body and by a two-thirds vote of the voters voting in an election on the issue, and (iii) that the revenues from a special tax be used for the purposes or for the services for which the special tax was imposed. On September 28, 1995, the California Supreme Court filed its decision in Santa Clara County Local Transportation Authority v. Guardino, 11 Cal. 4th 220 (1995) (the “Santa Clara decision”), which upheld a Court of Appeal decision invalidating a one-half cent countywide sales tax for transportation purposes levied by a local transportation authority. The California Supreme Court based its decision on the failure of the authority to obtain a two-thirds vote for the levy of a “special tax” as required by Proposition 62. The Santa Clara decision did not address the question of whether it should be applied retroactively. In McBrearty v. City of Brawley, 59 Cal. App. 4th 1441 (1997), the Court of Appeal, Fourth District, concluded that the Santa Clara decision is to be applied retroactively to require voter approval of taxes enacted after the adoption of Proposition 62 but before the Santa Clara decision. 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 et al. v. City of La Habra, 25 Cal. 4th 809 (2011). In this case, 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. 45340-0001\pos-7 34 Proposition 62 as an initiative statute does not have the same level of authority as a constitutional initiative, but is analogous to legislation adopted by the State Legislature, except that it may be amended only by a vote of the State’s electorate. Since the passage of Proposition 218, however, certain provisions of Proposition 62 (e.g., voter approval of taxes) are governed by the California Constitution. The requirements of Proposition 218 and Proposition 62 are not in complete harmony, and so where they diverge, the local governmental entity must meet both standards. For a discussion of taxes affected by Proposition 218, see “–Article XIII C and Article XIII D of the California Constitution” above. If a court determined that a jurisdiction imposed a tax in violation of Proposition 62, Proposition 62 would require that the portion of the one percent general ad valorem property tax levy allocated to that jurisdiction be reduced by $1 for every $1 in revenue attributable to the tax for each year that the tax had been collected. Proposition 1A The California Constitution and existing statutes give the Legislature authority over property taxes, sales taxes and the vehicle license fee (the “VLF”). The Legislature has authority to change tax rates, the items subject to taxation and the distribution of tax revenues among local governments, schools, and community college districts. The State has used this authority for many purposes, including increasing funding for local services, reducing State costs, reducing taxation, addressing concerns regarding funding for particular local governments, and restructuring local finance. The California Constitution generally requires the State to reimburse the local governments when the State mandates a new local program or higher level of service. Due to the ongoing financial difficulties of the State in recent years, it has not provided reimbursements for many mandated costs. In other cases, the State has suspended mandates, eliminating both responsibility of the local governments for complying with the mandate and the need for State reimbursements. On November 3, 2004, the voters of the State approved Proposition 1A, which amended the California Constitution to, among other things, reduce the State Legislature’s authority over local government revenue sources by placing restrictions on the State’s access to local government’s property, sales and vehicle license fee revenues. Proposition 1A generally prohibits the shift of property tax revenues from cities, counties and special districts, except to address a “severe state financial hardship,” which must be approved by a two-thirds vote of both houses of the Legislature, and only then if, among other things, such amounts were agreed to be repaid with interest within three years. The measure also (a) protects the property tax backfill of sales tax revenues diverted to pay the State’s economic recovery bonds, and the reinstatement of the sales tax revenues once such bonds are repaid, and (b) protects local agency vehicle license fee revenue (or a comparable amount of backfill payments from the State). If the State reduces the VLF rate below its current level of 0.65 percent of the vehicle value, Proposition 1A requires the State to provide local governments with equal replacement revenues. Proposition 1A provides two significant exceptions to the above restrictions regarding sales and property taxes. First, the State may shift to schools and community colleges up to 8 percent of local government property tax revenues if the Governor proclaims that the shift is needed due to a severe State financial hardship, the legislature approves the shift with a two-thirds vote of both houses and certain other conditions are met. The State must repay local governments for the diversion of their property tax revenues, with interest, within three years. Second, Proposition 1A allows the State to approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Proposition 1A amends the California Constitution to require the State to suspend certain State laws creating mandates in any year that the State does not fully reimburse local governments for their costs to comply with the mandates. If the State does not provide funding for the activity that has been determined to be mandated, the requirement on cities, counties or special districts to abide by the mandate would be suspended. In addition, Proposition 1A expands the definition of what constitutes a mandate to 45340-0001\pos-7 35 encompass State action that transfers to cities, counties and special districts financial responsibility for a required program for which the State previously had complete or partial financial responsibility. This provision does not apply to mandates relating to schools or community colleges, or to those mandates relating to employee rights. Proposition 1A restricts the State’s authority to reallocate local tax revenues to address concerns regarding funding for specific local governments or to restructure local government finance. For example the State could not enact measures that changed how local sales tax revenues are allocated to cities and counties. In addition, measures that reallocated property taxes among local governments in a county would require approval by two-thirds of the members of each house of the legislature (rather than a majority vote). As a result, Proposition 1A could result in fewer changes to local government revenues than otherwise would have been the case. Proposition 22 Proposition 22 (“Proposition 22”) which was approved by California voters in November 2010, prohibits the State, even during a period of severe fiscal hardship, from delaying the distribution of tax revenues for transportation, redevelopment, or local government projects and services and prohibits fuel tax revenues from being loaned for cash-flow or budget balancing purposes to the State General Fund or any other State fund. In addition, Proposition 22 generally eliminates the State’s authority to temporarily shift property taxes from cities, counties, and special districts to schools, temporarily increase a school and community college district’s share of property tax revenues, prohibits the State from borrowing or redirecting redevelopment property tax revenues or requiring increased pass-through payments thereof, and prohibits the State from reallocating vehicle license fee revenues to pay for State-imposed mandates. The County is unable to predict how Proposition 22 will be interpreted, or to what extent the measure will affect the revenues in the general fund of local agencies, although it could eventually provide greater stability in local agency revenues. Due to the prohibition with respect to the State’s ability to take, reallocate, and borrow money raised by local governments for local purposes, Proposition 22 supersedes certain provisions of Proposition 1A (2004). However, borrowings and reallocations from local governments during 2009 are not subject to Proposition 22 prohibitions. In addition, Proposition 22 supersedes Proposition 1A of 2006. Accordingly, the State is prohibited from borrowing sales taxes or exercise taxes on motor vehicle fuels or changing the allocations of those taxes among local governments except pursuant to specified procedures involving public notices and hearings. Proposition 26 On November 2, 2010, the voters of the State approved Proposition 26 (“Proposition 26”), revising certain provisions of Articles XIII A and XIII C of the California Constitution. Proposition 26 re- categorizes many State and local fees as taxes, requires local governments to obtain two-thirds voter approval for taxes levied by local governments, and requires the State to obtain the approval of two-thirds of both houses of the State Legislature to approve State laws that increase taxes. Furthermore, pursuant to Proposition 26, any increase in a fee beyond the amount needed to provide the specific service or benefit is deemed to be a tax and the approval thereof will require a two-thirds vote. In addition, for State imposed charges, any tax or fee adopted after January 1, 2010 with a majority vote which would have required a two-thirds vote if Proposition 26 were effective at the time of such adoption is repealed as of November 2011 absent the re-adoption by the requisite two-thirds vote. Proposition 26 amends Article XIII C of the State Constitution to state that a “tax” means a levy, charge or exaction of any kind imposed by a local government, except: (1) a charge imposed for a specific 45340-0001\pos-7 36 benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege; (2) a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product; (3) a charge imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof; (4) a charge imposed for entrance to or use of local government property or the purchase, rental or lease of local government property; (5) a fine, penalty, or other monetary charge imposed by the judicial branch of government or a local government, as a result of a violation of law, including late payment fees, fees imposed under administrative citation ordinances, parking violations, etc.; (6) a charge imposed as a condition of property development; or (7) assessments and property related fees imposed in accordance with the provisions of Article XIII D. Fees, charges and payments that are made pursuant to a voluntary contract that are not “imposed by a local government” are not considered taxes and are not covered by Proposition 26. Proposition 26 applies to any levy, charge or exaction imposed, increased, or extended by local government on or after November 3, 2010. Accordingly, fees adopted prior to that date are not subject to the measure until they are increased or extended or if it is determined that an exemption applies. If the local government specifies how the funds from a proposed local tax are to be used, the approval will be subject to a two-thirds voter requirement. If the local government does not specify how the funds from a proposed local tax are to be used, the approval will be subject to a fifty percent voter requirement. Proposed local government fees that are not subject to Proposition 26 are subject to the approval of a majority of the governing body. In general, proposed property charges will be subject to a majority vote of approval by the governing body although certain proposed property charges will also require approval by a majority of property owners. Future Initiatives The laws and Constitutional provisions described above were each adopted as measures that qualified for the ballot pursuant to the State’s initiative process. From time to time other initiative measures could be adopted, further affecting revenues of the County, the County’s ability to expend revenues. Neither the Authority nor the County can anticipate the nature or impact of such measures. THE AUTHORITY The Authority is a joint powers authority, organized pursuant to an Amended and Restated Joint Exercise of Powers Agreement, dated as of June 16, 2015 (the “JPA Agreement”), by and between the County and the Contra Costa County Flood Control and the Water Conservation District (the “District”). The JPA Agreement was entered into pursuant to the California Government Code, commencing with Section 6500. The Authority is a separate entity constituting a public instrumentality of the State of California and was formed for the public purpose of assisting in financing and refinancing projects for the benefit of the County and the District. 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; the Assistant Executive Director of the Authority is the County Public Works Director; the Deputy Executive Directors of the Authority are the Chief Assistant County Administrator and the County Finance Director; the Treasurer of the Authority is the County Auditor- Controller; and the Assistant Secretary of the Authority is the County Finance Director. The Authority’s 45340-0001\pos-7 37 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 General Fund Final Budget for Fiscal Year 2014-15 was approximately $1.392 billion and for Fiscal Year 2015-16 is approximately $1.423 billion in the Recommended General Fund Budget. 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–“COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30, 2014.” RATINGS Moody’s Investors Service (“Moody’s”) and Standard & Poor’s, a division of the McGraw-Hill Companies (“S&P”) have assigned ratings of “__”and “__,” respectively, to the 2015 Bonds. Certain information was supplied by the Authority and the County to Moody’s and S&P to be considered in evaluating the 2015 Bonds. The ratings express only the views of the rating agencies and are not a recommendation to buy, sell or hold the 2015 Bonds. An explanation of the significance of the ratings may be obtained from Moody’s Investors Service, 7 World Trade Center at 250 Greenwich Street, New York, New York 10007 and Standard & Poor’s, a division of the McGraw-Hill Companies, Inc., 55 Water Street, New York, New York 10041. 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 2015 Bonds. LITIGATION MATTERS At the time of delivery of and payment for the 2015 Bonds, the County and the Authority will each certify that there is no action, suit, litigation, inquiry or investigation before or by any court, governmental agency, public board or body served, or to the best knowledge of the County or the Authority threatened, against the County or the Authority in any material respect affecting the existence of the County or the Authority or the titles of their officers to their respective offices or seeking to prohibit, restrain or enjoin the sale or delivery of the 2015 Bonds, the execution of the Trust Agreement, the Facilities Lease, the Site Leases or the payment of Base Rental Payments or challenging, directly or indirectly, the location of the Facilities, or the proceedings to lease the Facilities from the Authority. 45340-0001\pos-7 38 Various other legal actions are pending against the County. The aggregate amount of the uninsured liabilities of the County which may result from all legal claims currently pending against it will not, in the opinion of the County, materially affect the County’s finances or impair its ability to make Base Rental Payments under the Facilities Lease. On April 12, 2012, the Retiree Support Group, a mutual benefit non-profit corporation whose members are retired County employees, filed a complaint in federal court alleging that changes to their County health plan were a breach of contract and/or a violation of the State and federal constitutions on the basis that the changes impair vested contractual rights. On July 10, 2012, the initial complaint was dismissed without prejudice. Plaintiffs filed a second amended complaint in December 2012. Effective March 2015, discovery is stayed while the parties engage in mediation to try to amicably resolve their dispute. Currently, the case is set for trial in February 2016. The County is unable to predict the eventual outcome of this dispute. However, if the plaintiffs prevail it could result in County paying the past and future health care premium costs of the retirees, rather than damages, and attorney’s fees. Such amounts, if awarded, could be material. TAX MATTERS In the opinion of Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the 2015 Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”) and is exempt from State of California personal income taxes. Bond Counsel is of the further opinion that interest on the 2015 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 calculating corporate alternative minimum taxable income. A complete copy of the proposed form of opinion of Bond Counsel is set forth as APPENDIX F hereto. To the extent the issue price of any maturity of the 2015 Bonds is less than the amount to be paid at maturity of such 2015 Bonds (excluding amounts stated to be interest and payable at least annually over the term of such 2015 Bonds), the difference constitutes “original issue discount,” the accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is treated as interest on the 2015 Bonds which is excluded from gross income for federal income tax purposes and State of California personal income taxes. For this purpose, the issue price of a particular maturity of the 2015 Bonds is the first price at which a substantial amount of such maturity of the 2015 Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the 2015 Bonds accrues daily over the term to maturity of such 2015 Bonds on the basis of a constant interest rate compounded semiannually (with straight-line interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such 2015 Bonds to determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such 2015 Bonds. Beneficial Owners of the 2015 Bonds should consult their own tax advisors with respect to the tax consequences of ownership of 2015 Bonds with original issue discount, including the treatment of Beneficial Owners who do not purchase such 2015 Bonds in the original offering to the public at the first price at which a substantial amount of such 2015 Bonds is sold to the public. 2015 Bonds purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) (“Premium Bonds”) will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond 45340-0001\pos-7 39 premium in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner’s basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such Beneficial Owner. Beneficial 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 2015 Bonds. The Authority and the City have made certain representations and covenanted to comply with certain restrictions, conditions and requirements designed to ensure that interest on the 2015 Bonds will not be included in federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the 2015 Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the 2015 Bonds. The opinion of Bond Counsel assumes the accuracy of these representations and 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), or any other matters coming to Bond Counsel’s attention after the date of issuance of the 2015 Bonds may adversely affect the value of, or the tax status of interest on, the 2015 Bonds. Accordingly, the opinion of Bond Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or matters. Although Bond Counsel is of the opinion that interest on the 2015 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, or the accrual or receipt of amounts treated as interest on, the 2015 Bonds may otherwise affect a Beneficial Owner’s federal, state or local tax liability. The nature and extent of these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner’s other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions may cause interest on the 2015 Bonds to be subject, directly or indirectly, in whole or in part, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. For example, the Obama Administration’s budget proposals in recent years have proposed legislation that would limit the exclusion from gross income of interest on the 2015 Bonds to some extent for high-income individuals. The introduction or enactment of any such legislative proposals or clarification of the Code or court decisions may also affect, perhaps significantly, the market price for, or marketability of, the 2015 Bonds. Prospective purchasers of the 2015 Bonds should consult their own tax advisors regarding the potential impact of any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel is expected to express no opinion. The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, and represents Bond Counsel’s judgment as to the proper treatment of the Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service (“IRS”) or the courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future activities of the Authority or the City, or about the effect of future changes in the Code, the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. The Authority and the City have covenanted, however, to comply with the requirements of the Code. Bond Counsel’s engagement with respect to the 2015 Bonds ends with the issuance of the 2015 Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the Authority, the City or 45340-0001\pos-7 40 the Beneficial Owners regarding the tax-exempt status of the 2015 Bonds in the event of an audit examination by the IRS. Under current procedures, parties other than the Authority, the City and their appointed counsel, including the Beneficial Owners, would have little, if any, right to participate in the audit examination process. Moreover, because achieving judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which the Authority or the City legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to selection of the 2015 Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability of, the 2015 Bonds, and may cause the Authority, the City or the Beneficial Owners to incur significant expense. LEGAL MATTERS Orrick, Herrington & Sutcliffe LLP, San Francisco, California, Bond Counsel, will render an opinion with respect to the validity of the 2015 Bonds. Copies of such approving opinion will be available at the time of delivery of the 2015 Bonds. The form of the legal opinion proposed to be delivered by Bond Counsel is included as APPENDIX F 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 Schiff Hardin LLP, San Francisco, California, Disclosure Counsel, and for the Underwriter by Nossaman LLP, Irvine, California. Compensation paid to Bond Counsel, Disclosure Counsel and Underwriter’s Counsel is contingent on the delivery of the 2015 Bonds. FINANCIAL ADVISOR The County has retained Montague DeRose and Associates, LLC, Walnut Creek, California as financial advisor (the “Financial Advisor”) to the County and the Authority in connection with the issuance of the 2015 Bonds. The Financial Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or negotiable instruments. CONTINUING DISCLOSURE The County will undertake all responsibilities for any continuing disclosure to Owners of the 2015 Bonds as described below. The County will enter into a Continuing Disclosure Agreement with Digital Assurance Certification, L.L.C., as Dissemination Agent, to be dated the date of delivery of the 2015 Bonds (the “Continuing Disclosure Agreement”), which provides for certain disclosure obligations on the part of the County. Pursuant to the Continuing Disclosure Agreement, the County will covenant for the benefit of Owners and Beneficial Owners of the 2015 Bonds to provide certain financial information and operating data relating to the County by not later than nine months after the end of its fiscal year (which fiscal year currently ends on June 30), commencing with the report for the fiscal year ending June 30, 2015 (the “Annual Report”), and to provide notices of the occurrence of certain specified events (the “Specified Events”). The Annual Report and notices of Specified Events will be filed by the County or the Dissemination Agent, through the Electronic Municipal Market Access site maintained by the MSRB. These covenants will be made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5) (the “Rule”). For a form of the Continuing Disclosure Agreement, see APPENDIX G–“PROPOSED FORM OF CONTINUING DISCLOSURE AGREEMENT.” 45340-0001\pos-7 41 During the past five years, in connection with the County of Contra Costa Community Facilities District No. 1991-1 (Pleasant Hill Bart Station Area) 1998 Special Tax Refunding Bonds (the “1998 Bonds”); the County of Contra Costa Public Financing Authority 2001 Revenue Refunding Bonds (Reassessment District of 2001) (the “2001 Bonds”), the County failed on occasion to timely file: (i) with respect to the 1998 Bonds, complete annual reports – in several instances the fund balances in the accounts related to 1998 Bonds was omitted and the total number of occupied units was not included in the annual report on the date it was filed; and (ii) with respect to the 2001 Bonds, the information required to be given the California Debt and Advisory Commission was not included in the annual report on the date it was filed. The County made all required filings by July __, 2015 and has established procedures, including the appointment of Digital Assurance Certification, L.L.C., as Dissemination Agent for all County bond transactions and designating the County Administrator, the Director of Conservation and Development, and the County Finance Director, or their written designees as the Disclosure Representative for the County, that the County believes are sufficient to ensure timely future and complete compliance with its continuing disclosure undertakings. UNDERWRITING Pursuant to the terms of a Bond Purchase Contract with respect to the 2015 Bonds, dated __________, 2015 (the “Purchase Contract”), by and among the Authority, the County and Piper Jaffray & Co. (the “Underwriter”), the Underwriter will purchase all of the 2015 Bonds, if any are purchased. The obligation of the Underwriter to make such purchase is subject to certain terms and conditions set forth in the Purchase Contract. The Underwriter may change the initial public offering prices and yields set forth on the inside cover pages of this Official Statement. The Underwriter may offer and sell the 2015 Bonds to certain dealers and others at prices lower or yields higher than the public offering prices and yields set forth on the inside cover pages hereof. Piper Jaffray & Co. and Pershing LLC, a subsidiary of The Bank of New York Mellon Corporation, entered into an agreement (the “Agreement”) which enables Pershing LLC to distribute certain new issue municipal securities underwritten by or allocated to Piper Jaffray & Co., including the 2015 Bonds. Under the Agreement, Piper Jaffray & Co. will share with Pershing LLC a portion of the fee or commission paid to Piper Jaffray. 2015 Series A Bonds The Underwriter purchased the 2015 Series A Bonds at a price of $_______ (which represents the principal amount of the 2015 Series A Bonds [less a net original issue discount /plus a net original issue premium] in the amount of $_______and less an Underwriter’s discount in the amount of $_______). 2015 Series B Bonds The Underwriter purchased the 2015 Series B Bonds at a price of $_______ (which represents the principal amount of the 2015 Series B Bonds [less a net original issue discount /plus a net original issue premium] in the amount of $________ and less an Underwriter’s discount in the amount of $________). 45340-0001\pos-7 42 VERIFICATION OF MATHEMATICAL COMPUTATIONS FOR THE 2015 SERIES B BONDS Upon delivery of the 2015 Bonds, Grant Thornton LLP, San Francisco, California (the “Verification Agent”), will deliver a report stating that it has reviewed and confirmed the mathematical accuracy of certain computations relating to the adequacy of the funds and/or securities deposited in the Refunded Bonds Escrow Fund and the interest thereon, if any, to pay, when due, the redemption price and interest on the Refunded Bonds on the specified respective payment or redemption dates thereof. 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. Copies of documents referred to herein are available upon written request from the County: 651 Pine Street, 10th Floor, Martinez, California 94553-0663; Attention: Finance Director. The County may impose a charge for copying, mailing and handling. 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 2015 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: David J. Twa Executive Director 45340-0001\pos-7 A-i APPENDIX A GENERAL COUNTY ECONOMIC AND DEMOGRAPHIC INFORMATION TABLE OF CONTENTS PAGE General ...................................................................................................................................................... A-1 County Government .................................................................................................................................. A-1 Population ................................................................................................................................................. A-3 Industry and Employment ......................................................................................................................... A-4 Major Employers ...................................................................................................................................... A-5 Personal Income ........................................................................................................................................ A-5 Commercial Activity ................................................................................................................................. A-7 Construction Activity ................................................................................................................................ A-8 Transportation ........................................................................................................................................... A-9 Environmental Control Services ............................................................................................................ A-10 Education and Health Services ............................................................................................................... A-11 INDEX OF TABLES PAGE Table A-1 Population ............................................................................................................................ A-3 Table A-2 Employment and Unemployment of Resident Labor Force Wage and Salary Employment by Industry Annual Averages ..................................................................... A-4 Table A-3 Major Employers in the East Bay with Employees in the County ...................................... A-5 Table A-4 Personal Income ................................................................................................................... A-6 Table A-5 Taxable Transactions ........................................................................................................... A-7 Table A-6 Building Permit Valuations ................................................................................................. A-8 45340-0001\pos-7 A-1 APPENDIX A GENERAL COUNTY ECONOMIC AND DEMOGRAPHIC 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 about 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 middle. A large part of the County is served by the San Francisco Bay Area Rapid Transit District (“BART”), which has enabled 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 (the “County Auditor-Controller”), Clerk-Recorder, District Attorney-Public Administrator, Sheriff-Coroner and Treasurer-Tax Collector (the “County Treasurer”). A County Administrator appointed by the Board of Supervisors runs the day-to-day business of the County. The current County Administrator is David J. Twa. CONTRA COSTA COUNTY ELECTED OFFICIALS Name Office Expiration of Current Term John M. Gioia Supervisor, District 1 January 7, 2019 Candace Anderson Supervisor, District 2 January 2, 2017 Mary N. Piepho Supervisor, District 3 January 2, 2017 Karen Mitchoff Supervisor, District 4 January 7, 2019 Federal D. Glover Supervisor, District 5 January 2, 2017 Robert R. Campbell Auditor-Controller January 7, 2019 Russell V. Watts Treasurer-Tax Collector January 7, 2019 Gus S. Kramer Assessor January 7, 2019 Joe Canciamilla Clerk Recorder January 7, 2019 Mark A. Peterson District Attorney-Public Administrator January 7, 2019 David O. Livingston Sheriff-Coroner January 7, 2019 45340-0001\pos-7 A-2 Brief resumes of key County officials are set forth below. David J. Twa, County Administrator. Mr. Twa was appointed County Administrator by the Board of Supervisors in June 2008 and is responsible for the overall administration of County government. Prior to his appointment, he served as the County Manager for Ramsey County, Minnesota from 2003-2008. Prior to that, Mr. Twa served as the County Administrator in three counties in Minnesota for over 20 years and served as an Elected County Attorney, Interim Property Records and Revenue Director, Executive Director of Housing and Redevelopment Authority, and Interim Director of Public Health and Long-term Care. Mr. Twa received his Juris Doctorate from the University of Minnesota, as well as a degree in accounting, and is also a Certified Public Accountant. Under Mr. Twa’s leadership in Ramsey County, Minnesota maintained a triple-A credit rating, one of few counties in the country to achieve this distinguished rating. He also oversaw the efforts of Ramsey County to institute a Strategic Planning Program, address its health care cost liability, start a two year budget process, work with community partners to improve public services in the Minneapolis-St. Paul Region, and institute significant redevelopment projects. Mr. Twa was named the County Manager of the Year (2007) by the Minnesota Association of County Administrators for his innovation in public service. Robert R. Campbell, Auditor-Controller. Mr. Campbell was elected Auditor-Controller of the County in June 2010 and is the chief accounting officer for the County. Prior to his election to the Office of Auditor-Controller, Mr. Campbell was the Chief Accountant over the property tax division. Mr. Campbell has worked for the County for more than 25 years. He received a Bachelor of Science degree in business administration from the California State University, Hayward. Mr. Campbell is an active member of the State Association of County Auditors, a member of the Government Finance Officers Association and the Association of Government Accountants. Mr. Campbell is a former president of the State Association of County Auditors Property Tax and Payroll Managers’ committees, and served as a member on various State Association’s Property Tax Guideline Committees. Russell V. Watts, Treasurer-Tax Collector. Mr. Watts was elected Treasurer-Tax Collector in June 2010. In this capacity he also serves as ex officio member on the Board of Trustees of the Contra Costa County Employees’ Retirement Association, representing the County at large. Mr. Watts also serves on the County’s Debt Advisory Committee and the OPEB Trust Advisory Group, and is the Plan Administrator for the Public Agencies Post-Retirement Health Care Plan Trust. Mr. Watts is a member of the California Association of County Treasurer-Tax Collectors and serves on both the Executive and Legislative Committees. He is also a member of the Government Finance Officers Association. Mr. Watts has sat on the Contra Costa County Treasury Oversight Committee since 2003. Mr. Watts received his Bachelor of Arts from Brigham Young University and earned his Masters in Public Administration at the University of North Carolina-Chapel Hill. He has worked in tax administration and treasury management since 1994. (Remainder of this Page Intentionally Left Blank) 45340-0001\pos-7 A-3 Population The County is the ninth most populous county in California, with its population reaching approximately 1,102,871 as of January 1, 2015. This represents an increase of approximately 1.3% compared to the County’s population as of January 1, 2014. 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. Population growth in the County has been strongest in unincorporated areas as well as in the cities of Antioch, Brentwood, Hercules, Oakley, Pittsburg and San Ramon. The following is a summary of the County’s population levels since 2011. Table A-1 COUNTY OF CONTRA COSTA POPULATION(1) (AS OF JANUARY 1) Incorporated Cities 2011 2012 2013 2014 2015(2) Antioch 103,058 103,580 105,076 106,691 108,298 Brentwood 52,027 52,434 53,234 54,824 56,493 Clayton 10,941 10,964 11,079 11,209 11,288 Concord 122,604 122,917 123,787 124,977 126,069 Danville 42,214 42,336 42,683 43,206 43,691 El Cerrito 23,646 23,707 23,885 24,115 24,288 Hercules 24,151 24,204 24,378 24,601 24,775 Lafayette 24,022 24,093 24,289 24,690 25,154 Martinez 36,053 36,130 36,545 36,891 37,384 Moraga 16,075 16,112 16,223 16,363 16,466 Oakley 35,996 36,432 37,218 38,124 38,789 Orinda 17,712 17,769 17,906 18,109 18,612 Pinole 18,459 18,507 18,643 18,813 18,946 Pittsburg 63,733 64,537 65,291 66,479 67,628 Pleasant Hill 33,278 33,349 33,602 33,917 34,162 Richmond 104,388 104,639 105,530 106,388 107,346 San Pablo 28,929 29,025 29,237 24,499 29,730 San Ramon 73,107 74,473 76,266 77,410 78,561 Walnut Creek 64,710 65,071 65,652 66,319 66,868 SUBTOTAL 895,104 900,279 910,524 917,625 934,548 Balance of County 161,202 162,467 163,793 166,594 168,323 TOTAL 1,056,306 1,062,746 1,074,317 1,089,219 1,102,871 California 37,427,946 37,680,593 38,030,609 38,357,121 38,714,725 _______________ (1) Columns may not total due to independent rounding. (2) Preliminary. Source: State of California, Department of Finance, Table 2: E-4 Population Estimates for Cities, Counties and State, 2011-2015 with 2010 Benchmark. 45340-0001\pos-7 A-4 Industry and Employment As shown below, the County’s civilian labor force was 544,900 in 2014. With average 2014 unemployment rates of 6.1% and 7.5% for the County and the State, respectively, the County has achieved a lower unemployment rate than that of the State in each of the prior five calendar 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) 2010 2011 2012 2013 2014 County Civilian Labor Force (1) 523.8 528.9 535.8 538.9 544.9 Employment 465.5 473.9 487.6 499.1 511.4 Unemployment 58.3 55.0 48.2 39.8 33.5 Unemployment Rate: County 11.1% 10.4% 9.0% 7.4% 6.1% State of California 12.2% 11.7% 10.4% 8.9% 7.5% 2010 2011 2012 2013 2014† Wage and Salary Employment (2) Farm 0.7 0.8 0.8 1.0 N/A Natural Resources and Mining 18.3 17.8 19.7 21.6 N/A Manufacturing 18.3 17.4 17.4 15.8 N/A Durable Goods 6.7 6.5 6.8 6.6 N/A Nondurable Goods 11.6 10.9 10.6 9.1 N/A Trade, Transportation and Utilities 55.9 56.5 57.4 58.1 N/A Wholesale Trade 7.6 7.9 8.2 8.6 N/A Retail Trade 40.4 40.5 41.2 41.0 N/A Transportation, Warehousing and Utilities 8.0 8.1 8.1 8.5 N/A Information 9.6 9.0 8.4 8.5 N/A Financial Activities 25.3 24.8 25.3 25.3 N/A Professional and Business Services 43.8 45.9 48.0 51.3 N/A Educational and Health Services 53.0 53.5 55.7 58.7 N/A Leisure and Hospitality 31.3 32.3 33.5 35.7 N/A Other Services 11.8 12.4 12.4 12.1 N/A Government 49.2 47.8 47.9 48.1 N/A TOTAL (3) 391.5 392.1 401.4 410.0 N/A _____________ † Detailed information is not yet available. (1) Based on place of residence. (2) Based on place of work. (3) Columns may not total due to independent rounding. Source: State of California, Employment Development Department, and Labor Market Information Division, March 2014 Benchmark. 45340-0001\pos-7 A-5 Major 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 Bay and San Pablo Bay leading to San Francisco Bay and the Pacific Ocean. The County is located in the region east of the San Francisco Bay known as the “East Bay,” which also includes the County of Alameda. The following Table A-3 provides a listing of major employers headquartered or with locations in the County who participated in the data collection survey and their estimated firm-wide employment levels. Table A-3 MAJOR EMPLOYERS IN THE EAST BAY WITH EMPLOYEES IN THE COUNTY 2015 Firm Primary Location Product or Service Estimated No. Employees University of California, Berkeley Alameda Higher Education 23,962 Kaiser Permanente Medical Center† Walnut Creek, Martinez Healthcare 18,450 Alameda County Oakland County Government 9,147 State of California Countywide State Government 8,930 County of Contra Costa† Martinez County Government 8,500 Chevron Corp.† Countywide Energy, Oil and Gas 6,361 Safeway Countywide Supermarkets 6,270 U.S. Postal Service Countywide Postal Services 5,948 John Muir Health† Walnut Creek Health Care 5,857 Wells Fargo & Co. Countywide Banking 5,400 PG&E Corp. Countywide Gas and Electric Service 4,625 Alta Bates Summit Medical Center, Summit Campus Oakland Healthcare 4,471 Lawrence Livermore National Laboratory Berkeley Scientific Research 4,200 Lawrence Livermore National Laboratory Livermore Scientific Research 4,015 FedEx Corp. Oakland Shipping Services 4,000 UPS Countywide Shipping Services 3,369 Contra Costa Community College District Martinez Community College 3,100 Tesla Motors Inc. Walnut Creek Electric Vehicle Maker 3,000 West Contra Costa Unified School District Richmond Public Education 2,968 San Ramon Valley Unified School District Danville Public Education 2,900 _______________ † Headquartered in the County. Sources: San Francisco Business Times, 2015 Bay Area Book of Lists. Data is for the reported entity’s latest fiscal year. Personal Income The United States Department of Commerce, Bureau of Economic Analysis (the “BEA”) produces economic account statistics that enable government and business decision-makers, researchers, and the public to follow and understand the performance of the national economy. The BEA defines “personal income” as income received by persons from all sources, including income received from participation in production as well as from government and business transfer payments. Personal income represents the sum of compensation of employees (received), supplements to 45340-0001\pos-7 A-6 wages and salaries, proprietors’ income with inventory valuation adjustment and capital consumption adjustment (CCAdj), rental income of persons with CCAdj, personal income receipts on assets, and personal current transfer receipts, less contributions for government social insurance. Per capita personal income is calculated as the personal income divided by the resident population based upon the Census Bureau’s annual midyear population estimates. Table A-4 below presents the latest available total income and per capita personal income for the County, the State and the nation for the calendar years 2009 through 2013 (the most recent annual data available). The County has traditionally had per capita income levels significantly higher than those of the State and the nation. Table A-4 COUNTY OF CONTRA COSTA PERSONAL INCOME CALENDAR YEARS 2009 THROUGH 2013† Year and Area Personal Income (millions of dollars) Per Capita Personal Income (dollars) 2013† County State United States 69,376 1,856,614 14,151,427 63,403 48,434 44,765 2012 County State United States 67,779 1,805,194 13,873,161 62,860 47,505 44,200 2011 County State United States 62,693 1,685,635 13,189,935 58,816 44,749 42,332 2010 County State United States 58,023 1,578,553 12,417,659 55,118 42,282 40,144 2009 County State United States 56,636 1,537,095 12,080,223 54,568 41,587 39,379 † Preliminary. Most recent annual data available. Source: U.S. Department of Commerce, Bureau of Economic Analysis, Regional Economic Information System, March 2014. 45340-0001\pos-7 A-7 Commercial Activity Commercial activity comprises an important part of the County’s economy, with taxable transactions totaling approximately $14.5 billion in calendar year 2013, the most recent year for which complete annual data is available. For calendar year 2013, the approximately 3.4% increase in total taxable transactions was due primarily to an increase in nonstore retailers (106.3%); building materials and garden equipment and supplies (11.1%) and motor vehicle and parts dealers (10.5%). Presented in Table A-5 below is a summary of taxable transactions in the County since 2009. Table A-5 COUNTY OF CONTRA COSTA TAXABLE TRANSACTIONS(1) CALENDAR YEARS 2009 TO 2013(2) ($ IN 000’S) 2009 2010 2011 2012 2013(2) Motor Vehicle and Parts Dealers $1,184,803 $1,234,844 $1,372,234 $1,650,526 $1,823,019 Furniture and Home Furnishings Stores 225,331 227,432 240,863 260,102 277,477 Electronics and Appliance Stores 385,742 356,124 357,941 371,588 371,275 Building Materials and Garden Equipment and Supplies 711,475 718,405 739,836 791,073 879,211 Food and Beverage Stores 657,337 673,326 692,641 725,277 748,131 Health and Personal Care Stores 264,279 264,011 277,662 293,030 303,182 Gasoline Stations 1,151,058 1,312,703 1,522,725 1,587,047 1,623,539 Clothing and Clothing Accessories Stores 642,813 663,243 702,573 773,210 825,235 Sporting Goods, Hobby, Book, and Music Stores 314,924 304,491 303,397 302,051 312,720 General Merchandise Stores 1,380,111 1,406,756 1,443,317 1,505,629 1,525,347 Miscellaneous Store Retailers 397,297 382,048 396,831 420,581 427,955 Nonstore Retailers 47,224 46,613 50,078 87,720 180,980 Food Services and Drinking Places 1,111,182 1,126,398 1,200,318 1,294,601 1,378,947 Other Retail Stores – – – – – Total Retail and Food Services 8,473,578 8,716,393 9,300,418 10,062,437 10,677,018 Business and Personal Services – – – – All Other Outlets 3,409,471 3,237,454 3,499,439 3,934,812 3,794,970 TOTAL ALL OUTLETS $11,883,049 $11,953,846 $12,799,857 $13,997,249 $14,470,988 % CHANGE (10.7%) 0.6% 7.1% 9.4% 3.4% _______________ (1) Columns do not total due to independent rounding. (2) Most recent annual data available. Source: State of California, Board of Equalization. Much of the County’s commercial activity is concentrated in central business districts of its cities and unincorporated towns. Regional shopping centers, numerous smaller centers and several “big box” warehouse stores serve County residents. The County is served by all major banks including Bank of America and Wells Fargo Bank. In addition there are numerous local banks and branches of smaller California and foreign banks. See also APPENDIX B–“COUNTY FINANCIAL INFORMATION.” 45340-0001\pos-7 A-8 Construction Activity The value of building permits in the County declined by 30.2% in calendar year 2014 compared to calendar year 2013 levels. The decrease is attributable to declines in building permits issued for the construction of single-family homes and other nonresidential valuation. The following Table A-6 provides a summary of residential building permit valuations and number of new dwelling units authorized in the County since calendar year 2010. Table A-6 COUNTY OF CONTRA COSTA BUILDING PERMIT VALUATIONS CALENDAR YEARS 2010 THROUGH 2014 ($ IN THOUSANDS) Residential Year Single Family Multifamily Alterations and Additions Total Residential Nonresidential Valuation Total† Units Valuation Units Valuation 2010 809 $237,458 890 $106,555 $209,044 $553,058 $285,417 $838,475 2011 718 211,418 355 47,305 197,448 456,171 290,629 746,800 2012 1,188 340,256 949 54,885 179,472 574,612 214,603 789,215 2013 1,585 469,376 370 62,800 195,787 727,964 394,088 1,122,052 2014 1,439 402,109 588 82,009 256,618 740,736 42,529 783,265 ______________ † Total represents the sum of residential building permit valuations. Data may not total due to independent rounding. Source: Construction Industry Research Board. An approximately 5,979 acre development located east of the City of San Ramon known as “Dougherty Valley” is expected to add 11,000 new homes in the County. The development is being constructed in nine phases. Construction of the final phase of development has commenced and is expected to be completed in 2020. All phases of the development plan for Dougherty Valley have been approved by the County. To date, approximately 8,900 homes have been constructed, as well as the 2,600 student Dougherty Valley High School which opened in fall 2007; two 900-student middle schools and three 760-student kindergarten through grade 5 elementary schools. For the 2014-15 academic year, approximately 2,330 students in grades 9 through 12 were enrolled in Dougherty Valley High School. Urban Limit Line. In November 2004, County voters approved Measure J, which extended a ½ percent transportation sales tax program within the County. Measure J included a continuation of the Growth Management Program (the “GMP”) originally approved under the transportation sales tax measure, known as “Measure C-1988,” and it carried forward six of eight compliance requirements from the existing Measure C GMP. Measure J also added a new requirement that local jurisdictions adopt a voter-approved Urban Limit Line (a boundary outside of which future growth is prohibited). In order to remain eligible to receive the 18% Local Street Maintenance and Improvement Funds and the 5% Transportation for Livable Communities funds under Measure J, each jurisdiction is required to adopt a voter-approved Urban Limit Line. On November 7, 2006, the voters in the County approved Measure L that: (i) extended the term of the County’s Urban Limit Line to the Year 2026; (ii) requires voter approval to expand the Urban Limit Line by more than 30 acres; (iii) adopted a new Urban Limit Line Map; and, (iv) established new review procedures. 45340-0001\pos-7 A-9 On April 3, 2007, the County received a letter from the Contra Costa Transportation Authority acknowledging that through the passage of Measure L, the County had a voter-approved Urban Limit Line in compliance with the GMP under Measure J. To date, the County, and the cities of Antioch, Brentwood, Pittsburg and San Ramon each have voter-approved Urban Limit Lines in compliance with the Measure C GMP. 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 and the central portion of the County to Sacramento and points north via 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 and portions of the Central Valley of the State via State Routes 4 and 24, the County’s major east-west arteries. Caltrans completed the widening of Interstate 80 in the western portion of the County in fall 2011. Caltrans completed construction of the Alfred Zampa Memorial span across the Carquinez Strait on Interstate Highway 80 in November 2003; a five-lane bridge, with nine toll booths, over the Benicia – Martinez Bridge on Interstate Highway 680 at a cost of approximately $1.3 billion in August 2007; and the realignment of the original Benicia-Martinez Bridge for four lanes of southbound traffic and a separated two-way bicycle and pedestrian path in August 2009. Ground transportation is available to County residents from several service providers, as described below:  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, including the Oakland International Airport, San Francisco, including the San Francisco International Airport, 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 has 43 stations and 104 miles of roadway in its system.  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 stop at the intermodal facility in Martinez, the County seat.  The Santa Fe and Union Pacific Railroads’ main lines serve the County, both in the industrial coastal areas and in the inland areas. 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, is comprised of five City owned terminals, five dry docks and 10 privately owned terminals, covers approximately 202 acres and handles more than 20 million metric tons of general, liquid and dry bulk commodities annually. The majority of 45340-0001\pos-7 A-10 the shipments are bulk liquids, primarily petroleum, petroleum products, chemicals and petrochemicals, coconut and other vegetable oils, tallow and molasses. Imports of automobiles, agricultural products, vehicles, steel products, scrap metals and other diversified bulk cargo are significant components of Port activities. 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 located in Byron and the other in Concord. Environmental Control Services Water. The East Bay Municipal Utility District (“EBMUD”) and the Contra Costa County Water District (“CCWD”) supply water to the County. EBMUD supplies water to the western part of the County, including Alamo, Crockett, Danville, Diablo, Hercules, Lafayette, Moraga, Orinda, Pinole, portions of Pleasant Hill, Richmond, Rodeo, San Pablo, San Ramon, Selby and portions of Walnut Creek. Approximately 89% of its supply is from the Mokelumne River watershed stored at the 69.4 billion gallon capacity Pardee Dam in Ione, California. EBMUD is entitled to 325 million gallons per day under a contract with the State Water Resources Control Board, plus an additional 119 million gallons per day in a single dry year under a contract with the U.S. Water and Power Resources Service (formerly the U.S. Bureau of Reclamation). As a result of dismal rain levels and melted snowpack, storage in all EBMUD reservoirs combined is expected to be at one-third of capacity by October 1, 2015, the start of the water year. Only in 1977 did EBMUD see lower reservoir storage levels. EBMUD expanded its emergency drought measures, declared a Stage 4 (critical) drought, and set a community-wide goal to reduce water use by 20% compared to 2013. To achieve these savings, EBMUD adopted new water use rules that affect all customers. In addition, EBMUD expects to supplement normal water supplies with purchased water from additional sources and enforcement of water use restrictions. CCWD obtains its water from the Sacramento-San Joaquin Delta and serves approximately 500,000 customers in the central and eastern part of the County, including Antioch, Bay Point, Clayton, Clyde, Concord, Martinez, Oakley, portions of Pleasant Hill, Pittsburg and portions of Walnut Creek. It is entitled under a contract with the U.S. Water and Power Resources Service to purchase 195,000 acre- feet per year. Water purchased by CCWD has ranged between 80,000 and 110,000 acre-feet annually. In addition, a number of industrial users and several municipalities draw water directly from the San Joaquin River under their own riparian rights, so that actual water usage in the service area averages about 125,000 acre-feet annually. To provide expanded water storage capacity, CCWD constructed the Los Vaqueros Reservoir with a capacity of 100,000 acre-feet south of the City of Antioch. In 2012, construction to expand the Los Vaqueros Reservoir to a capacity of up to 160,000 acre-feet was completed. In February 2015, CCWD implemented a voluntary drought program that requested customers to reduce use by 15%. To comply with the Governor’s April 2015 Executive Order, the CCWD Board of Directors set a conservation requirement of 25% compared to 2013 usage and adopted new water use prohibitions to comply with Statewide mandates that include limiting outdoor irrigation to two days per week. To encourage customers to meet the 25% reduction the CCWD Board of Directors is considering temporary pricing adjustment for households using more than 200 gallons per day and fines for violating water use prohibitions. Sewer. Sewer services in the County are provided by approximately 20 sanitation districts and municipalities. Federal and State environmental requirements, plus grant money available from these two sources, resulted in upgrading, expanding and/or building new facilities by approximately 14 agencies. 45340-0001\pos-7 A-11 Flood Control. The Contra Costa County Flood Control and Water Conservation District (the “Control District”) has been in operation since 1951 to plan, build, and operate flood control projects in unincorporated areas of the County except for the Delta area on its eastern border. The Delta is interspersed with inland waterways that fall under the jurisdiction of the U.S. Army Corps of Engineers and the State Department of Water Resources. The Control District is responsible for meeting requirements set forth by the Environmental Protection Agency (“EPA”) with respect to addressing potential pollutants in nonspecific groundwater runoff. The County is not presently able to estimate the cost of compliance with EPA requirements, although such costs may be significant. Education and Health Services Education. Public school education in the County is available through nine elementary school districts, two high school districts, and seven unified school districts, one independent charter and the County Department of Education. School enrollment for Fiscal Year 2014-15 numbered approximately 174,800 students in public schools and approximately 1,072 in nonpublic, non-sectarian district schools. Higher education is available in the County through a combination of two-year community colleges and four-year colleges, including the Contra Costa County Community College District which has campuses in Richmond, Pleasant Hill and Pittsburg; California State University East Bay which 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; and St. Mary’s College of California, a four-year private institution, located on a 100-acre campus in Moraga. Also located within the County is the John F. Kennedy University with campuses in Pleasant Hill and Pittsburg, the UC Berkeley Extension Contra Costa Center in San Ramon and the University of Phoenix Campus in Concord. Health Services. There are 12 privately operated hospitals and one public hospital in the County, with a combined total of approximately 1,900 beds. The major public hospital is the Contra Costa Regional Medical Center located in Martinez. See also “–Contra Costa Regional Medical Center.” Five of the private hospitals are run by Kaiser, the largest health maintenance organization in the United States. The Walnut Creek-based John Muir/Mt. Diablo Health System operates hospitals at its Walnut Creek and Concord Campuses and outpatient services at its Brentwood Campus and in Rossmoor. Doctors Medical Center. The 247-bed Doctors Medical Center, located in the western portion of the County with a population of approximately 250,000 (many of whom are low income), was operated by the West Contra Costa Healthcare District (the “Healthcare District”) until Doctors Medical Center was closed on April 21, 2015. Doctors Medical Center provided medical services to the general public and was a critical component of the County Emergency Medical Services system. Prior to its closure, Doctors Medical Center had been experiencing financial difficulties for many years and in 2006 the Healthcare District filed a voluntary petition for Chapter 9 bankruptcy protection. The bankruptcy reorganization plan was approved in 2008, and the Healthcare District bankruptcy case was concluded in 2010. Since 2006, the County provided approximately $35 million in emergency funding to Doctors Medical Center through various property tax transfer agreements with the Healthcare District to assist in keeping Doctors Medical Center open to the public. In return, the Healthcare District authorized allocations of its ad valorem property taxes to the County pursuant to various property tax transfer agreements between the County and the Healthcare District. 45340-0001\pos-7 A-12 There are currently two agreements between the County and the Healthcare District regarding the allocation of ad valorem property taxes from the Healthcare District to the County, namely: (i) the Amended and Restated Second Agreement for Property Tax Transfer from the West Contra Costa Healthcare District to Contra Costa County, dated July 16, 2013 (the “Second Agreement”); and (ii) the Third Agreement for Property Tax Transfer From West Contra Costa Healthcare District to Contra Costa County, dated July 1, 2014 (the “Third Agreement”, and together with the Second Agreement, the “Transfer Agreements”). The Transfer Agreements operate sequentially. In other words, the parties have agreed that property tax revenues will not be allocated to the County under the Third Agreement, until after all property tax revenues have been allocated to the County under the Second Agreement. The County Auditor-Controller administers the ad valorem property tax transfers under the Transfer Agreements. The total remaining ad valorem property taxes to be transferred to the County under the Second Agreement is $13,277,804. The total amount of ad valorem property taxes to be transferred to the County under the Third Agreement is $8,200,000. The ad valorem property taxes are allocated from the Healthcare District to the County at the rate of approximately $3,000,000 each Fiscal Year. The amount may be higher or lower depending on the change in property values within the tax rate areas of the Healthcare District and actual apportionments. On December 2, 2014, the Board of Supervisors adopted a resolution authorizing a permanent waiver of up to $9 million in ad valorem property tax transfers to the County pursuant to the Transfer Agreements for Fiscal Years 2015-16, 2016-17 and 2017-18. The permanent waiver would only go into effect if, prior to October 30, 2015, the Healthcare District secured additional funding of at least $15 million per year for Fiscal Years 2015-16 through 2017-18 for the purpose of supporting a full- service hospital at Doctors Medical Center. On December 3, 2014, the Healthcare District and the County entered into an amendment to the Second Agreement providing for a one-time temporary suspension of up to $3 million of the Fiscal Year 2014-15 ad valorem property taxes that would otherwise be allocated to the County under the Second Agreement. This amendment authorized the County Auditor-Controller to transmit to the Healthcare District up to $3 million of the Fiscal Year 2014-15 ad valorem property taxes at the time property tax allocations are made. The amendment did not alter the total amount of property taxes that are required to be transferred to the County under the Second Agreement. By April 16, 2015, the County Auditor- Controller apportioned $3 million in ad valorem property taxes to the Healthcare District pursuant to the amendment. The Health Care District was not able to secure sufficient funding for Doctors Medical Center to satisfy the permanent waiver condition and, as stated previously, the hospital closed. For this reason, the permanent waiver did not go into effect. The County will continue to receive allocations of ad valorem property pursuant to the Transfer Agreements until the amounts required to be transferred have been paid in full. As of June 2015, the aggregate amount of ad valorem property taxes to be transferred to the County under the Transfer Agreements is $21,477,804. It is anticipated that the ad valorem property tax transfers to the County under the Transfer Agreements will be completed by Fiscal Year 2021-22. 45340-0001\pos-7 A-13 Contra Costa Regional Medical Center. The public hospital in the County is Contra Costa Regional Medical Center (“CCRMC”), a 164-bed facility that the County rebuilt and re-opened to the public in 1998 on the existing campus in Martinez. Since reconstruction of the hospital in 1998, the County completed a public health/clinical laboratory in 2001 on the CCRMC campus, converted the former Los Medanos Hospital into the Pittsburg Health Center, completed construction of an ambulatory care clinic on the campus of CCRMC and expanded clinics in Antioch, Concord and Brentwood. The County reopened the Bay Point Family Health Center in Pittsburg in February 2009, following extensive renovations, including construction of a state-of-the-art children’s dental clinic. The County also operates the approximately 53,000 square foot West County Health Center that opened in 2012 and replaced the former Richmond Health Center. 45340-0001\pos-7 B-i APPENDIX B COUNTY FINANCIAL INFORMATION TABLE OF CONTENTS PAGE Introduction ............................................................................................................................................... B-1 State Budgets ............................................................................................................................................ B-1 State Budget Acts ...................................................................................................................................... B-1 County Budget Process ............................................................................................................................. B-3 Recent County General Fund Budgets ..................................................................................................... B-4 County Financial Management Policies ................................................................................................... B-8 Ad Valorem Property Taxes .................................................................................................................... B-10 Largest Property Taxpayers .................................................................................................................... B-16 Taxation of State-Assessed Utility Property ........................................................................................... B-17 Dissolution of Redevelopment Agency .................................................................................................. B-18 Accounting Policies, Reports and Audits ............................................................................................... B-19 County Employees .................................................................................................................................. B-22 Contract Negotiations ............................................................................................................................. B-22 Pension Plan ............................................................................................................................................ B-23 Other Post-Employment Benefits .......................................................................................................... B-30 Long Term Obligations ........................................................................................................................... B-34 Future Capital Projects ............................................................................................................................ B-37 Insurance and Self-Insurance Programs .................................................................................................. B-37 Health Plans ............................................................................................................................................ B-38 INDEX OF TABLES Table B-1 General Fund Budget Summary ......................................................................................... B-8 Table B-2 Summary of Secured Assessed Valuations and Ad Valorem Property Taxation ............. B-14 Table B-3 Summary of Foreclosure Activity .................................................................................... B-15 Table B-4A Ten Largest Property Taxpayers by Taxes Paid .............................................................. B-16 Table B-4B Ten Largest Property Taxpayers by Taxable Assessed Value (Secured and Unitary) ..... B-17 Table B-5 General Fund Statement of Revenues, Expenditures and Charges in Fund Balances ...... B-21 Table B-6 Full-Time Equivalent County Employees ........................................................................ B-22 Table B-7 Labor Organization Unit Contract Expiration Dates ........................................................ B-23 Table B-8 Schedule of Funding Progress .......................................................................................... B-26 Table B-9 Total Member Population ................................................................................................ B-26 Table B-10 Schedule of Employer Contributions ............................................................................... B-27 Table B-11 Employer Contribution Rates ........................................................................................... B-28 Table B-12 Reserves and Designated Fiduciary Net Positions Assuming a 7.25% Actuarial Rate of Return ................................................................................. B-29 Table B-13 Schedule of Revenues, Net Assets at Market Value and Return on Market Value .......... B-29 Table B-14 Investment Policy Asset Allocation Targets .................................................................... B-30 Table B-15 Summary of Active Plan Members and Other Post-Employment Benefit Plan Participating Retirees ................................................................................................ B-31 Table B-16 Other Post-Employment Benefits Summary of Contributions ......................................... B-32 Table B-17 Other Post-Employment Health Benefits Schedule of Funding Progress ........................ B-33 Table B-18 Other Post-Employment Benefits Plan Annual OPEB Cost ............................................ B-34 Table B-19 Outstanding Lease Revenue Obligations and Pension Obligation Bonds ........................ B-35 Table B-20 Direct and Overlapping Bond Debt .................................................................................. B-36 45340-0001\pos-7 B-1 APPENDIX B COUNTY FINANCIAL INFORMATION Introduction California counties administer numerous health and social service programs as the administrative agent of the State and pursuant to State law. Many of these programs have been either wholly or partially funded with State revenues which have been subject each year to the State budget and appropriation process. Currently, the County is required to provide health care to all indigents, administer welfare programs, provide justice facilities (courts and jails) and administer the property tax system and real estate recordings. Due to competing program priorities and the lack of available State funds, some of these programs have had reduced State support without a corresponding reduction in program responsibilities for county governments. The result has been that the County has increased its contribution to maintain mandated services while optional local services have been reduced. The Board of Supervisors has responded to this trend in part by instituting measures to improve management, thereby reducing costs while increasing productivity and maintaining services with diminished funding. The level of intergovernmental revenues that the County received from the State in Fiscal Year 2014-15 and in subsequent Fiscal Years is likely to be affected by the financial condition of the State. State Budgets Property tax revenues received by local governments initially declined more than 50% following passage of Proposition 13 in June 1978. Subsequently, the State Legislature enacted measures to provide for the redistribution of the State’s General Fund surplus to local agencies, the reallocation of certain State revenues to local agencies and the assumption of the cost of certain governmental functions by the State to assist municipalities to raise revenues. Approximately 22% of the County’s Fiscal Year 2015-16 General Fund Recommended Budget is expected to consist of payments collected by the State and passed-through to the County or collected by the County and allocated to County purposes by State law. For Fiscal Year 2014-15, approximately 23% of the County’s General Fund Budget consisted of payments from the State. The financial condition of the State has an impact on the level of these revenues. To the extent the State should be constrained by its Article XIII B appropriations limit, or its obligation to conform to Proposition 98, or other fiscal considerations, the absolute level, or the rate of growth, of State assistance to local governments may be reduced. Any such reductions in State aid could adversely affect local governments, particularly counties. State Budget Acts The level of intergovernmental revenues that the County will receive from the State in Fiscal Year 2015-16 and in subsequent Fiscal Years will be affected by the financial condition of the State. See “CERTAIN RISK FACTORS–State Funding of Counties.” The following information concerning the State Budgets has been obtained from publicly available information on the State Department of Finance, the State Treasurer and the California Legislative Analyst Office websites. The estimates and projections provided below are based upon various assumptions, which may be affected by numerous factors, including future economic conditions in the State and the nation, and there can be no assurance that the estimates will be achieved. For further 45340-0001\pos-7 B-2 information and discussion of factors underlying the State’s projections, see the aforementioned websites. The County and Underwriter believe such information to be reliable, however, the County and Underwriter take no responsibility as to the accuracy or completeness thereof and has not independently verified such information. Information about the State budget and State spending is regularly available at various State- maintained websites. Text of the budget may be found at the website of the Department of Finance, www.dof.ca.gov, under the heading “California Budget.” An impartial analysis of the budget is posted by the Office of the Legislative Analyst at www.lao.ca.gov. In addition, various State official statements, many of which contain a summary of the State budgets may be found at the website of the State Treasurer, www.treasurer.ca.gov and at the Electronic Municipal Market Access site maintained by the Municipal Securities Rulemaking Board at www.emma.msrb.org. Information on these websites has not been reviewed or verified by the County, the Underwriter or the Financial Advisor and is not incorporated by reference in this Official Statement. Fiscal Year 2015-16 State Budget. On June 24, 2015, the Governor approved the budget for 2015-16 (the “Fiscal Year 2015-16 State Budget Act”), which projects Fiscal Year 2014-15 State General Fund revenue of $116.9 billion (inclusive $5.6 billion in fund balance from Fiscal Year 2013-14), total expenditures of $114.5 billion and a year-end surplus of $2.4 billion, of which $971 million would be reserved for the liquidation of encumbrances and $1.4 billion would be deposited in a reserve for economic uncertainties. The Fiscal Year 2015-16 State Budget Act projects Fiscal Year 2015-16 State General Fund revenues and transfers of $115.0 billion (inclusive $2.4 billion in fund balance from Fiscal Year 2014-15), total expenditures of $115.4 billion and a year-end surplus of $2.1 billion, of which $971 million would be reserved for the liquidation of encumbrances and $1.1 billion would be deposited in a reserve for economic uncertainties. The Fiscal Year 2015-16 State Budget Act is balanced, pays down debt, and funds the Rainy Day Fund as the first year of Proposition 2 is implemented. In addition, spending for education, health case, In-Home Supportive Service, workforce deployment, drought assistance and the judiciary is increased. The Fiscal Year 2015-16 State Budget Act also establishes the State’s first Earned Income Tax Credit to assist the poorest working families and amnesty program to assist may State residents in paying past due court-ordered debt and regain their drivers’ licenses. Features of the Fiscal Year 2015-16 State Budget Act affecting counties in general include, but are not limited to, the following: (i) augmenting the $1.9 billion appropriated for drought response since 2014 with an additional $1.8 billion of one-time resources, including funding for County and other local projects; (ii) repayment to local governments of the final mandate reimbursements for activities completed in 2004 or earlier (totaling $765 million); (iii) assumption of additional Medi-Cal caseloads of 3.7 million individuals and costs of $16.9 billion related to the implementation of the Affordable Care Act, will be paid from State and federal moneys, including $40 million in State General Fund moneys to expand the scope of Medi-Cal coverage to qualified low-income immigrants effective May 2016; and (iv) $270 million in State General Fund moneys to pay for In-Home Supportive Services overtime (assuming an overtime provision is upheld by the court by October 1, 2015) and a one-time State General Fund augmentation of $226 million in Fiscal Year 2015-16 to restore service hours. Fiscal Year 2014-15 State Budget. On June 20, 2014, Governor Brown approved the budget for 2014-15 (the “Fiscal Year 2014-15 State Budget Act”), which projects $108 billion in State general fund revenues, $7.3 billion more than in Fiscal Year 2013-14. The Fiscal Year 2014-15 State Budget Act was balanced and projected paying down unprecedented amounts of budgetary debt from past years, including paying down deferral of payments to schools by $5 billion, paying off Economic Recovery Bonds, repaying various special fund loans, and funding $100 million in mandate claims that have been owed to local governments since 2004. The budgetary deficit is projected to be reduced to below $5 billion by the end of Fiscal Year 2016-17. The Fiscal Year began with a Fiscal Year 2014-15 State Budget reserve of 45340-0001\pos-7 B-3 $2 billion dollars, including $1.6 billion in the State’s Budget Stabilization Account, also known as the State’s rainy day fund. Temporary revenues provided by the passage of Proposition 30 (Sales and Income Tax Revenue Increase approved by State voters at an election held on November 8, 2011) and spending cuts allowed for continued economic growth in the State. The Fiscal Year 2014-15 State Budget also contained triggers allowing for additional spending, if various revenue benchmarks were exceeded. If revenues surpass certain estimates, then the Fiscal Year 2014-15 State Budget called for more funds to be applied to higher education and to pay down debt. The Fiscal Year 2014-15 State Budget included a constitutional amendment which was placed before State voters on November 4, 2014 and passed. That measure alters the State’s requirements for the Budget Stabilization Account (the State’s existing rainy day account). This amendment: • Requires deposits into the Rainy Day Fund whenever capital gains revenues rise to more than 8% of State general fund tax revenues, and would set the maximum size of the Rainy Day Fund at 10% of State general fund revenues. • Requires half of each year’s deposit for the next 15 years be used for supplemental payments of debt or other long-term liabilities. • Allows for withdrawal of funds only for a disaster or if spending remains at or below the highest level of spending from the past three years. The maximum amount that could be withdrawn in the first year of a recession would be limited to half of the Rainy Day Fund’s balance. • Requires that the state provide a multiyear budget forecast to better manage the State’s long-term finances. • Creates a Proposition 98 reserve, known as the “Public School System Stabilization Account,” where spikes in funding would be saved for future years. This is intended to smooth school spending and minimize future cuts to education funding. County Budget Process The County’s Fiscal Year spans from July 1 to June 30; however, the budget development process begins as early as December with the Board of Supervisors setting a Preliminary Budget Schedule for preparation of the upcoming budget. The County Administrator presents the Board of Supervisors, department heads and the public with an analysis of key issues and budget projections in January, followed by budget instructions, departmental budget submissions, meetings with departments in February and March and presentation of the State Controller’s Office required Budget Schedules and Recommended Budget companion document for consideration by the Board of Supervisors in April. Chapter 1, Division 3, Title 3 of the State Government Code, commencing with Section 29000 et. seq. (the “County Budget Act”) requires that each county adopt a recommended budget no later than June 30 of each year and an adopted (or final) budget no later than October 2 of each year. The adoption of a recommended budget by each June 30 provides counties with spending authority until a final budget is passed. In the County, the State schedules are presented with the recommended budget and companion document, which includes detailed information and narrative regarding the County, including its current and projected financial situation; the programs/services and administrative/program goals of individual departments; and the County Administrator’s budgetary recommendations for the upcoming budget year. After public hearings and budget deliberations, the Board of Supervisors adopts the Recommended Budget by May 31 (pursuant to Board of Supervisors Policy). After the State budget is passed (legally due by June 15) and County Fiscal 45340-0001\pos-7 B-4 Year-end closing activities are completed in August, a Final Budget is prepared for consideration by the Board of Supervisors to allow incorporation of any needed adjustments resulting from the State budget. If significant changes to programs or revenues are required based upon the State budget and/or closing activities, public budget hearings regarding the Final Budget may be scheduled. The practice of the County is to adopt its Final Budget no later than mid-September of each year. The County Administrator monitors actual expenditures and revenue receipts each month, and mid-year adjustments may be made in order to ensure that the budget remains in balance throughout the Fiscal Year. Annually, the County Administrator’s staff prepares a report presented to the Board of Supervisors detailing the activity within each budget category and providing 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 budget status report; other items which have major fiscal impacts are also reviewed. Supplemental appropriations, which are normally financed by unanticipated revenues during the Fiscal Year, and any amendments or transfers of appropriations between summary accounts or departments, must be approved by the Board of Supervisors. Pursuant to adoption of a resolution by the Board of Supervisors, the County Administrator is authorized to approve transfers of appropriations among summary accounts within a department as deemed necessary and appropriate. Accordingly, the legal level of budgetary control by the Board of Supervisors is at the department level. 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 provision of services. See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES, REVENUES AND APPROPRIATIONS.” Recent County General Fund Budgets Set forth in Table B-1 is a description of the County’s comparative Final Budgets for Fiscal Years 2012-13 through 2014-15. Base Rental Payments are included in and allocated to individual department budgets. For a summary of the actual audited financial results of the County for Fiscal Year 2009-10 through Fiscal Year 2013-14, see TABLE B-5–“STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FISCAL YEAR 2009-10 THROUGH 2013-14.” See also “COMPREHENSIVE FINANCIAL REPORT OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30, 2014” in APPENDIX C to this Official Statement. Fiscal Year 2015-16. The County’s Fiscal Year 2015-16 budget, adopted by the Board of Supervisors on May 12, 2015 (the “Fiscal Year 2015-16 Adopted Budget”), reflects a General Fund budget of $1.423 billion, which was approximately 5% or $70 million higher than the Fiscal Year 2014-15 approved budget. The Fiscal Year 2015-16 Adopted Budget assumes a strong increase in assessed valuation of 6%. On July 1, 2015, the County Assessor announced an increase of 7.53% in Countywide assessed valuation for Fiscal Year 2015-16. Proposition 172 sales tax revenue, a significant source of revenue for public safety departments, was budgeted at $74.4 million, which was approximately 3% or $2.2 million higher than the Fiscal Year 2014-15 approved budget. The Board of Supervisors took the following actions in relation to the Fiscal Year 2015-16 Adopted Budget:  April 21, 2015 – The Board of Supervisors held budget hearings regarding the Fiscal Year 2015-16 Budget as proposed by the County Administrator. The Board of Supervisors received public comment and directed the County Administrator to prepare for Board adoption on May 12, 2015, the Fiscal Year 2015-16 County and Special District Budgets, as modified, to incorporate any changes directed by the Board of Supervisors during the public hearings. The Board of Supervisors also formally acknowledged that continuing to build the 45340-0001\pos-7 B-5 County’s reserve funds, maintaining an improved credit rating, and maintenance of the County’s physical assets remain priorities of the Board of Supervisors over the long term. In addition, the Board of Supervisors adopted the Fiscal Year 2015-16 State Controller’s Recommended Budget Schedules. This action ensures compliance with statute and authorizes expenditure authority for the coming Fiscal Year.  May 12, 2015 – The Board of Supervisors requested the Auditor-Controller to adjust Fiscal Year 2014-15 appropriations and revenues by reallocating and balancing budgeted and actual expenditures and revenues as needed for various budget units and special districts, subject to Board of Supervisors approval in September 2015, and authorized the Auditor-Controller to make technical adjustments to the Fiscal Year 2015-16 Recommended Budget when actual amounts are known and return to the Board on September 15, 2015 for adoption of the Budget as Finally Determined. Fiscal Year 2014-15. The County’s Fiscal Year 2014-15 budget, adopted by the Board of Supervisors on May 13, 2014 (the “Fiscal Year 2014-15 Adopted Budget”), reflected a General Fund budget of $1.353 billion, which was approximately 6% or $78 million higher than the Fiscal Year 2013-14 approved budget. The Fiscal Year 2014-15 Adopted Budget assumed an increase in assessed valuation of 5%. For Fiscal Year 2014-15, assessed valuation actually increased by approximately 9.1%. Proposition 172 sales tax revenue was budgeted at $72.2 million, which was approximately 4.5% or $3.1 million higher than the Fiscal Year 2013-14 approved budget. The Board of Supervisors took the following actions in relation to the Fiscal Year 2014-15 Adopted Budget:  April 22, 2014 – The Board of Supervisors held budget hearings regarding the Fiscal Year 2014-15 Budget as proposed by the County Administrator. The Board received public comment and directed the County Administrator to prepare for Board of Supervisors adoption on May 13, 2014, the Fiscal Year 2014-15 County and Special District Budgets, as modified, to incorporate any changes directed by the Board of Supervisors during the public hearings. The Board of Supervisors also formally acknowledged that due to significant market losses in the Contra Costa County Employees’ Retirement Association assets in 2008 and changes to economic and demographic assumptions since that time, retirement expenses were expected to increase in the next few years and that restoration of the County’s reserve funds and maintaining the County improved credit rating would remain priorities over the long term. In addition, the Board of Supervisors adopted the Fiscal Year 2014-15 State Controller’s Recommended Budget Schedules. This action ensures compliance with statute and authorizes expenditure authority for the coming Fiscal Year.  May 13, 2014 – The Board of Supervisors requested the Auditor-Controller to adjust Fiscal Year 2013-14 appropriations and revenues by reallocating and balancing budgeted and actual expenditures and revenues as needed for various budget units and special districts, subject to Board of Supervisors approval in September 2014, and authorized the Auditor-Controller to make technical adjustments to the FY 2014-15 Recommended Budget when actual amounts are known and return to the Board of Supervisors on September 16, 2014 for adoption of the Budget as Finally Determined. 45340-0001\pos-7 B-6  September 16, 2014 – The Board of Supervisors adopted the Fiscal Year 2014-15 Adopted Budget as Finally Determined. The Board of Supervisors also authorized final changes to closeout the Fiscal Year 2013-14 County and Special District budgets and authorized the County Administrator and Auditor-Controller to make technical adjustments to the Fiscal Year 2014-15 County and Special Districts budgets, including increasing appropriations in the amount of $1.9 million to partially fund the acquisition of a new helicopter for the Sheriff’s Office using Fiscal Year 2013-14 fund balance.  March 10, 2015 – The Board of Supervisors accepted a mid-year report on the status of the Fiscal Year 2014-15 budget as of December 31, 2014. The report indicated that departmental revenues and expenditures were performing in accordance with expectations and were not projected to exceed the Fiscal Year 2014-15 Adjusted Budget in any major area. For the General Fund, actual expenditures totaled 43.7% of planned spending and actual revenues totaled 37.1% of amounts anticipated for the year. Revenue from State and Federal sources are typically late in being realized because much of it is based on expenditure claims paid in arrears. Normally, departments that rely on State and Federal revenues experience a two to three-month lag in revenue reimbursement. No mid-year budget corrections were recommended for Fiscal Year 2014-15. Fiscal Year 2013-14. The County’s Fiscal Year 2013-14 budget, adopted by the Board of Supervisors on May 15, 2013 (the “Fiscal Year 2013-14 Adopted Budget”), reflected a General Fund budget of $1.275 billion, which was approximately 4% or $53 million higher than the Fiscal year 2012-13 approved budget. The Fiscal Year 2013-14 Adopted Budget assumed an increase in assessed valuation of 2%. For Fiscal Year 2013-14 assessed valuation actually increased by approximately 3.45%. Proposition 172 sales tax revenue was budgeted at $69.1 million, which was approximately 8% or $5.1 million higher than the Fiscal Year 2012-13 approved budget. The Board of Supervisors took the following actions in relation to the Fiscal Year 2013-14 Adopted Budget:  April 23, 2013 – The Board of Supervisors held budget hearings regarding the Fiscal Year 2013-14 Budget as proposed by the County Administrator. The Board of Supervisors received public comment and directed the County Administrator to prepare for Board adoption on May 14, 2013, the FY 2013-14 County and Special District Budgets, as modified, to incorporate any changes directed by the Board of Supervisors during the public hearings. The Board of Supervisors also formally acknowledged that significant economic issues continued to be a challenge in the effort to finance services and programs which County residents need, or expect will be provided to them by the County, especially in a time of economic downturn. The Board of Supervisors also acknowledged that restoration of the County’s reserve funds and an improved credit rating remain priorities over the long term. In addition, the Board of Supervisors adopted the Fiscal Year 2013-14 State Controller’s Recommended Budget Schedules. This action ensures compliance with statute and authorizes expenditure authority for the coming Fiscal Year.  May 14, 2013 – The Board of Supervisors requested the Auditor-Controller to adjust Fiscal Year 2012-13 appropriations and revenues by reallocating and balancing budgeted and actual expenditures and revenues as needed for various budget units and special districts, subject to Board approval in September 2013, and authorized the Auditor-Controller to make technical adjustments to the Fiscal Year 2013-14 Recommended Budget when actual amounts are 45340-0001\pos-7 B-7 known and return to the Board on September 17, 2013 for adoption of the Budget as Finally Determined.  September 17, 2013 – The Board of Supervisors adopted the Fiscal Year 2013-14 Adopted Budget as finally determined. The Board also authorized final changes to closeout the Fiscal Year 2012-13 County and Special District budgets and authorized the County Administrator and Auditor-Controller to make technical adjustments to the Fiscal Year 2013-14 County and Special Districts budgets. The Board of Supervisors also authorized the Auditor-Controller to transfer $15 million from the Tax Losses Reserve Fund into the County General Fund for Facility Lifecycle Improvement Projects (FLIP) related to deferred maintenance in the following budgeted denominations: $5 million for Fiscal Year 2012-13 and $10 million for Fiscal Year 2013-14.  February 25, 2014 – The Board of Supervisors accepted a mid-year report on the status of the Fiscal Year 2013-14 budget as of December 31, 2013. The report indicated that departmental revenues and expenditures were performing in accordance with expectations and were not projected to exceed the Fiscal Year 2013-14 Adjusted Budget in any major area. For the General Fund, actual expenditures totaled 43.0% of planned spending and actual revenues totaled 34.4% of amounts anticipated for the year. Revenue from State and Federal sources are typically late in being realized because much of it is based on expenditure claims paid in arrears. Normally, departments that rely on State and Federal revenues experience a two to three-month lag in revenue reimbursement. No mid-year budget corrections were recommended for Fiscal Year 2013-14. See also “–County Financial Management Policies” for more information. (Remainder of this Page Intentionally Left Blank) 45340-0001\pos-7 B-8 A summary of Final General Fund Budgets for Fiscal Years 2012-13 through 2014-15 is presented in Table B-1. Table B-1 COUNTY OF CONTRA COSTA GENERAL FUND BUDGET SUMMARY FOR FISCAL YEARS 2012-13 THROUGH 2014-15 ($ IN 000’S) Final Budget 2012-13 Final Budget 2013-14 Final Budget 2014-15 Requirements General Government $159,729 $173,896 $194,451 Public Protection 367,919 396,510 417,626 Health and Sanitation 272,443 273,861 289,685 Public Assistance 402,438 413,648 435,912 Education – – – Public Ways and Facilities 37,892 42,521 48,974 Recreation and Culture – – – Reserves and Debt Service 5,036 3,110 4,856 TOTAL REQUIREMENTS 1,245,457 1,303,546 1,391,504 Available Funds Property Taxes 264,573 273,900 294,200 Fund Balance Available 15,950 20,919 35,157 Other Taxes 16,980 17,524 17,817 Licenses, Permits and Franchises 12,236 11,289 11,314 Fines, Forfeitures and Penalties 17,585 21,044 26,691 Use of Money and Property 2,090 2,140 2,146 Intergovernmental 510,617 527,472 531,967 Charges for Current Services 226,355 216,523 223,519 Other Revenue 179,071 212,735 248,693 TOTAL AVAILABLE FUNDS $1,245,457 $1,303,546 $1,391,504 ___________ Source: County Auditor-Controller. County Financial Management Policies The Board of Supervisors has adopted a comprehensive set of financial management policies to provide for: (i) the annual adoption of a policy for the prudent investment of County funds; (ii) establishing a Treasury Oversight Committee; (iii) establishing and maintaining a General Fund reserve (iv) establishing formal fiscal policies regarding the adoption and maintenance of an annual balanced budget, and (v) establishing parameters for issuing and managing debt. Each of these financial management policies is described below. Investment Policy. The County annually adopts an investment policy (the “Investment Policy”) governing the County’s investment of funds in the County Treasurer’s Investment Pool, which as of June 30, 2014 held assets in the approximate amount of $2.4 billion. The most recent update to the Investment Policy was approved by the Board of Supervisors on June 9, 2015. For a description of the Investment Policy and investments held in the County Treasurer’s Investment Pool, see APPENDIX B– 45340-0001\pos-7 B-9 “COUNTY FINANCIAL INFORMATION–CONTRA COSTA COUNTY TREASURER’S INVESTMENT POOL” and APPENDIX D–“COUNTY INVESTMENT POLICY.” Treasury Oversight Committee. In November 1995, the Board of Supervisors adopted an Order establishing a committee (the “Treasury Oversight Committee”). The Treasury Oversight Committee is composed of seven members: the County Superintendent of Schools or his/her designee; a representative selected by a majority of the presiding officers of the governing bodies of the school districts and community college districts in the County; a representative selected by a majority of the presiding officers of the legislative bodies of the special districts in the County that are required or authorized to deposit funds in the County treasury; a representative appointed by the Board of Supervisors; and three members of the public nominated by the County Treasurer-Tax Collector (the “County Treasurer”). Members of the Treasury Oversight Committee are appointed to four year terms. The Treasury Oversight Committee is responsible for reviewing and monitoring the County Treasurer’s annual investment policy and ensuring an annual audit is conducted to determine the County Treasurer’s compliance with Government Code §§27130-27137. General Fund Reserve Policy. In January 2006, the Board of Supervisors adopted a General Fund Reserves Policy, as revised in June 2011 to comply with GASB 54–“Fund Balance Reporting and Governmental Fund Type Definitions” (the “Reserves Policy”). The Reserves Policy requires the County to maintain a General Fund balance equal to a minimum of 10% of General Fund revenues and an unreserved balance equal to a minimum of 5% of General Fund revenues. Reserves exceeding the minimum are applied only to one-time uses such as additional reserves or capital projects up to an amount equal to 1% of General Fund revenues. The reserves can be used only in emergency situations and only if accompanied by a Board-approved plan to restore reserves to the target levels. Since Fiscal Year 2005- 06, the County’s audited financial reports confirm compliance with the Reserves Policy. For Fiscal Year 2013-14, the total General Fund balance was approximately 18.3% of General Fund revenues and the unassigned portion was approximately 10.7%. Budget Policy. In November 2006, the Board of Supervisors adopted a Budget Policy (the “Budget Policy”) to establish best practices for the budget process and require the preparation of multi- year budget projections. Among other things, the Budget Policy requires: (i) the adoption of structurally balanced budgets; (ii) preparation of mid-year departmental updates on budget status, with corrective actions presented to the Board of Supervisors within 30 days for any cost centers over budget; and (iii) adoption of an annual budget early enough (and no later than May 31) to allow all impacts on programs and/or revenues to be in effect on the first day of the Fiscal Year (July 1). Debt Management Policy. In December 2006, the Board of Supervisors adopted a Debt Management Policy, most recently revised on June 7, 2015, that formulized the parameters for issuing and managing outstanding debt, guidance regarding the timing and purpose for which various types of debt instruments and other financial obligations may be issued, the types and amounts of which permissible debt, and the methods of sale and structural features may be incorporated in debt transactions. The Debt Management Policy provides that the County prepare a multi-year capital program and sets forth guidelines for the term of debt issues, refunding savings targets and other structural debt features. The Debt Management Policy established a Debt Affordability Advisory Committee (the “Advisory Committee”) that annually reviews and evaluates existing and proposed debt and other findings; assesses the ability of the County to generate and repay debt; and issues an annual report to the County Administrator defining the debt capacity of the County, which report is an important element of the budget process and includes recommendations made by the Advisory Committee regarding how much new debt can be authorized by the County without overburdening itself with debt service payments. The 45340-0001\pos-7 B-10 Advisory Committee is composed of the Auditor-Controller, the County Treasurer-Tax-Collector, the Director/Conservation and Development, and the County Director of Finance. The Advisory Committee examines specific statistical measures to determine debt capacity and relative debt position and compares these ratios to other counties, rating agency standards and County historical ratios to determine debt affordability. From Moody’s Investors Service, the Advisory Committee evaluates the County against the following debt ratios from the most recently available national medians for counties in the “Aa” rating tier with population of at least one million. 1. Direct debt as a percentage of assessed valuation; 2. Overall net debt as a percentage of assessed valuation; 3. Assessed valuation per-capita; 4. Available General Fund balance as a percentage of revenue; and 5. General Fund balance as a percentage of revenues. From Standard and Poor’s, the Advisory Committee evaluates the County against the following debt ratios from the most recent available national medians for counties in the “AAA” rating tier: 1. Assessed valuation per capita; 2. Direct debt as a percentage of governmental funds revenue; 3. Total government available cash as a percentage of debt service; 4. Total government available cash as a percentage of expenditures; and 5. Total debt service as a percentage of General Fund expenditures. The Advisory Committee also evaluates the County against a group of cohort counties, namely, other large urban counties in the State. The Advisory Committee utilizes each respective cohort county’s most recently available comprehensive audited financial report to measure the comparative performance of the County on the various debt measures calculated by Moody’s and S&P as noted above, and also against the additional ratios below: 1. Direct debt per capital; and 2. Debt payments as a percentage of General Fund revenues. Workers’ Compensation Confidence Level Policy. In September 2007, the Board of Supervisors adopted a Workers’ Compensation Internal Services Fund Funding Policy that established a targeted minimum confidence level (the measure of probability that the workers’ compensation trust fund will have sufficient money to cover all benefits and claims that have been incurred) of 80%. The actuarial report dated as of June 30, 2014 indicated that the total County self-insurance reserves reflected an approximately 86% confidence level on a discounted basis. Ad Valorem Property Taxes General. 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 County Assessor, to secure payment of the taxes. Other property is assessed on the “unsecured roll.” 45340-0001\pos-7 B-11 Ad valorem 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 power of sale by the County Treasurer and may be subsequently sold by the County 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. Ad valorem property taxes on the supplemental roll are 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. Ad valorem 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 of the taxpayer; and (4) by the seizure and sale of personal property, improvements or possessory interest, belonging to the taxpayer. The County and its political subdivisions operate under the Teeter Plan pursuant to provisions of Sections 4701 through 4717 of the California Revenue and Taxation Code. See “–The Teeter Plan.” Pursuant to those sections, the accounts of all political subdivisions that levy ad valorem taxes on the County tax rolls are credited with 100% of their respective tax levies regardless of actual payments and delinquencies. The County Treasury’s cash position (from taxes) is protected by a special fund (the “Tax Losses Reserve Fund”) into which all County-wide delinquent penalties are deposited. The County has used this method since Fiscal Year 1950-51. See the “–Tax Losses Reserve Fund.” Fiscal Year 2014-15 secured ad valorem property tax revenues are expected to comprise approximately 14.5% of General Fund revenues of the County. Assessment Appeals. Property values determined by the County Assessor, which are used to determine property taxes, may be subject to an appeal by the property owners or property taxpayer (the “Applicant”) by filing a timely assessment appeal. The County Assessment Appeals Board (the “Appeals Board”) hears and determines the assessment appeals. The Appeals Board hears appeals within two years of the filing date, except when this period has been extended. The decision of the Appeals Board may result in a reduction to the County Assessor’s enrolled property value and a tax refund to the taxpayer. 45340-0001\pos-7 B-12 Property tax assessment appeals were filed by Chevron for the years 2004 through 2012 challenging the assessed value of its refinery in the City of Richmond. Chevron disagreed with the determinations of the Appeals Board and filed three separate actions in Contra Costa Superior Court. On September 17, 2013, the County Board of Supervisors approved execution of a Settlement Agreement and Release (the “Settlement Agreement”) among Chevron USA, Chevron Corporation, the County, the County Assessor and the City of Richmond, which became effective upon the approval of a Stipulated Settlement by the Appeals Board. The Appeals Board approved the Stipulated Settlement in November 2013. Pursuant to the Settlement Agreement, the assessment appeals by Chevron for the years 2004 through 2012 are resolved, and Chevron agreed to dismiss the three pending court cases challenging the assessed value, withdraw or dismiss the pending appeals before the Appeals Board and forgo an approximately $8 million refund. In addition, Chevron agreed not to file or re-file assessment appeals for any prior fiscal year up to and including fiscal year 2013-14 and to annually meet and confer with the County about the value of the refinery facilities. As agreed to by Chevron and the County Assessor in the Stipulated Settlement, and ordered by the Appeals Board, the assessed value of the refinery was determined to be $3.28 billion for Fiscal Year 2012-12, which replaced the enrolled value of $3.87 billion (a reduction of $591,000,000). The Settlement Agreement does not prevent Chevron from filing assessment appeals or litigation against the County concerning the assessed value of the refinery in future years. The County cannot predict whether additional appeals will be filed by Chevron or any other major property taxpayer in the future, or if filed whether or to what extent such appeals will be successful. Proposition 8 Appeals. In 1978, the voters of the State passed Proposition 8 (“Proposition 8”), a constitutional amendment to Article XIII A that allows a temporary reduction in assessed value when real property suffers a decline in value. A decline in value occurs when the current market value of real property is less than the current assessed (taxable) factored base year value as of the lien date, January 1. See also “–Declines in Fiscal Year 2012-13 and Fiscal Year 2013-14 Assessed Valuation.” A property owner may apply for a Proposition 8 reduction of the ad valorem property tax assessment for such owner’s property by filing a written application, in the form prescribed by the State Board of Equalization, with the appropriate county assessment appeals board (a “Proposition 8” appeal). In addition to reductions in assessed value resulting from Proposition 8 appeals, Proposition 8 also allows assessors to reduce assessed value unilaterally to reflect reductions in market value. Any reduction in the assessment ultimately granted applies only to the year for which application is made and during which written application is filed. The assessed value increases to its pre-reduction level for fiscal years following the year for which the reduction application is filed. However, if the taxpayer establishes through proof of comparable values that the property continues to be overvalued (known as “ongoing hardship”), a county assessor has the power to grant a reduction not only for the year for which application was originally made, but also for the then current year as well. In a similar manner, a county assessor may reassert the pre-appeal level of assessed value depending on the county assessor’s determination of current value. In addition to reductions in assessed value resulting from Proposition 8 appeals, California law also allows assessors to reduce assessed value unilaterally based on a general decline in market value of an area. Although Proposition 8 reductions are temporary only for those property that are not sold to new owners, and are otherwise expected to be eliminated under Proposition 13 if and when market conditions improve, no assurance is given that such reductions will be eliminated. 45340-0001\pos-7 B-13 The Teeter Plan. In 1949, the California Legislature enacted an alternative method for the distribution of secured ad valorem 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”). 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 deposits in the Tax Losses Reserve Fund 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 Corrie v. County of Contra Costa, 110 Cal. App. 2d 210 (1952). The Teeter Plan was named after Desmond Teeter, the then Auditor-Controller of the County who originated this method of tax distribution. The County was the first Teeter Plan county in the State. Tax Losses Reserve Fund. Pursuant to the Law, the County is required to establish 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. As of June 30, 2014, the balance in the Tax Losses Reserve Fund was approximately $90.6 million. An amount equal to $22.0 million of such reserve was transferred to the County’s General Fund in Fiscal Year 2013-14. As of June 30, 2015, the balance in the Tax Losses Reserve Fund is projected to be approximately $85.0 million after the budgeted reserve amount is transferred to the County’s General Fund in Fiscal Year 2014-15. Effect of Foreclosures on Property Tax Collections. As described above, once an installment of property tax becomes delinquent, penalties are assessed commencing on the applicable delinquency date until the delinquent installment(s) and all assessed penalties are paid. In the event of foreclosure and sale of property by a mortgage holder, all past due property taxes, penalties and interest are required to be paid before the property can be transferred to the purchaser/new owner. In addition, as required under the Teeter Plan (described below), the County maintains a Tax Losses Reserve Fund, to cover potential losses that may result if tax-defaulted property is sold by the County for less than the amount of the taxes owed. See also “–The Teeter Plan.” 45340-0001\pos-7 B-14 A recent history of secured County tax levies, delinquencies and the Tax Losses Reserve Fund cash balances as of June 30 of each year is shown in Table B-2 below. Table B-2 COUNTY OF CONTRA COSTA SUMMARY OF SECURED ASSESSED VALUATIONS(1) AND AD VALOREM PROPERTY TAXATION FISCAL YEARS 2007-08 THROUGH 2014-15 Tax Losses Fiscal Secured Secured Current Year Tax Balance in Total Reserve Fund Year Assessed Property % Delinquent Tax Losses as % of Total (June 30) Valuation(1) Tax Levies Delinquencies Delinquent Property Tax Reserve Fund Delinquencies 2007-08(2) $154,721,506,676 $2,077,282,718 $106,031,582 5.10% $143,490,997 $45,174,112 31.48% 2008-09 154,820,838,330 2,061,930,220 86,035,461 4.17 129,971,278 66,209,174 50.94 2009-10 143,356,117,163 1,964,723,577 55,418,474 2.82 101,461,335 84,269,785 83.06 2010-11 139,106,978,652 1,932,503,520 35,684,974 1.85 78,164,109 94,110,127 120.40 2011-12 138,382,133,511 1,973,645,892 54,933,259 2.79 96,699,117 101,354,611 104.81 2012-13 139,353,572,756 1,974,837,555 21,622,707 1.09 58,162,000 96,423,523 165.78 2013-14 144,725,591,361 2,092,731,716(3) 20,610,514 0.99 51,636,396 90,648,537 175.55 2014-15 158,026,299,690 N/A N/A N/A N/A N/A N/A ___________ (1) Assessed values are those defined under California Revenue and Taxation Code Sections: 601 and 721 et. seq. Article XIII A, added to California Constitution by Proposition 13 in 1978, fixed the base for valuation of property subject to taxes at the full cash value which appeared on the Assessor’s 1975-76 assessment roll. Thereafter, full cash value can be increased to reflect: (i) annual inflation up to 2%; (ii) current market value at time of ownership change; and (iii) market value for new construction. (2) Revised. (3) Adjusted on January 5, 2015 from the original amount reported ($2,083,809,768). Source: County Auditor-Controller–Property Tax Division. From 2008 through 2010, residential mortgage loan defaults and foreclosures increased significantly in connection with the collapse of the subprime sector of the residential mortgage market and broader economic pressures. In California, the greatest impacts were in regions of the Central Valley and the Inland Empire (both areas that are outside of the County), although the County was impacted as well, particularly in the eastern portions of the County where the largest number of new mortgages were originated. Since 2010, notices of default and foreclosures have declined significantly. Based on information provided by an independent data collection service for calendar year 2014, mortgage holders had sent 2,245 notices of default with respect to properties located within the County compared to 2,972 during calendar year 2013, and 819 trustee deeds had been recorded (indicating that the property has been lost to foreclosure) during calendar year 2014 compared to 1,490 during calendar year 2013. A summary of the notices of default sent and trustee deeds recorded for the cities within the County during calendar years 2010 through 2014 are set forth in Table B-3. Table B-3 CONTRA COSTA COUNTY SUMMARY OF FORECLOSURE ACTIVITY CALENDAR YEARS 2010 THROUGH 2014 Notices of Defaults Foreclosures Incorporated 2010 2011 2012 2013 2014 % Change 2013 to 2014 2010 2011 2012 2013 2014 % Change 2013 to 2014 Alamo 92 97 57 18 31 72.2% 40 34 13 6 0 – Antioch 1,871 1,617 1,088 540 348 (35.6) 1,288 1,003 619 249 160 (35.7%) Bethel Island 24 23 22 6 6 0.0 19 19 10 8 3 (62.5) Brentwood 1,013 835 555 193 138 (28.5) 568 518 279 88 50 (43.2) Byron 7 7 6 2 1 (50.0) 4 2 5 1 1 0.0 Clayton 89 103 63 38 22 (42.1) 35 38 22 17 7 (58.8) Concord 1,493 1,263 814 307 243 (20.8) 796 872 484 162 91 (43.8) Crockett 40 27 14 12 7 (41.7) 19 16 8 6 5 (16.7) Danville 396 355 272 112 79 (29.5) 141 130 73 29 20 (31.0) Diablo 3 5 0 1 1 0.0 0 2 1 0 0 0.0 Discovery Bay 343 278 212 80 50 (37.5) 194 175 93 41 19 (53.7) El Cerrito 90 94 61 22 13 (40.9) 36 44 33 11 1 (90.9) El Sobrante 350 252 188 94 72 (23.4) 177 202 120 42 17 (59.5) Hercules 487 424 319 126 95 (24.6) 239 257 159 62 29 (53.2) Knightsen 3 2 1 0 0 0.0 2 12 1 0 0 0.0 Lafayette 79 84 64 24 21 (12.5) 30 31 19 3 1 (66.7) Martinez 503 480 351 110 88 (20.0) 265 311 159 65 29 (55.4) Moraga 59 43 41 18 16 (11.1) 24 19 11 8 3 (62.5) Oakley 695 573 429 176 122 (30.7) 438 395 244 80 50 (37.5) Orinda 64 65 42 16 16 0.0 26 10 13 3 3 0.0 Pinole 218 233 138 56 32 (42.9) 113 109 106 40 16 (60.0) Pittsburg 1,288 1,006 741 276 245 (11.2) 935 722 383 155 88 (43.2) Pleasant Hill 258 255 180 56 38 (32.1) 134 126 72 25 24 (4.0) Richmond 1,014 815 591 222 192 (13.5) 679 622 354 151 85 (43.7) Rodeo 104 91 74 34 31 (8.8) 65 63 28 22 14 (36.4) San Pablo 793 645 523 201 144 (100.3) 482 463 291 117 60 (48.7) San Ramon 651 565 379 112 114 1.8 233 251 130 46 19 (58.7) Walnut Creek 519 467 299 116 79 (31.9) 253 287 147 53 24 (54.7) Subtotal Incorporated 12,546 10,704 7,524 2,968 2,244 (24.4)(1)7,235 6,733 3,877 1,490 819 (45.0)(1)Unincorporated 18 17 11 4 1 (75.0)(2) 41 3 4 0 0 0.0(2)Total County 12,564 10,721 7,535 2,972 2,245 (24.5)(3)7,276 6,736 3,881 1,490 819 (45.0)(3)____________ (1) Represents the average for all incorporated areas. (2) Represents the average for all unincorporated areas. (3) Represents the Countywide average. Source: MDA DataQuick Information. B-15 45340-0001\pos-7 B-16 Largest Property Taxpayers The 10 largest property taxpayers in the County, as shown on the Fiscal Year 2013-14 secured tax roll and the approximate amounts of their ad valorem property tax payments and the 10 largest property taxpayers by assessed value are shown below in Table B-4A and Table B-4B, respectively. Table B-4A COUNTY OF CONTRA COSTA TEN LARGEST PROPERTY TAXPAYERS BY TAXES PAID FISCAL YEAR 2013-14(1) Taxpayer Total Taxes Paid(2) Percent of Total County Tax Roll(2) Chevron USA Inc.(3) $46,631,982 2.25% Pacific Gas & Electric 27,138,136 1.31 Equilon Enterprises LLC 20,945,361 1.01 Tesoro Refining & Marketing 15,687,332 0.76 Tosco Corporation 14,531,052 0.70 Pacific Bell Telephone Co. 8,580,830 0.41 SDC 7 8,043,909 0.39 Genon Marsh Landing, LLC 6,044,703 0.29 First Walnut Creek Mutual 6,013,015 0.29 Sierra Pacific Properties Inc. 5,902,911 0.29 SUBTOTAL TEN LARGEST TAXPAYERS $159,519,232 7.71 Other Taxpayers 1,910,043,527 92.29 TOTAL $2,069,562,759 100.00% ______________ (1) Most recent data available. (2) Column does not total due to rounding. (3) In July 2014, the final environmental impact report and applications submitted by Chevron Products Company for a Conditional Use Permit (“CUP”) and Design Review Permit (“DRP”), as well as an Environmental and Community Investment Agreement (the “ECIA”) was approved by the City of Richmond to allow an approximately $1.0 billion replacement of the existing hydrogen plant, power plant, and reformer. The equipment is designed to improve the ability of the Chevron refinery to process high-sulfur crude oil, reliability, energy efficiency, and add environmental controls. An injunction that had halted project construction of this project in 2009 was lifted by the Contra Costa County Superior Court in April 2015, and the Bay Area Air Quality Management District reissued the authority-to-construct permit. Chevron has commenced updating its engineering, procurement and construction plans. It is expected that, field construction will restart in mid to late 2016 and be completed within 18 months to two years. Source: County Treasurer-Tax Collector. (Remainder of this Page Intentionally Left Blank) 45340-0001\pos-7 B-17 Table B-4B COUNTY OF CONTRA COSTA TEN LARGEST PROPERTY TAXPAYERS BY TAXABLE ASSESSED VALUE (SECURED AND UNITARY) FISCAL YEAR 2013-14(1) Taxpayer Taxable Assessed Value(2) Percent of Total Chevron USA Inc.(3) $3,217,924,448 2.25% Pacific Gas & Electric 1,881,913,680 1.32 Equilon Enterprises LLC 1,353,518,289 0.95 Tesoro Refining & Marketing 1,279,317,983 0.90 Tosco Corporation 694,544,328 0.49 Pacific Bell Telephone Co. 544,800,000 0.38 SDC 7 425,073,340 0.30 Genon Marsh Landing, LLC 418,787,284 0.29 First Walnut Creek Mutual 360,313,182 0.25 Sierra Pacific Properties Inc. 326,900,000 0.22 SUBTOTAL TEN LARGEST TAXPAYERS 10,503,092,534 7.35 Other Taxpayers 132,361,460,664 92.65 TOTAL $142,864,553,198 100.00% ______________ (1) Most recent data available. (2) Includes secured and unitary values. (3) In July 2014, the final environmental impact report and applications submitted by Chevron Products Company for a Conditional Use Permit (“CUP”) and Design Review Permit (“DRP”), as well as an Environmental and Community Investment Agreement (the “ECIA”) was approved by the City of Richmond to allow an approximately $1.0 billion replacement of the existing hydrogen plant, power plant, and reformer. The equipment is designed to improve the ability of the Chevron refinery to process high-sulfur crude oil, reliability, energy efficiency, and add environmental controls. An injunction that had halted project construction of this project in 2009 was lifted by the Contra Costa County Superior Court in April 2015, and the Bay Area Air Quality Management District reissued the authority-to-construct permit. Chevron has commenced updating its engineering, procurement and construction plans. It is expected that, field construction will restart in mid to late 2016 and be completed within 18 months to two years. Source: Contra Costa County Comprehensive Annual Financial Report, Fiscal Year Ended June 30, 2014. 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. In 1999, the SBE adopted a rule that provides for local assessment of certain investor-owned electric utility facilities. As a result of this rule, the County Assessor currently assesses three power plants located in the County. However, assessment of certain power plants has been transferred to the SBE, so the portion of the County’s total net assessed valuation constituting unitary property subject to SBE assessment has increased (see further discussion below). 45340-0001\pos-7 B-18 For Fiscal Year 2013-14, approximately 2.1% of the County’s total net assessed valuation constituted property subject to State assessment by the SBE, for which approximately $44.2 million of property taxes were collected in Fiscal Year 2013-14. The portion of Fiscal Year 2013-14 tax collections through the SBE assessment methodology attributable to the County General Fund was approximately $8.8 million. For Fiscal Year 2014-15, approximately 1.9% of the County’s total net assessed valuation constituted property subject to State assessment by the SBE, for which approximately $45.9 million of property taxes are expected to be collected in Fiscal Year 2014-15. The portion of Fiscal Year 2014-15 tax collections through the SBE assessment methodology attributable to the County General Fund for Fiscal Year 2014-15 is expected to be $8.7 million. Dissolution of Redevelopment Agency No revenues of the Contra Costa County Redevelopment Agency (the “Former Agency”) have ever been pledged as a payment source for County indebtedness in the past and such revenues are not pledged to the payment of the Series 2015 Bonds. No General Fund expenses of the County have ever been paid from Former Agency revenues. Two bills enacted as part of the 2011 State Budget Act (ABx1 26 and ABx1 27 (Chapter 6, Statutes of 2011-12, First Extraordinary Session) (the “Dissolution Act” and “AB 27,” respectively) dissolved all redevelopment agencies, and designated “successor agencies” and “oversight boards” to satisfy “enforceable obligations” of the dissolved redevelopment agencies and to administer the wind down and dissolution of the dissolved redevelopment agencies. The California Supreme Court upheld the Dissolution Act, resulting in the formal dissolution of all redevelopment agencies in the State, including the Former Agency, effective February 1, 2012. All property tax revenues that would have been allocated to redevelopment agencies, including the Former Agency, will be allocated to the applicable redevelopment property tax trust fund created by the county auditor-controller for the “successor agency.” Such funds will to be used for payments on indebtedness and other “enforceable obligations” (as defined in the Dissolution Act), and to pay certain administrative costs and any amounts in excess of that amount are to be considered property taxes that will be distributed to taxing agencies. In addition, under the Dissolution Act tax increment is no longer deemed to flow to the successor agency and the requirement to deposit a portion of the tax increment into a low and moderate income housing fund is also no longer required. Rather, all funds are considered property taxes. See “SECURITY FOR THE BONDS.” Pursuant to California Health and Safety Code Section 34173(d), the Board of Supervisors declared that the County would act as the “successor agency” to the Former Agency (the “Successor Agency”) under the Dissolution Act. Pursuant to AB 1484, the Successor Agency is a separate public entity from the County. The Dissolution Act also required that an oversight board for each successor agency be established no later than May 1, 2012. The Successor Agency duly established the Oversight Board of the Successor Agency to the Contra Costa County Redevelopment Agency (the “Oversight Board”) pursuant to California Health and Safety Code Section 34179(a). The Dissolution Act expressly limits the liabilities of a successor agency in performing duties under the Dissolution Act to the amount of property tax revenues received by such successor agency under the Dissolution Act (generally equal to the amount of former tax increment received by the former redevelopment agency) and the assets of the former redevelopment agency. The Dissolution Act does not provide for any new sources of revenue, including general fund revenues of the County, for any Former Agency bonds (but as discussed below, the costs to the County of performing its obligations under the 45340-0001\pos-7 B-19 Dissolution Act and of pursuing the economic development goals of the Former Agency are uncertain and could be significant. Under the Dissolution Act, the County Auditor-Controller is required to determine the amount of property taxes that the redevelopment agencies would have received had they not been dissolved pursuant to the Dissolution Act, using assessed values on the last equalized roll on August 20, statutory formulas or contractual agreements with taxing entities, and deposit such amount in the Redevelopment Property Tax Trust Fund. The Redevelopment Property Tax Trust Fund is administered by the County Auditor- Controller for the benefit of the holders of enforceable obligations and the taxing entities that receive pass-through payments and property tax distributions. Although provisions have been made under the Dissolution Act to provide funds (i.e. property tax revenues) to continue certain enforceable obligations, the costs of the Successor Agency in performing its duties under the Dissolution Act, including performing all enforceable obligations of the Former Agency, and pursing community development goals that the Former Agency undertook and that are not covered by enforceable obligations are uncertain, and could impose significant costs on the General Fund not offset by property tax revenues. The Successor Agency does not issue separate financial statements. Although a separate legal entity from the County, the financial results for the Successor Agency are reported as fiduciary funds in the CAFR of the County. Accounting Policies, Reports and Audits The County believes that its accounting policies used in preparation of its audited financial statements conform to generally accepted accounting principles applicable to counties. The County’s governmental funds use the modified accrual basis of accounting. This system recognizes revenues when they become available and measurable. Expenditures are recognized when the fund liability is incurred. Proprietary funds and fiduciary funds (except for Agency funds) use the accrual basis of accounting, whereby revenues are recognized when they are earned and become measurable, while expenses are recognized when the liabilities are incurred. The County Treasurer also holds certain trust and agency funds not under the control of the Board of Supervisors, such as those of school districts, which are accounted for on a cash basis. The California Government Code requires every county to prepare an annual financial report. The County Auditor-Controller prepares the Comprehensive Annual Financial Report for the County. This annual report covers financial operations of the County, County districts and service areas, and various trust transactions of the County Treasury. Under California law, independent audits are required of all operating funds under the control of the Board of Supervisors. The County has had independent audits for more than 40 years. See APPENDIX C–“COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30, 2014.” In addition to the above-mentioned audits, the County Grand Jury may also conduct management audits of certain offices of the County. The County, like other State and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the County can be divided into these categories as follows: (i) governmental funds; (ii) proprietary funds; and (iii) fiduciary funds. 45340-0001\pos-7 B-20 Governmental Funds: used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government- wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of resources that are available for spending as well as on balances of resources that are available for spending at the end of the Fiscal Year. The County maintains 26 individual governmental funds (e.g. General Fund, special revenue funds, debt service funds, capital projects funds and permanent fund) for reporting purposes. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund, the Contra Costa County Fire Protection District Special Revenue Fund, and the Health and Sanitation Special Revenue Fund. Proprietary Funds: used to account for information of the same type as the government-wide financial statements, only in more detail. These are of two different types: (i) Enterprise Funds (used to report the same functions presented as business-type activities in the government-wide financial statements) and (ii) Internal Service Funds (used to accumulate and allocate costs internally among the County’s various functions and to account for its administrative costs and payment of claims for its various insurance programs). Fiduciary Funds: used to account for resources held for the benefit of entities legally separate from the County and individuals, which are not part of the reporting entity. Fiduciary Funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the County’s own programs. 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 30 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, 2014 appears in APPENDIX C to this Official Statement. (Remainder of this Page Intentionally Left Blank) 45340-0001\pos-7 B-21 Table B-5 COUNTY OF CONTRA COSTA GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FISCAL YEARS 2009-10 THROUGH 2013-14 ($ IN THOUSANDS) 2009-10 2010-11 2011-12 2012-13 2013-14 REVENUES Taxes $291,937 $284,644 $286,122 $294,155 $314,670 Licenses, permits & franchises 11,496 11,576 11,344 10,737 11,678 Fines, forfeitures & penalties 13,889 17,870 15,131 28,016 29,357 Use of money & property† 2,673 2,827 3,078 4,967 3,408 Intergovernmental revenues† 544,262 573,932 479,494 482,049 488,683 Charges for services† 215,363 217,702 203,374 196,362 207,361 Other revenue† 79,246 79,166 139,180 210,328 242,236 TOTAL REVENUES 1,158,866 1,187,717 1,137,723 1,226,614 1,297,393 EXPENDITURES Current: General government 134,325 141,645 131,640 132,586 147,491 Public protection 321,272 323,178 329,321 334,200 349,074 Health & sanitation 215,292 224,424 218,161 230,429 250,374 Public assistance 378,622 389,332 366,855 378,675 382,491 Education 218 – – – – Public ways and facilities 40,841 37,346 38,140 32,613 36,127 Recreation and culture – 43 – – – Debt service: Principal 52 20 79 100 85 Interest 1 110 51 48 45 TOTAL EXPENDITURES 1,090,623 1,116,098 1,084,247 1,108,651 1,165,687 Excess (deficiency) of Revenues over (under) Expenditures 68,243 71,619 53,476 117,963 131,706 OTHER FINANCING SOURCES (USES) Operating transfers in 23,922 23,833 43,698 1,474 62 Operating transfers out (89,520) (87,093) (87,993) (85,485) (83,869) Issuance of debt – – 262 14 – Premium on debt issues – – – – – Capital lease financing –944 245 1,182 1,797 TOTAL OTHER FINANCING SOURCES (USES) (65,598)(62,316)(43,788) (82,815)(82,010) NET CHANGE IN FUND BALANCES 2,645 9,303 9,688 35,148 49,696 FUND BALANCE AT BEGINNING OF YEAR 130,724 133,369 142,672 152,360 187,508 FUND BALANCE AT END OF YEAR $133,369 $142,672 $152,360 $187,508 $237,204 _______________ † The terms “Use of money and property,” “Intergovernmental revenues,” “Charges for services,” and “Other revenue” are defined in “Accounting Standards and Procedures for Counties.” Revision No. 2 May 1, 2014. California State Controller’s Office. Source: County Auditor-Controller. 45340-0001\pos-7 B-22 County Employees A summary of the total number of County full-time equivalent (FTE) employees is set forth below: Table B-6 COUNTY OF CONTRA COSTA FULL-TIME EQUIVALENT COUNTY EMPLOYEES(1) As of June 30 Number of FTE Employees 2006 8,423 2007 8,409 2008 8,697 2009 8,625 2010 8,191 2011 8,142 2012 8,329 2013 8,367 2014 8,624 2015(1)8,417 2016(2) 8,905 ___________ (1) As of June 30, 2015. (2) Budgeted. Source: County Administrator’s Office. Contract Negotiations County employees are represented in 42 bargaining units by 15 labor organizations, the principal ones being Public Employees Union, Local One; Local 1021 of the Service Employees International Union (“SEIU”) and Local 2700 of the American Federation of State County and Municipal Employees (“AFSCME”) which, combined, represent approximately 55% of all permanent County and Contra Costa County Fire District employees in a variety of classifications. The Memoranda of Understanding (the “MOUs”) of the employee organizations that have expired remain in full force and effect. Table B-7 summarizes the labor organizations at the County, contract expiration dates and status of negotiations. (Remainder of this Page Intentionally Left Blank) 45340-0001\pos-7 B-23 Table B-7 COUNTY OF CONTRA COSTA LABOR ORGANIZATION UNIT CONTRACT EXPIRATION DATES (As of June 30, 2015) Contract Total Expiration Number of Labor Organization Date Employees(1) AFSCME Local 512, Professional and Technical Employees 06/30/16 271 AFSCME Local 2700, United Clerical, Technical and Specialized Employees 06/30/17 1,506 California Nurses Association 07/31/14(2) 603 Contra Costa County Defenders Association 06/30/15(2) 63 Contra Costa County Deputy District Attorneys Association 06/30/15(2) 87 Deputy Sheriff’s Association, Management Unit and Rank and File Unit 06/30/16 824 District Attorney Investigator’s Association 06/30/16 14 Contra Costa County Firefighters Association, IAFF, Local 1230 06/30/17 256 Management Classified, Exempt and Management Project N/A(3) 322 Physicians and Dentists of Contra Costa 10/31/16 257 Probation Peace Officers Association 06/30/15(2) 203 Professional and Technical Engineers, Local 21, AFL-CIO 06/30/16 887 Public Employees Union, Local One 06/30/16 2,107 SEIU Local 1021, Rank and File and Service Line Supervisors Units 06/30/16 983 United Chief Officers’ Association 06/30/14 12 Western Council of Engineers 06/30/17 22 TOTAL 8,417 ____________ (1) Figures represent permanent employee counts. (2) Negotiations are in process and the employees continue to work for the County pursuant to the terms of the existing MOU for this labor organization. (3) Not represented. Source: Contra Costa County Human Resources Department. Pension Plan Description. The Contra Costa County Employees’ Retirement Association (the “Association” or “CCCERA”) is a cost-sharing multiple-employer defined pension benefit plan governed by the County Employees’ Retirement Law of 1937, as amended (the “1937 Act”), and the Public Employees’ Pension Reform Act of 2013 (“PEPRA” and together with the 1937 Act, the “Retirement Law”). The plans cover substantially all of the employees of the county, its special districts, the Housing Authority of the County and four other member agencies. CCCERA issues a stand-alone financial report, which is available at its office located at 1355 Willow Way, Suite 221, Concord, California 94520 and on their website at http://www.cccera.org/publicationssample.html. For additional information on the County’s pension plan, see APPENDIX C–“COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30, 2014–Note 14–Employees’ Retirement Plan.” The plan provides for retirement, disability, and death and survivor benefits, in accordance with the 1937 Act. Annual cost-of-living adjustments to retirement benefits can be granted by the Board of Retirement of the Association (the “Board of Retirement”) as provided by State statutes. CCCERA uses the “Entry Age” method to determine the normal cost and the Actuarial Accrued Liability (AAL). Under this method, the employer contribution rate provides for current cost (normal cost) plus a level percentage of payroll to amortize the Unfunded Actuarial Accrued Liability (UAAL). Normal cost under the Entry Age method is the annual contribution rate that, if paid annually from a 45340-0001\pos-7 B-24 member’s first year of membership through the year of retirement, would accumulate to the amount necessary to fully fund the member’s retirement benefit if all underlying assumptions are met. The UAAL is the difference between the Actuarial Accrued Liability and the Actuarial Value of Assets. The plan is currently divided into 11 benefit sections in accordance with the 1937 Act and PEPRA. These levels are known as General Tier I Enhanced, Tier II, Tier III Enhanced, Tier IV, Tier V (2% and 3% maximum COLAs); Tier V (2% and 3%/4% Maximum COLAs); Safety Tier A Enhanced, Safety Tier C Enhanced, Safety Tier D, Tier I Enhanced, and Tier IV. On October 1, 2002, the Contra Costa County Board of Supervisors adopted Resolution No. 2002/608, which provided enhanced benefit changes commonly known as 3% at 50 for Safety members and 2% at 55 for general members, effective July 1, 2002, and January 1, 2003, respectively. Effective January 1, 2005, the enhanced benefits were applied to the bargaining units represented by the California Nurses Association and the nonrepresented employees within similar classifications as employees in bargaining units represented by the California Nurses Association, as well as the supervisors and managers of those employees. In addition, each special district that is a participant of CCCERA, and whose staff are not county employees covered by Resolution No. 2002/608, was permitted to participate in the enhanced benefits. As of December 31, 2012, nine general member agencies and four safety member agencies had adopted enhanced benefits for their employees. A fifth safety member agency adopted enhanced benefits for its general members in 2003, but not for safety members. Under PEPRA, which became effective January 1, 2013, special districts that have not adopted enhanced benefits will no longer be allowed to do so. Legislation signed by the Governor in 2002 allowed the County, effective October 1, 2002, to provide Tier III to all new employees, to move those previously in Tier II to Tier III as of that date, and to apply all future service as Tier III. Tier III was originally created October 1, 1998, and made available to all members with five or more years of Tier II service who elected to transfer to Tier III coverage. Tier I includes members not mandated to be in Tier II or Tier III prior to PEPRA and reciprocal members who were placed in Tier I membership. There are no active Tier II member accounts. All members who moved to Tier III with five or more years of service prior to October 1, 2002, or were moved to Tier III effective October 1, 2002, January 1, 2005, or February 1, 2006, continue to have Tier II benefits for service prior to that date unless the service is converted to Tier III. Safety includes members in active law enforcement, active fire suppression work or certain other “Safety” classifications as defined in sections of the 1937 Act made operative by the Board of Supervisors. Effective January 1, 2007, Contra Costa County and the Deputy Sheriff’s Association agreed to adopt a new Safety Tier C for sworn employees hired by the County after December 31, 2006. A Deputy Sheriff hired on or after January 1, 2007 through December 31, 2012, had a 3% at 50 benefit formula with a 2% maximum COLA and a 36 month final average salary period. Due to PEPRA, a Deputy Sheriff hired on or after January 1, 2013, has a 2.7% at 57 benefit formula with a 36 month final average salary period with compensation limited as noted below. The 2% maximum annual COLA is unchanged. In March 2010, the Board of Retirement agreed to adopt a change to terminal pay elements for members with membership dates on or after January 1, 2011. Except for the California Nurses Association, effective January 1, 2012, new hires and employees are now responsible for the payment of 100% of the employees’ basic retirement benefit contributions, determined annually by the Board of Retirement, without the County paying any part of the employee’s contributions. 45340-0001\pos-7 B-25 On September 12, 2012, the Governor of California signed into law Assembly Bill (AB) 340 as amended by trailer bill AB 197, with an effective date of January 1, 2013. PEPRA changed how county retirement boards were permitted to calculate their current members’ retirement allowances. In November 2012, CCCERA members and their representative bargaining units filed a lawsuit challenging the validity of the new law. By operation of a court-imposed Stay Order, CCCERA was prohibited from implementing the new law during the course of the litigation. On May 12, 2014, the Contra Costa County Superior Court entered a Judgment in the litigation and a Writ directing CCCERA to proceed to comply with AB 197 for all retirements effective on or after July 12, 2014. The matter was appealed. The Court of Appeal was requested to issue a “stay” of the implementation of AB 197 past July 11, 2014 during the pendency of the appeal. On June 30, 2014, the Court of Appeal issued an order denying the request for an additional “stay.” CCCERA was therefore required to implement the AB 197 changes in calculating benefits for all retirements with an effective date of July 12, 2014 or later. Retirements with an effective date of July 11, 2014 or before were calculated under the pre-AB 197 rules. In November 2012, the County Board of Supervisors approved two memoranda of understanding (deputy district attorneys and public defenders) that stipulated new members who become members after December 31, 2012 within these bargaining units will earn retirement benefits that will be subject to a maximum annual COLA of 2%. As a result, CCCERA created a second Tier V for general members subject to this COLA provision. The majority of the bargaining units have since agreed to this COLA provision for those who become members after a certain date. PEPRA established new tiers for General and Safety employees entering membership on or after January 1, 2013. The benefit formula for General members is 2.5% at age 67 and the Safety formula is 2.7% at age 57. Benefits under the PEPRA tiers are based on a three-year final average compensation period. Additionally, PEPRA limits the amount of compensation CCCERA can use to calculate a retirement benefit. The 2014 compensation limits were $115,064 for members covered by Social Security and $138,077 for members not covered by Social Security and will be adjusted in future years for changes in the Consumer Price Index. County General members are covered by Social Security, while County Safety members and Contra Costa County Fire Protection District General and Safety members are not covered by Social Security. The 2015 compensation limits are $117,020 and $140,424, respectively. At CCCERA’s September 4, 2013 meeting, the Board of Retirement approved to use base pay only for purposes of pensionable compensation for PEPRA members and to exclude all other special compensation beyond base pay. In addition, the Board of Retirement clarified that Fair Labor Standards Act pay items will be excluded from pensionable compensation. In September 2013, CCCERA received a favorable letter of determination from the Internal Revenue Service (IRS). With a “Letter of Determination,” the retirement plan is “tax-qualified” under the Internal Revenue Code and IRS rules, and therefore plan participants are not taxed when contributions are made to the plan, but rather upon receipt of benefits at retirement. On January 1, 2014, AB 1380, making various technical corrections that align the 1937 Act with provisions of PEPRA became effective. On January 22, 2014 of the Board of Retirement exercised the discretion permitted by AB 1380 to no longer round members’ contribution rates for PEPRA members to the nearest quarter of one percent as previously required by PEPRA. This should allow for the normal cost of employees covered under the PEPRA tiers to be paid equally by employees and the County. In August 2014, California Senate Bill No. 673 was passed. As a result, CCCERA became a district for the purposes of the 1937 Act effective January 1, 2015 and CCCERA staff members became employees of CCCERA, thus relieving the County of future obligations relating to them. With the passing of Senate Bill No. 673 and the implementation of GASB Statement Nos. 67 (CCCERA) and 68 (the County) in Fiscal Year 2014-15, CCCERA is no longer being considered a blended component unit of the County. 45340-0001\pos-7 B-26 Service retirement benefits are based on age, length of service and final average salary in accordance with the California Government Code Sections 31462, 31462.1, and 7522.32. For the Tiers I, III and Safety Tier A sections, the retirement benefit is based on a one-year final average salary. For Tiers II, IV, V and Safety Tiers C, D, and E, the benefit is based on a three-year final average salary. A five-year schedule of the funding progress for the Association is set forth in Table B-8. Table B-8 CONTRA COSTA COUNTY EMPLOYEES’ RETIREMENT ASSOCIATION SCHEDULE OF FUNDING PROGRESS ($ in 000’s) Actuarial Valuation Date Actuarial Value of Assets(1) (a) Actuarial Accrued Liability (AAL)(2) Entry Age (b) Unfunded AAL (UAAL) (b-a) Funded Ratio (a/b) Covered Payroll (c) UAAL as a Percentage of Covered Payroll (b-a/c) 12/31/09 $5,290,114 $6,314,787 $1,024,673 83.7% $694,444 147.6% 12/31/10 5,341,822 6,654,037 1,312,215 80.3 687,443 190.9 12/31/11 5,426,719 6,915,312 1,488,593 78.5 666,394 223.4 12/31/12 5,482,257 7,761,316 2,279,059 70.6 652,312 349.4 12/31/13 5,907,416 7,731,097 1,823,681 76.4 679,429 268.4 12/31/14 6,557,496 8,027,438 1,469,942 81.7 697,832 210.6 _____________ (1) Excludes assets for non-valuation reserves. (2) Excludes liabilities from non-valuation reserves. Sources: CCERA Comprehensive Annual Financial Reports for the years ended December 31, 2009 through 2013 and the CCCERA Actuarial Valuation and Review as of December 31, 2014. During calendar year 2014, 7,791 County employees were active members of the Association, representing approximately 85% of the Association’s total active membership. Listed in Table B-9 is a summary of member population in the Association and in Table B-10 are the payments made by the County to the Association for normal retirement costs as well, as in certain years, UAAL amortized payments. Table B-9 COUNTY OF CONTRA COSTA EMPLOYEES’ RETIREMENT ASSOCIATION TOTAL MEMBER POPULATION Year Ended December 31 Total Association Active Members Inactive Vested and Terminated Members† Retired Members and Beneficiaries Total Membership 2010 8,811 2,231 7,559 18,601 2011 8,629 2,214 8,085 18,928 2012 8,640 2,288 8,517 19,445 2013 9,124 2,345 8,625 20,094 2014 9,159 2,647 8,871 20,677 _____________ † Includes terminated members due a refund of member contributions. Sources: CCCERA Comprehensive Annual Financial Reports for the years ended December 31, 2010 through 2014. 45340-0001\pos-7 B-27 Table B-10 CONTRA COSTA COUNTY EMPLOYEES’ RETIREMENT ASSOCIATION SCHEDULE OF EMPLOYER CONTRIBUTIONS ($ IN 000’S) Year Ended December 31 Annual Pension Cost (APC) Percentage APC Contributed Net Pension Asset 2012 $177,406 88.10% $363,877 2013 206,077 87.68 338,487 2014 219,647 86.25 308,287 _______________ Source: Contra Costa County Comprehensive Annual Financial Report, Fiscal Year Ended June 30, 2014. Funding Policy. Pursuant to provisions of the Retirement Law, the Retirement Board recommends the annual contribution rates for adoption by the Board of Supervisors. The contribution rates, based on the actuarial study as of December 31, 2013, became effective on July 1, 2015. The contribution requirements are determined as a percentage of payroll. The employer rates were calculated on the alternate funding method permitted by the California Government Code Section 31453.5. The “entry age normal funding” method is used to calculate the rate required to provide all the benefits promised to a new member. On March 25, 2009, the Retirement Board decided to leave the UAAL derived from periods on or before the December 31, 2007 valuation date to be amortized on a level percent closed basis over 14 years on a declining basis with eight years remaining as of December 31, 2014. Changes in UAAL after December 31, 2007, will be separately amortized over a fixed 18-year period effective with that valuation; and effective December 31, 2013, any changes in UAAL due to plan amendments (with the exception of a change due to retirement incentives) will be amortized over a 10- year fixed period effective with that valuation. The entire increase in UAAL resulting from a temporary retirement incentive will be funded in full upon adoption of the incentive. Active plan members are required to contribute an actuarially determined percentage of their annual covered salary. The required percentage rates vary according to the benefit section and entry age of the employee. The rates in effect during Fiscal Year 2014-15 (based on covered payroll as of January 1, 2012) ranged from ___% to ___% (for members with membership dates before January 1, 2011), ___% to ___% (for members with membership dates on or after January 1, 2011 and before January 1, 2013) and ___% to ___% (for members with membership dates on or after January 1, 2013) of the employees’ annual covered salary. These rates do not include any employer subvention of member contributions or any member subvention of employer contributions. The employer rates in effect during Fiscal Year 2014-15 (based on covered payroll as of January 1, 2013) ranged from 7.92% to 22.99% of the employees’ annual covered salary depending upon employer and tier. 45340-0001\pos-7 B-28 The employer rates of contribution for the County, calculated as a percentage of the covered payroll, as determined in an actuarial report as of December 31, 2013 for Fiscal Year 2015-16 are set forth in Table B-11. Table B-11 CONTRA COSTA COUNTY EMPLOYEES’ RETIREMENT ASSOCIATION EMPLOYER CONTRIBUTION RATES FISCAL YEAR 2015-16† Members with Membership Dates Before 1/1/11 On or After 1/1/11 and Before 1/1/2013 On or After 1/1/2013 General Members, Tier I Enhanced General Members, Tier II General Members, Tier III Enhanced General PEPRA Tier IV (2% Max COLA) General PEPRA Tier IV (3% Max COLA) General PEPRA Tier V (2% Max COLA) General PEPRA Tier V (3%/4% Max COLA) Safety Members, Tier A Enhanced Safety Members, Tier C Enhanced Safety Members, PEPRA Tier D Safety Members, PEPRA Tier E CCC Fire Protection District – Tier I Enhanced CCC Fire Protection District – Safety Tier A Enhanced CCC Fire Protection District – Safety PEPRA Tier D CCC Fire Protection District – PEPRA Tier IV (3% Max COLA) ______________ † Most recent data available. Source: County Auditor Controller based upon the CCERA Actuarial Valuation and Review as of December 31, 2013. An actuarial valuation and review as of December 31, 2014 recommending contribution rates for 2016 was accepted by the Board of Retirement in July 2015. The rates for Fiscal Year 2016-17 are not expected to be available until fall 2015. (Remainder of this Page Intentionally Left Blank) 45340-0001\pos-7 B-29 Table B-12 sets forth the balances as of December 31, 2013 and December 31, 2014, in reserved and designated fiduciary net positions: Table B-12 CONTRA COSTA COUNTY EMPLOYEES’ RETIREMENT ASSOCIATION RESERVES AND DESIGNATED FIDUCIARY NET POSITIONS ASSUMING A 7.25% ACTUARIAL RATE OF RETURN (AS OF DECEMBER 31, 2013 AND 2014) ($ IN THOUSANDS) Amount Category 2013 2014 Total Valuation Reserves $5,907,417 $6,557,496 Post Retirement Death Benefit 15,033 15,064 Statutory Contingency Reserve (one percent) 0 0 Deferred Return 535,868 336,350 NET POSITION RESTRICTED FOR PENSION BENEFITS $6,458,318 $6,908,910 ______________ Sources: CCCERA Comprehensive Annual Financial Report for the Year Ended December 31, 2014. The revenues of CCCERA by source, net assets at the end of the year and the total return on market value for the five years ending December 31, 2013 are set forth in Table B-13. Table B-13 CONTRA COSTA COUNTY EMPLOYEES’ RETIREMENT ASSOCIATION SCHEDULE OF REVENUES, NET ASSETS AT MARKET VALUE AND RETURN ON MARKET VALUE 2009 THROUGH 2013 ($ IN THOUSANDS) Net Assets Source of Revenues Held at Investment Market Value Return Year Employee Employer Income/ End of on Market (December 31) Contributions Contributions (Loss)(1) Year(2) Value(3) 2009 $66,536 $195,614 $748,861 $4,476,730 19.7% 2010 64,330 183,951 605,672 5,027,157 13.4 2011 61,575 200,389 100,363 5,052,290 1.8 2012 73,362 212,321 680,538 5,027,157 13.3 2013 72,373 235,017 884,870 6,458,318 15.5 _______________ (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. Sources: CCCERA Comprehensive Annual Financial Reports for the years ended December 31, 2009 through 2013. Investment Policy of the Association. The Board of Retirement adopted its investment guidelines in 1985 and has amended those guidelines, the most recent amendment having been adopted on June 17, 2014 (the “Investment Policy”). The Investment Policy prescribes, among other things, asset class targets for investment of Association funds. The asset allocation targets and their associated ranges, which are a function of the returns and risks from various asset class and the nature of the Association’s liabilities, currently are set forth in Table B-14. 45340-0001\pos-7 B-30 Table B-14 CONTRA COSTA COUNTY EMPLOYEES’ RETIREMENT ASSOCIATION INVESTMENT POLICY ASSET ALLOCATION TARGETS (AS OF DECEMBER 31, 2014) Asset Type Current Investment Allocation Target Allocation Range Total Equity 45.9% 42.6% 40% to 55% Fixed Income 24.1 24.4 20 to 30 High Yield Fixed Income 4.7 5.0 2 to 9 Real Estate 12.9 12.5 10 to 16 Inflation Hedge 4.7 5.0 0 to 10 Alternative Investments† 6.7 10.0 5 to 12 Opportunistic 0.4 0.0 0 to 5 Cash and Equivalents 0.5 0.5 0 to 1 TOTAL 100.0% 100.0% _____________ † CCCERA does not have any hedge fund investments. Source: CCCERA’s Statement of General Investment Policies and Guidelines (Last revised 10/30/13); and Milliman’s Quarterly Review & Performance Measurement Report for the period ending December 31, 2014. CCCERA contracts with 34 investment managers who are responsible for investment of their respective portion of the portfolio. The Investment Policy prescribes investment guidelines to be followed by the investment managers as well as monitoring procedures regarding their performance. Other Post-Employment Benefits Overview. The County is the plan sponsor and administers a single-employer defined benefit healthcare plan. This plan provides post-employment medical and dental insurance benefits to eligible retired employees and their dependents. Health benefit provisions for active employees are established and may be amended through negotiations between the County and the respective bargaining units. The County contracts with Kaiser Permanente, Health Net, Contra Costa Health Plans and PERS to provide medical benefits, and Delta Dental and PMI Deltacare for dental benefits. Actuarial Reports. Since delivery of an initial actuarial report in 2006 prepared by Buck Consultants LLC that presented the actuarial analysis of County liability other post-employment benefits (“OPEB”), the OPEB liability has declined from $2.6 billion, based upon a 4.5% discount rate as of January 1, 2006, to $794.4 million, based upon a 5.7% discount rate as of January 1, 2014. The approximately 69% reduction in the OPEB liability is a result of the actions taken by the Board of Supervisors since 2006. Actuarial Methods and Assumptions. Projections of benefits for financial reporting purposes are based on the substantive plan and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the January 1, 2014 actuarial valuation, the projected unit credit cost method was used. The actuarial assumptions included a 5.70% discount rate. This rate was derived based on the fund’s investment policy for a partially funded plan. A 6.25% annual return is assumed on the Trust’s assets, and a 3.50% discount rate is assumed for liabilities expected to be funded directly by the county. This resulted in a blended discount rate of 5.70%. Overall health costs of the medical benefits will increase 45340-0001\pos-7 B-31 according to the health cost inflation trend derived by using the “Getzen” model developed by the Society of Actuaries. Under the Patient Protection and Affordable Care Act of 2010, a federal excise tax will apply for high cost health benefits beginning in 2018. A margin to reflect the impact of the excise tax in future years is reflected in the assumed trend. The UAAL is being amortized as a level dollar amount over 30 years on a closed basis. The remaining amortization period is 24 years. Effective January 1, 2015, CCCERA personnel became employees of the County. Their OPEB obligation is included with the County’s data. Eligibility. Currently, eligible County retirees may participate in the plans upon retirement from the County (drawing a pension from CCCERA). Currently, eligible members in deferred retirement status may participate in County health plans as retirees, so long as they are receiving a pension from CCCERA within 24 months of separation from the County. The number of County retirees and beneficiaries of County retirees receiving OPEB benefits and the annual required contribution made by the County are set forth in Table B-15. Table B-15 CONTRA COSTA COUNTY SUMMARY OF ACTIVE PLAN MEMBERS AND OTHER POST-EMPLOYMENT BENEFIT PLAN PARTICIPATING RETIREES (Calendar Years) Calendar Year Active Plan Members Number of Participating Retirees(1) 2010 7,338 5,251 2011 7,169 (2) 2012 7,269 5,941 2013 7,735 (2) 2014 7,791 6,206 _____________ (1) Represents retirees and beneficiaries of retirees. (2) Actuarial reports are prepared every two years, therefore data for odd numbered years is not available. Sources: CCCERA Comprehensive Annual Financial Report for the Years Ended December 2014. Funding Policy. The contribution requirements for program members and the County are established and may be amended through negotiations between the County and the respective bargaining units. For over 40 years, the County paid for healthcare costs, the funding was based on a pay-as-you-go (“pay-go”) basis. In Fiscal Year 2008-09, the County began making annual contributions in the amount of $20 million to the OPEB Trust Fund. For the Fiscal Year 2013-14, the funding was based on the pay-go basis plus a contribution of $19,373,000 to the OPEB Trust Fund. For Fiscal Year ending June 30, 2014, the County paid $57,272,000 as the pay-go cost (approximately 81.63% of total premiums). Plan members receiving benefits contributed $12,887,000, or approximately 18.37% of the total premiums, through their required contribution. The contributions for Fiscal Year 2013-14, were as follows: 45340-0001\pos-7 B-32 Table B-16 CONTRA COSTA COUNTY OTHER POST-EMPLOYMENT BENEFIT PLAN SUMMARY OF CONTRIBUTIONS FISCAL YEAR ENDING JUNE 30, 2014 ($ IN THOUSANDS) Active Employees Retirees Total Total blended premiums at $11,305 per plan member $0 $70,159 $70,159 Employer pre-funding contributions 0 19,373 19,373 Less: member contributions 0 (12,887) (12,887) Total Employer Contributions $0 $76,645 $76,645 _____________ Source: Comprehensive Annual Financial Report of the County for the Fiscal Year Ended June 30, 2014. For Fiscal Year 2014-15, the Board of Supervisors budgeted $19,440,000 to pre-fund OPEB liabilities. Allocation of Funds for OPEB. The Board of Supervisors adopted Ordinance No. 2014-04 that, commencing in Fiscal Year 2022-23, redirects pension obligation bond debt service payments to the payment of OPEB costs following the final maturity of the outstanding pension obligation bonds in Fiscal Year 2021-22. Ordinance No. 2014-04 may only be amended by a 4/5 vote of the Board of Supervisors. Funded Status and Funding Progress. As of January 1, 2014, the most recent actuarial valuation date, the OPEB obligation was 14.0% funded. The actuarial accrued liability for benefits was $924 million, and the actuarial value of assets was $129 million, resulting in an unfunded actuarial liability (UAAL) of $794 million. The covered payroll (annual payroll of active employees covered by the plan) was $614 million, and the ratio of the unfunded accrued actuarial liability (UAAL) to the covered payroll was 129.42%. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past exceptions and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities. 45340-0001\pos-7 B-33 Table B-17 CONTRA COSTA COUNTY OTHER POST-EMPLOYMENT HEALTH BENEFITS SCHEDULE OF FUNDING PROGRESS ($ IN THOUSANDS) Actuarial Actuarial UAAL as % Actuarial Value of Accrued Unfunded Funded Covered of Covered Valuation Assets Liability (AAL) AAL Ratio Payroll Payroll Date (a) (b) (b - a) (a/b) (c) ((b - a) / c) 01/01/2010 $61,720 $1,077,734 $1,016,014 5.73% $599,734 169.41% 01/01/2012 65,491 1,033,801 968,310 6.33 595,245 162.67 01/01/2014 129,426 923,848 794,422 14.01 613,841 129.42 _____________ Source: Comprehensive Annual Financial Report of the County for the Fiscal Year Ended June 30, 2014. The County has an agreement with the majority of its bargaining units, for the limited purpose of reopening bargaining over Health, Life & Dental Care, to explore changes effective in the 2016 Plan year. The County is evaluating alternative approaches to sharing health care premiums for the 2016 Plan year, taking into consideration any effect on its budget. In the event the parties fail to reach an agreement by January 1, 2016, the bargaining units reserve the right to strike with respect to the subject of the reopener. Annual OPEB Cost and Net OPEB Obligation. The County’s annual OPEB cost (expense) is calculated based on the ARC, an amount actuarially determined in accordance with the parameters of GASB Statement 45. The County charges current costs of these benefits to the department from which the employee retired. The County has determined that the future liability is an obligation of the general government. The County records the accrued liability and expense in the general government classification of the Government-Wide Statement of Net Position and Statement of Activities. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal costs each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The following table shows the components of the County’s annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the County’s net OPEB obligation ($ in thousands): Annual required contribution $88,538 Interest on net OPEB obligation 27,839 Adjustment to annual required contribution (35,802) Annual OPEB cost (expense) 80,575 Contributions made (76,645) Increase in net OPEB obligation 3,930 Net OPEB obligation (asset), beginning of year 488,397 Net OPEB obligation (asset), end of year $492,327 _____________ Source: Comprehensive Annual Financial Report of the County for the Fiscal Year Ended June 30, 2014. 45340-0001\pos-7 B-34 The County’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net OPEB obligation for the Fiscal Year June 30, 2014 are set forth in Table B-18: Table B-18 CONTRA COSTA COUNTY OTHER POST-EMPLOYMENT BENEFITS PLAN ANNUAL OPEB COST Percentage of Fiscal Year Annual Annual OPEB Net OPEB Ended OPEB Cost Cost Contributed Obligation 06/30/2012 $94,630,000 74.7% $471,538,000 06/30/2013 93,780,000 82.0 488,397,000 06/30/2014 80,575,000 95.1 492,327,000 _____________ Source: Comprehensive Annual Financial Report of the County for the Fiscal Year Ended June 30, 2014. The current funding policy is to partially pre-fund the plan with annual trust contributions of approximately $20 million and future planned increases to this amount while also funding the pay-as-you- go cost of benefits. 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, lease obligations and direct and overlapping debt. No General Obligation Debt. The County has no direct general obligation bonded indebtedness and has no authorized and unissued general obligation debt. 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 2040. Certain of the lease obligations of the County reflect annual payments made for debt service on lease revenue bonds issued to finance capital projects. As of June 30, 2015, the County had approximately $252.5 million in lease revenue obligations outstanding. For a summary of the County’s outstanding lease revenue obligations, see APPENDIX C–“COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30, 2014–Notes to General Purpose Financial Statements.” Pension Obligation Bonds. The County issued pension obligation bonds in 1994, a portion of which were restructured in 2001, and again in 2003 (of which $236.9 million principal amount are outstanding as of June 30, 2015) to refund debentures issued to evidence its statutory obligation to make pension payments with respect to its UAAL to CCCERA. See also “–Pension Plan.” 45340-0001\pos-7 B-35 Fiscal Year debt service for the County’s lease revenue obligations and pension obligation bonds outstanding as of June 30, 2015 is shown in Table B-19 below. Table B-19 COUNTY OF CONTRA COSTA OUTSTANDING LEASE REVENUE OBLIGATIONS AND PENSION OBLIGATION BONDS Fiscal Year Ending (June 30) Total Lease Debt Service(1) Total POB Debt Service Total Debt Service 2016 $34,918,476 $36,914,526 $71,833,002 2017 32,517,716 38,484,360 71,002,076 2018 31,992,616 40,114,901 72,107,517 2019 31,873,504 41,821,636 73,695,140 2020 30,349,064 43,600,400 73,949,463 2021 30,345,814 45,452,243 75,798,057 2022 27,803,176 47,382,398 75,185,574 2023 27,765,151 – 27,765,151 2024 17,726,676 – 17,726,676 2025 15,315,043 – 15,315,043 2026 13,644,230 – 13,644,230 2027 12,411,445 – 12,411,445 2028 6,224,985 – 6,224,985 2029 3,183,975 – 3,183,975 2030 3,147,895 – 3,147,895 2031 3,106,580 – 3,106,580 2032 3,054,280 – 3,054,280 2033 2,997,495 – 2,997,495 2034 2,941,225 – 2,941,225 2035 2,885,125 – 2,885,125 2036 2,818,850 – 2,818,850 2037 2,755,700 – 2,755,700 2038 2,691,950 – 2,691,950 2039 2,622,250 – 2,622,250 2040 2,546,600 – 2,546,600 TOTAL(2) $347,639,820 $293,770,643 $641,410,282 _______________ (1) Includes debt service on Refunded Bonds. Excludes capital leases, debt service on the 2015 Bonds and federal subsidy receipts for certain Build America Bonds and Recovery Zone Bonds payable by the County. See “PLAN OF FINANCE–Refunding.” (2) Totals may not add due to independent rounding. Source: County Administrator’s Office. 45340-0001\pos-7 B-36 Direct and Overlapping Debt. The County contains numerous municipalities, school districts and special purpose districts, as well as the overlapping East Bay Municipal Utility District, which has issued general obligation bonded and lease indebtedness. Set forth in Table B-20 below is a direct and overlapping debt report (the “Debt Report”) prepared by California Municipal Statistics Inc. that summarizes such indebtedness as of June 30, 2015. The Debt Report is included for general information 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. Table B-20 CONTRA COSTA COUNTY DIRECT AND OVERLAPPING BOND DEBT [Available on 7/17/2015] _____________ Source: California Municipal Statistics, Inc. 45340-0001\pos-7 B-37 Future Capital Projects The County expects to submit an application for construction grant funding pursuant to Senate Bill 863 (Chapter 37, Statutes of 2014) – “Construction of Adult Local Criminal Justice Facilities” (“SB 863”) for an expansion of the West County Detention Facility in Richmond, California with a focus on rehabilitation and re-entry programming for inmates. Pursuant to SB 863, the State will award up to $500 million to counties for the acquisition, design, renovation, or construction of adult local criminal justice facilities. The State will allocate available funds to counties through a competitive process. The maximum allocation for large counties, such as the County, is $80 million. SB 863 requires applicants to provide a minimum 10% match of the total project costs. The County is also undertaking a comprehensive update of future and existing maintenance needs of certain facilities owned by the County. A draft report identified a 10 year deferred maintenance/capital renewal cost of $272.2 million when adjusted for surplus and uninhabitable buildings. The County continues to assess this situation. Insurance and Self-Insurance Programs The County is exposed to various risks of loss related to liabilities and damages to the public at- large, as well as damage to, loss of, and destruction of assets and has obligations to provide its employees with negotiated and mandated benefits. The County self-insures its employee dental, state unemployment, management long-term disability, workers’ compensation, automotive liability, public liability, and medical liability exposures. The County reports the activities of these exposures through its internal service funds. With respect to the workers’ compensation, automotive liability, public liability and medical liability exposures, the County purchases excess insurance:  Workers’ compensation in excess of $750,000 per incident, with excess coverage provided by CSAC-EIA (California State Association of Counties Excess Insurance Pooling Fund).  General and auto liability in excess of $1 million per incident, to a limit of $50 million.  Medical malpractice in excess of $1 million per incident, to a limit of $21.5 million. The County is self-insured for most insurable risk, except for insurance coverage provided by commercial insurance and reinsurance companies that are subject to the following:  Airports liability and property damage coverage to a limit of $100 million with no deductible.  Property insurance - all risk in excess of $50,000 per incident, to a limit of $600 million from loss by fire, lightning, and other perils.  Property insurance - flood damage in excess of 2% per unit, $100,000 minimum and $500,000 maximum deductible per incident, to a limit of $490 million shared aggregate.  Property insurance - earthquake in excess of 5% per unit, $100,000 minimum, to a limit of $490 million shared aggregate. 45340-0001\pos-7 B-38  Property insurance - terrorism to a limit of $200 million with a $500,000 deductible.  Crime bond coverage in excess of $100,000 per incident, to a limit of $20 million for fidelity coverage, computer, and funds transfer fraud.  Watercraft liability to a limit of $50 million.  Sheriff’s helicopters to a limit of $50 million per incident.  Boiler and machinery to a limit of $100 million with a $5,000 deductible.  Cyber liability coverage in excess of $100,000 with an aggregate limit of $2 million. During the past five years there have been no instances of the amount of claim settlements exceeding excess insurance coverage. All excess coverage insurance policies have an annual coverage period ending July 1, 2015, except for medical malpractice, which is on a two-year coverage cycle ending October 1, 2015, and property insurance, which is on an annual coverage period ending March 31, 2016. Internal service funds are used to account for the County’s self-insurance activities. The County’s policy is to provide in each fiscal year, by charges to affected operating funds, amounts sufficient to cover the estimated expenditures for self-insured claims. Charges to operating funds are recorded as expenditures/expenses of such funds and revenues of the internal service funds. Accrual and payment of claims are recorded in the internal service funds. The County has accrued a liability of $169,396,000 at June 30, 2014, for all self-insured claims in the internal service funds. The self-insurance reserve is based on actuarially determined amounts for workers’ compensation, pubic and automobile liability, and medical liability and based on management’s estimates for all other reserves. The actuarially determined claims liabilities, including incurred but not reported claims are based on the estimated ultimate cost of settling the claims, using past experience adjusted for current trends, and any other factors that modify past experience. It also includes incremental claim adjustment expenses. In addition, estimated recoveries on settled and unsettled claims were evaluated in terms of their estimated realizable value and deducted from the liability for unpaid claims. Health Plans The County administers two health plans: HMO Medi-Cal and HMO Commercial Plans (Plans); which are reported as enterprise funds. The Plans have fee-for-service arrangements in which providers, including the County Hospital, bill for individual services provided to enrollees. These arrangements result in claim submission by providers subsequent to services being rendered. Claims expenses are presented as part of services and supplies expense in the statement of revenues, expenses, and changes in net position. Estimated liabilities for incurred but not reported claims are presented as part of accounts payable and accrued liabilities in the statement of net position. The provision for claims incurred but not reported claims is developed in-house using principles and assumptions that consider among other things, contractual requirements, historical utilization trends and payment patterns, benefit changes, medical inflation, product mix, seasonality, membership, and other relevant factors. 45340-0001\pos-7 B-39 Changes to the internal service funds’ claims liability amount, including medical liability claims payable, for Fiscal Years 2012-13 and 2013-14 are as follows ($ in thousands): Liability at June 30, 2012 $146,622 FY 2012-2013 claims and changes in estimates 62,055 FY 2012-2013 claim payments (47,819) Liability at June 30, 2013 160,858 FY 2013-2014 claims and changes in estimates 51,330 FY 2013-2014 claim payments (42,792) Liability at June 30, 2014 $169,396 The actuarially determined claims liabilities, including incurred but not reported claims, are based on the estimated ultimate cost of settling the claims, using past experience adjusted for current trends, and any other factors that modify past experience. It also includes incremental claim adjustment expenses. In addition, estimated recoveries on settled and unsettled claims were evaluated in terms of their estimated realizable value and deducted from the liability for unpaid claims. For additional information on the County’s insurance coverage, see APPENDIX C– “COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30, 2014–NOTES TO GENERAL PURPOSE FINANCIAL STATEMENTS.” 45340-0001\pos-7 C-1 APPENDIX C COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30, 2014 45340-0001\pos-7 D-1 APPENDIX D COUNTY INVESTMENT POLICY    ʹͲͳͶǦʹͲͳͷ ƒ‰‡ͳ  CONTRA COSTA COUNTY TREASURER’S ANNUAL INVESTMENT POLICY  FISCALYEAR2014Ͳ2015 APPROVED BY THE BOARD OF SUPERVISORS JUNE 2014 The Contra Costa County Treasurer will annually present to both the Board of Supervisors (Board) and the Treasury Oversight Committee (Committee) a statement of investment policy, which the Board shall review and approve at a public meeting. Any changes in the policy shall also be reviewed and approved by the Board at a public meeting (Gov’t Code §53646(a)(1)). OFFICE OF COUNTY TREASURER-TAX COLLECTOR 625 COURTS STREET, ROOM 100 MARTINEZ, CALIFORNIA 94553    ʹͲͳͶǦʹͲͳͷ ƒ‰‡ʹ  TableofContents 1.0PURPOSE.............................................................................................................................................3 2.0SCOPE..................................................................................................................................................3 3.0PARTICIPANTS.....................................................................................................................................3 4.0IMPLEMENTATION..............................................................................................................................3 5.0OBJECTIVES.........................................................................................................................................3 6.0GENERALSTRATEGY...........................................................................................................................4 7.0STANDARDOFCARE...........................................................................................................................5 8.0SAFEKEEPINGANDCUSTODY.............................................................................................................6 9.0AUTHORIZEDBROKERS/DEALERSANDFINANCIALINSTITUTIONS...................................................7 10.0SUITABLEANDAUTHORIZEDINVESTMENTS.....................................................................................7 11.0RESTRICTIONSANDPROHIBITIONS.................................................................................................13 12.0INVESTMENTPARAMETERS.............................................................................................................14 13.0CALIFORNIALOCALAGENCYINVESTMENTFUND(LAIF).................................................................16 14.0PORTFOLIOMANAGEMENTACTIVITY.............................................................................................17 15.0REPORTING.......................................................................................................................................18 16.0COMPENSATION...............................................................................................................................19 17.0CALCULATINGANDAPPORTIONINGPOOLEARNINGS....................................................................19 18.0NONͲMANDATEDDEPOSITSANDWITHDRAWALSINTHETREASURY...........................................20 19.0TEMPORARYBORROWINGOFPOOLFUNDS...................................................................................21 20.0INVESTMENTOFBONDPROCEEDS..................................................................................................22 21.0DISASTERRECOVERYPLAN..............................................................................................................22 22.0POLICYCONSIDERATIONS................................................................................................................22 AUTHORIZATIONFORLAIFINVESTMENTS..................................................................................................23 APPROVEDBROKERS...................................................................................................................................24 APPROVEDISSUERS....................................................................................................................................25 APPROVEDPRIMARYDEALERS...................................................................................................................26 GLOSSARYOFTERMS..................................................................................................................................27    ʹͲͳͶǦʹͲͳͷ ƒ‰‡͵   CONTRA COSTA COUNTY TREASURER’S ANNUAL INVESTMENT POLICY 1.0PURPOSE ThepurposeofthisInvestmentPolicy(Policy)istoestablishcashmanagementandinvestment guidelinesofsurplusfundsentrustedtothecareoftheContraCostaCountyTreasurer’sOffice (Treasurer’sOffice)inaccordancewithapplicablesectionsofCaliforniaGovernmentCode.Allportfolio activitieswillbejudgedbythestandardsofthePolicyanditsrankingofinvestmentobjectives. 2.0SCOPE ThisPolicyappliestoallfundsoverwhichtheTreasurer’sOfficehasbeengrantedfiduciaryresponsibility anddirectcontrolfortheirmanagement. 3.0PARTICIPANTS ThisPolicyrestrictsdepositstothoseagenciesmandatedbyCaliforniaGovernmentCodeastreasury deposits.However,subjecttotheconsentoftheTreasurer’sOfficeandinaccordancewithsection 53684,exemptionsmaybegrantedtononͲmandatorydepositingagencies,ifitisdeterminedthatthe additionaldepositprovidesabenefittotheinvestmentpoolasawholewhilenotcreating unmanageableliquidityrisk. 4.0IMPLEMENTATION Inordertoprovidedirectiontothoseresponsibleformanagementofsurplusfunds,theCounty TreasurerhasestablishedthisPolicyandpresentedittotheTreasuryOversightCommitteeandthe BoardofSupervisors,andhasmadeavailablethereporttothelegislativebodyoflocalagenciesthat participatesintheCountyTreasurer’sinvestmentprogram. ThePolicyexplainsinvestablefunds;authorizedinstruments;creditqualityrequired;maximum maturitiesandconcentrations;collateralrequirements;qualificationsofbrokerͲdealersandfinancial institutionsdoingbusinesswith,oronbehalfof,theCounty;limitsongiftsandhonoraria;thereporting requirements;theTreasuryOversightCommittee;themannerofappropriatingcosts;andthecriteriato requestwithdrawaloffunds. 5.0OBJECTIVES Gov’tCode§53600.5:Wheninvesting,reinvesting,purchasing,acquiring,exchanging,sellingor managingpublicfunds,theprimaryobjectiveofatrusteeshallbetosafeguardtheprincipalofthefunds underitscontrol.Thesecondaryobjectiveshallbetomeettheliquidityneedsofthedepositor.The thirdobjectiveshallbetoachieveareturnonthefundsunderitscontrols. 5.1 Safetyofprincipalistheforemostobjectiveoftheinvestmentprogram.Investmentsshallbe undertakeninamannerthatseekstoensurethepreservationofcapitalintheoverallportfolio. Theobjectivewillbetomitigatecreditriskandmarketrisk. 5.1.aCreditRisk TheTreasurerwillminimizecreditrisk,theriskoflossduetothefailureofthesecurity issuerorbacker,by: 1.Limitinginvestmentstothesafesttypeofsecurities    ʹͲͳͶǦʹͲͳͷ ƒ‰‡Ͷ  2.PreͲqualifyingthefinancialinstitutions,broker/dealers,intermediaries,andadvisers withwhichtheTreasurer’sOfficewilldobusiness 3.Diversifyingtheinvestmentportfoliosothatpotentiallossesonindividualsecurities willbeminimized. 5.1.bMarketRisk TheTreasurer’sOfficewillminimizetheriskthatthemarketvalueofsecuritiesinthe portfoliowillfallduetochangesingeneralinterestrates,by: 1.Structuringtheinvestmentportfoliosothatsecuritiesmaturetomeetcash requirementsforongoingoperations,therebyavoidingtheneedtosellsecuritieson theopenmarketpriortomaturity 2.InvestingoperatingfundsprimarilyinshorterͲtermsecurities,moneymarketmutual funds,orsimilarinvestmentpools. 5.2 Liquidity:Theinvestmentportfolioshallremainsufficientlyliquidtomeetalloperating requirementsthatmaybereasonablyanticipated.Thisisaccomplishedbystructuringthe portfoliosothatsecuritiesmatureconcurrentwithcashneedstomeetanticipateddemands. Furthermore,sinceallpossiblecashdemandscannotbeanticipated,theportfolioshouldconsist largelyofsecuritieswithactivesecondaryorresalemarkets.Aportionoftheportfolioalsomay beplacedinmoneymarketmutualfundsorlocalgovernmentinvestmentpoolswhichoffer sameͲdayliquidityforshortͲtermfunds. 5.3 Yield:Theinvestmentportfolioshallbedesignedwiththeobjectiveofattainingamarketrateof returnthroughoutbudgetaryandeconomiccycles,takingintoaccounttheinvestmentrisk constraintsandliquidityneeds.Returnoninvestmentisofsecondaryimportancecomparedto thesafetyandliquidityobjectivesdescribedabove.Thecoreofinvestmentsislimitedto relativelylowrisksecuritiesinanticipationofearningafairreturnrelativetotheriskbeing assumed.Securitiesmaybesoldpriortomaturitywhendeemedprudentandnecessary. Reasonsofsellingincludebutnotlimitedto: 1. Asecuritywithdecliningcreditmaybesoldearlytominimizelossofprincipal. 2. Asecurityswapwouldimprovethequality,yield,ortargetdurationintheportfolio. 3. Liquidityneedsoftheportfoliorequirethatthesecuritybesold. 4. Portfoliorebalancingwouldbringtheportfoliobackintocompliance. Investmentswillbemadewithjudgmentandcare,undercircumstancesthenprevailing,which personsofprudence,discretionandintelligenceexerciseinthemanagementoftheirown affairs,notforspeculation,butforinvestment,consideringtheprobablesafetyoftheircapital aswellastheprobableincometobederived. 5.4 PublicTrust:Allinvestmentswillbeinconformancewithstatelawandcountyordinancesand policies.Theinvestmentofpublicfundsisataskthatmustmaintainthepublictrust. 6.0 GENERALSTRATEGY 6.1BuyandHold:TheTreasurerwillgenerallyusethepassiveinvestmentstrategyknownasBUY ANDHOLDwhereassecuritiesarepurchasedwiththeintentofholdingthemtomaturity. Interestincomeandthereinvestmentofinterestincomeusuallyaretheonlysourcesofreturn intheportfolio. Theinvestmentprogramwillfocusonpurchasingsecuritiesthatwilllimitorreducethe potentialdefaultriskandensurethereliabilityofcashflowsfrominterestincome.Generally, purchaseswillbeladderedthroughouttheportfolioinordertominimizethenumberandcost ofinvestmenttransactions.    ʹͲͳͶǦʹͲͳͷ ƒ‰‡ͷ  6.2 DirectedInvestment:Localagenciesmaydirecttheinvestment,exchange,liquidationand reinvestmentoftheirassets,butmustmeettheprovisionsoftheinvestmentobjectivesofthis policy.ThewithdrawaloffundsintheTreasuryshallcoincidewithinvestmentmaturitiesor authorizedsalesofsecuritiesbythelocalagency’slegislativeorgoverningbody. 7.0STANDARDOFCARE ThefollowingpoliciesaredesignedinaccordancewithGovernmentCodetoprovidetransparencytothe investmentprogramwhileenhancingportfoliocontrols: 7.1PrudentInvestorStandard:“Governingbodiesoflocalagenciesorpersonsauthorizedtomake investmentdecisionsonbehalfofthoselocalagenciesinvestingpublicfundsaretrusteesand thereforefiduciariessubjecttotheprudentinvestorstandard.Wheninvesting,reinvesting, purchasing,acquiring,exchanging,sellingormanagingpublicfunds,atrusteeshallactwithcare, skill,prudenceanddiligenceunderthecircumstancesthenprevailing,thataprudentperson actinginalikecapacityandfamiliaritywiththosematterswoulduseintheconductoffundsofa likecharacterandwithlikeaims,tosafeguardtheprincipalandmaintaintheliquidityneedsof theagency.Withinthelimitationsofthissectionandconsideringindividualinvestmentsaspart toanoverallstrategy,investmentsmaybeacquiredasauthorizedbylaw.”(Gov’tCode §53600.3.1) 7.2 LimitsonHonoraria,Gifts,andGratuities InaccordancewithCaliforniaGovernmentCodeSection27133(d),thisPolicyestablisheslimits fortheDirectorofFinance;individualsresponsibleformanagementoftheportfolios;and membersoftheInvestmentGroupandReviewGroupwhodirectindividualinvestment decisions,selectindividualinvestmentadvisorsandbroker/dealers,andconductdayͲtoͲday investmenttradingactivity.ThelimitsalsoapplytomembersoftheOversightCommittee.Any individualwhoreceivesanaggregatetotalofgifts,honorariaandgratuitiesinexcessof$50ina calendaryearfromabroker/dealer,bankorserviceprovidertothePooledInvestmentFund mustreportthegifts,datesandfirmstothedesignatedfilingofficialandcompletethe appropriateStateforms. Noindividualmayreceiveaggregategifts,honoraria,andgratuitiesinacalendaryearinexcess oftheamountspecifiedinSection18940.2(a)ofTitle2,Division6oftheCaliforniaCodeof Regulations.Thislimitationis$440fortheperiodJanuary1,2013,toDecember31,2014.Any violationmustbereportedtotheStateFairPoliticalPracticesCommission. PleaserefertotheContraCostaCountyTreasurerͲTaxCollector’sConflictofInterestCodefor furtherexplanationoftheprohibitedactivities,andtheirenforcementsandexceptions. 7.3 DelegationofAuthority 7.4.aSubjecttoSection53607,theboardofsupervisorsmay,byordinance,delegatetothe countytreasurertheauthoritytoinvestorreinvestthefundsofthecountyandthe fundsofotherdepositorsinthecountytreasury,pursuanttoChapter4(commencing withSection53600)ofPart1ofDivision2ofTitle5.Thecountytreasurershall thereafterassumefullresponsibilityforthosetransactionsuntiltheboardofsupervisors eitherrevokesitsdelegationofauthority,byordinance,ordecidesnottorenewthe annualdelegation,asprovidedinSection53607(Gov’tCode§27000.1). 7.4.bTheauthorityofthelegislativebodytoinvestortoreinvestfundsofalocalagency,orto sellorexchangesecuritiessopurchased,maybedelegatedforaoneͲyearperiodbythe legislativebodytothetreasurerofthelocalagency,whoshallthereafterassumefull responsibilityforthosetransactionsuntilthedelegationofauthorityisrevokedor    ʹͲͳͶǦʹͲͳͷ ƒ‰‡͸  expires,andshallmakeamonthlyreportofthosetransactionstothelegislativebody. Subjecttoreview,thelegislativebodymayrenewthedelegationofauthoritypursuant tothissectioneachyear(Gov’tCode§53607). 7.4.cResponsibilityfortheoperationoftheinvestmentprogramisherebydelegatedtothe CountyTreasurer,whoshallactinaccordancewithestablishedwrittenproceduresand internalcontrolsfortheoperationoftheinvestmentprogramconsistentwiththis investmentpolicy.Proceduresincludereferencesto:safekeeping,deliveryvs.payment, investmentaccounting,repurchaseagreements,wiretransferagreements,and collateral/depositoryagreements.Nopersonmayengageinaninvestmenttransaction exceptasprovidedunderthetermsofthispolicyandtheproceduresestablishedbythe CountyTreasurer. 7.5 TreasuryOversightCommittee:IncompliancewithaBoardOrderoftheContraCostaCounty BoardofSupervisors,theCountyContraCostaCountyTreasuryOversightCommitteewas establishedinNovember6of1995.TheintentoftheCommitteeistoallowlocalagencies, includingschooldistricts,aswellasthepublic,toparticipateinreviewingthepoliciesthatguide theinvestmentofpublicfunds.ThemandatefortheexistenceoftheCommitteewas suspendedin2004bytheStateofCalifornia;however,theCommitteeservesanimportant functionandtheTreasurer’sOfficehaselectedtocontinuetheprogram. 7.5.aTheCommitteeshallannuallyreviewandmonitortheCounty’sInvestmentPolicy. 7.5.bTheCommitteeshallcauseanannualaudittodeterminetheCountyTreasurer’s compliancewiththeInvestmentPolicyandallinvestmentfundsinthecountyTreasury. 8.0SAFEKEEPINGANDCUSTODY 8.1Deliveryvs.Payment:Alltradesofmarketablesecuritieswillbeexecuted(clearedandsettled) onadeliveryvs.payment(DVP)basistoensurethatsecuritiesaredepositedintheCounty Treasurer’ssafekeepinginstitutionpriortothereleaseoffunds. 8.2ThirdͲpartySafekeeping:SecuritieswillbeheldbyanindependentthirdͲpartysafekeeping institutionselectedbytheCountyTreasurer.Allsecuritieswillbeevidencedbysafekeeping receiptsintheCounty’snameorinanamedesignatedbytheCountyTreasurer.The safekeepinginstitutionshallannuallyprovideacopyofitsmostrecentreportoninternal controlsͲServiceOrganizationControlReports(formerly70,orSAS70)preparedinaccordance withtheStatementonStandardsforAttestationEngagements(SSAE)No.16(effectiveJune15, 2011.) 8.2.aAlocalagencypurchasingorobtaininganysecuritiesprescribedinthissection,ina negotiable,bearer,registeredornonͲregisteredformat,shallrequiredeliveryofthe securitiestothelocalagency,includingthosepurchasedfortheagencybyfinancial advisors,consultantsormanagersusingtheagency’sfunds,bybookentry,physical deliveryorbythirdͲpartycustodialagreement.Thetransferofsecuritiestothe counterpartybank’scustomerbookͲentryaccountmaybeusedforbookͲentrydelivery. Forpurposesofthissection,“counterparty”meanstheotherpartytothetransaction.A counterpartybank’strustdepartmentorseparatesafekeepingdepartmentmaybeused forthephysicaldeliveryofthesecurityifthesecurityisheldinthenameofthelocal agency.Wherethissectionspecifiesapercentagelimitationforaparticularcategoryof investment,thatpercentageisapplicableonlyatthedateofpurchase.Wherethis sectiondoesnotspecifyalimitationonthetermofremainingmaturityatthetimeof    ʹͲͳͶǦʹͲͳͷ ƒ‰‡͹  theinvestment,noinvestmentshallbemadeinanysecurityotherthanasecurity underlyingarepurchaseorreverserepurchaseagreementauthorizedbythissection. 8.2.bIncompliancewiththissection,thesecuritiesofContraCostaCountyanditsagencies shallbeinsafekeepingatTheBankofNewYorkTrustCompany,N.A.,acounterparty bank’strustdepartmentorasdefinedinthedebtindentureandcontract. 8.3 InternalControls:TheCountyTreasurerisresponsibleforestablishingandmaintainingan internalcontrolstructuredesignedtoensurethattheassetsoftheTreasurerareprotectedfrom loss,theftormisuse.Specificsfortheinternalcontrolsshallbedocumentedinaninvestment proceduresmanualthatshallbereviewedandupdatedperiodicallybytheCountyTreasurer. Theinternalcontrolstructureshallbedesignedtoprovidereasonableassurancethatthese objectivesaremet.Theconceptofreasonableassurancerecognizesthat(1)thecostofcontrol shouldnotexceedthebenefitslikelytobederivedand(2)thevaluationofcostsandbenefits requiresestimatesandjudgmentsbymanagement. 9.0 AUTHORIZEDBROKERS/DEALERSANDFINANCIALINSTITUTIONS 9.1 AlltransactionsinitiatedonbehalfofthePooledInvestmentFundandContraCostaCountyshall beexecutedonlythroughoneofthefollowing: 1.GovernmentsecuritydealersreportingasprimarydealerstotheMarketReportsDivision oftheFederalReserveBankofNewYork; 2.Banksandfinancialinstitutionsthatdirectlyissuetheirownsecuritieswhichhavebeen placedontheApprovedListofBroker/DealersandFinancialInstitutions; 3.Brokers/dealersintheStateofCaliforniaapprovedbytheCountyTreasurerbasedonthe reputationandexpertiseofthecompanyandindividualsemployed. Broker/dealersandfinancialinstitutionswhichhaveexceededthepoliticalcontributionlimits ascontainedinRuleGͲ37oftheMunicipalSecuritiesRulemakingBoardwithinafouryear periodtotheCountyTreasureroranmemberofthegoverningboardofalocalagencyorany candidateforthoseoffices,areprohibitedfromtheApprovalListofBroker/Dealersand FinancialInstitutions. 9.2Qualifications:Allfinancialinstitutionsandbroker/dealerswhodesiretobecomequalifiedfor investmenttransactionsmustcompleteContraCostaCountyTreasurer’sOfficeBroker/Dealer DueDiligenceQuestionnairewhichcanbeobtainedatwww.cctax.us.Anannualreviewofthe financialconditionandregistrationofqualifiedfinancialinstitutionsandbroker/dealerswillbe conductedbytheTreasurer’sOffice. 9.3 ListofApprovedFinancialInstitutions,SecurityBrokersandDealers Alistwillbemaintainedoffinancialinstitutionsauthorizedtoprovideinvestmentservices.In addition,alistalsowillbemaintainedofapprovedsecuritybroker/dealersselectedby creditworthinessandqualificationsstatedinsection9.2.However,theCountyTreasurywillnot belimitedtothefinancialinstitutionsandbrokers/dealersonthelist.Otherswillbeincludedas longasconditionsforauthorizedfinancialinstitutionsandbrokers/dealerssetforthinthisPolicy aremet.Additionally,deletionsandadditionsarebasedonthemaintenanceofrequiredcredit qualityasratedbyanationallyrecognizedstatisticalͲratingorganization(NRSRO)orreliable financialsources. 10.0SUITABLEANDAUTHORIZEDINVESTMENTS 10.1 AuthorizedInvestmentTypes:(Gov’tCode§53601etseq.)Thelegislativebodyofalocal agencyhavingmoneysinasinkingfundormoneysinitstreasurynotrequiredfortheimmediate    ʹͲͳͶǦʹͲͳͷ ƒ‰‡ͺ  needsofthelocalagencymayinvestanyportionofthemoneysthatitdeemswiseorexpedient inthoseinvestmentssetforthbelow.Alocalagencypurchasingorobtaininganysecurities prescribedinthissection,inanegotiable,bearer,registered,ornonregisteredformat,shall requiredeliveryofthesecuritiestothelocalagency,includingthosepurchasedfortheagency byfinancialadvisers,consultants,ormanagersusingtheagency'sfunds,bybookentry,physical delivery,orbythirdͲpartycustodialagreement.Thetransferofsecuritiestothecounterparty bank'scustomerbookentryaccountmaybeusedforbookentrydelivery. Forpurposesofthissection,"counterparty"meanstheotherpartytothetransaction.A counterpartybank'strustdepartmentorseparatesafekeepingdepartmentmaybeusedforthe physicaldeliveryofthesecurityifthesecurityisheldinthenameofthelocalagency.Where thissectionspecifiesapercentagelimitationforaparticularcategoryofinvestment,that percentageisapplicableonlyatthedateofpurchase.Wherethissectiondoesnotspecifya limitationonthetermorremainingmaturityatthetimeoftheinvestment,noinvestmentshall bemadeinanysecurity,otherthanasecurityunderlyingarepurchaseorreverserepurchase agreementorsecuritieslendingagreementauthorizedbythissection,thatatthetimeofthe investmenthasatermremainingtomaturityinexcessoffiveyears,unlessthelegislativebody hasgrantedexpressauthoritytomakethatinvestmenteitherspecificallyorasapartofan investmentprogramapprovedbythelegislativebodynolessthanthreemonthspriortothe investment: 10.1.a Bondsissuedbythelocalagencies,includingbondspayablesolelyoutoftherevenues fromarevenueͲproducingproperty,owned,controlled,oroperatedbythelocalagency orbyadepartment,board,agencyorauthorityofthelocalagency. 10.1.b UnitedStatesTreasurynotes,bonds,billsorcertificatesofindebtedness,orthosefor whichthefaithandcreditoftheUnitedStatesarepledgedforthepaymentofprincipal andinterest. 10.1.c Registeredstatewarrantsortreasurynotesorbondsofthisstate,includingbonds payablesolelyoutoftherevenuesfromarevenueͲproducingpropertyowned, controlled,oroperatedbythestateorbyadepartment,board,agencyorauthorityof thestate. 10.1.d Registeredtreasurynotesorbondsofanyoftheother49statesinadditionto California,includingbondspayablesolelyoutoftherevenuesfromarevenueͲproducing propertyowned,controlled,oroperatedbyastateorbyadepartment,board,agency, orauthorityofanyoftheother49states,inadditiontoCalifornia. 10.1.e Bonds,notes,warrantsorotherevidencesofindebtednessofanylocalagencywithin thisstate,includingbondspayablesolelyoutoftherevenuesfromarevenueͲproducing propertyowned,controlledoroperatedbythelocalagency,orbyadepartment,board, agencyorauthorityofthelocalagency. 10.1.f FederalagencyorUnitedStatesgovernmentͲsponsoredenterpriseobligations, participations,orotherinstruments,includingthoseissuedbyorfullyguaranteedasto principalandinterestbyfederalagenciesorUnitedStatesgovernmentͲsponsored enterprises. 10.1.g Bankersacceptancesotherwiseknownasbillsofexchangeortimedraftsdrawnon andacceptedbyacommercialbank.Purchasesofbanker’sacceptancesmaynotexceed 180days’maturityor40percentoftheagency’smoneythatmaybeinvestedpursuant tothissection.However,nomorethan30percentoftheagency’smoneymaybe investedinthebanker’sacceptancesofanyonecommercialbankpursuanttothis section.Thissubdivisiondoesnotprecludeamunicipalutilitydistrictfrominvestingany    ʹͲͳͶǦʹͲͳͷ ƒ‰‡ͻ  moneyinitstreasuryinanymannerauthorizedbytheMunicipalUtilityDistrictAct (Division6,commencingwithSection11501,ofthePublicUtilitiesCode). 10.1.h Commercialpaperof“prime”qualityofthehighestrankingorofthehighestletterand numberratingasprovidedforbyanationallyrecognizedstatisticalͲratingorganization (NRSRO).Theentitythatissuesthecommercialpapershallmeetallofthefollowing conditionsineitherparagraph(1)orparagraph(2): 1.Theentitymeetsthefollowingcriteria: A.IsorganizedandoperatingintheUnitedStatesasageneralcorporation. B.Hastotalassetsinexcessoffivehundredmilliondollars($500,000,000). C.Hasdebtotherthancommercialpaper,ifany,thatisrated“A”orhigherbya nationallyrecognizedstatisticalͲratingorganization(NRSRO). 2.Theentitymeetsthefollowingcriteria: A.IsorganizedwithintheUnitedStatesasaspecialpurposecorporation,trust,or limitedliabilitycompany. B.HasprogramͲwidecreditenhancementsincluding,butnotlimitedto,over collateralization,lettersofcredit,orsuretybond. C.Hascommercialpaperthatisrated“AͲ1”orhigher,ortheequivalent,bya nationallyrecognizedstatisticalͲratingorganization(NRSRO). Eligiblecommercialpapershallhaveamaximummaturityof270daysorless.Local agencies,otherthancountiesoracityandcounty,mayinvestnomorethan25percent oftheirmoneysineligiblecommercialpaper.Localagencies,otherthancountiesora cityandcounty,maypurchasenomorethan10percentoftheoutstandingcommercial paperofanysingleissuer.Countiesoracityandcountymayinvestincommercialpaper pursuanttotheconcentrationlimitsinsubdivision(a)ofSection53635: i. Notmorethan40percentofthelocalagency’smoneymaybeinvestedin eligiblecommercialpaper. ii. Notmorethan10percentofthetotalassetsoftheinvestmentsheldbyalocal agencymaybeinvestedinanyoneissuer’scommercialpaper. 10.1.a NegotiablecertificatesofdepositissuedbyanationallyͲorstateͲcharteredbankora savingsassociationorfederalassociation(asdefinedbySection5102oftheFinancial Code),astateorfederalcreditunion,orbyastateͲlicensedbranchofaforeignbank. Purchasesofnegotiablecertificatesofdepositmaynotexceed30percentofthe agency’smoneythatmaybeinvestedpursuanttothissection.Forpurposesofthis section,negotiablecertificatesofdepositsdonotcomewithinArticle2(commencing withSection53630),exceptthattheamountsoinvestedshallbesubjecttothe limitationsofSection53638.Thelegislativebodyofalocalagencyandthetreasureror otherofficialofthelocalagencyhavinglegalcustodyofthemoneyareprohibitedfrom investinglocalagencyfunds,orfundsinthecustodyofthelocalagency,innegotiable certificatesofdepositissuedbyastateorfederalcreditunionifamemberofthe legislativebodyofthelocalagency,oranypersonwithinvestmentdecisionmaking authorityintheadministrativeoffice,manager’soffice,budgetoffice,auditorͲ controller’soffice,ortreasurer’sofficeofthelocalagencyalsoservesontheboardof directors,oranycommitteeappointedbytheboardofdirectors,orthecredit committeeorthesupervisorycommitteeofthestateorfederalcreditunionissuingthe negotiablecertificatesofdeposit. 10.1.b Repurchaseandreverserepurchaseagreements    ʹͲͳͶǦʹͲͳͷ ƒ‰‡ͳͲ  1.Investmentsinrepurchaseagreementsorreverserepurchaseagreementsofany securitiesauthorizedbythissection,aslongastheagreementsaresubjecttothis subdivision,includingthedeliveryrequirementsspecifiedinthissection. 2.Investmentsinrepurchaseagreementsmaybemadeonanyinvestmentauthorized inthissectionwhenthetermoftheagreementdoesnotexceedoneyear.The marketvalueofsecuritiesthatunderlayarepurchaseagreementshallbevaluedat 102percentorgreaterofthefundsborrowedagainstthosesecuritiesandthevalue shallbeadjustednolessthanquarterly.Sincethemarketvalueoftheunderlying securitiesissubjecttodailymarketfluctuations,theinvestmentsinrepurchase agreementsshallbeincomplianceifthevalueoftheunderlyingsecuritiesis broughtbackupto102percentnolaterthanthenextbusinessday. 3.Reverserepurchaseagreementsorsecuritieslendingagreementsmaybeutilized onlywhenallofthefollowingconditionsaremet: A.Thesecuritytobesoldusingareverserepurchaseagreementorsecurities lendingagreementhasbeenownedandfullypaidforbythelocalagencyfora minimumof30dayspriortosale. B.Thetotalofallreverserepurchaseagreementsandsecuritieslending agreementsoninvestmentsownedbythelocalagencydoesnotexceed20 percentofthebasevalueoftheportfolio. C.Theagreementdoesnotexceedatermof92days,unlesstheagreement includesawrittencodicilguaranteeingaminimumearningorspreadforthe entireperiodbetweenthesaleofasecurityusingareverserepurchase agreementorsecuritieslendingagreementandthefinalmaturitydateofthe samesecurity. D.Fundsobtainedorfundswithinthepoolofanequivalentamounttothat obtainedfromsellingasecuritytoacounterpartyusingareverserepurchase agreementorsecuritieslendingagreementshallnotbeusedtopurchase anothersecuritywithamaturitylongerthan92daysfromtheinitialsettlement dateofthereverserepurchaseagreementorsecuritieslendingagreement, unlessthereverserepurchaseagreementorsecuritieslendingagreement includesawrittencodicilguaranteeingaminimumearningorspreadforthe entireperiodbetweenthesaleofasecurityusingareverserepurchase agreementorsecuritieslendingagreementandthefinalmaturitydateofthe samesecurity. 4.Priorapprovalofthegoverningbody;onlywithprimarydealers: A.Investmentsinreverserepurchaseagreements,securitieslendingagreements, orsimilarinvestmentsinwhichthelocalagencysellssecuritiespriortopurchase withasimultaneousagreementtorepurchasethesecuritymaybemadeonly uponpriorapprovalofthegoverningbodyofthelocalagencyandshallbemade onlywithprimarydealersoftheFederalReserveBankofNewYorkorwitha nationallyorstateͲcharteredbankthathasorhashadasignificantbanking relationshipwithalocalagency. B.Forpurposesofthispolicy,"significantbankingrelationship"meansanyofthe followingactivitiesofabank: i.Involvementinthecreation,sale,purchase,orretirementofalocal agency'sbonds,warrants,notes,orotherevidenceofindebtedness. ii.Financingofalocalagency'sactivities.    ʹͲͳͶǦʹͲͳͷ ƒ‰‡ͳͳ  iii.Acceptanceofalocalagency'ssecuritiesorfundsasdeposits. 5.Definitionsandtermsofrepos,securitiesandsecuritieslending: A."Repurchaseagreement"meansapurchaseofsecuritiesbythelocalagency pursuanttoanagreementbywhichthecounterpartysellerwillrepurchasethe securitiesonorbeforeaspecifieddateandforaspecifiedamountandthe counterpartywilldelivertheunderlyingsecuritiestothelocalagencybybook entry,physicaldelivery,orbythirdͲpartycustodialagreement.Thetransferof underlyingsecuritiestothecounterpartybank'scustomerbookͲentryaccount maybeusedforbookͲentrydelivery. B."Securities,"forpurposesofrepurchaseunderthissubdivision,meanssecurities ofthesameissuer,description,issuedate,andmaturity. C."Reverserepurchaseagreement"meansasaleofsecuritiesbythelocalagency pursuanttoanagreementbywhichthelocalagencywillrepurchasethe securitiesonorbeforeaspecifieddateandincludesothercomparable agreements. D."Securitieslendingagreement"meansanagreementunderwhichalocalagency agreestotransfersecuritiestoaborrowerwho,inturn,agreestoprovide collateraltothelocalagency.Duringthetermoftheagreement,boththe securitiesandthecollateralareheldbyathirdparty.Attheconclusionofthe agreement,thesecuritiesaretransferredbacktothelocalagencyinreturnfor thecollateral. E.Forpurposesofthissection,thebasevalueofthelocalagency'spoolportfolio shallbethatdollaramountobtainedbytotalingallcashbalancesplacedinthe poolbyallpoolparticipants,excludinganyamountsobtainedthroughselling securitiesbywayofreverserepurchaseagreements,securitieslending agreements,orothersimilarborrowingmethods. F.Forpurposesofthissection,thespreadisthedifferencebetweenthecostof fundsobtainedusingthereverserepurchaseagreementandtheearnings obtainedonthereinvestmentofthefunds. 10.1.c MediumͲtermnotes,definedasallcorporateanddepositoryinstitutiondebtsecurities withamaximumremainingmaturityoffiveyearsorless,issuedbycorporations organizedandoperatingwithintheUnitedStatesorbydepositoryinstitutionslicensed bytheUnitedStatesoranystateandoperatingwithintheUnitedStates.Noteseligible forinvestmentunderthissubdivisionshallberated"A"orbetterbyanNRSRO. PurchasesofmediumͲtermnotesshallnotincludeotherinstrumentsauthorizedbythis sectionandmaynotexceed30percentoftheagency'smoneysthatmaybeinvested pursuanttothissection. 10.1.d Sharesofbeneficialinterest 1.Sharesofbeneficialinterestissuedbydiversifiedmanagementcompaniesthat investinthesecuritiesandobligationsasauthorizedbysubdivisions(a)to(k), inclusive,andsubdivisions(m)to(o),inclusive,andthatcomplywiththeinvestment restrictionsofthisarticleandArticle2(commencingwithSection53630).However, notwithstandingtheserestrictions,acounterpartytoareverserepurchase agreementorsecuritieslendingagreementisnotrequiredtobeaprimarydealerof theFederalReserveBankofNewYorkifthecompany'sboardofdirectorsfindsthat thecounterpartypresentsaminimalriskofdefault,andthevalueofthesecurities    ʹͲͳͶǦʹͲͳͷ ƒ‰‡ͳʹ  underlyingarepurchaseagreementorsecuritieslendingagreementmaybe100 percentofthesalespriceifthesecuritiesaremarkedtomarketdaily. 2.Sharesofbeneficialinterestissuedbydiversifiedmanagementcompaniesthatare moneymarketfundsregisteredwiththeSecuritiesandExchangeCommissionunder theInvestmentCompanyActof1940(l5U.S.C.Sec.80aͲ1etseq.). 3.Ifinvestmentisinsharesissuedpursuanttoparagraph(1),thecompanyshallhave meteitherofthefollowingcriteria: A.Attainedthehighestrankingorthehighestletterandnumericalratingprovided bynotlessthantwoNRSROs. B.Retainedaninvestmentadviserregisteredorexemptfromregistrationwiththe SecuritiesandExchangeCommissionwithnotlessthanfiveyears'experience investinginthesecuritiesandobligationsauthorizedbysubdivisions(a)to(k), inclusive,andsubdivisions(m)to(o),inclusive,andwithassetsunder managementinexcessoffivehundredmilliondollars($500,000,000). 4.Ifinvestmentisinsharesissuedpursuanttoparagraph(2),thecompanyshallhave metthefollowingcriteria: A.Attainedthehighestrankingorthehighestletterandnumericalratingprovided bynotlessthantwonationallyrecognizedstatisticalratingorganizations. B.Retainedaninvestmentadviserregisteredorexemptfromregistrationwiththe SecuritiesandExchangeCommissionwithnotlessthanfiveyears'experience investinginthesecuritiesandobligationsauthorizedbysubdivisions(a)to(k), inclusive,andsubdivisions(m)to(o),inclusive,andwithassetsunder managementinexcessoffivehundredmilliondollars($500,000,000). 5.Thepurchasepriceofsharesofbeneficialinterestpurchasedpursuanttothis subdivisionshallnotincludeanycommissionthatthecompaniesmaychargeand shallnotexceed20percentoftheagency’smoneythatmaybeinvestedpursuantto thissection.However,nomorethan10percentoftheagency’sfundsmaybe investedinsharesofbeneficialinterestofanyonemutualfundpursuantto paragraph(1). 10.1.e Moneysheldbyatrusteeorfiscalagentandpledgedtothepaymentofsecurityof bondsorotherindebtedness,orobligationsunderalease,installmentsale,orother agreementofalocalagency,orcertificatesofparticipationinthosebonds, indebtedness,orleaseinstallmentsale,orotheragreements,maybeinvestedin accordancewiththestatutoryprovisionsgoverningtheissuanceofthosebonds, indebtedness,orleaseinstallmentsale,orotheragreement,ortotheextentnot inconsistenttherewithoriftherearenotspecificstatutoryprovision,inaccordancewith theordinance,resolution,indenture,oragreementofthelocalagencyprovidingforthe issuance. 10.1.f Notes,bonds,orotherobligationsthatareatalltimessecuredbyavalidfirstͲpriority securityinterestinsecuritiesofthetypeslistedbySection53651aseligiblesecurities forthepurposeofsecuringlocalagencydepositshavingamarketvalueatleastequalto thatrequiredbySection53652forthepurposeofsecuringlocalagencydeposits.The securitiesservingascollateralshallbeplacedbydeliveryorbookentryintothecustody ofatrustcompanyorthetrustdepartmentofabankthatisnotaffiliatedwiththeissuer ofthesecuredobligation,andthesecurityinterestshallbeperfectedinaccordancewith therequirementsoftheUniformCommercialCodeorfederalregulationsapplicableto thetypesofsecuritiesinwhichthesecurityinterestisgranted.    ʹͲͳͶǦʹͲͳͷ ƒ‰‡ͳ͵  10.1.g AnymortgagepassͲthroughsecurity,collateralizedmortgageobligation,mortgageͲ backedorotherpayͲthroughbond,equipmentleaseͲbackedcertificate,consumer receivablepassͲthroughcertificate,orconsumerreceivableͲbackedbondofa maximumoffiveyears’maturity.Securitieseligibleforinvestmentunderthis subdivisionshallbeissuedbyanissuerhavingan“A”orhigherratingfortheissuer’s debtasprovidedbyanationallyrecognizedratingserviceandratedinaratingcategory of“AA”oritsequivalentorbetterbyanationallyrecognizedratingservice.Purchaseof securitiesauthorizedbythissubdivisionmaynotexceed20percentoftheagency’s surplusmoneythatmaybeinvestedpursuanttothissection. 10.1.h Sharesofbeneficialinterestissuedbyajointpowerauthorityorganizedpursuantto Section6509.7thatinvestsinthesecuritiesandobligationsauthorizedinsubdivisions (a)to(n),inclusive.Eachshareshallrepresentanequalproportionalinterestinthe underlyingpoolofsecuritiesownedbythejointpowersauthority.Tobeeligibleunder thissection,thejointpowersauthorityissuingsharesshallhaveretainedaninvestment adviserthatmeetsallofthefollowingcriteria: 1.TheadviserisregisteredorexemptfromregistrationwiththeSecuritiesand ExchangeCommission. 2.Theadviserhasnotlessthanfiveyearsofexperienceinvestinginthesecuritiesand obligationsauthorizedinsubdivisions(a)to(n)inclusive. 3.Theadviserhasassetsundermanagementinexcessoffivehundredmilliondollars ($500,000,000). 11.0RESTRICTIONSANDPROHIBITIONS 11.1 RestrictionssetbytheTreasurer 11.1.a AllinvestmentspurchasedbytheTreasurer’sOfficeshallbeofinvestmentgrade.The minimumcreditratingofpurchasedinvestmentsshallbeasdefinedbyGovernment Code53600et.seq. 11.1.b AlllegalsecuritiesissuedbyatobaccoͲrelatedcompanyareprohibited.AtobaccoͲ relatedcompanyisdefinedas1)anentitythatmakessmokingproductsfromtobacco usedincigarettes,cigarsand/orsnuff,orforsmokinginpipesor2)acompanythathas totalrevenuesof15percentormorefromthesaleofsuchtobaccoproducts.The tobaccoͲrelatedissuersrestrictedfromanyinvestmentareAllianceOne,AltriaGroup, Inc.,AuriInc.,BritishAmericanTobaccoPLC,ImperialTobaccoGroupPLC,Kirin InternationalHoldingInc.,Lorillard,PhilipMorrisInternational,ReynoldsAmerican,Inc., SchweitzerͲMauduitInternationalInc.,SmokefreeInnotecInc.,StarScientificInc., UniversalCorp.,andVectorGroup,Ltd.AnnuallytheTreasurystaffwillupdatethelist oftobaccoͲrelatedcompanies. 11.1.c Financialfuturesorfinancialoptioncontractswilleachbeapprovedonapertradebasis bytheCountyTreasurer. 11.1.d Reverserepurchaseagreementswillbeusedstrictlyforthepurposeofsupplementing incomewithalimitof10percentofthetotalportfoliowithpriorapprovalofthe Treasurer. 11.1.e SBAloansrequirepriorapprovaloftheTreasurerineverytransaction. 11.1.f SecuritiespurchasedthroughbrokerswillbeheldinsafekeepingatTheBankofNew YorkTrustCompany,N.A.orasdesignatedbythespecificcontract(s)forgovernment securitiesandtriͲpartyrepurchaseagreements.    ʹͲͳͶǦʹͲͳͷ ƒ‰‡ͳͶ  11.1.g SwapsandTradeswilleachbeapprovedonaperͲtradebasisbyTreasurerorAssistant Treasurer. 11.1.h BankCDsornonͲnegotiableCDswillbecollateralizedat110percentbygovernment securitiesor150percentbycurrentmortgages.Therewillbenowaiverofthefirst $100,000collateralexceptbyspecialarrangementwiththeTreasurer. 11.2 ProhibitionsbyGovernmentCode(§53601.6) 11.2.a AlocalagencyshallnotinvestanyfundspursuanttothisArticleorpursuanttoArticle2 (commencingwithSection53630)ininversefloaters,rangenotesorinterestͲonlystrips thatarederivedfromapoolofmortgages. 11.2.b AlocalagencyshallnotinvestanyfundspursuanttothisarticleorpursuanttoArticle2 (commencingwithSection53630)inanysecuritythatcouldresultinzerointerest accrualifheldtomaturity.However,alocalagencymayholdprohibitedinstruments untiltheirmaturitydates.Thelimitationinthissubdivisionshallnotapplytolocal agencyinvestmentsinsharesofbeneficialinterestissuedbydiversifiedmanagement companiesregisteredundertheInvestmentCompanyActof1940(15U.S.C.Sec.80aͲ 1,etseq.)thatareauthorizedforinvestmentpursuanttosubdivision(l)ofSection 53601. 12.0INVESTMENTPARAMETERS 12.1 Diversification:Investmentsshallbediversifiedsoastominimizetheriskoflossandto maximizetherateofreturnby: 1.Limitinginvestmenttoavoidoverconcentrationinsecuritiesfromaspecificissueror businesssector(excludingU.S.Treasurysecurities), 2.Limitinginvestmentinsecuritiesthathavehighercreditrisks, 3.Investinginsecuritieswithvaryingmaturities,and 4.Continuouslyinvestingaportionoftheportfolioinreadilyavailablefundssuchas investmentpools,moneymarketfundsorovernightrepurchaseagreementstoensure thatappropriateliquidityismaintainedinordertomeetongoingobligations. 12.2 MaximumMaturities:Totheextentpossible,theCountyTreasurershallattempttomatch itsinvestmentswithanticipatedcashflowrequirements.Unlessmatchedtoaspecificcash flow,theTreasurerwillnotdirectlyinvestinsecuritiesmaturingmorethanfive(5)years fromthedateofpurchaseorinaccordancewithstateandlocalstatutesandordinances. TheTreasurershalladoptweightedaveragematuritylimitations(whichoftenrangefrom90 daysto3years),consistentwiththeinvestmentobjectives. Becauseofinherentdifficultiesinaccuratelyforecastingcashflowrequirements,aportion oftheportfolioshouldbecontinuouslyinvestedinreadilyavailablefundssuchasLAIF, moneymarketfunds,orovernightrepurchaseagreementstoensurethatappropriate liquidityismaintainedtomeetongoingobligations. 12.3 ExceptiontoMaximumMaturity:InaccordancewithGovernmentCode§53601theCounty TreasurerretainstherighttopetitiontheBoardofSupervisorsforapprovaltoinvestin securitieswithafinalmaturityinexcessoffiveyears.TheBoardofSupervisorsadoptionof anyresolutionallowingmaturitiesbeyondfiveyearsshallbeconsideredanallowed modificationtothispolicyandanyinvestmentsmadeinaccordancewiththemodification shallbeallowableunderthispolicy.    ʹͲͳͶǦʹͲͳͷ ƒ‰‡ͳͷ  12.4 InvestmentCriteria1:AlllimitationssetforthinthisPolicyareapplicableonlyatthetimeof purchase.TheCountyTreasurerhasthefulldiscretiontorebalancetheportfoliowhenitis outofcomplianceowingtovariousreasons,suchasmarketfluctuation. INVESTMENTTYPE MAXIMUM %of PORTFOLIO MAXIMUM MATURITY MAXIMUM %ofISSUEOTHERRESTRICTIONS Bondsissuedbylocalagencies, §53601(a)100%5years100% U.S.TreasuryObligations,§53601(b)100%5years100% RegisteredStateWarrants,andCA TreasuryNotesandbonds,§53601 (c) 100%5years100% RegisteredTreasuryNotesorBonds ofanyoftheother49statein additiontoCA,§53601(d) 100%5years100% BondsandNotesissuedbyother localagenciesinCalifornia,§53601 (e) 100%5years100% ObligationsofU.S.Agenciesor governmentsponsoredenterprises, §53601(f)  100%  5years  100%   U.S.AgenciesCallables100%5years25% BankersAcceptances),§53601(g) *Domestic:($5Bmin.assets)  *Foreign:($5Bmin.assets)   40%  40%   180days  180days  30% Aggregate  5% Aggregate  Commercialpaper,§53601(h)and §53635(a)40%270days orless 10% Aggregate Nomorethan10%ofthelocalagency’smoney maybeinvestedintheoutstandingcommercial paperofanysingleissuer. NegotiableCertificatesofDeposit($5 billionminimumassets),§53601(i)30%5years10% Aggregate RepurchaseAgreementssecuredby U.S.Treasuryoragencyobligation (102%collateral),§53601(j) 100%1year  See limitations for Treasuries andAgencies above GenerallylimitedtoWellsFargoBank,Bankof Americaorotherinstitutionswithwhomthe CountytreasuryhasexecutedtriͲparty agreements.Collateralwillbeheldbyathird partytothetransactionthatmayincludethe trustdepartmentofparticularbanks.Collateral willbeonlysecuritiesthatcomplywith GovernmentCode53601. ReverseRepurchaseAgreementsand SecuritiesLendingAgreements, §53601(j) 20%92days See limitations for Treasuries andAgencies above  Corporatebonds,MediumTerm Notes&Covered,§53601(k) 30% 5years5% Aggregate  Sharesofbeneficialinterestissued bydiversifiedmgt.companies §53601(l) 20%N/A10% Aggregate  Moneysheldbyatrusteeorfiscal agent,§53601(m)20%N/A CollateralizedNotes,Bonds,Time Deposits,orotherobligations,15%5years5% Aggregate Collateralizedbytheeligiblesecuritiesata percentagespecifiedinGovernmentCode  1TheratingrequirementforeachinvestmenttypeisreferencedintherelevantsectionsofCaliforniaGovernmentCode.    ʹͲͳͶǦʹͲͳͷ ƒ‰‡ͳ͸  INVESTMENTTYPE MAXIMUM %of PORTFOLIO MAXIMUM MATURITY MAXIMUM %ofISSUEOTHERRESTRICTIONS §53601(n)53652. MrtgBackedSecurities/CMO’s: AssetBackedSecurities §53601(o) 20%  20% 5Years  5Years 5% Aggregate No InverseFloaters NoRangeNotes NoInterestonlystripsderivedfromapoolof mortgages JointPowersAuthority,CalTRUST, §53601(P) Aslimited by CalTRUST N/AAslimitedby CalTRUST LocalAgencyInvestmentFund(LAIF), §16429.1 AsLimited byLAIFN/AAslimitedby LAIF  13.0 CALIFORNIALOCALAGENCYINVESTMENTFUND(LAIF) 13.1 GeneralInformation(Gov’tCode§16305.9). 13.1.aAllmoneyintheLocalAgencyInvestmentFundshallbeheldintrustinthecustody oftheStateTreasurer. 13.1.bAllmoneyintheLocalAgencyInvestmentFundisnonstatemoney.Thatmoneyshall beheldinatrustaccountoraccounts.TheControllershallberesponsiblefor maintainingthoseaccountstorecordtheTreasurer'saccountability,andshall maintainaseparateaccountforeachtrustdepositintheLocalAgencyInvestment Fund. 13.1.cThatmoneyshallbesubjecttoauditbytheDepartmentofFinanceandtocash countasprovidedforinSections13297,13298,and13299.Itmaybewithdrawn onlyupontheorderofthedepositingentityoritsdisbursingofficers.Thesystem thattheDirectorofFinancehasestablishedforthehandling,receiving,holding,and disbursingofstateagencymoneyshallalsobeusedforthemoneyintheLocal AgencyInvestmentFund. 13.1.dAllmoneyintheLocalAgencyInvestmentFundshallbedeposited,invested,and reinvestedinthesamemannerandtothesameextentasifitwerestatemoneyin theStateTreasury. 13.2 InvestmentandDistributionofDeposits(§16429.1). 13.2.aThereisintrustinthecustodyoftheTreasurertheLocalAgencyInvestmentFund, whichfundisherebycreated.TheControllershallmaintainaseparateaccountfor eachgovernmentalunithavingdepositsinthisfund. 13.2.bNotwithstandinganyotherprovisionsoflaw,alocalgovernmentalofficial,withthe consentofthegoverningbodyofthatagency,havingmoneyinitstreasurynot requiredforimmediateneeds,mayremitthemoneytotheTreasurerfordepositin theLocalAgencyInvestmentFundforthepurposeofinvestment. 13.2.cNotwithstandinganyotherprovisionsoflaw,anofficerofanynonprofitcorporation whosemembershipisconfinedtopublicagenciesorpublicofficials,oranofficerof aqualifiedquasiͲgovernmentalagency,withtheconsentofthegoverningbodyof thatagency,havingmoneyinitstreasurynotrequiredforimmediateneeds,may remitthemoneytotheTreasurerfordepositintheLocalAgencyInvestmentFund forthepurposeofinvestment. 13.2.dNotwithstandinganyotherprovisionoflaworofthissection,alocalagency,with theapprovalofitsgoverningbody,maydepositintheLocalAgencyInvestment Fundproceedsoftheissuanceofbonds,notes,certificatesofparticipation,orother evidencesofindebtednessoftheagencypendingexpenditureoftheproceedsfor    ʹͲͳͶǦʹͲͳͷ ƒ‰‡ͳ͹  theauthorizedpurposeoftheirissuance.Inconnectionwiththesedepositsof proceeds,theLocalAgencyInvestmentFundisauthorizedtoreceiveanddisburse moneys,andtoprovideinformation,directlywithortoanauthorizedofficerofa trusteeorfiscalagencyengagedbythelocalagency,theLocalAgencyInvestment Fundisauthorizedtoholdinvestmentsinthenameandfortheaccountofthat trusteeorfiscalagent,andtheControllershallmaintainaseparateaccountforeach depositofproceeds. 13.2.eThelocalgovernmentalunit,thenonprofitcorporation,orthequasiͲgovernmental agencyhastheexclusivedeterminationofthelengthoftimeitsmoneywillbeon depositwiththeTreasurer. 13.2.fThetrusteeorfiscalagentofthelocalgovernmentalunithastheexclusive determinationofthelengthoftimeproceedsfromtheissuanceofbondswillbeon depositwiththeTreasurer. 13.2.gTheLocalInvestmentAdvisoryBoardshalldeterminethosequasiͲgovernmental agencieswhichqualifytoparticipateintheLocalAgencyInvestmentFund. 13.2.hTheTreasurermayrefusetoacceptdepositsintothefundif,inthejudgmentofthe Treasurer,thedepositwouldadverselyaffectthestate’sportfolio. 13.2.iTheTreasurermayinvestthemoneyofthefundinsecuritiesprescribedinSection 16430.TheTreasurermayelecttohavethemoneyofthefundinvestedthroughthe SurplusMoneyInvestmentFundasprovidedinArticle4(commencingwithSection 16470)ofChapter3ofPart2ofDivision4ofTitle2. 13.2.jMoneyinthefundshallbeinvestedtoachievetheobjectiveofthefund,thatisto realizethemaximumreturnconsistentwithsafeandprudenttreasury management. 13.2.kAllinstrumentsoftitleofallinvestmentsofthefundshallremainintheTreasurer’s vaultorbeheldinsafekeepingundercontroloftheTreasurerinanyfederalreserve bank,oranybranchthereof,ortheFederalHomeLoanBankofSanFrancisco,with anytrustcompany,orthetrustdepartmentofanystateornationalbank. 13.2.lImmediatelyattheconclusionofeachcalendarquarter,allinterestearnedand otherincrementderivedfrominvestmentsshallbedistributedbytheControllerto thecontributinggovernmentalunitsortrusteesorfiscalagents,nonprofit corporations,andquasiͲgovernmentalagenciesinamountsdirectlyproportionate totherespectiveamountsdepositedintheLocalAgencyInvestmentfundandthe lengthoftimetheamountsremainedtherein.Anamountequaltothereasonable costsincurredincarryingouttheprovisionsofthissection,nottoexceeda maximumofoneͲhalfofonepercentoftheearningsofthisfund,shallbededucted fromtheearningspriortodistribution.Theamountofthisdeductionshallbe creditedasreimbursementstothestateagencieshavingincurredcostsincarrying outtheprovisionsofthissection. 13.2.mTheTreasurershallpreparefordistributionamonthlyreportofinvestmentsmade duringtheprecedingmonth. 14.0 PORTFOLIOMANAGEMENTACTIVITY 14.1 PassivePortfolioManagement: (SeeSection6.0.,GeneralStrategy) 14.2 CompetitiveBidding:    ʹͲͳͶǦʹͲͳͷ ƒ‰‡ͳͺ  Investmentswillbepurchasedinthemostcosteffectiveandefficientmannerbyusinga competitivebiddingprocessforthepurchaseofsecurities.Competitivebiddingisrequired fromapreͲapprovedlistofbroker/dealersonallinvestmenttransactionsexceptfornew issuesecurities. 14.3 ReviewingandMonitoringofthePortfolio: Monthlyreportswillreviewportfolioinvestmentstoensuretheyarekepttrackofina timelymanner.ThereportswillalsomonitortheCountyTreasurer’sinvestmentpractices andtheresultsofsuchpractices. 14.4 PortfolioAdjustments: Certainactionsmaybetakeniftheportfoliobecomesoutofcompliance.Forinstance, shouldaconcentrationlimitationbeexceededduetoanincidentsuchasafluctuationin portfoliosize,theaffectedsecuritiesmaybeheldtomaturitytoavoidlosses;however,the CountyTreasurermaychoosetorebalancetheportfolioearliertobringitbackinto complianceiftheportfoliowillnotsufferanylossesforsellingtheinvestmentpriorto maturity. 14.5 PerformanceStandards: Theinvestmentportfoliowillbemanagedinaccordancewiththeparametersspecified withinthisPolicy.Theportfolioshouldobtainamarketaveragerateofreturnduringa market/economicenvironmentofstableinterestrates.Aseriesofappropriatebenchmarks shallbeestablishedagainstwhichportfolioperformanceshallbecomparedonaregular basis. 15.0 REPORTING 15.1 Methodology:TheCountyTreasurershallprepareaninvestmentreportatleastquarterly, includingamanagementsummarythatprovidesananalysisofthestatusofthecurrent investmentportfolioandtransactionsmadeoverthelastquarter.Thismanagement summarywillbepreparedinamannerwhichwillallowtheCountyTreasurertoascertain whetherinvestmentactivitiesduringthereportingperiodhaveconformedtothe investmentpolicy.ThereportshallbeprovidedtotheChiefAdministrativeOfficer,the CountyAuditor,theBoardofSupervisors,TreasuryOversightCommitteeandanypool participants[GovernmentCode27133(e),and53646(b)].Thereportwillincludethe following: 1.Thetypeofinvestment,issuer,dateofmaturity,paranddollaramountinvestedonall securities,investmentsandmoneysheldbytheCountyTreasurer 2.Adescriptionofanyofthelocalagency'sfunds,investments,orprogramsthatare underthemanagementofcontractedparties,includinglendingprograms. 3.Acurrentmarketvalueasofthedateofthereportofallsecuritiesheldbythelocal agency,andundermanagementofanyoutsidepartythatisnotalsoalocalagencyor theStateofCaliforniaLocalAgencyInvestmentFund,andthesourceofthissame valuation. 4.Astatementthattheportfolioisincompliancewiththeinvestmentpolicy,orthe mannerinwhichtheportfolioisnotincompliance. 5.AstatementdenotingtheabilityoftheCountyTreasurertomeetitspool'sexpenditure requirementsforthenextsixmonths,oranexplanationastowhysufficientmoney shall,ormay,notbeavailable.    ʹͲͳͶǦʹͲͳͷ ƒ‰‡ͳͻ  6.Listingofindividualsecuritiesbytypeandmaturitydateheldattheendofthereporting period. A.PLEDGEREPORT:Anysecuritiesthatarepledgedorloanedforanypurposeshallbe reportedintheQuarterlyInvestmentReport.Thetransactiondetailwillbe provided,includingpurpose,beginningandterminationdatesandallpartiestothe contract.Thesecuritydescriptionsastotype,name,maturitydate,couponrate, CUSIPandothermaterialinformationwillbeincluded. B.REVERSEREPURCHASEAGREEMENTSREPORT:Allreverserepurchaseagreements enteredinto,whetheractiveorinactivebytheendofeachquarter,shallbe reportedintheTreasurer’sQuarterlyInvestmentReport. 7.Realizedandunrealizedgainsorlossesresultingfromappreciationordepreciationby listingthecostandmarketvalueofsecuritiesoveroneͲyeardurationthatarenot intendedtobehelduntilmaturity. 8.Averagematurityanddurationofportfoliooninvestmentsaswellastheyieldto maturityoftheportfolioascomparedtoapplicablebenchmarks. 9.Percentageofthetotalportfoliowhicheachtypeofinvestmentrepresents. 10.Whateveradditionalinformationordatamayberequiredbythelegislativebodyofthe localagency. 15.2 MarkingtoMarket:Themarketvalueoftheportfolioshallbecalculatedatleastquarterly andastatementofthemarketvalueoftheportfolioshallbeissuedatleastquarterly.This willensurethatreviewoftheinvestmentportfolio,intermsofvalueandpricevolatility,has beenperformedonaregularbasis. 16.0 COMPENSATION InaccordancewithGovernmentCode§§27013and53684,theCountyTreasurerwillchargeall poolparticipantsforadministrativeandoverheadcosts.Costsinclude,butarenotlimitedto, employeesalariesandbenefits,portfoliomanagement,bankandcustodialfees,software maintenancefeesandotherindirectcostsincurredfromhandlingandmanagingfunds.In addition,whenapplicable,thecostsassociatedwiththeTreasuryOversightprovisionsof GovernmentCode§§27130Ͳ27137shallbeincludedasadministrativecosts.Costswillbe deductedfrominterestearningsonthepoolpriortoapportioningandpaymentofinterest.The CountyTreasurershallannuallyprepareaproposedbudgetprovidingadetaileditemizationof allestimatedcostswhichcomprisetheadministrativefeechargedinaccordancewith GovernmentCode§27013.Theadministrativefeewillbesubjecttochange.Feeswillbe deductedfrominterestearnings. 16.1 DeductionofCosts:TheCountyTreasurerdeductsactualcostsandmakesanyadjustments fromtheinterestearningandapportionstheremainingearningstoallparticipantsbasedon thepositiveaveragedailybalance. 17.0 CALCULATINGANDAPPORTIONINGPOOLEARNINGS TheInvestmentPoolFundiscomprisedofmoniesfrommultipleunitsoftheCounty,agencies, schooldistrictsandspecialdistricts.Eachentityhasuniquecashflowdemands,whichdictate thetypeofinvestmentstheTreasurer’sOfficemaypurchase.Toensureparityamongthepool memberswhenapportioninginterestearnings,thefollowingprocedureshavebeendeveloped: 1.InterestisapportionedonatleastaquarterlybasisinaccordancewithGovernmentCode §53684.    ʹͲͳͶǦʹͲͳͷ ƒ‰‡ʹͲ  2.Interestisapportionedtopoolparticipantsbasedontheparticipant’saveragedailyfund balanceandthetotalaveragedailybalanceofdepositsintheinvestmentpool. 3.InterestiscalculatedonanaccrualbasisforallinvestmentsintheCountyTreasurer’s investmentpoolandreportedtotheAuditorͲControllerfordistributionintothefundsofthe participants. 4.Specificfeeschedulesareasfollow: A. RegularandRoutineInvestments2 $20perinvestmenttransaction;i.e.,$20atplacementand$20atmaturity. .00333ofinterestincome;i.e.,$3.33per$1,000ofinterestincome. Theaboveischargedquarterlybyjournalentry. B. SpecialReportsandResearch:Actualstafftimeandmaterials. C. SpecialBankTransactions:Actualbankfeeschedule,stafftimeandmaterials. 5.Negativeaveragedailyfundbalancewillbechargedinterestattherateofinterestthatis beingapportioned. 18.0 DEPOSITSANDWITHDRAWALSINTHETREASURY 18.1DepositbyVoluntaryParticipants Followingarethetermsandconditionsfordepositoffundsforinvestmentpurposesby voluntaryparticipants,i.e.entitiesthatarenotlegallyrequiredtodeposittheirfundsinthe CountyTreasury. 18.1.aResolutionbytheCountyBoardofSupervisorsauthorizingtheacceptanceofoutside participantsbytheCountyTreasury. 18.1.bResolutionbythelegislativeorgoverningbodyofthelocalagency(voluntary participant)authorizingtheinvestmentoffundspursuanttoGovernmentCode53684. 18.1.cTreasuryinvestmentswillbedirectedtransactions.Foreachtransaction,thelocal agency(voluntaryparticipant)mustindicatethefundsource,theamounttobeinvested andthedurationoftheinvestment. 18.2 WithdrawalRequest TheTreasurer’sOfficehasestablishedtheWithdrawalofFundsPolicyforallTreasury InvestmentPoolparticipantswhoseektowithdrawfundsfromtheCountyTreasuryInvestment Poolforvariouspurposes.InaccordancewithCaliforniaStateGovernmentCodeSection27136, allparticipantshavingfundsondepositinthePoolandseekingtowithdrawtheirfunds,shall firstsubmitaformalwrittenrequesttotheCountyTreasurer.TheCountyTreasurershall evaluatethewithdrawalproposalsofallPoolparticipantsuponreceiptofthewrittenrequests. Theevaluationprocessmaytakeupto30days.TheCountyTreasurerreservestherighttoreject anyrequestforwithdrawalifitisintheTreasurer’sopinionafterthoroughevaluation,thatthe withdrawalwillviolateapplicablelawsand/orgoverningdocuments,compromiseTreasurer’s fiduciaryresponsibility,adverselyimpactthestabilityofthePool,orharmtheinterestsofany PoolParticipant.Suchrejectionshallpreventthewithdrawalofthefunds. Typically,participantsmakewithdrawalsforthefollowingtworeasons:a)regularoperations andb)investingordepositingfundsoutsidethePoolinaccordancewithCaliforniaState GovernmentCodeSection27136(a).TheCountyTreasurerseekstohonorallwritten  2AppliestodirectedinvestmentsasdescribedinSection6.2ofthePolicy.    ʹͲͳͶǦʹͲͳͷ ƒ‰‡ʹͳ  withdrawalrequestsforregularoperatingpurposesthatareapprovedbytheCountyAuditorͲ Controller’sOfficeinatimelyfashion.However,theCountyTreasurerrecognizesthat occasionallythePoolparticipantsmayrequestlargeamountsinwithdrawalstocover unexpectedoperationalneeds.Toaccommodatesuchwithdrawalsandallowforadequatetime foradjustmentstotheliquiditypositionofthePool,theCountyTreasurerexpectsallPool Participantstosubmittheirwrittenrequestswithinthefollowingtimeframes: i) WithdrawalsofUpto$1million–priorto8:00a.m.forsamedaydisbursement ii) Withdrawalsofbetween$1millionto$10million–1businessdayinadvanceof disbursement iii) Withdrawalsofmorethan$10million–3businessdayinadvanceofdisbursement WithdrawalsofinvestmentdepositsfromtheCountyTreasuryInvestmentPoolbyanyPool participantshallcoincidewithinvestmentmaturitiesand/orauthorizedsaleofsecuritiesby authorizedpersonnelofthePoolParticipant.ExceptforfundsintheCaliforniaStateLocal AgencyInvestmentFund,afiveͲbusinessͲdaysnotificationmayberequiredwhenauthorized saleofsecuritiesisinvolved.IntheeventthattheTreasurermustliquidateinvestmentsinorder tohonorthewithdrawalrequest,theParticipantwhorequeststhewithdrawalshallbesubject toallexpensesassociatedwiththeliquidation,including,butnotlimitedtolossofprincipaland interestincome,withdrawalpenalties,andassociatedfees. TomaintainfullfiduciaryresponsibilityforinvestmentandadministrationofthePool,the CountyTreasurershallNOTpermitstatutoryparticipantstowithdrawfundsfromand subsequentlydepositthefundsoutsidethePoolforthepurposeofinvestmentswithoutprior approvaloftheCountyTreasurer.AspermittedbytheGovernmentCodeSection53635,upon requesttheCountyTreasurermayenterintoaninvestmentagreementwithathirdparty investmentmanageronbehalfofstatutoryparticipants.However,thefundsshallremaininthe Poolduringtheentireagreementperiodunderthecareofthecustodianbankretainedbythe CountyTreasurer. Voluntaryparticipantsmaywithdrawfundsfromandsubsequentlydepositthefundsoutside thePoolforinvestmentpurposesupontheCountyTreasurer’sapproval.However,such withdrawalsshallbemadefortheentireamountoftheparticipant’sfundsdepositedinthe Pool.Uponcompletionofsuchwithdrawals,thevoluntaryparticipantswillnolongerbeableto participateinthePoolorreceivefurtherservicesfromtheCountyTreasurer’sOffice.NOpartial withdrawalsfromthePoolforinvestmentpurposesarepermitted. PleaserefertoWithdrawalofFundsPolicy,whichismaintainedasaseparatedocument,for detailedguidelinesandprocedures. 19.0 TEMPORARYBORROWINGOFPOOLFUNDS Section6ofArticleXVIoftheCaliforniaConstitutionprovidesinpartthat"thetreasurerofany city,county,orcityandcountyshallhavepowerandthedutytomakesuchtemporarytransfers fromthefundsincustodyasmaybenecessarytoprovidefundsformeetingtheobligations incurredformaintenancepurposesbycity,county,cityandcounty,district,orotherpolitical subdivisionwhosefundsareincustodyandarepaidoutsolelythroughthetreasurer'soffice." TheCountyAuditorͲControllerandtheCountyTreasurershallmakeatemporarytransferof fundstotherequestingagency,nottoexceed85%oftheamountofmoneywhichwillaccrueto theagencyduringthefiscalyear,providedthattheamountofsuchtransferhasbeen determinedbytheCountyAuditorͲControllertobetransferableundertheconstitutionaland statutoryprovisionscitedinArticleXVIandhasbeencertifiedbytheCountyTreasurerͲTax Collectortobeavailable.Suchtemporarytransferoffundsshallnotbemadepriortothefirst dayofthefiscalyearnorafterthelastMondayinAprilofthecurrentfiscalyear.    ʹͲͳͶǦʹͲͳͷ ƒ‰‡ʹʹ  20.0 INVESTMENTOFBONDPROCEEDS TheCountyTreasurershallinvestbondproceedsusingthestandardsofthisInvestmentPolicy. Thebondproceedswillbeinvestedinsecuritiespermittedbythebonddocuments.Ifthebond documentsaresilent,thebondproceedswillbeinvestedinsecuritiespermittedbythisPolicy. 21.0 DISASTERRECOVERYPLAN TheContraCostaCountyTreasurer’sDisasterRecoveryPlanincludescriticalphonenumbersand addressesofkeypersonnelaswellasactivebankersandbrokers/dealers.Laptops,tablets, smartphones,andotherequivalentelectronicdevicesshallbeissuedtokeypersonnelfor communicatingbetweenstaff,bankandbroker/dealers.Copiesoftheplanshallbedistributed totheinvestmentstaff:AssistantCountyTreasurer,theTreasurer’sInvestmentOfficer,andthe InvestmentOperationsAnalyst.Theinvestmentstaffshallinteractwithoneanotherbyhome phone,cellphone,oreͲmailtodecideanalternatelocationfromwhichtoconductdaily operations. Intheeventinvestmentstaffisunabletoconductnormalbusinessoperations,thecustodial bankwillautomaticallysweepalluninvestedcashintoaninterestbearingaccountattheendof thebusinessday.Untilnormalbusinessoperationshavebeenrestored,thelimitationsonthe sizeofanindividualissuerandthepercentagerestrictionsbyinvestmenttypewouldbeallowed toexceedthoseapprovedinthisinvestmentpolicy. 22.0 POLICYCONSIDERATIONS 22.1 Exemption Anyinvestmentcurrentlyheldthatdoesnotmeettheguidelinesofthispolicyshallbe exemptedfromtherequirementsofthispolicy.Atmaturityorliquidation,suchmoniesshallbe reinvestedonlyasprovidedbythispolicy. 22.2 Amendments Thispolicyshallbereviewedonanannualbasis.AnychangesmustbeapprovedbytheCounty Treasurerandanyotherappropriateauthority.     ʹͲͳͶǦʹͲͳͷ ƒ‰‡ʹ͵  AUTHORIZATIONFORLAIFINVESTMENTS       ʹͲͳͶǦʹͲͳͷ ƒ‰‡ʹͶ   APPROVEDBROKERS  ABNAMRO,Incorporated AlamoCapital BankofAmericaMerrillLynch BankoftheWest BarclaysCapital,Incorporated CaliforniaArbitrageManagementProgram CitigroupGlobalMarkets CreditSuisse DaiwaCapitalMarketsAmericaInc. Goldman,Sachs&Company GovernmentPerspectives JPMorganSecuritiesLLC PenserraSecuritiesLLC PrudentialSecurities,Incorporated PublicFinancialManagement,Incorporated RBCCapitalMarkets,LLC UBSFinancialServices,Inc. UnionBancInvestmentServices WellsFargoSecurities           Note:TheCountyTreasurywillnotbelimitedtotheabovelist.Otherswillbeincludedaslongasallconditionsfor authorizedbrokersand/ordealerssetforthinthispolicyaremet.Additionally,deletionsandadditionsarebased onmanyfactorsincludingthemaintenanceofrequiredcreditqualityasratedbyStandardandPoor’s,Moody’s andotherrecognizedratingservicesandreliablefinancialsources.     ʹͲͳͶǦʹͲͳͷ ƒ‰‡ʹͷ   APPROVEDISSUERS  AbbeyNationalNAPepsiCo,Inc. AmericanHondaFinancePNCBankNA Australia&NewZealandBankingGroupPrudential BankofMontrealProcter&GambleCompany BankofNovaScotiaRabobankNederlandNewYork BNPParibasRoyalBankofCanada ChevronScieteGeneraleNorthAmerica CocaͲColaCoStandardCharteredBank CommonwealthBankofAustraliaStateStreetBank&TrustCo CreditAgricoleSASvenskaHandelsbankenAB Deer&CompanyTorontoͲDominionBank DeutscheBankFinancialLLCToyotaMotorCreditCorp ExxonMobilUBSFinancial GeneralElectricCapitalCorpUnionBank GeneralElectricCoUSBankcorp JPMorganChase&CoWalmart JohnDeereCapitalCorporationWaltDisneyCompany Johnson&JohnsonWellsFargoBankNA McDonald'sCorporationWestpacBankingCorp NationalAustraliaBankWestamericaBank NestleCapitalCorp NordeaBankAB         Note:TheCountyTreasurywillnotbelimitedtotheabovelistinmakinginvestments.Otherissuersmaybe consideredastheCountyTreasurywillperformadditionalduediligenceoneachinvestmentdecision.Thelistdoes notreflecttheactualportfolioholdingsmanagedbytheCountyTreasury.     ʹͲͳͶǦʹͲͳͷ ƒ‰‡ʹ͸  APPROVEDPRIMARYDEALERS   BankofNovaScotia,NewYorkAgency BMOCapitalMarketsCorp. BNPParibasSecuritiesCorp. BarclaysCapitalInc. CantorFitzgerald&Co. CitigroupGlobalMarkets,Inc. CreditSuisseSecurities(USA)LLC DaiwaCapitalMarketsAmericaInc. DeutscheBankSecuritiesInc. Goldman,Sachs&Co. HSBCSecurities(USA)Inc. Jefferies&Company,Inc. J.P.MorganSecurities,Inc. MerrillLynch,Pierce,Fenner&SmithIncorporated MizuhoSecuritiesUSAInc. MorganStanley&Co.Incorporated NomuraSecuritiesInc. RBCCapitalMarkets,LLC RBSSecuritiesInc. SGAmericasSecurities,LLC TDSecurities(USA)LLC UBSSecuritiesLLC.                      Note:TheabovelistconsistsofprimarydealersthatserveastradingcounterpartiesoftheFederalReserveBankof NewYorkinitsimplementationofmonetarypolicy.Theseprimarydealersarerequiredtoparticipateinall auctionsofU.S.governmentdebt.TreasuryStaffwillperformadditionalduediligenceoneachinvestment decision,andhence,mayormaynotusetheprimarydealerslistedabove.    ʹͲͳͶǦʹͲͳͷ ƒ‰‡ʹ͹  GLOSSARYOFTERMS ACCRUEDINTERESTTheaccumulatedinterestdueonabondasofthelastinterestpaymentmadeby theissuer. AGENCYAdebtsecurityissuedbyafederalorfederallysponsoredagency.Federalagenciesarebacked bythefullfaithandcreditoftheU.S.Government.Federallysponsoredagencies(FSAs)arebackedby eachparticularagencywithamarketperceptionthatthereisanimplicitgovernmentguarantee.An exampleoffederalagencyistheGovernmentNationalmortgageAssociation(GNMA).Anexampleofa FSAistheFederalNationalMortgageAssociation(FNMA). AMORTIZATIONThesystematicreductionoftheamountowedonadebtissuethroughperiodic paymentsofprincipal. AVERAGELIFETheaveragelengthoftimethatanissueofserialbondsand/ortermbondswitha mandatorysinkingfundfeatureisexpectedtobeoutstanding. BANKERSACCEPTANCESAtimebillofexchangedrawnonandacceptedbyacommercialbankto financetheexchangeofgoods.Whenabank“accepts”suchabill,thetimedraftbecomes,ineffect,a predated,certifiedcheckpayabletothebeareratsomefuturespecifieddate.Thecommercialbank assumesprimaryliabilityoncethedraftisaccepted. BASISPOINTAunitofmeasurementusedinthevaluationoffixedͲincomesecuritiesequalto1/100of onepercentofyield.Forexample,ifinterestratesincreasefrom8.25%to8.50%,thedifferenceis referredtoasa25ͲbasisͲpointincrease. BENCHMARKAcomparativebaseformeasuringtheperformanceorrisktoleranceoftheinvestment portfolio.Abenchmarkshouldrepresentaclosecorrelationtothelevelofriskandtheaverageduration oftheportfolio’sinvestment. BIDTheindicatedpriceatwhichabuyeriswillingtopurchaseasecurityorcommodity. BLUESKYLAWSCommontermforstatesecuritieslaw,whichvaryfromstatetostate.Generallyrefers toprovisionrelatedtoprohibitionsagainstfraud,dealerandbrokerregulationsandsecurities registration. BONDAbondisessentiallyaloanmadebyaninvestortoadivisionofthegovernment,agovernment agencyoracorporation.Thebondisapromissorynotetorepaytheloaninfullattheendofafixed timeperiod.Thedateonwhichtheprincipalmustberepaidiscalledthematuritydateormaturity.In addition,theissuerofthebond,thatistheagencyorcorporationreceivingtheloanproceedsand issuingthepromissorynote,agreestomakeregularpaymentsofinterestatarateinitiallystatedonthe bond.Bondsareratedaccordingtomanyfactors,includingcost,degreeofriskandrateofincome. BOOKVALUEReferstovalueofaheldsecurityascarriedintherecordsofaninvestor.Maydifferfrom currentmarketvalueofthesecurity. BROKER/DEALERAnypersonengagedinthebusinessofeffectingtransactioninsecuritiesinthisstate fortheaccountofothersorforher/hisownaccount.Broker/dealeralsoincludesapersonengagedin    ʹͲͳͶǦʹͲͳͷ ƒ‰‡ʹͺ  theregularbusinessofissuingorguaranteeingoptionswithregardtosecuritiesnotofher/hisown issue. CALLABLEBONDAbondissueinwhichallorpartofitsoutstandingprincipalamountmayberedeemed beforematuritybytheissuerunderspecifiedconditions. CALLPRICEThepriceatwhichanissuermayredeemabondpriortomaturity.Thepriceisusuallyata slightpremiumtothebond’soriginalissuepricetocompensatetheholderforthelossofincomeand ownership. CALLRISKTherisktothebondholderthatabondmayberedeemedpriortomaturity. CASHSALE/PURCHASEAtransactionwhichcallsfordeliveryandpaymentofsecuritiesonthesameday thatthetransactionisinitiated. CERTIFICATESOFDEPOSIT(CD)Certificatesissuedagainstfundsdepositedinacommercialbankfora definiteperiodoftimeandearningaspecifiedrateofreturn.Theyareissuedintwoforms,negotiable andnonͲnegotiable. CLEANUPCALLAnactionofadebtinstrumentissuerrequiringearlyredemptionoftheinstrumentto reduceitsownadministrativeexpenses.Thisnormallyoccurswhentheprincipaloutstandingis significantlyreducedtoasmallamount,e.g.,lessthan10%oftheoriginalissue. COLLATERALIZATIONProcessbywhichaborrowerpledgessecurities,property,orotherdepositsfor thepurposeofsecuringtherepaymentofaloanand/orsecurity. COMMERCIALPAPERShortͲterm,unsecuredpromissorynotesissuedineitherregisteredorbearer formandusuallybackedbyalineofcreditwithabank.Maturitiesdonotexceed270daysandgenerally average30Ͳ45days. CONVEXITYAmeasureofabond’spricesensitivitytochanginginterestrates.Ahighconvexity indicatesgreatersensitivityofabond’spricetointerestratechanges. COUPONRATETheannualrateofinterestreceivedbyaninvestorfromtheissuerofcertaintypesof fixedͲincomesecurities.Alsoknownasthe“interestrate.” CREDITQUALITYThemeasurementofthefinancialstrengthofabondissuer.Thismeasurementhelps aninvestortounderstandanissuer’sabilitytomaketimelyinterestpaymentsandrepaytheloan principaluponmaturity.Generally,thehigherthecreditqualityofabondissuer,thelowertheinterest ratepaidbytheissuerbecausetheriskofdefaultislower.Creditqualityratingsareprovidedby nationallyrecognizedratingagencies. CREDITRISKTherisktoaninvestorthatanissuerwilldefaultinthepaymentofinterestand/or principalonasecurity. CURRENTYIELD(CURRENTRETURN)Ayieldcalculationdeterminedbydividingtheannualinterest receivedonasecuritybythecurrentmarketpriceofthatsecurity. CUSIPNUMBERSCUSIPisanacronymforCommitteeonUniformSecurityIdentificationProcedures. CUSIPnumbersareidentificationnumbersassignedeachmaturityofasecurityissueandusuallyprinted    ʹͲͳͶǦʹͲͳͷ ƒ‰‡ʹͻ  onthefaceofeachindividualsecurityintheissue.TheCUSIPnumbersareintendedtofacilitate identificationandclearanceofsecurities. DELIVERYVERSUSPAYMENT(DVP)Atypeofsecuritiestransactioninwhichthepurchaserpaysforthe securitieswhentheyaredeliveredeithertothepurchaserorhis/hercustodian. DERIVATIVESECURITYFinancialinstrumentcreatedfrom,orwhosevaluedependsupon,oneormore underlyingassetsorindexesofassetvalues. DISCOUNTTheamountbywhichtheparvalueofasecurityexceedsthepricepaidforthesecurity. DIVERSIFICATIONAprocessofinvestingassetsamongarangeofsecuritytypesbysector,maturity,and qualityrating. DURATIONAmeasureofthetimingofthecashflows,suchastheinterestpaymentsandtheprincipal repayment,tobereceivedfromagivenfixedͲincomesecurity.Thiscalculationisbasedonthree variables:termtomaturity,couponrate,andyieldtomaturity.Thedurationofasecurityisauseful indicatorofitspricevolatilityforgivenchangesininterestrates. EARNINGSAPPORTIONMENTThequarterlyinterestdistributionofthePoolParticipantswherethe actualinvestmentcostsincurredbytheTreasureraredeductedfromtheinterestearningsofthePool FAIRVALUETheamountatwhichaninvestmentcouldbeexchangedinacurrenttransactionbetween willingparties,otherthaninaforcedorliquidationsale. FEDERALFUNDS(FEDFUNDS)FundsplacedinFederalReservebanksbydepositoryinstitutionsin excessofcurrentreserverequirements.Thesedepositoryinstitutionsmaylendfedfundstoeachother overnightoronalongerbasis.TheymayalsotransferfundsamongeachotheronasameͲdaybasis throughtheFederalReservebankingsystem.Fedfundsareconsideredtobeimmediatelyavailable funds. FEDERALFUNDSRATEInterestratechargedbyoneinstitutionlendingfederalfundstotheother. FEDERALOPENMARKETCOMMITTEE(FOMC)ThiscommitteesetsFederalReserveguidelines regardingpurchasesandsalesofgovernmentsecuritiesintheopenmarketasameansofinfluencing thevolumeofbankcreditandmoney. FIDUCIARYAnindividualwhoholdssomethingintrustforanotherandbearsliabilityforitssafekeeping. FLOATINGRATENOTEAdebtsecuritywhoseinterestrateisresetperiodically(monthly,quarterly, annually)andisbasedonamarketindex(e.g.,Treasurybills,LIBOR,etc.). FUTURESCommoditiesandotherinvestmentssoldtobedeliveredatafuturedate. GOVERNMENTSECURITIESAnobligationoftheU.S.government,backedbythefullfaithandcreditof thegovernment.Thesesecuritiesareregardedasthehighestqualityofinvestmentsecuritiesavailable intheU.S.securitiesmarket.See“TreasuryBills,NotesandBonds.” INTERESTRATESee“CouponRate.”    ʹͲͳͶǦʹͲͳͷ ƒ‰‡͵Ͳ  INTERNALCONTROLSAninternalcontrolstructuredesignedtoensurethattheassetsofthe Treasurer’sInvestmentPoolareprotectedfromloss,theft,ormisuse.Theinternalcontrolstructureis designedtoprovidereasonableassurancethattheseobjectivesaremet.Theconceptofreasonable assurancerecognizesthat(1)thecostofacontrolshouldnotexceedthebenefitslikelytobederived and(2)thevaluationofcostsandbenefitsrequiresestimatesandjudgmentsbymanagement.Internal controlsshouldaddressthefollowingpoints: 1. Controlofcollusion—Collusionisasituationwheretwoormoreemployeesareworkingin conjunctiontodefraudtheiremployer. 2. Separationoftransactionauthorityfromaccountingandrecordkeeping—Byseparatingthe personwhoauthorizesorperformsthetransactionfromthepeoplewhorecordorotherwise accountforthetransaction,aseparationofdutiesisachieved. 3. Custodialsafekeeping—Securitiespurchasedfromabankordealerincludingappropriate collateral(asdefinedbystatelaw)shallbeplacedwithanindependentthirdpartyforcustodial safekeeping. 4. Avoidanceofphysicaldeliverysecurities—BookͲentrysecuritiesaremucheasiertotransferand accountforsinceactualdeliveryofadocumentnevertakesplace.Deliveredsecuritiesmustbe properlysafeguardedagainstlossordestruction.Thepotentialforfraudandlossincreaseswith physicallydeliveredsecurities. 5. Cleardelegationofauthoritytosubordinatestaffmembers—Subordinatestaffmembersmust haveaclearunderstandingoftheirauthorityandresponsibilitiestoavoidimproperactions.Clear delegationofauthorityalsopreservestheinternalcontrolstructurethatiscontingentonthe variousstaffpositionsandtheirrespectiveresponsibilities. 6. Writtenconfirmationoftransactionsforinvestmentsandwiretransfers—Duetothepotentialfor errorandimproprietiesarisingfromtelephoneandelectronictransactions,alltransactionsshould besupportedbywrittencommunicationsandapprovedbytheappropriateperson.Written communicationsmaybeviafaxifonletterheadandifthesafekeepinginstitutionhasalistof authorizedsignatures. 7. DevelopmentofawiretransferagreementwiththeleadbankandthirdͲpartycustodian—The designatedofficialshouldensurethatanagreementwillbeenteredintoandwilladdressthe followingpoints:controls,securityprovisions,andresponsibilitiesofeachpartymakingand receivingwiretransfers. INVERSEFLOATERSAnadjustableinterestratenotekeyedtovariousindicessuchasLIBOR,commercial paper,federalfunds,treasuriesandderivativestructures.Thedefinedinterestrateformulaisthe oppositeorinverseoftheseindices.Interestratesandpaydatesmayresetdaily,weekly,monthly, quarterly,semiͲannuallyorannually. INVERTEDYIELDCURVEAchartformationthatillustrateslongͲtermsecuritieshavingloweryieldsthan shortͲtermsecurities.Thisconfigurationusuallyoccursduringperiodsofhighinflationcoupledwithlow levelsofconfidenceintheeconomyandarestrictivemonetarypolicy. INVESTMENTCOMPANYACTOF1940Federallegislationwhichsetsthestandardsbywhichinvestment companies,suchasmutualfunds,areregulatedintheareasofadvertising,promotion,performance reportingrequirements,andsecuritiesvaluations.    ʹͲͳͶǦʹͲͳͷ ƒ‰‡͵ͳ  INVESTMENTPOLICYAconciseandclearstatementoftheobjectivesandparametersformulatedby theinvestororinvestmentmanagerforaportfolioofinvestmentsecurities. INVESTMENTͲGRADEOBLIGATIONSAninvestmentinstrumentsuitableforpurchasebyinstitutional investorsundertheprudentpersonrule.InvestmentͲgradeisrestrictedtothoseobligationsratedBBB orhigherbyaratingagency. LIQUIDITYUsuallyreferstotheabilitytoconvertassets(suchasinvestments)intocash. LOCALAGENCYINVESTMENTFUND(LAIF)TheStateofCaliforniainvestmentpoolinwhichmoneyof localagenciesispooledasamethodformanagingandinvestinglocalfunds. MAKEWHOLECALLAtypeofcallprovisiononabondallowingtheborrowertopayoffremainingdebt early.Theborrowerhastomakealumpsumpaymentderivedfromaformulabasedonthenetpresent valueoffuturecouponpaymentsthatwillnotbepaidbecauseofthecall. MARKTOMARKETValuingtheinventoryofheldsecuritiesatitscurrentmarketvalue. MARKETRISKTheriskthatthevalueofasecuritywillriseordeclineasaresultofchangesinmarket conditions. MARKETVALUEPriceatwhichasecuritycanbetradedinthecurrentmarket. MASTERREPURCHASEAGREEMENTAwrittencontractcoveringallfuturetransactionsbetweenthe partiestorepurchaseͲreverserepurchaseagreementsthatestablisheseachparty’srightsinthe transaction.Amasteragreementwilloftenspecify,amongotherthings,therightofthebuyerͲlenderto liquidatetheunderlyingsecuritiesintheeventofdefaultbythesellerͲborrower. MATURITYThedateuponwhichtheprincipalofasecuritybecomesdueandpayabletotheholder. MEDIUMͲTERMNOTES(MTNS)Corporatedebtobligationscontinuouslyofferedinabroadrangeof maturities.MTNswerecreatedtobridgethegapbetweencommercialpaperandcorporatebonds.The keycharacteristicofMTNsisthattheyareissuedonacontinuousbasis. MONEYMARKETINSTRUMENTSPrivateandgovernmentobligationsofoneyearorless. MONEYMARKETMUTUALFUNDSMutualfundsthatinvestsolelyinmoneymarketinstruments(shortͲ termdebtinstruments,suchasTreasurybills,commercialpaper,banker’sacceptances,reposand federalfunds). MUTUALFUNDAninvestmentcompanythatpoolsmoneyandcaninvestinavarietyofsecurities, includingfixedͲincomesecuritiesandmoneymarketinstruments.Mutualfundsareregulatedbythe InvestmentCompanyActof1940andmustabidebythefollowingSecuritiesandExchangeCommission (SEC)disclosureguidelines: 1. Reportstandardizedperformancecalculations. 2. Disseminatetimelyandaccurateinformationregardingthefund’sholdings,performance, managementandgeneralinvestmentpolicy. 3. Havethefund’sinvestmentpoliciesandactivitiessupervisedbyaboardoftrustees,whichare independentoftheadviser,administratororothervendorofthefund.    ʹͲͳͶǦʹͲͳͷ ƒ‰‡͵ʹ  4. Maintainthedailyliquidityofthefund’sshares. 5. Valuetheirportfoliosonadailybasis. 6. HaveallindividualswhosellSECͲregisteredproductslicensedwithaselfͲregulatingorganization (SRO)suchastheNationalAssociationofSecuritiesDealers(NASD). 7. HaveaninvestmentpolicygovernedbyaprospectuswhichisupdatedandfiledbytheSEC annually. MUTUALFUNDSTATISTICALSERVICESCompaniesthattrackandratemutualfunds,e.g., IBC/Donoghue,LipperAnalyticalServicesandMorningstar. NATIONALASSOCIATIONOFSECURITIESDEALERS(NASD)AselfͲregulatoryorganization(SRO)of brokersanddealersintheoverͲthecountersecuritiesbusiness.Itsregulatorymandateincludes authorityoverfirmsthatdistributemutualfundsharesaswellasothersecurities. NEGOTIABLECERTIFICATESOFDEPOSITMaybesoldbyoneholdertoanotherpriortomaturity.Thisis possiblebecausetheissuingbankagreestopaytheamountofthedepositplusinterestearnedtothe bearerofthecertificateatmaturity. NETASSETVALUEThemarketvalueofoneshareofaninvestmentcompany,suchasamutualfund. Thisfigureiscalculatedbytotalingafund’sassetswhichincludessecurities,cash,andanyaccrued earnings,subtractingthisfromthefund’sliabilitiesanddividingthistotalbythenumberofshares outstanding.Thisiscalculatedonceadaybasedontheclosingpriceforeachsecurityinthefund’s portfolio.(Seebelow) [(Totalassets)–(Liabilities]/(Numberofsharesoutstanding) NOLOADFUNDAmutualfundwhichdoesnotlevyasaleschargeonthepurchaseofitsshares. NOMINALYIELDThestatedrateofinterestthatabondpaysitscurrentowner,basedonparvalueof thesecurity.Itisalsoknownasthe“coupon,”“couponrate,”or“interestrate.” NONͲNEGOTIABLECERTIFICATESOFDEPOSITForpublicfunds,thesecertificatesarecollateralizedand arenotmoneymarketinstrumentssincetheycannotbetradedinthesecondarymarket.Theyare issuedonafixedͲmaturitybasisandoftenpayhigherinterestratesthanarepermissibleonother savingsortimeͲdepositaccounts. OFFERThepriceofasecurityatwhichapersoniswillingtosell. OPTIONAcontractthatprovidestheright,butnottheobligation,tobuyortosellaspecificamountof aspecificsecuritywithinapredeterminedtimeperiod.Acalloptionprovidestherighttobuythe underlyingsecurity.Aputoptionprovidestherighttoselltheunderlyingsecurity.Thesellerofthe contractsiscalledthewriter. PARFacevalueofprincipalvalueofabond,typically$1,000perbond. PARVALUEThestatedorfacevalueofasecurityexpressedasaspecificdollaramountmarkedonthe faceofthesecurity;theamountofmoneydueatmaturity.Parvalueshouldnotbeconfusedwith marketvalue.    ʹͲͳͶǦʹͲͳͷ ƒ‰‡͵͵  POSITIVEYIELDCURVEAchartformationthatillustratesshortͲtermsecuritieshavingloweryieldsthan longͲtermsecurities. PREMIUMTheamountbywhichthepricepaidforasecurityexceedsparvalue,generallyrepresenting thedifferencebetweenthenominalinterestrateandtheactualoreffectivereturntotheinvestor. PRIMERATEApreferredinterestratechargedbycommercialbankstotheirmostcreditworthy customers.Manyinterestratesarekeyedtothisrate. PRINCIPALThefacevalueorparvalueofadebtinstrument.Alsomayrefertotheamountofcapital investedinagivensecurity. PROSPECTUSAlegaldocumentthatmustbeprovidedtoanyprospectivepurchaserofanewsecurities offeringregisteredwiththeSEC.Thiscanincludeinformationontheissuer,theissuer’sbusiness,the proposeduseofproceeds,theexperienceoftheissuer’smanagement,andcertaincertifiedfinancial statements. PRUDENTPERSONRULEAninvestmentstandardoutliningthefiduciaryresponsibilitiesofpublicfunds investorsrelatingtoinvestmentpractices. RANGENOTESAsecuritywhoserateofreturnispeggedtoanindex.Thenotedefinestheinterestrate minimumorfloorandtheinterestratemaximumorcap.Anexampleofanindexmaybefederalfunds. Theadjustablerateofinterestisdeterminedwithinthedefinedrangeofthefunds. RATEOFRETURNTheyieldobtainableonasecuritybasedonitspurchasepriceoritscurrentmarket price.Thismaybetheamortizedyieldtomaturityonabondandthecurrentincomereturn. REINVESTMENTRISKTheriskthatafixedͲincomeinvestorwillbeunabletoreinvestincomeproceeds fromasecurityholdingatthesamerateofreturncurrentlygeneratedbythatholding. REPURCHASEAGREEMENTORRPORREPOAnagreementconsistingoftwosimultaneoustransactions wherebytheinvestorpurchasessecuritiesfromabankordealerandthebankordealeragreesto repurchasethesecuritiesatthesamepriceonacertainfuturedate.TheinterestrateonaRPisthat whichthedealerpaystheinvestorfortheuseofhisfunds.Reverserepurchaseagreementsarethe mirrorimageoftheRPswhenthebankordealerpurchasessecuritiesfromtheinvestorunderan agreementtosellthembacktotheinvestor. REVERSEREPURCHASEAGREEMENT(REVERSEREPO)Anagreementofonepartytosellsecuritiesata specifiedpricetoasecondpartyandasimultaneousagreementofthefirstpartytorepurchasethe securitiesataspecifiedpriceorataspecifiedlaterdate. RULE2AͲ7OFTHEINVESTMENTCOMPANYACTAppliestoallmoneymarketmutualfundsand mandatessuchfundstomaintaincertainstandards,includinga13Ͳmonthmaturitylimitanda90Ͳday averagematurityoninvestments,tohelpmaintainaconstantnetassetvalueofonedollar($1.00). SAFEKEEPINGHoldingofassets(e.g.,securities)byafinancialinstitution. SECURITIESLENDINGAtransactionwhereintheTreasurer’sPooltransfersitssecuritiestoa broker/dealerorotherentitiesforcollateralwhichmaybecashorsecuritiesandsimultaneouslyagrees toreturnthecollateralforthesamesecuritiesinthefuture.    ʹͲͳͶǦʹͲͳͷ ƒ‰‡͵Ͷ  SERIALBONDAbondissue,usuallyofamunicipality,withvariousmaturitydatesscheduledatregular intervalsuntiltheentireissueisretired. SETTLEMENTDATEThedateusedinpriceandinterestcomputations,usuallythedateofdelivery. SINKINGFUNDMoneyaccumulatedonaregularbasisinaseparatecustodialaccountthatisusedto redeemdebtsecuritiesorpreferredstockissues. SLUGSAnacronymforStateandLocalGovernmentSeries.SLUGSarespecialUnitedStatesGovernment securitiessoldbytheSecretaryoftheTreasurytostates,municipalitiesandotherlocalgovernment bodiesthroughindividualsubscriptionagreements.TheinterestratesandmaturitiesofSLUGSare arrangedtocomplywitharbitragerestrictionsimposedunderSection103oftheInternalRevenueCode. SLUGSaremostcommonlyusedfordepositinescrowinconnectionwiththeissuanceofrefunding bonds. STRIPSUSTreasuryacronymfor“separatetradingofregisteredinterestandprincipalofsecurities." CertainregisteredTreasurysecuritiescanbedividedintoseparateinterestandprincipalcomponents, whichmaythenbetradedasseparateentities. SWAPGenerallyreferstoanexchangeofsecurities,withessentiallythesameparvalue,butmayvaryin couponrate,typeofinstrument,nameofissuerandnumberofdaystomaturity.Thepurposeofthe SWAPmaybetoenhanceyield,toshortenthematurityoranybenefitdeemedbythecontracting parties. TERMBONDSBondscomprisingalargepartorallofaparticularissuewhichcomedueinasingle maturity.Theissuerusuallyagreestomakeperiodicpaymentsintoasinkingfundformandatory redemptionoftermbondsbeforematurity. TOTALRETURNThesumofallinvestmentincomepluschangesinthecapitalvalueoftheportfolio.For mutualfunds,returnonaninvestmentiscomposedofsharepriceappreciationplusanyrealized dividendsorcapitalgains.Thisiscalculatedbytakingthefollowingcomponentsduringacertaintime period:(PriceAppreciation)+(Dividendspaid)+(Capitalgains)=TotalReturn TREASURYSECURITIESDebtobligationsoftheUnitedStatesGovernmentsoldbytheTreasury Departmentintheformofbills,notesandbonds: 1.BillsShortͲtermobligationsthatmatureinoneyearorlessandaresoldatadiscountinlieuof payingperiodicinterest. 2.NotesInterestͲbearingobligationsthatmaturebetweenoneyearand10years. 3.BondsInterestͲbearinglongͲtermobligationsthatgenerallymaturein10yearsormore. UNIFORMNETCAPITALRULESECRule15C3Ͳ1outliningcapitalrequirementsforbroker/dealers. U.S.AGENCYOBLIGATIONSFederalagencyorUnitedStatesgovernmentͲsponsoredenterprise obligations,participants,orotherinstruments.Theobligationsareissuedbyorfullyguaranteedasto principalandinterestbyfederalagenciesorUnitedStatesgovernmentͲsponsoredenterprises. U.S.TREASURYOBLIGATIONSSecuritiesissuedbytheU.S.Treasuryandbackedbythefullfaithand creditoftheUnitedStates.Treasuriesareconsideredtohavenocreditriskandarethebenchmarkfor    ʹͲͳͶǦʹͲͳͷ ƒ‰‡͵ͷ  interestratesonallothersecuritiesintheU.S.andoverseas.TheTreasuryissuesbothdiscounted securitiesandfixedcouponnotesandbonds. VOLATILITYAdegreeoffluctuationinthepriceandvaluationofsecurities. “VOLATILITYRISK”RATINGAratingsystemtoclearlyindicatethelevelofvolatilityandothernonͲcredit risksassociatedwithsecuritiesandcertainbondfunds.Theratingsforbondfundsrangefromthose thathaveextremelylowsensitivitytochangingmarketconditionsandofferthegreateststabilityofthe returns(“S1+”byS&P)tothosethatarehighlysensitivewithcurrentlyidentifiablemarketvolatilityrisk (“S6”byS&P). WEIGHTEDAVERAGEMATURITY(WAM)Theaveragematurityofallthesecuritiesthatcomprisea portfolio.AccordingtoSECrule2aͲ7,theWAMforSECregisteredmoneymarketmutualfundsmaynot exceed90daysandnoonesecuritymayhaveamaturitythatexceeds397days. WHENISSUED(WI)Aconditionaltransactioninwhichanauthorizednewsecurityhasnotbeenissued. All“whenissued”transactionsaresettledwhentheactualsecurityisissued. YIELDThecurrentrateofreturnonaninvestmentsecuritygenerallyexpressedasapercentageofthe security’scurrentprice. YIELDͲTOͲCALL(YTC)Therateofreturnaninvestorearnsfromabondassumingthebondisredeemed (called)priortoitsnominalmaturitydate. YIELDCURVEAgraphicrepresentationthatdepictstherelationshipatagivenpointintimebetween yieldsandmaturityforbondsthatareidenticalineverywayexceptmaturity.Anormalyieldcurvemay bealternativelyreferredtoasapositiveyieldcurve. YIELDͲTOͲMATURITYTherateofreturnyieldedbyadebtsecurityheldtomaturitywhenbothinterest paymentsandtheinvestor’spotentialcapitalgainorlossareincludedinthecalculationofreturn. ZEROͲCOUPONSECURITYAsecuritythatmakesnoperiodicinterestpaymentsbutinsteadissoldata discountfromitsfacevalue. 45340-0001\pos-7 E-1 APPENDIX E SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS 45340-0001\pos-7 F-1 APPENDIX F PROPOSED FORM OF BOND COUNSEL OPINION 45340-0001\pos-7 G-1 APPENDIX G PROPOSED FORM OF CONTINUING DISCLOSURE AGREEMENT This Continuing Disclosure Agreement (the “Disclosure Agreement”), dated as of ________, 2015, is executed and delivered by the County of Contra Costa, California (the “County”), and acknowledged and agreed to by Digital Assurance Certification, L.L.C., as dissemination agent, in connection with the issuance by the County of Contra Costa Public Financing Authority (the “Authority”) of $__,___,000 aggregate principal amount of its Lease Revenue Bonds, comprised of: $__,___,000 principal amount of (Refunding and Capital Projects), 2015 Series A; and $__,___,000 principal amount of (Refunding and Capital Projects), 2015 Series B (together, the “2015 Bonds”). The 2015 Bonds are being issued pursuant to a Trust Agreement, dated as of July 1, 2015 (the “Trust Agreement”), by and between the County of Contra Costa Public Financing Authority (the “Authority”) and the Trustee and acknowledged by the County. Pursuant to a Facilities Lease, dated as July 1, 2015 (the “Facilities Lease”), the County has covenanted to comply with its obligations under this Disclosure Agreement and to assume all obligations for continuing disclosure with respect to the 2015 Bonds. The County and the Dissemination Agent covenant and agree as follows: SECTION 1. Purpose of the Disclosure Agreement This Disclosure Agreement is being executed and delivered by the County and the Dissemination Agent for the benefit of the Holders and Beneficial Owners of the 2015 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 2015 Bonds (including persons holding a 2015 Bonds through nominees, depositories or other intermediaries). “Disclosure Representative” shall mean the County Administrator, the Director of Conservation and Development, and the County Finance Director 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 initially mean Digital Assurance Certification, L.L.C., or any successor Dissemination Agent which may be designated in writing by the County and which has filed with the County a written acceptance of such designation. “Filing Date” shall mean March 31 of each Fiscal Year of the County (or the next succeeding business day if such day is not a business day), commencing March 31, 2016. “Fiscal Year” shall mean the period beginning on July 1 of each year and ending on the next succeeding June 30, or any other twelve-month period hereafter selected and designated as the official fiscal year period of the County and certified to the Trustee in writing by an Authorized Representative of the County. 45340-0001\pos-7 G-2 “MSRB” shall mean the Municipal Securities Rulemaking Board or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org. “Official Statement” means the Official Statement dated _______, 2015 relating to the 2015 Bonds. “Participating Underwriter” shall mean the original underwriter of the 2015 Bonds required to comply with the Rule in connection with offering of the 2015 Bonds. “Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. “Specified Event” shall mean any of the events listed in Section 5(a) or Section 5(b) of this Disclosure Agreement and any other event legally required to be reported pursuant to the Rule. “State” shall mean the State of California. SECTION 3 Provision of Annual Reports. (a) The County shall provide, or shall cause the Dissemination Agent to provide, to the MSRB not later than the Filing Date, an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report shall be submitted in electronic format, accompanied by such identifying information as is prescribed by the MSRB, 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 Specified Event under Section 5. (b) Not later than thirty (30) days (nor more than sixty (60) days) prior to each Filing Date, the Dissemination Agent shall give notice to the County that the Annual Report is so required to be filed in accordance with the terms of this Disclosure Agreement. Not later than fifteen (15) Business Days prior to the Filing Date, the County shall provide the Annual Report to the Dissemination Agent (if other than the County). If by said date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall notify the County of such failure to receive the Annual Report. (c) The Dissemination Agent shall: 1. If the County is unable to provide to the Dissemination Agent an Annual Report by the Filing Date, and if not previously filed by the County, send a notice, in electronic format, to the MSRB in substantially the form attached hereto as Exhibit A. 2. File a report with the County certifying that the Annual Report has been provided pursuant to this Disclosure Agreement and stating the date it was provided. 45340-0001\pos-7 G-3 SECTION 4. Content of Annual Reports. The County’s Annual Report shall contain or include by reference the following: (a) 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. (b) Numerical and tabular information for the immediately preceding Fiscal Year of the type contained in the Official Statement under the following captions: 1. The status of the construction and installation of the improvement constituting the 2015 Project, until such time as the 2015 Project is completed; 2. Report of changes in “DEBT SERVICE SCHEDULE;” 3. Table B-1–“County of Contra Costa General Fund Budget Summary;” 4. Table B-2–“County of Contra Costa Summary of Secured Assessed Valuations and Ad Valorem Property Taxation;” 5. Table B-5–“County of Contra Costa General Fund Statement of Revenues, Expenditures and Changes in Fund Balances;” 6. Table B-8–“Contra Costa County Employees’ Retirement Association Schedule of Funded Status;” 7. Table B-16–“Contra Costa County Other Post Employment Benefit Plan Summary of Contributions;” and 8. Table B-19–“Contra Costa County Outstanding Lease Revenue Obligations and Pension Obligation Bonds”). (c) In addition to any of the information expressly required to be provided under Sections 4(a) and 4(b), the County shall provide such other information, if any, necessary to the required statements, in light of the circumstances under which they were made, not misleading. (d) The presentation and format of the Annual Report may be modified from time to time as determined in the judgment of the County to conform to changes in accounting or disclosure principles or practices and legal requirements followed by or applicable to the County to reflect changes in the business, structure, or operations of the County; provided that any such modifications shall comply with the requirements of the Rule. (e) 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 made available to the public on the MSRB website. The County shall clearly identify each such other document so included by reference. 45340-0001\pos-7 G-4 SECTION 5. Reporting of Specified Events. (a) Pursuant to the provisions of this Disclosure Agreement, the County shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the 2015 Bonds, no later than ten (10) Business Days after the occurrence of such event: 1. Principal and interest payment delinquencies; 2. Unscheduled draws on debt service reserves reflecting financial difficulties; 3. Unscheduled draws on credit enhancements reflecting financial difficulties; 4. Substitution of credit or liquidity providers, or their failure to perform; 5. Issuance by the Internal Revenue Service of proposed or final determination of taxability or of a Notice of Proposed Issue (IRS Form 5701 TEB); 6. Tender offers; 7. Defeasances; 8. Rating changes; or 9. Bankruptcy, insolvency, receivership or similar event of the obligated person. This event is considered to occur upon the happening of any of the following: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. (b) The County shall give, or cause to be given, notice to the MSRB of the occurrence of any of the following events described in this Section 5(b) with respect to the 2015 Bonds, if material, not later than ten (10) Business Days after the occurrence of the event: 1. Unless described in Section 5(a)(7) above, adverse tax opinions or other material notices or determinations by the Internal Revenue Service with respect to the tax status of the 2015 Bonds or other material events affecting the tax status of the 2015 Bonds; 2. Modifications to rights of the Bond holders; 3. Optional, unscheduled or contingent 2015 Bond calls; 4. Release, substitution, or sale of property securing repayment of the 2015 Bonds; 5. Non-payment related defaults; 6. The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an 45340-0001\pos-7 G-5 action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms; or 7. Appointment of a successor or additional trustee or the change of name of a trustee. (c) The County acknowledges that it is required to make a determination whether a Specified Event in in Section 5(b) above is material under applicable federal securities laws in order to determine whether a filing with the MSRB is required under Section 5(b). Notwithstanding the foregoing, notice of Specified Events described in Section 5(a)(7) and Section 5(b)(3) above need not be given any earlier than the notice (if any) of the underlying event is given to Holders of affected 2015 Bonds pursuant to the Trust Agreement. (d) If the Dissemination Agent has been instructed by the County to report the occurrence of a Specified Event, the Dissemination Agent shall file a notice of such occurrence with the MSRB. Notwithstanding the foregoing, notice of Specified Events described in Section 5(a)(4) and Section 5(a)(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 2015 Bonds pursuant to the Trust Agreement. SECTION 6 CUSIP Numbers. Whenever providing information to the Dissemination Agent, including but not limited to Annual Reports, documents incorporated by reference to the Annual Reports, Audited Financial Statements and notices of Specified Events, the County shall indicate the full name of the 2015 Bonds and the nine-digit CUSIP numbers for the 2015 Bonds as to which the provided information relates. SECTION 7 Termination of Reporting Obligation. The County’s obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the 2015 Bonds. If such termination occurs prior to the final maturity of the 2015 Bonds, the County shall give notice of such termination in the same manner as for a Specified Event under Section 5(c). SECTION 8. Dissemination Agent. (a) 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. (b) The initial Dissemination Agent shall be Digital Assurance Certification, L.L.C. If at any time there is no designated Dissemination Agent appointed by the County, or if the Dissemination Agent so appointed is unwilling or unable to perform the duties of the Dissemination Agent hereunder, the County shall be the Dissemination Agent an undertake or assume its obligations hereunder. The Dissemination Agent (other than the County) shall not be responsible in any manner for the content of any notice or report required to be delivered by the County pursuant to this Disclosure Agreement. 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 Specified 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 Specified Event in addition to that which is specifically required by this Disclosure Agreement, the County shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Specified Event. 45340-0001\pos-7 G-6 SECTION 10. Amendment; Waiver Notwithstanding any other provision of this Disclosure Agreement, the County may amend this Disclosure Agreement, 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 such 2015 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 2015 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 affected Series of 2015 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 nationally recognized bond counsel, materially impair the interest of the Holders or Beneficial Owners of such 2015 Bonds. (e) 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 Specified Event under Section 5(c), 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 11. Default. In the event of a failure of the County to comply with any provision of this Disclosure Agreement, the Dissemination Agent may (and, at the request of any Participating Underwriters or the Holders or Beneficial Owners of at least 25% of aggregate principal amount of the Certificates then outstanding, shall) or any Holders or Beneficial Owners of the 2015 Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the County to comply with its obligations under this Disclosure Agreement; provided that any such action may be instituted only in the Superior Court of the State of California in and for the County of Contra Costa or in the U.S. District Court in the County of Contra Costa. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Resolution, and the sole remedy under this Disclosure Agreement in the event of any failure of the County to comply with this Disclosure Agreement shall be an action to compel performance. SECTION 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the County agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s gross 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 2015 Bonds. 45340-0001\pos-7 G-7 SECTION 13. 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 Pine Street, 10th Floor Martinez, CA 94553-0063 Attention: Lisa Driscoll, County Finance Director Telephone: 925-335-1023 If to the Dissemination Agent: Digital Assurance Certification, L.L.C. 390 North Orange Avenue, Suite 1750 Orlando, FL 32801-1674 Attention: Customer Assistance Telephone: 888-824-2663 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 14. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the County, the Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners from time to time of the 2015 Bonds, and shall create no rights in any other person or entity. SECTION 15. 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. Dated: ________, 2015 COUNTY OF CONTRA COSTA By Chair of the Board of Supervisors County of Contra Costa, State of California DIGITAL ASSURANCE CERTIFICATION, L.L.C., as Dissemination Agent By: Dissemination Agent 45340-0001\pos-7 G-8 EXHIBIT A FORM OF NOTICE TO REPOSITORY OF FAILURE TO FILE ANNUAL REPORT Name of District: County of Contra Costa Name of Bond Issue: County of Contra Costa Public Financing Authority Lease Revenue Bonds, (Refunding and Capital Projects), 2015 Series A; and County of Contra Costa Public Financing Authority Lease Revenue Bonds, (Refunding and Capital Projects), 2015 Series B Date of Issuance: ________, 2015 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 8.08 of the Subleases, each dated as of July 1, 2015, 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: _______________ DIGITAL ASSURANCE CERTIFICATION, L.L.C., as Dissemination Agent By: Dissemination Agent cc: County of Contra Costa 45340-0001\pos-7 H-1 APPENDIX H DTC AND THE BOOK-ENTRY ONLY SYSTEM The following description of the procedures and record keeping with respect to beneficial ownership interests in the 2015 Bonds, payment of principal, redemption premium, if any, and interest with respect to the 2015 Bonds to DTC, its Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the 2015 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 Underwriter 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. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the 2015 Bonds. The 2015 Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond certificate will be issued for each maturity of each Series of the 2015 Bonds, each in the aggregate principal amount of such maturity, 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 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. Purchases of the 2015 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2015 Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the 45340-0001\pos-7 H-2 2015 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the 2015 Bonds, except in the event that use of the book-entry system for the 2015 Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the 2015 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the 2015 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the 2015 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the 2015 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Indenture. For example, Beneficial Owners of the 2015 Bonds may wish to ascertain that the nominee holding the 2015 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC, if less than all of the 2015 Bonds within a maturity are being redeemed. DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in each issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the 2015 Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the 2015 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments of principal of, premium, if any, and interest on the 2015 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the 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, 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 on the 2015 Bonds to Cede (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. 45340-0001\pos-7 H-3 DTC may discontinue providing its services as depository with respect to the 2015 Bonds at any time by giving reasonable notice to the County or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered. The County may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered. The foregoing information concerning DTC concerning and DTC’s book-entry system has been provided by DTC, and neither the County nor the Trustee take any responsibility for the accuracy thereof. NEITHER THE COUNTY NOR THE TRUSTEE WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO DTC PARTICIPANTS, INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS WITH RESPECT TO THE PAYMENTS OR THE PROVIDING OF NOTICE TO DTC PARTICIPANTS, INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS OR THE SELECTION OF BONDS FOR REDEMPTION. Neither the County nor the Trustee can give any assurances that DTC, DTC Participants, Indirect Participants or others will distribute payments of principal of, premium, if any, and interest on the 2015 Bonds paid to DTC or its nominee, as the registered Owner, or any redemption or other notice, to the Beneficial Owners or that they will do so on a timely basis or that DTC will serve and act in a manner described in this Official Statement. In the event that the book-entry system is discontinued as described above, the requirements of the Indenture will apply. The County and the Trustee cannot and do not give any assurances that DTC, the Participants or others will distribute payments of principal, interest or premium, if any, evidenced by the 2015 Bonds paid to DTC or its nominee as the registered owner, or will distribute any redemption notices or other notices, to the Beneficial Owners, or that they will do so on a timely basis or will serve and act in the manner described in this Official Statement. Neither the County nor the Trustee are responsible or liable for the failure of DTC or any Participant to make any payment or give any notice to a Beneficial Owner with respect to the 2015 Bonds or an error or delay relating thereto. 45340-0001 SF\321518161.2 45340-0000\CDC-2 SH DRAFT 7/16/15 CONTINUING DISCLOSURE AGREEMENT This Continuing Disclosure Agreement (the “Disclosure Agreement”), dated as of ________, 2015, is executed and delivered by the County of Contra Costa, California (the “County”), and acknowledged and agreed to by Digital Assurance Certification, L.L.C., as dissemination agent, in connection with the issuance by the County of Contra Costa Public Financing Authority (the “Authority”) of $__,___,000 aggregate principal amount of its Lease Revenue Bonds, comprised of: $__,___,000 principal amount of (Refunding and Capital Projects), 2015 Series A; and $__,___,000 principal amount of (Refunding and Capital Projects), 2015 Series B (together, the “2015 Bonds”). The 2015 Bonds are being issued pursuant to a Trust Agreement, dated as of July 1, 2015 (the “Trust Agreement”), by and between the County of Contra Costa Public Financing Authority (the “Authority”) and the Trustee and acknowledged by the County. Pursuant to a Facilities Lease, dated as July 1, 2015 (the “Facilities Lease”), the County has covenanted to comply with its obligations under this Disclosure Agreement and to assume all obligations for continuing disclosure with respect to the 2015 Bonds. The County and the Dissemination Agent covenant and agree as follows: SECTION 1. Purpose of the Disclosure Agreement This Disclosure Agreement is being executed and delivered by the County and the Dissemination Agent for the benefit of the Holders and Beneficial Owners of the 2015 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 2015 Bonds (including persons holding a 2015 Bonds through nominees, depositories or other intermediaries). “Disclosure Representative” shall mean the County Administrator, the Director of Conservation and Development, and the County Finance Director 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 initially mean Digital Assurance Certification, L.L.C., or any successor Dissemination Agent which may be designated in writing by the County and which has filed with the County a written acceptance of such designation. “Filing Date” shall mean March 31 of each Fiscal Year of the County (or the next succeeding business day if such day is not a business day), commencing March 31, 2016. “Fiscal Year” shall mean the period beginning on July 1 of each year and ending on the next succeeding June 30, or any other twelve-month period hereafter selected and designated as the official fiscal year period of the County and certified to the Trustee in writing by an Authorized Representative of the County. 45340-0000\CDC-2 2 “MSRB” shall mean the Municipal Securities Rulemaking Board or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org. “Official Statement” means the Official Statement dated _______, 2015 relating to the 2015 Bonds. “Participating Underwriter” shall mean the original underwriter of the 2015 Bonds required to comply with the Rule in connection with offering of the 2015 Bonds. “Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. “Specified Event” shall mean any of the events listed in Section 5(a) or Section 5(b) of this Disclosure Agreement and any other event legally required to be reported pursuant to the Rule. “State” shall mean the State of California. SECTION 3 Provision of Annual Reports. (a) The County shall provide, or shall cause the Dissemination Agent to provide, to the MSRB not later than the Filing Date, an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report shall be submitted in electronic format, accompanied by such identifying information as is prescribed by the MSRB, 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 Specified Event under Section 5. (b) Not later than thirty (30) days (nor more than sixty (60) days) prior to each Filing Date, the Dissemination Agent shall give notice to the County that the Annual Report is so required to be filed in accordance with the terms of this Disclosure Agreement. Not later than fifteen (15) Business Days prior to the Filing Date, the County shall provide the Annual Report to the Dissemination Agent (if other than the County). If by said date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall notify the County of such failure to receive the Annual Report. (c) The Dissemination Agent shall: 1. If the County is unable to provide to the Dissemination Agent an Annual Report by the Filing Date, and if not previously filed by the County, send a notice, in electronic format, to the MSRB in substantially the form attached hereto as Exhibit A. 2. File a report with the County certifying that the Annual Report has been provided pursuant to this Disclosure Agreement and stating the date it was provided. 45340-0000\CDC-2 3 SECTION 4. Content of Annual Reports. The County’s Annual Report shall contain or include by reference the following: (a) 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. (b) Numerical and tabular information for the immediately preceding Fiscal Year of the type contained in the Official Statement under the following captions: 1. The status of the construction and installation of the improvement constituting the 2015 Project, until such time as the 2015 Project is completed; 2. Report of changes in “DEBT SERVICE SCHEDULE;” 3. Table B-1–“County of Contra Costa General Fund Budget Summary;” 4. Table B-2–“County of Contra Costa Summary of Secured Assessed Valuations and Ad Valorem Property Taxation;” 5. Table B-5–“County of Contra Costa General Fund Statement of Revenues, Expenditures and Changes in Fund Balances;” 6. Table B-8–“Contra Costa County Employees’ Retirement Association Schedule of Funded Status;” 7. Table B-16–“Contra Costa County Other Post Employment Benefit Plan Summary of Contributions;” and 8. Table B-19–“Contra Costa County Outstanding Lease Revenue Obligations and Pension Obligation Bonds”). (c) In addition to any of the information expressly required to be provided under Sections 4(a) and 4(b), the County shall provide such other information, if any, necessary to the required statements, in light of the circumstances under which they were made, not misleading. (d) The presentation and format of the Annual Report may be modified from time to time as determined in the judgment of the County to conform to changes in accounting or disclosure principles or practices and legal requirements followed by or applicable to the County to reflect changes in the business, structure, or operations of the County; provided that any such modifications shall comply with the requirements of the Rule. (e) 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 made available to the public on the MSRB website. The County shall clearly identify each such other document so included by reference. 45340-0000\CDC-2 4 SECTION 5. Reporting of Specified Events. (a) Pursuant to the provisions of this Disclosure Agreement, the County shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the 2015 Bonds, no later than ten (10) Business Days after the occurrence of such event: 1. Principal and interest payment delinquencies; 2. Unscheduled draws on debt service reserves reflecting financial difficulties; 3. Unscheduled draws on credit enhancements reflecting financial difficulties; 4. Substitution of credit or liquidity providers, or their failure to perform; 5. Issuance by the Internal Revenue Service of proposed or final determination of taxability or of a Notice of Proposed Issue (IRS Form 5701 TEB); 6. Tender offers; 7. Defeasances; 8. Rating changes; or 9. Bankruptcy, insolvency, receivership or similar event of the obligated person. This event is considered to occur upon the happening of any of the following: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. (b) The County shall give, or cause to be given, notice to the MSRB of the occurrence of any of the following events described in this Section 5(b) with respect to the 2015 Bonds, if material, not later than ten (10) Business Days after the occurrence of the event: 1. Unless described in Section 5(a)(7) above, adverse tax opinions or other material notices or determinations by the Internal Revenue Service with respect to the tax status of the 2015 Bonds or other material events affecting the tax status of the 2015 Bonds; 2. Modifications to rights of the Bond holders; 3. Optional, unscheduled or contingent 2015 Bond calls; 4. Release, substitution, or sale of property securing repayment of the 2015 Bonds; 5. Non-payment related defaults; 45340-0000\CDC-2 5 6. The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms; or 7. Appointment of a successor or additional trustee or the change of name of a trustee. (c) The County acknowledges that it is required to make a determination whether a Specified Event in in Section 5(b) above is material under applicable federal securities laws in order to determine whether a filing with the MSRB is required under Section 5(b). Notwithstanding the foregoing, notice of Specified Events described in Section 5(a)(7) and Section 5(b)(3) above need not be given any earlier than the notice (if any) of the underlying event is given to Holders of affected 2015 Bonds pursuant to the Trust Agreement. (d) If the Dissemination Agent has been instructed by the County to report the occurrence of a Specified Event, the Dissemination Agent shall file a notice of such occurrence with the MSRB. Notwithstanding the foregoing, notice of Specified Events described in Section 5(a)(4) and Section 5(a)(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 2015 Bonds pursuant to the Trust Agreement. SECTION 6 CUSIP Numbers. Whenever providing information to the Dissemination Agent, including but not limited to Annual Reports, documents incorporated by reference to the Annual Reports, Audited Financial Statements and notices of Specified Events, the County shall indicate the full name of the 2015 Bonds and the nine-digit CUSIP numbers for the 2015 Bonds as to which the provided information relates. SECTION 7 Termination of Reporting Obligation. The County’s obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the 2015 Bonds. If such termination occurs prior to the final maturity of the 2015 Bonds, the County shall give notice of such termination in the same manner as for a Specified Event under Section 5(c). SECTION 8. Dissemination Agent. (a) 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. (b) The initial Dissemination Agent shall be Digital Assurance Certification, L.L.C. If at any time there is no designated Dissemination Agent appointed by the County, or if the Dissemination Agent so appointed is unwilling or unable to perform the duties of the Dissemination Agent hereunder, the County shall be the Dissemination Agent an undertake or assume its obligations hereunder. The Dissemination Agent (other than the County) shall not be responsible in any manner for the content of any notice or report required to be delivered by the County pursuant to this Disclosure Agreement. 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 Specified 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 Specified Event in addition to that which is specifically 45340-0000\CDC-2 6 required by this Disclosure Agreement, the County shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Specified Event. SECTION 10. Amendment; Waiver Notwithstanding any other provision of this Disclosure Agreement, the County may amend this Disclosure Agreement, 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 such 2015 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 2015 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 affected Series of 2015 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 nationally recognized bond counsel, materially impair the interest of the Holders or Beneficial Owners of such 2015 Bonds. (e) 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 Specified Event under Section 5(c), 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 11. Default. In the event of a failure of the County to comply with any provision of this Disclosure Agreement, the Dissemination Agent may (and, at the request of any Participating Underwriters or the Holders or Beneficial Owners of at least 25% of aggregate principal amount of the Certificates then outstanding, shall) or any Holders or Beneficial Owners of the 2015 Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the County to comply with its obligations under this Disclosure Agreement; provided that any such action may be instituted only in the Superior Court of the State of California in and for the County of Contra Costa or in the U.S. District Court in the County of Contra Costa. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Resolution, and the sole remedy under this Disclosure Agreement in the event of any failure of the County to comply with this Disclosure Agreement shall be an action to compel performance. SECTION 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the County agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including 45340-0000\CDC-2 7 attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s gross 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 2015 Bonds. SECTION 13. 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 Pine Street, 10th Floor Martinez, CA 94553-0063 Attention: Lisa Driscoll, County Finance Director Telephone: 925-335-1023 If to the Dissemination Agent: Digital Assurance Certification, L.L.C. 390 North Orange Avenue, Suite 1750 Orlando, FL 32801-1674 Attention: Customer Assistance Telephone: 888-824-2663 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 14. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the County, the Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners from time to time of the 2015 Bonds, and shall create no rights in any other person or entity. 45340-0000\CDC-2 8 SECTION 15. 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. Dated: ________, 2015 COUNTY OF CONTRA COSTA By Chair of the Board of Supervisors County of Contra Costa, State of California DIGITAL ASSURANCE CERTIFICATION, L.L.C., as Dissemination Agent By: Dissemination Agent 45340-0000\CDC-2 A-1 EXHIBIT A FORM OF NOTICE TO REPOSITORY OF FAILURE TO FILE ANNUAL REPORT Name of District: County of Contra Costa Name of Bond Issue: County of Contra Costa Public Financing Authority Lease Revenue Bonds, (Refunding and Capital Projects), 2015 Series A; and County of Contra Costa Public Financing Authority Lease Revenue Bonds, (Refunding and Capital Projects), 2015 Series B Date of Issuance: ________, 2015 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 8.08 of the Subleases, each dated as of July 1, 2015, 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: _______________ DIGITAL ASSURANCE CERTIFICATION, L.L.C., as Dissemination Agent By: Dissemination Agent cc: County of Contra Costa 45340-0001 SF\321485216.3