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MINUTES - 11012005 - C53
TO: BOARD OF SUPERVISORS Contra FROM: JOHN SWEETEN, COUNTY ADMINISTRATOR ••` r ;# Y ' Costa DATA: NOVEMBER 1, 2005 '', -� cCounty SUBJECT: FISCAL YEAR 2006-2006 TAX AND REVENUE ANTICIPATION NOTES (TRANS) SPECIFIC REQUESTS)''OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION RECOMMENDATIONS ADOPT Resolution No. 2005/675 authorizing the issuance and sale of not to exceed $125,000,000'.2005- 2006 Tax and Revenue Anticipation Notes (TRANS); APPROVE the forms and distribution of a Notice of Intention to Sell, an Official Notice of Sale and an Official Statement, AUTHORIZE the County Administrator, or designee, to award bids and to take any other necessary actions to execute said Notes. FISCAL IMPACT The County will generate an estimated $600,000 in new revenue resulting from net interest earnings on the T'RANs proceeds and pledged repayment funds. BACKGROUND' Historically,'the County has from time to time issued Tax and Revenue Anticipation Notes (TRANS) to meet General Fund cash requirements during periods in;a fiscal year when receipt of anticipated revenues; flags behind°expenditures. Each year, the County Auditor-Controller develops a cash flow projection for the County General Fund, showing the expected level's of expenditures and revenues for each month. Typically, General' Fund'expenditures exceed revenues'in the first half of each fiscal year, as the County incurs expenses more rapidly than it receives revenues during the same time; period. This cash flow shortfall typically reaches its peak prior to the due date for the first installment of property taxes in early: December. TRANS are a short-term cash management tool that allows the County to have sufficient cash on hand to pay General Fund expenses prior to the receipt of anticipated revenues.' For FY 05-06, the County will seek to issue TRANS in an amount not to exceed $125,000,000, based on the cash flow analysis prepared` by the Auditor-Controller's Office. The notes will mature 12 months after the date'of issue. State law allows the County to invest the TRANS proceeds and pledged repayment funds in specified high- quality investments, such as the County Treasurer's Investment Pool'. The County expects to earn interest on the TRANS proceeds and pledged repayment funds that exceeds the interest the County will pay on the TRANS. This is projected to produce $600,000 in net interest earnings to the County'resulting from this transaction, in addition to providing a cost effective tool to address the County's temporary cask flow deficits. (. _ ._ CONTINUED ON ATTACHMENT: _YES SIGNATURE -0ECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMEdDAON OF BOARD COMMITTEE L--"PROVE OTHER SIGNATURE(S): -__ ______ _________ ._ '_t__ ..__. ._.---._ _.__.__ ._--..---.---.__- ---..__--___ __- _--.. _..__--._..,_ ACTION OF 80 ON + V 4 PPROVE AS RECOMMENDED ._..OTHER VOTE OF SUPERVISORS I-HEREBY CERTIFY THAT THIS IS A TRUE ,�f AND CORRECT COPY OF AN ACTION TAKEN UNANIMOUS(ABSENT +!✓ } AND ENTERED ON THE MINUTES OF THE BOARD OF SUPERVISORS ON THE DATE AYES: NOES: SHOWN. ABSENT: ABSTAIN: ATTESTED tJG s��S�+�►' '+�''� 020 CONTACT: Jason Crapo JOHN SWEETEN,CLERK OF THE BOARD OF SUPERVISORS AND COUNTY, ADMINISTRATOR CC: Jason Crapo Jahn Sweeten,County Administrator Bill Pollack,Treasurer-Tax Collector Steve Ybarra,Auditor-Controller BY ,DEPUTY BOARD OF SUPERVISORS OF THE COUNTY OF CONTRA COSTA RESOLUTION NO.ARvAfI4 '75 RESOLUTION AUTHORIZING THE ISSUANCE AND SALE OF NOT TO EXCEED$125,000,000 COUNTY OF CONTRA COSTA,CALIFORNIA, 2005- 2006 TAX AND REVENUE ANTICIPATIONNOTES;APPROVING THE FORMS OF AND DIRECTING THE DISTRIBUTION OF A NOTICE OF INTENTION TO SELL,AN OFFICIAL NOTICE OF SALE,AN OFFICIAL STATEMENT AND A CONTINUING DISCLOSURE CERTIFICATE; DELEGATING TO COUNTY ADMINISTRATOR OR HIS DESIGNEE AUTHORIZATION TO AWARD BIDS FOR SAID NOTES; AND AUTHORIZING TAKING OF NECESSARY ACTIONS AND EXECUTION OF NECESSARY DOCUMENTS WHEREAS,pursuant to Sections 53850 et seq. of the Government Code of the State of California(the"Government Code"),this Board of Supervisors(the"Board") has found and determined that the sum of not to exceed One Hundred Twenty-Five Million Dollars ($125,000,000)is needed for the requirements of the County of Contra Costa(the"County") to satisfy obligations payable from the general fund of the County(the"General Fund") and that it is necessary that said sum be borrowed for such purpose at this time by the issuance of temporary notes,(the"Notes")therefor in anticipation of the receipt of taxes,revenue and other moneys to be received by the County for the General Fund of the County allocable to Fiscal Year 2005-2006; WHEREAS, it appears,and the Board hereby finds and determines,that said sum of One Hundred Twenty-Five Million Dollars ($125,000,000)when added to the interest estimated to be payable thereon, does not exceed'eighty-five percent(85%) of the estimated amount of the uncollected taxes,income,revenue, cash receipts and other moneys of the County for the General Fund of the County attributable to Fiscal Year 2005-2006 and available for the payment of the principal of and interest on the Notes; WHEREAS,no money has heretofore been borrowed by the County through the issuance of any temporary notes in anticipation of the receipt of,or payable or secured by, taxes, income,revenue,cash receipts or other moneys of the County received or accrued during or allocable to Fiscal Year 2005-2006;however,the County did''participateinthe securitization of certain of its vehicle license fee revenues from the State of California pursuant to a California Statewide Communities Development Authority Revenue Anticipation Notes(Vehicle License Fee Program) financing,which notes were issued on March 17, 2005 and defeased on August 4, 2005. WHEREAS,pursuant to Section 53856 of the Government'Code,'certain revenues which will be received by the County for the General Fund and attributable to Fiscal Year 2005- 2006 can be pledged for the payment of the principal of and interest on the Notes; DOCSSF1:838482.5 WHEREAS, the County wishes to authorize the issuance of one or more series of the Notes in an aggregate amount not to exceed$125,000,000; WHEREAS,the Notes shall be sold to the highest bidder or bidders pursuant to a competitive sale to be held on December 1,2005 or on such earlier or later date as is established by the County Administrator of the County(the"County Administrator")in accordance with the terms of the Official Notice of Sale for the Notes; WHEREAS, an Official Statement describing the Notes and an Official Notice of Sale for the sale of the Notes will be distributed to potential purchasers of the Notes and a Notice of Intention to Sell Notes will be published in THE BOND BUYER WHEREAS,this Board has been presented with the form of each document hereinafter referred to,relating to the Notes, and the Board has examined and approved the form of each document and desires to authorize and direct the execution of such documents and the issuance of the Notes;and WHEREAS,the County has full legal right,power and authority under the , Constitution and the laws of the State of California to enter into the transactions hereinafter authorized; NOW THEREFORE,BE IT RESOLVED by the Board of Supervisors of the County of Contra Costa, as follows: Section 1. Recitals. The foregoing recitals are true and correct and this Board hereby so'finds and determines. Section 2. Authorization and Issuance. (A) Solely for the purpose of anticipating taxes, income,revenues, cash receipts and other moneys to be received by the County for the General Fund of the County allocable to Fiscal Year 2005-2006, and not pursuant to any common plan of financing, the County hereby determines to and shall borrow the aggregate principal sum of not to exceed One Hundred Twenty-Five Million Dollars($125,000,000),by the issuance of temporary notes in one or more series under Sections 53550 et seq. of the Government Code,designated the"County of Contra Costa, California,2005-2006 Tax and Revenue Anticipation Notes." A first series of Notes labeled"Series A"(the"Series A Notes")shall be issued pursuant hereto in the aggregate principal amount of not to exceed$120,000,000. A second series of Notes labeled"Series B (the"Series B Notes")may hereafter be issued prior to,January 1,2006, in an amount not to exceed the difference between$125,000,000 and the principal amount of the Series A Notes. The Notes of each series shall be payable on a parity with each other. (B) The Series A Notes shall be initially issued and registered as provided in Section 9 hereof and otherwise shall be in the denominationsof$5,000 or any integral multiple thereof,and shall be dated the date of issuance thereof,shall mature(without option of prior redemption)not more than thirteen(13)months thereafter, and shall bear interest,payable at least one year from the date of issuance and at maturity and computed on the basis of a 360-day DOCssF1:838482.5 2 year composed of twelve 30-day months, at the rate per annum determined in accordance with this'Resolution: (C) Interest due on the Notes,prior to the maturity thereof, shall be payable to the person in whose name such Note is registered on the registration books of the County, maintained by the Paying Agent(hereinafter defined), as of the close of business on the 15th day of the calendar month immediately preceding the interest payment date(the"Record Date"), such interest to be paid by check mailed to such registered owner. Both the principal of the Notes and:,interest due on the Notes at maturity shall be payable in lawful money of the United States of America, only to the registered owners of the Notes upon surrender thereof at the office of the Treasurer-Tax Collector of the County, as initial paying agent for the Notes(the"Paying Agent")in Martinez, California upon the maturity thereof. No interest shall be payable on any Note for any period after maturity during which the registered owner thereof fails to properly present such Note for payment. (D) The Series B Notes shall be dated the date of issuance thereof, shall mature(without option of prior redemption)not more than thirteen(13)months thereafter and shall bear interest payable at least one year from the date of issuance and at maturitycomputed on the basis of a'360-day year composed of twelve 30-day months at the rate or rates determined in accordance with this Resolution. The issuance of the Series B Notes shall be subject to the following conditions. (1) Receipt of confirmation from Moody's Investors Service'("Moody's") and Standard&Poor's Ratings Service("S&P") (each an"Agency")(if such respective rating agency rated the Series A Notes)that the issuance of the Series B'Notes will not cause a reduction or withdrawal in such Agency's rating on the Series A Notes, and (2) Receipt of an opinion of Bond Counsel to the effect that the interest on the Series B Notes is excludable from gross income for federal income tax purposes. (E) At any time after the sale of a series of the Notes, the County shall execute the Notes of such series for issuance hereunder and shall deliver them to the Paying Agent, and thereupon such Notes shall be authenticated and delivered by the Paying Agent to the purchaser thereof upon the written request of the County and upon receipt of payment therefor from the purchaser thereof. Section 3. Sale of Notes. The proposed form of the Official Notice of Sale for the Series A Notes, in substantially the form presented to this meeting(a copy of which is on file with the Clerk of the Board), is hereby approved and adopted as the Official Notice of Sale for the Series A Notes. The County Administrator is hereby authorized and directed, for and in the name of and on behalf of'the County,to execute and deliver such Official Notice of Sale, with such changes, additions,completions and corrections therein as the County Administrator shall require or approve, including specifying the term of the Series A Notes and the interest payment dates therefor, such';.approval to be conclusively evidenced by the execution and delivery thereof.` All of'the Series A Notes shall be offered for public sale in accordance with the Official Notice of Sale. Tarnalpais Advisors, Inc. (the"Financial Advisor")is hereby'authorized and directed to cause to be delivered to prospective bidders for the Notes copies of said Official Docssrr:838492.5 3 Notice of Sale, subject to such changes, additions and completions as may acceptable to the County Administrator: The proposed form of the Notice of Intention to Sell Notes, in substantially the form presented to this meeting(a copy of which is on file with the Clerk of the Board), is hereby approved. The CountyAdministrator is hereby directed to cause said Notice of Intention to Sell Notes to be published once,no later than 5 days before the date of sale of the Notes, in THE BOND BUYER, a financial publication generally circulated throughout the State of California. Electronic bids shall be received by the County Administrator or his designee up to the hour of 10:00 a.m. California time on December 1, 2005, or on such earlier or later date or time as determined by the County Administrator as set forth in the Official Notice of Sale for the purchase of the Series A Notes, for immediately available funds at not less than their principal amount and accrued interest thereon to the date of their delivery,the interest rate or rates (which shall not exceed'12%per annum)to be designated in the bid or bids,with the County Administrator reserving the right to reject any and all bids,in accordance with the terms and conditions of said Official Notice of Sale. The County Administrator is hereby authorized to determine whether to accept partial bids in increments of a specified denominational amount, such as$5,000,000, and to award the Series A Notes to the highest responsible bidder or bidders resulting in the lowest true interest cost to the County or to reject any or all bids. If the Series A Nates are awarded to more than one bidder and at different rates of interest, each incremental amount of Series A Notes of the same interest rate shall be given the same designation with the number of designations equal to the number of different interest rates. The County Administrator may, in his sole discretion,cancel the public sale of the Series A Notes and negotiate for the sale of the Series A Notes with an underwriter or underwriters, and enter into an agreement for the sale of the Notes,upon such terms and conditions as he shall deem appropriate. The County Administrator is hereby authorized,upon a determination,it is in the best interest of the County, to sell the Series B Notes prior to January 1,2006,by negotiated or public sale at not less than the principal amount thereof,which principal'amount shall not exceed the difference between$125,000,000 and the principal'`amount of the Series A Notes,and at an interest rate or rates not to exceed 12%per annum. Section'4. Disposition of Proceeds of Notes. The County shall, immediately upon receiving the proceeds of the sale of"the Notes,place in the County General Fund maintained in the County Treasury all amounts received from such sale. Such amounts held in the County General Fund shall be invested'as permitted by Section 53601 or Section 53635 of the Government Code provided that no such investments shall consist of reverse repurchase agreements. Such amounts may be commingled with other funds of the County. Amounts in the County General Fund attributable to the sale of the Notes shall be withdrawn,and expended by the County for any purpose for which the County is authorized to expend funds from the General Fund of the County, but(except for costs related to the issuance of the Notes)only after exhausting funds otherwise available for such purposes (which are not restricted funds), and only to the extent that on any given day such other funds are not then vUcssxi:$38482.5 4' available, and for purposes of this section,:otherwise available funds excludes amounts that are heldor set aside in a reasonable working capital reserve(as described in the tax certificate of the County delivered upon issuance of the Notes and,in any event,not exceeding five percent(5%) of the County's total working capital expenditures from its available'funds`in Fiscal Year 2004- 2005). If on the date that is six months from the date of issuance of'a series of the Notes all amounts attributable to the proceeds of the Notes of such series(including investment earnings thereon) have not been so expended,the County shall promptly notify Orrick,Herrington&" Sutcliffe ILP("Bond Counsel") and,to the extent of its power'and authority, comply with the instructions from Bond'Counsel as to the means of satisfying the rebate requirements of Section 148 of the Internal Revenue Code of 1986(the"Code"). Section 5. Source of PgMent. (A) The principal of and interest on the Notes shall be payable from taxes, income,revenue,cash receipts and other moneys which are received by the County for the General Fund for the Fiscal Year 2005-2006 and which are lawfully'available for the payment of current expenses and other obligations of the County(the"Unrestricted Revenues"). (B) As security for the payment of the principal of and interest on the Notes, the County hereby pledges to deposit in trust in a;special County fund designated as the "2005- 2006 Tax and Revenue Anticipation Note Repayment Fund"(the"Repayment Fund") (i) an amount equal to fifty percent(50%)of the aggregate principal amount of the Notes from the first Unrestricted Revenues received by the County during the accounting period commencing on December 13,2005 and ending January 12, 2006, inclusive(the"First Pledge Period"), and(ii) an amount equal to 50%of the principal amount of Notes from the first Unrestricted Revenues received by the County during the accounting period commencing on April 13,2006 and ending May 11, 2006,inclusive(the``Second Pledge Period"),together with an amount sufficient(stet of anticipated earnings on moneys in the Repayment Fund) (x)to satisfy and make up any deficiency in the Repayment Fund with respect to the prior Pledge Period and(y)to pay the interest on the Notes due on and prior to maturity. The amounts pledged by the County for deposit into the Repayment Fund from the Unrestricted Revenues received during each indicated accounting period are hereinafter called the "Pledged Revenues." (C) In the event that there have been insufficient Unrestricted Revenues received by the'County by the third business day prior to the end of any such Pledge Period to permit the deposit into the Repayment Fund of the full amount of the Pledged Revenues required to be deposited with respect to such Pledge Period,then the amount of any deficiency in the Repayment Fund shall be satisfied and made up from any other moneys of the County lawfully available for the payment of the principal of the Notes and the interest thereon(all as provided in Sections 53856 and 53857 of the Government Code)(the"Other Pledged Moneys") on such date or thereafter on a daily basis,'when,and as such Pledged Revenues and Other Pledged Moneys are received by the County. Section 6. Pledged Revenues. (A) The Pledged Revenues shall be deposited by the Treasurer-Tax Collector of the County(the"Treasurer")in the Repayment Fund on or prior to the last business'clay of DOCSSF1:838482.5 5 each respective Pledge Period,and applied as directed in this Resolution; and the Other Pledged Moneys, if any, shall be deposited by the Treasurer in the Repayment Fund on the last business dayof such Pledge Period and on each business day thereafter,until the full amount of the moneys required by Section 5(B)has been so deposited in the Repayment;.Fund provided that,if on the date that is six months from the date of issuance of a series of the Notes all amounts attributable to the proceeds of the Notes of such series(including investment earnings thereon) have not been expended in accordance with Section 4,the amounts to be deposited in the Repayment Fund during the period in which received shall be deposited as soon as received. The principal of and interest on the Notes'constitute a first lien and charge on, and shall be payable from,moneys in the Repayment Fund. Moneys in the Repayment Fund shall be applied only as hereinafter in this Section 6 provided. (B) The Treasurer shall use the moneys in the Repayment Fund on the respective interest payment dates to pay interest on the Notes then due and on the respective maturity dates of the Notes to pay the principal of and'interest on the Notes then due. Any moneys remaining in the Repayment Fund after all such payments, or after provision for such payments have been made, shall be transferred to the General Fund of the County. If for any reason amounts in the Repayment Fund are insufficient to pay the Notes in full, such amounts shall be applied pro rata to the payment of each series of Notes based on the total principal of and interest payable upon the Notes at the respective maturities thereof,taking into account anticipated earnings to be received on amounts in the Repayment Fund prior to the final maturity date thereof. (C) Moneys in the Repayment Fund shall be invested in Permitted Investments as defined below, except that no such investments (other than the Contra Costa County Treasurer's Investment Pool,set forth below) shall have a maturity date later than the maturity date of the respective series of Notes expected to be paid with proceeds of such investments. The proceeds of any such investments shall be retained in the Repayment Fund until payment of principal of and interest on the Notes(or provision therefor)has been made in accordance with paragraph'(B), at which time any excess amount shall be transferred to the General Fund of the County. (D) Permitted Investments mean any of the following: (1) United'States'Treasury notes,bonds,bills or certificates of indebtedness,or those for which the full faith and credit of the United States are pledged for the payment of principal and interest. (2) Obligations of instrumentalities or agencies of the United States of America limited to the following: (a)the Federal Horne Loan Bank Board (FHLB); (b) the Federal Home Loan Mortgage Corporation(FHLMC); (c) the Federal National Mortgage Association(FNMA); (d)Federal Farm Credit Bank (FFCB); (e) Government National Mortgage Association (GNMA); (f) Student Loan Marketing Association(SLMA); Federal Agricultural Mortgage Association and(g) guaranteed portions of Small Business Administration(SBA)notes.' DOCSSFt:83'64$2.5 6 (3) Bills of exchange or time drafts drawn on and accepted by a commercial bank,otherwise known as bankers acceptances. Purchases-ofbankers acceptances may not exceed a maturity of 180days. The financial institution must have a minimum short-term rating of"A-1'"and "P-1"by S&P and Moody's,respectively, and a long-term rating of no less than "A". (4) Commercial paper of"prime"quality of the highest ranking or of the highest letter and numerical rating as provided for by Moody's ("P-1")or S'&P ("A-1') Eligible paper is further limited to issuing corporations that are organized and operating within the United'States and having total assets in excess of five hundred million'dollars($500,000,000). Purchases of eligible commercial'paper may not exceed a maturity of 270 days. (5) Negotiable certificates of deposits issued by a nationally or state;-chartered bank or a state or federal association(as defined by Section 5102 of the California Financial Code)or by'a state-licensed branch of a foreign bank' in each case which has, or which is a subsidiary of a parent company which has,the highest letter and numerical rating from Moody's("P-1") and S&P ("A-1"),respectively. (6) Investments in repurchase agreements of any securities listed in(1)through (4) above. Investments in repurchase agreements may be made with financial institutions having a rating of"Aa"or"AA"or better from Moody's and S&P,respectively,and when the term of the`;,agreement does not exceed 30 days,and are fully secured at or greater than 102%'of the market value plus accrued interest by obligations of the United States Government,`its agencies and instrumentalities,in accordance with number (2) above. (7) Deposits in the State of California Treasurer's Local Agency Investment Fund (LAID). (8) Shares of beneficial interest issued by the Investment Trust of California (CaITRUST)pursuant to California Government Code Section 6509.7; and authorized for local agency investment pursuant to California Government Code Section 53601(o). (9) The Contra Costa County Treasurer's Investment Pool. Section 7. Execution of Notes. The Treasurer or his designee is hereby authorized to execute the Notes by use of his manual or facsimile signature,and the Clerk of the Board of Supervisors of the County(the"Clerk of the Board")or one of his assistants is hereby authorized to countersign,by manual or facsimile signature,the Notes and to affix the seal of the County thereto by impressing the seal or by imprinting a facsimile of the seal thereon. Said officers are hereby authorized to cause the blank spaces in Exhibit A to be filled in as may be appropriate and to deliver the Notes to the respective purchasers thereof. In the case of Notes Docssrr:838482.5 7 executed by facsimile signature of both the Treasurer and the Clerk of the Board,the Notes shall not be valid unless and until the paying Agent or his designee shall have manually authenticated such Notes. In case any officer whose signature appears on the Notes shall cease to be such officer before the delivery of the Notes 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 Notes. Section 8. Form of Notes and Certificate of Authentication and Registration. The Notes shall be issued in fully registered form without coupons and the Notes and the Certificate;of Authentication and Registration shall be substantially in the form and substance set forth in Exhibit A attached hereto and by reference incorporated herein,the blanks in said form to be filled in with appropriate words and figures.` Section 9. Use of Depository; Registration, Exchange and Transfer. (A) The Depository Trust Company,'New York,New York,is hereby appointed depository for the Notes. The Depository Trust Company shall act as depository pursuant to the Blanket Issuer Letter of Representations on file with the Clerk of the Board. The Notes shall be initially issued and registered in the name of"Cede &Co. 'as nominee of The Depository Trust Company,New York,New York and shall be evidenced by a single Note. Registered ownership of each Note,or any portion thereof,may not thereafter be transferred except as set forth in Section 9(B), (B) The Notes shall be initially issued and registered as provided in Section(A) hereof. Registered ownership of the Notes, or any portions thereof,may not thereafter be transferred except: (i) to any successor of Cede&Co;, as nominee of The Depository Trust Company, or its nominee, or of any substitute depository designated pursuant to clause(ii) of this subsection(B) ("Substitute Depository"); provided that any successor of Cede&Co.,, as nominee of The Depository Trust Company or Substitute Depository, shall be qualified under any applicable laws to provide the service proposed to be provided by it; (ii) to any Substitute Depository not objected to by the Treasurer, upon (1)the resignation of The Depository Trust Company or its successor(or any Substitute Depository or its successor)from its functions as depository, or(2)determination by the Treasurer to substitute;;another depository for The Depository Trust Company(or its successor) because the Depository Trust Company(or its successor)is no longer able to carry out its functions as depository;provided that any such'Substitute Depository shall be qualified under any applicable laws to provide the services proposed to be provided by it or (iii) to any person as provided below,upon(1)the resignation of The Depository Trust Company or its successor(or any Substitute Depository or its successor) from its functions as depository, or(2) a determination by the Treasurer to discontinue using The Depository Trust Company or a depository. DOCSSF1:838482.5 8 (C) In the case of any transfer pursuant to clause(i)or clause(ii)of subsection (B)of this Section ,upon receipt of all outstanding Nates of each series by the Paying Agent (together, in the case of a successor paying agent appointed by the County pursuant to Section 12 hereof, with a written request of the Treasurer to such successor paying agent designating the Substitute Depository), a single new Note for each series, which the County shall prepare or cause to be prepared,shall be executed and delivered,registered in the name of any such successor to Cede&Co. or such Substitute Depository,or their respective nominees,as the case may be, all as specified by the Treasurer or,in the case of a successor paying agent appointed by the County pursuant to Section 12 hereof, as specified in the written request of the Treasurer. In the case of any transfer pursuant to clause(iii)of Subsection(B)of this Section 9 upon receipt of all outstanding Notes by the Paying Agent(together,in the case of a successor paying agent appointed by the County pursuant to Section 12 hereof,with a written request of the Treasurer to such successor,paying agent),new Notes,which the County shall prepare or cause to be prepared, shall`be executed and delivered in such denominations and registered in the names of such persons as specified by the Treasurer or, in the case of a successor paying agent appointed by the County pursuant to Section 12 hereof,as are requested in such written request of the Treasurer, subject to the limitations of this Section 9,provided that the Paying Agent shall deliver such new Nates as soon as practicable. (D) The County and the Paying Agent shall be entitled to treat the person in whose name any Note is registered as the owner thereof for all purposes of the Resolution and for purposes of payment of principal of and interest on such Note,'notwithstanding any notice to the contrary received by the Paying Agent or the County; and the County and the Paying Agent shall not have responsibility for transmitting payments to,communicating with,notifying,or otherwise dealing with any beneficial owners of the Notes. Neither the County nor the Paying Agent shall have any responsibility or obligation, legal or otherwise,to any such beneficial owners or to any other party,including The Depository Trust Company or its successor(or Substitute Depository or its successor), except to the owner of any Notes, and the Paying Agent may rely conclusively on its records as to the identity of the owners of the Notes. (E) Notwithstanding any other provision of this Resolution and so long as all outstanding Notes are registered in the name of Cede&Co. or its registered assigns,the County and the Paying Agent shall cooperate with Cede&. Co. or its registered assigns, as sole registered owner, in effecting payment of the principal of and interest on the Notes by arranging for payment in such manner that funds for such payments are properly identified and are made available on the date they are due all in accordance with the better of Representations, the provisions of which the Paying Agent may rely upon to implement the foregoing procedures notwithstanding any inconsistent provisions herein, (F) In the case of any transfer pursuant to clause(iii) of subsection(B)of this Section, any Note may,in accordance with its terms,be transferred or exchanged for,a like aggregate principal amount in authorized denominations of the same series, upon the books required to be kept by the Paying Agent pursuant to the provisions hereof,by the person in whose name it is registered, in person or by his duly authorized attorney,upon surrender of such Note for cancellation,'and, in the case of'a transfer, accompanied by delivery of a written' instrument of transfer;duly executed and in form approved by the Paying Agent., nocssrI:s3sasa.s 9 Whenever any Note shall be surrendered for transfer or exchange,the County shall execute and the Paying Agent shall authenticate,if required, and deliver a new Note or Notes of the same series of authorized denominations,for a life aggregateprincipal amount. The Paying Agent shall require the owner requesting such transfer or exchange to pay.;any`tax or other governmental charge required to be paid with respect to such transfer or exchange. (G) The Paying Agent will keep or cause to be kept sufficient books for the registration and transfer of the Notes,which shall at all times be open to inspection by the County. Upon presentation for such purpose,the Paying Agent shall,under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred,on such books,Notes as hereinbefore provided. (H) If any Note shall become mutilated,the County, at the expense of the owner of such Note,shall execute, and the Paying Agent shall thereupon authenticate, if required,and deliver a new Note of like series,tenor and number in exchange and substitution for the Note so mutilated,but only upon surrender to the Paying Agent of the Note so mutilated. Every mutilated Note so surrendered to the Paying Agent shall be cancelled by it and delivered to,or upon the order of,the County. If any Note shall be lost, destroyed or stolen, evidence of such loss,;;destruction or theft'may be submitted to the County and the Paying Agent and, if such evidence be satisfactory to both and indemnity satisfactory to them shall be given,the County,at the expense of the owner,shall execute, and the Paying Agent shall thereupon authenticate,if required, and deliver a new Note of like series,tenor and number in lieu of and in substitution for the Note so lost, destroyed or stolen(or if any such Note shall have matured or shall be about to mature,instead of issuing a substitute Note, the Paying Agent may pay the same without surrender thereof). The Paying Agent may require payment by the registered owner of a Note of a sum not exceeding the actual cost of preparing each new Note issued pursuant to this paragraph and of the expenses which may be incurred by the County and the Paying'Agent. Any Note issued under these provisions'in lieu of any Note alleged to be lost,destroyed or stolen shall' constitute'an original additional contractual obligation on the part of the County whether or not the Note so alleged to be lost,destroyed or stolen be, at any time, enforceable by anyone, and shall be entitled to the benefits of this Resolution with all other Notes secured by this Resolution. All Notes surrendered for payment or registration of transfer,if surrendered to any person other than the Paying Agent, shall be delivered to the Paying Agent and shall be promptly cancelled by it. The County may at any time deliver to the Paying Agent for cancellation any Notes previously authenticated'and delivered hereunder which the County may have acquired in any manner whatsoever, and all Notes so delivered shall promptly be cancelled by the Paying Agent. No Note shall be authenticated in lieu of or in exchange for any Notes cancelled as provided herein,'except as expressly permitted hereunder. All cancelled Notes held by the Paying Agent shall be disposed of as directed by the County. Section 10. General Covenants. It is hereby covenanted and warranted by the Board that all representations and recitals contained in this Resolution are true and correct and that the Board and the County, and their appropriate officials,have duly taken all proceedings necessary to be taken by them, and will take any additional proceedings necessary to be taken by thein, for the levy, collection and enforcement of the taxes, income revenue, cash receipts and other moneys pledged hereunder in accordance with law and for carrying out the provisions of DOCSSFI:838482.5 10 this Resolution and the Notes and shall cause to be paid in accordance with their terms the principal of and interest on the Notes. The County hereby covenants to deposit:funds in the Repayment Fund at the times and in the amounts specified herein to provide sufficient moneys to pay the principal of and interest on the Notes on the day'or days on which they mature. Section 11. Tax Covenants• Rebate Fund, (A) The County hereby covenants that it will not take any action,or fail to take any action,if such action or failure to take such action would adversely affect the exclusion from gross income of the interest payable on the Notes under Section 103 of the Code. Without limiting the generality of the foregoing,the County hereby covenants that it will comply with the requirements of the Tax Certificate of the County with respect to the Notes (the"Tax Certificate'),to be entered into by the County as of the date of issuance of the Notes. The provisions of this Section 11 shall survive'payment in full or defeasance of the Notes. (B) The County covenants that it shall make or cause to be made all calculations in a reasonable and prudent fashion relating to any rebate of excess investment earnings on the proceeds of the Notes due to the United States Treasury, shall segregate and set aside from lawfully available sources the amount such calculations may indicate may be required to be paid to the United States Treasury and shall otherwise at all times do and perform all acts and things necessary and within its power and authority,including complying with each applicable requirement of Section 103 and Sections 141 through 150 of the Code and complying with the instructions of Bond Counsel referred to in Section 4 hereof,to assure that interest paid on the Notes shall, for the purposes'of federal income taxes and California personal income taxation,be excludable from the gross income of the recipients thereof and exempt from such taxation. As part of the performance of the covenant contained in the preceding sentence, promptly after six months from the date of the issuance of each series of the Notes,the County will reasonably and prudently calculate the amount of the Note proceeds of such series which have been expended, with a view to determining whether or not the County has met the requirements of Section 148(f)(4)(B)of the Code with respect to the Notes of such series, and if it has not met such requirements,it will reasonably and prudently calculate or cause to be calculated the amount,'if any, of investment earnings which must be rebated to the United States ,and will immediately set aside, from revenues attributable to the 2005-2006 Fiscal Year or,to the extent not available from such revenues, from any other moneys lawfully available,the amount of any such rebate in the Fund referred to in paragraph(C) of this Section 11,' (C) If funds are required to be deposited therein,;the County shall establish and maintain a fund separate from any other fund established and maintained hereunder designated as the"2005-2006 Tax and Revenue Anticipation Note Rebate Fund". There shall be deposited in the Rebate Fund such amounts as are required to be deposited therein in accordance with the written instructions'from Bond Counsel pursuant to Section 4 hereof (D) Notwithstanding any other provision of this Resolution to the contrary, upon the County's failure to observe, or refusal to comply with,the covenants contained in this Section,no one other than the owners or former owners of the Notes shall be entitled to exercise DOCSSFI:83$482:5 1' any right or remedy under this Resolution on the basis of the County's failure to observe,or refusal to comply with,such covenants:' (E) Notwithstanding any provision of this section,if the County shall provide to the Paying Agent an opinion of Bond Counsel that any specified action required under this section is no longer required or that some further or different action is required to maintainthe exclusion.from grass income for federal income tax purposes of interest on the Notes, the Paying Agent and the County may conclusively rely on such opinion in complying with the requirements of this section, and the covenants hereunder shall be deemed to be modified to that extent. Section 12.' Paving Agent. The Treasurer is hereby appointed as Paying Agent for the Notes. The County hereby directs and authorizes the payment by the Paying Agent of the interest on and principal of the Notes when such become due and payable, from the Repayment Fund in the manner set forth herein. Payment of the Notes shall be in accordance with the terms of the Nates and this Resolution This appointment shall not preclude the County from appointing a financial institution to act as Paying Agent or one or more successors thereto,all without notice to or the consent of the registered owners of the Notes. Any such successor paying agent shall be or shall have co-paying agent relationships with one or more banks or trust companies with a minimum of$100 million in capital and with offices in New York,New York,or Los Angeles,,California, or San Francisco, California. The Paying Agent,initially the Treasurer,is also appointed as registrar and upon the request of any registered owner is authorized to record the transfer or exchange of Notes in accordance with the provisions hereof. Section 13. Official Statement for Notes. The proposed form of Official Statement relating to the Notes(the"Official Statement"), on file with the Clerk of the Board of Supervisors and incorporated into this Resolution by reference,is hereby approved with such changes,additions,completion and corrections'as the County Administrator may approve. The County Administrator or his designee is hereby authorized and directed, for and in the name and on behalf of the County,to execute and deliver an official statement in substantially said form, with such changes therein as such officer executing the same may require or approve, such approval'to be conclusively evidenced by the execution and delivery thereof Distribution by the Financial Advisor of a preliminary Official Statement relating to the Notes is hereby approved' and the County Administrator or his designee is hereby authorized and directed, for and in the name and on behalf of the County,to execute a certificate confirming that the Preliminary Official Statement has been"deemed final"by the County for purposes of Securities and Exchange Commission Rule ISc2-12. Section 14, Continuin" Disclosure. The Treasurer is hereby authorized to execute a Continuing;Disclosure Certificate on behalf of the County containing such'covenants of the County as shall be necessary to comply with the requirements of Securities and Exchange Commission Rule 1 5c2-12. The County hereby covenants and agrees that it will comply with and carry out all of the provisions of such Continuing Disclosure Certificate. DOCSSF1:838482.5 12 Section 15. Approval ofActions. All actions heretofore taken by the officers and agents of the County or the Board with respect to the sale and issuance of the Notes are hereby approved,confirmed and ratified, and the officers of the County and the Board are hereby authorized and directed, for and in the name and on behalf of the County, to do any and all things and take;any and all actions and execute any and all certificates, agreements and other documents which they, or any of them, may deem necessary or advisable in order to consummate the lawful issuance and delivery of the Notes in accordance with this Resolution. Section 16. .' Proceedings Constitute Contract. The provisions of the Notes and of this Resolution shall constitute a contract between the County and the registered owners of the Notes, and such provisions shall be enforceable by mandamus or any other appropriate suit, action or proceeding at law or in equity in any court of competent jurisdiction,and, upon issuanceof the Notes, shall be irrepealable. Section 17. Severability. If any one or more of the agreements,conditions, covenants or terms contained herein required to be observed or performed by or on the part of the Board shall be contrary to law,then such agreement or agreements,such condition or conditions,such covenant or covenants or such term or terms shall be null and void and shall be deemed severable from the remaining agreements, conditions,covenants and terms hereof and shall in no way affect the validity hereof or of the Notes, and the owners'of the Notes shall=retain all the benefit,protection and security afforded:to them hereunder and under all provisions of applicable law. The Board hereby declares that it would have adopted this Resolution and each and every other section,paragraph,subdivision,sentence, clause and phrase hereof and would have authorized the issuance of the Notes pursuant hereto irrespective of the fact that any one or more of the 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. DOCSSFI;838482,5 13 Section°:15. Approval of Actions. All actions heretofore takenby the officers and agents of the County or the Board with respect to the sale and issuance of the Notes are hereby approved; confirmed and ratified, and the officers of the County and the Board are hereby authorized and directed, for and in the name and on behalf of the County,to do any and all things and take any and all actions and execute any and all certificates, agreements and other documents which they, or any of them,may deem necessary or advisable in order to consummate the lawful issuance and delivery of the Notes in accordance with this Resolution. Section'16. Proceedings Constitute Contract. The provisions of the Notes and of this Resolution shall constitute a contract between the County and the registered owners of the Notes, and such'provisions shall be enforceable by mandamus or any other appropriate suit, action or proceeding at law or in equity in any court of competent jurisdiction, and, upon issuance of the Notes,shall be irrepealable. Section 17. Severability. If any one or more of the agreements,conditions, covenants or terms contained herein required to be observed or performed by or on the part of the Board..shall be contrary to law,then such agreement or agreements, such condition or conditions, such covenant or covenants or such term or terms shall be null and void and shall"be deemed severable from the remaining agreements, conditions,covenants and terms hereof and shall in no way affect the validity hereof or of the Notes, and the owners of the Notes shall retain all the benefit,protection and security afforded to them hereunder and under all provisions of applicable law. The Board hereby declares that it would have adopted this Resolution and each and every other section,paragraph, subdivision, sentence, clause and phrase hereof and would have authorized the issuance of the Notes pursuant hereto irrespective of the fact that any one or more of the 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. PASSED AND ADOPTED BY THE BBO OF SUPERVISORS OF THE COUNTY OF CONTRA COSTA this�day of oile, � , 2405 by the following'vote'; AYES: AYES: G191a,Piepho,DeSaulnier,Glover and Llilkema NOES: None ABSENT: None COUNTY OF CONTRA COSTA ABSTAIN: None By: Chair of the I§oard of Supervisors ATTEST: John Sweeten,Clerk of the Board of Supervisors and County Administrator $y:, Dep y Clerk oftire Board of Supervisors DOCSSFI:838482.5 13 EXHIBIT A REGISTERED REGISTERED No.R- COUNTY OF CONTRA COSTA, CALIFORNIA, 2005-2006 TAX AND REVENUE ANTICIPATION NOTE, SERIES [A/B] Rate of Interest: Note Date: Maturity Date: CUSIP'No.: olo' Registered Owner: CEDE& CO, Principal Amount: DOLLARS FOR VALUE RECEIVED,the County of Contra Costa(the"County), State of California, acknowledges itself indebted to and promises to pay to the Registered Owner identified above,or registered assigns,the Principal Amountspecified above,in lawful money of the United States of America, on the Maturity Date specified'above,together with interest thereon payable [on and] at the maturity thereof,at the Rate of Interest per annum set forth above (computed on the basis of a 360-day year composed of twelve 30-day months)in like lawful money from the Note Date specified`above until payment in full of said principal sum. Interest on this Note, clue on ' shall be paid to the person in whose name this Note is registered as of the close of business on the 15th day of the calendar month immediately preceding the interest payment date by check mailed to such registered owner. The principal'of and interest on this Note shall be payable only to the registered owner hereof upon surrender'of this Note at the office of the Treasurer-Tax Collector of the County, as paying agent(together with any successor appointed by the County,the"Paying Agent") as the same shall fall due;, provided,however,that no interest shall be payable for any period after maturity during which the registered owner hereof fails to properly present this Note for payment. It is hereby certified,recited and declared that this Note is one of a series of Notes of the Series specified above issued in the aggregate principal amount of$ and is part of an authorized issue of Notes entitled"County of Contra Costa, California,2005-2006 Tax and Revenue Anticipation Notes"(the"Notes"), authorized in the aggregate principal amount of Dollars all of like tenor,made, executed and given pursuant to the authority of Article'7.6(commencing with Section 53850)of Chapter 4,Part 1, Division 2,Title 5 of the California Government Code and all laws amendatory thereof or supplemental thereto, and under and pursuant to the provisions of a Resolution of the Board of Supervisors of the County adopted on , 2005 (herein called the"Resolution')," noGssF1:83'8482.5 A-1 authorizing the issuance of the Notes,and that all acts,conditions and things required to exist, happen and be performed precedent to and in the issuance of this Note have existed, happened and been performed in regular and due time, form and manner as required by law, and that this Note,together with all other indebtedness and obligations of the County,does not exceed any limit prescribed by the Constitution or statutes of the State of California. The Notes of each series shall be payable on a parity with each other. The principal of and interest on the Notes shall be payable from taxes, income, revenue, cash receipts and other moneys which are received by the County for the General Fund of the County for the Fiscal Year 2005-2006 and which are lawfully available for the payment of current expenses and other obligations of the County(the"Unrestricted Revenues"). As security for the payment of the principal of and interest on the Notes,the County has pledged to deposit in the Repayment Fund(as defined in the Resolution): (i) an amount equal to 50% of the principal amount of the Notes from the first Unrestricted Revenues received by the County during the accounting periodcommencing on December 13, 2005 and ending January 12,2006, inclusive(the"First Pledge Period"), and(ii) an amount equal to 50%of the principal amount of Notes from the first Unrestricted Revenues received by the County during the accounting period commencing on April 13, 2006 and ending May 11, 2006,inclusive(the"Second Pledge Period"),together with an amount sufficient(net of anticipated earnings on moneys in the Repayment Fund) (x)to satisfy and make up any deficiency in the Repayment Fund with respect to the prior Pledge Period and(y)to pay the interest on the Notes due on and prior to maturity (such pledged amounts being hereinafter called the"Pledged''Revenues").' In the event that there are insufficient Pledged Revenues received by the County by the third business day prior to the end of any such Pledge Period to permit the deposit into the Repayment Fund of the full amount of the aforesaid moneys to be deposited,then the amount of any deficiency in the Repayment Fund shalt be satisfied"and made up from any other moneys of the County lawfully available for the payment of the principal of and interest on the Notes (such other pledged moneys being hereinafter called the"Other Pledged Moneys'), The principal of and interest on the Notes shall constitute'a first lien and charge on and shall be payable from,moneys in the Repayment Fund.. This Note is transferable by the registered owner hereof in person or by such owner's attorney duly°authorized in writing at the office of the Paying Agent,but only in the manner, subject to the limitations and upon payment of the charges provided in the Resolution, and upon surrender and cancellation of this Note. Upon such transfer a new Note or Notes of authorized denominations and for the same aggregate principal amount will be issued to the transferees in exchange herefor. The County and the Paying Agent may deem and treat the registered owner hereof as the absolute owner hereof for the purpose of receiving payment of or on account of principal hereof and interest due hereon and for all'other purposes,and neither the County nor the Paying Agent shall be affected by any notice to the contrary. This Note shall not be valid or become obligatory for any purpose until the Certificate of Registration hereon shall have been signed by the Paying Agent. DOGSSFi:83$482.5 A-2 IN WITNESS WHEREOF,the County of Contra Costa has caused this Note to be executed by the manual or facsimile;signature of its Treasurer-Tax Collector and countersigned by the manual or facsimile signatureof the Clerk of its Board of Supervisors and caused the official seal of its Board of Supervisors to be impressed hereon, all as of the Note Date'specified above. COUNTY OF CONTRA COSTA By Treasurer-Tax Collector (SEAL) Countersigned; County Administrator and Clerk of the Board of Supervisors [FORM OF CERTIFICATE OF AUTHENTICATION AND REGISTRATION] This Note is one of the Notes described in the within-mentioned Resolution,'' which Nate has been authenticated and registered on the date set forth below. Date of Authentication By Treasurer-Tax:Collector' of the County of Contra Costa DOCSSF]:838482.5 A-3 [FORM OF ASSIGNMENT For value received the undersigned do(es)hereby sell, assign and transfer unto (insert Social Security Number or taxpayer identification number)the within-mentioned registered Note and hereby irrevocably constitute(s) and appoint(s) attorney,to transfer the same on the books of the Trustee with full Trower of substitution in the premises. Dated: Signature NOTE:The signature to the assignment must correspond to the name as written on the face of this Note in every particular, without any alteration or change whatsoever. Signature Guaranteed By NOTE: The signature to the assignment must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. [FORM OF DTC LEGEND] Unless the certificate 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 certificate issued is registered in the name of Cede & Co. or such ether name as requested by an authorized representative of The Depositary 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. UOCSSF t:83$4$2.5 A-4 CLERK'S CERTIFICATE The undersigned Chief Clerk of the Board of Supervisors of the County of Contra Costa,hereby certifies as follows: The foregoing is a full,true and correct copy of a resolution duly adopted at a regular meeting of the Board of Supervisors of said County duly and regularly and legally held at the regular meeting place thereof on November 1, 2005,of which meeting all of the members of the Board of Supervisors of said County had due notice and at which a majority thereof were present. At said meeting said resolution was adopted by the following vete: AYES: Gioia,Piepho,DeSantnfer,Glover and Uilkema NOES: None ABSENT: None ABSTAIN: None I`have carefully compared the same with the original minutes of said meeting on file'and of record in my office and the foregoing is a full,true and correct'copy of the original resolution adopted at said meeting and entered in said minutes." I:f ether certify that an agenda of said meeting was posted at least 72 hours prior to the date of the meeting in a place in the City of Martinez, California, freely accessible to members of the public and that a short description of said resolution appeared on said agenda. Said resolution has not been amended,modified or rescinded since the date of its adoption,and the same is now in full force and effect.' Dated:,kr ,/�e.,,Ae y m/, ZW�OS Chief Cof the oard of Supervisors runty of ontra Costa [Seal] DOCSSF1:838482':5 . .................................................................................................... OFFICIAL NOTICE OF SALE COUNTY OF CONTRA COSTA STATE OF CALIFORNIA 2005-2006 TAX AND REVENUE ANTICIPATION NOTES, SERIES A DATE OF SALE THURSDAY,DECEMBER 1,2005 10:00 A.M.;LOCAL TIME BIDS TO BE RECEIVED EXCLUSIVELY VIA PARITY DOCSSFI:838503.5 OFFICIAL NOTICE OF SALE COUNTY OF CONTRA COSTA, CALIFORNIA 2005-2006 TAX AND REVENUE ANTICIPATION NOTES, SERIES A NOTICE IS HEREBY GIVEN that electronic unconditional proposals will be received by the County of Contra Costa (the "County") up to the time specified below for the purchase of $ principal amount of County of Contra Costa 2005-2006 Tax and Revenue Anticipation Notes, Series A (the "Notes"). Proposals may only be submitted electronically through the PARITY electronic bid submission systema No other method of bid submission will be accepted. TIME: 10:00 a.m. Pacific time on Thursday, December 1, 2005, or at such later date and/or other time as shall be established by the County Administrator of the County or his designee (the "County Administrator") and announced through The Bond Buyer Wire no later than 1:00 p.m., Pacific time, on the business day prior to the day proposals are to be received. If no legal proposals are received for the Notes on December 1, 2005 (or such other date as is communicated by The Bond buyer Wire) at the time specified, proposals will be received at such time specified on such other date as shall be designated by The Bond Buyer Wire; As an accommodation to Proposers, telephonic notice of the postponement of the sale time and/or date or change in the principal amount will be given to any Proposer requesting such notice' by request'directed to the County's Financial Advisor, Tamalpais Advisors,' Inc., 3030 Bridgeway, Suite 340, Sausalito, California 94965; 'Attn. Jean Buckley (Phone (415) 331-4473). Failure of any Proposer to receive such telephonic notice shall not affect the legality of the sale. The Notes will be issued pursuant to a Resolution (the "Resolution") adopted by the County on November 1, 2005. A copy of the Resolution will be furnished to any interested Proposer upon request to the Capital Facilities'Administrator, County of Contra Costa, 651 Pine Street, 11th Floor, Martinez, CA 94553-0063, (925) 335-1021, Attn: Jason Crapo. BOOK.-ENTRY ONLY: The Notes shall be issued in registered form by means of a book-entry system with no distribution of note certificates made to the public. One or more Note certificates representing the Note issue will be issued to The Depository Trust Company, New York, New York ("DTC"), registered in the name of Cede & Co., its nominee. The book entry system will evidence ownership interests in the Notes in the denominations of$5,000 or any integral multiple thereof,with transfers of ownership effected on the records of DTC. PAYMENT OF DTC FEES: The bidders for the Notes whose proposals are accepted by the County (the "Accepted Proposer(s)"), will be responsible for submitting all requisite documents to'DTC for DTC-eligibility purposes. In addition, the Accepted Proposer(s) of the Notes will be responsible for payment of all feeschargedby DTC. NOTE TERMS: The Notes will be dated the date of issuance thereof, will pay interest at the maturity thereof and are expected to mature on December 7,2006: DOCSSFI':838503.5 PREPAYMENT: The Notes are not subject to prepayment prior to maturity. PURPOSE: The proceeds of the sale of the Notes will provide moneys to help meet current (Fiscal Year 2005-2006) County expenditures, including current expenses, capital expenditures and the discharge of other obligations or'indebtedness of the County. ADDITIONAL NOTES: The County has authorized the issuance of additional notes (the"Series B Notes")payable on a parity with the Series A:.Notes and which in aggregate with the principal amount of the Series A Notes are not to exceed$125,000,000. SECURITY: The principal amount of the Notes and Series B Notes, together with interest thereon,'shall be payable from taxes, income, revenue, cash.receipts and other moneys which are received by the County for the General Fund of the County attributable to Fiscal Year 2005-2006 and which are lawfully available for the payment of current expenses and other obligations of the County (the "Unrestricted Revenues"). The Notes and Series B Notes are secured by the County's pledge to deposit in trust in a special fund designated as the "2005- 2006 Tax and Revenue Anticipation Note Repayment Fund" (the "Repayment Fund") specific amounts on specific dates. Proposers are referred to the Resolution and the Preliminary Official Statement'for further information. CONTINUING DISCLOSURE: The County will deliver to the Accepted Proposer(s) a Continuing Disclosure Certificate in connection with the issuance of the Notes in which, among other things, the County covenants to provide notice of certain material events to nationally recognized municipal securities information depositories. The County has never failed in any material' respects to comply with its obligations regarding continuing disclosure. All of the County's currently required continuing disclosure filings can be obtained on the website of Digital Assurance Certification: www.dacbond.com. LEGAL OPINION -- DISCLOSURE COUNSEL: The Accepted Proposer(s) will receive a disclosure opinion from Lofton & Jennings, San Francisco, California regarding the Official Statement. LEGAL OPINION -- TAX EXEMPT STATUS: The Notes will be issued subject to the approving legal opinion of Orrick, Herrington & Sutcliffe LLP, San.Francisco, California ("Bond Counsel"), approving the validity of the Notes and stating that, in the opinion of Bond Counsel,based on 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 Notes 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. The °amount treated as interest on the Notes and excluded from gross income may depend upon the taxpayer's election under Internal Revenue Service Notice 94-84. A copy of the proposed opinion of Bond Counsel is set forth in Appendix D of the Preliminary Official Statement. FORM OF PROPOSAL -- NO DISCOUNT: The proposals may be for all or part (in increments of$5,000,000) of the Notes hereby offered for sale. Proposals for less than all of the issue are required to be made in increments of$5,000,000, and no proposal for less DOCSSFI:838503.5 2 than $5,000,000 principal amount of Notes will be entertained. Awards will be made in increments of $5,000,000 up to $_,000,000 with the remainder to be then awarded. Each proposal shall state the purchase price, which shall not be less than par, and the interest rate, which shall not exceed 12% per annum, and must be delivered by electronic transmission, as described below, and received by the time specified above. Each proposal must be in accordance with the terms and conditions set forth in this Official Notice of Sale. FORM OF BID: A prescribed bid form ("Bid Form�) for the Notes is attached as Exhibit A hereto. Each bid for the Notes must be submitted electronically via PARITY pursuant to the prescribed version of Exhibit A posted thereon. For purposes of submitting all bids, the time as maintained on PARITY shall constitute the official time. WARNINGS REGARDING ELECTRONIC BIDS NEITHER THE COUNTY NOR THE FINANCIAL ADVISOR NOR BOND COUNSEL SHALL BE RESPONSIBLE FOR, AND THE PROPOSER EXPRESSLY ASSUMES THE RISK FOR, ANY INCOMPLETE, INA CCURA TE OR UNTIMELY BID SUBMITTED VIA PARITY BY SUCH PROPOSER, INCLUDING, WITHOUT LIMITATION, BY REASON OF GARBLED TRANSMISSION, MECHANICAL FAILURE, ENGAGED TELEPHONE OR TELECOMMUNICATIONS LINES, ORANY OTHER CAUSE ARISING FROM DELIVERY VIA PARITY. All bids which are submitted electronically via PARITY pursuant to the procedures described below shall be deemed to constitute a Bid for Purchase of the Notes and shall be deemed to incorporate by reference all of the terms and conditions of this Official Notice of Sale. The submission of a bid electronically via PARITY shall constitute and be deemed the Proposer's signature on the Bid Form. PROCEDURES REGARDING ELECTRONIC BIDDING: Bids may be submitted electronically via PARITY in accordance with this Official Notice of Sale, until 10:00 a.m., Pacific Time, December 1, 2005, but no bid will be received after the time for receiving bids specified above. To the extent any instructions or directions set forth on PARITY conflict with this Official Notice of Sale, the terms of this Official Notice of Sale shall control. For further information about PARITY, potential bidders may contact PARITY at (212) 806-8304 or the County's Financial Advisor. In the event that a bid for the Notes is submitted via PARITY, the Proposer further agrees that: 1. The County may regard the electronic transmission of the bid through PARITY (including information about the purchase price of the Notes,the interest rate or rates to be borne by the Notes, the initial public offering price of the Notes and any other inforination included in such transmission) as though the same information were submitted on the Bid Form provided by the County and executed by a duly authorized signatory of the Proposer. If a bid submitted electronically by PARITY is accepted by the County, the terms of the Bid Form and this Official Notice of Sale and the information that is electronically transmitted through PARITY shall form a contract and the Accepted Proposer(s)shall be bound by the terms of such contract. 2. PARITY is not an agent of the County, and the County shall have no liability whatsoever based on any Proposer's use of PARITY, including but not limited to any failure by DOCSSFI:838503.5 3 .................. PARITY to correctly or timely transmit information provided by the County or information provided by the Proposer. 3. The County may choose to discontinue use of electronic bidding via PARITY by issuing a notification to such effect via PARITY's internet site (wwv.tm3.com) no later than 1:00 p.m. (Pacific Time) on the last business day prior to the date of sale. 4. Once the bids are communicated electronically via PARITY to the County as described above, each bid will constitute a Bid and shall be deemed to be an irrevocable offer to purchase the Notes on the terms provided in this Official Notice of Sale. 5. Each Proposer choosing to bid electronically shall be solely responsible to make necessary arrangements to access PARITY for purposes of submitting its bid in a timely manner and in compliance with this Official Notice of Sale. Neither the County nor Dalcomp shall have any duty or obligation to undertake such registration to bid for any prospective Proposer or to provide or assure such access to any qualified prospective Proposer, and neither the County nor Dalcomp shall be responsible for a bidder's failure to register to bid or for proper operation of, or have any liability for any delays or interruptions of, or any damages caused by, PARITY. The County is using PARITY as a communication mechanism, and not as the County's agent, to conduct the electronic bidding for the Notes. By using PARITY, each Proposer agrees to hold the County harmless for any,harm or damages caused to such bidder in connection with its use of PARITY for bidding on the Notes. No bid received after the deadline shall be considered. In any case, each bid must be in accordance with the.terms and conditions set forth in this Official Notice of Sale. INTEREST RATE: Interest with respect to the Notes is computed on the basis of a 360-day year and a 30-day month and accrues from the date of issuance of the Notes. Interest on the Notes is payable at the maturity of the Notes. In connection with the proposal submitted for the Notes, (1) each Proposer must propose an interest rate in multiples of 1/20 or 1/8 percent, which rate shall not exceed 12%per annum; (2) interest with respect to a Note shall be computed from the date of issuance thereof (expected to be December 8, 2005) to December 7, 2006 the stated maturity date at the interest rate specified in the proposal; (3)the same interest rate shall apply to all Notes (with respect to the $5,000,000 increments specified in the proposal); and (4) any premium must be paid as part of the purchase price, and no proposal will be accepted which contemplates the waiver of any interest or other concession by the Proposer as a substitute for payment in full of the purchase price. BEST PROPOSAL: Unless all bids are rejected, the Notes will be awarded to the best responsible Proposer(s), considering the rate specified and the premium offered, if any, ,in increments of $5,000,000 up to $_,000,000, and the remainder out of the next best $5,000,000 until all $ of Notes have been awarded. Therefore, a Proposer may be awarded Notes in an amount which is less than that requested by such Proposer. The Notes will be awarded to the Proposers whose proposals represent the lowest true interest cost to the County, considering the interest rate specified and the premium offered, if any. The true interest cost will be that nominal annual discount rate which, when compounded semiannually and when used to discount all payments of principal and interest payable on the Notes at the rate specified DOCSSFI:838503.5 4 in the proposal to the date of the Notes (disregarding for the purposes of the calculation the accrued interestto the date of delivery of the Notes), results in the amount equal to the purchase price, which is the principal amount of the Motes plus the amount of any premium offered. In the. event that two or more Proposers'offer proposals for the Notes at the same lowest true interest cost, the first bid submitted, as determined by reference to the time displayed on PARITY, shall be awarded such Notes. PRINCIPAL AMOUNT: The County reserves the right following receipt of proposals and determination of the winning proposals to decrease the 'principal amount of the Notes by not more than 10%. In such event, the County will award such lesser amount of Notes and the purchase price of the Accepted Proposer(s) will be proportionally reduced or the proposals less advantageous to the County will not be accepted or will be accepted in a lesser amount. RIGHT OF REJECTION: The County reserves the right, in its sole discretion, to reject any and all proposals and to waive any irregularity or informality in any proposal. PROMPT AWARD: The County Administrator or his designee will take action awarding;the Notes or rejecting all proposals not later than'thirty'(30) hours after the expiration of the time herein prescribed for the receipt of proposals,unless such period for award is waived by the Accepted Proposer(s). Notice of the award will be given promptly to the successful' Proposer(s). The electronically submitted Proposal and Award by the County Administrator or his designee shall constitute an 'executed contract' for purchase of the Notes between the Accepted''Proposer(s)'and the County. DELIVERY AND PAYMENT: Delivery of the Notes through DTC'is expected' to be made to the Accepted Proposer(s) on or about December 8, 2005. Payment for the Notes must be made in Federal Reserve Bank funds or other immediately available funds. Any expense in providing'immediately available funds, whether by transfer of Federal Reserve Bank funds or otherwise, shall be borne by the Accepted Proposer(s). CUSIP NUMBERS: It is anticipated'that CUSIP numbers will be printed on the Notes, but neither failure to print such numbers on any Note nor.any error with respect thereto shall constitute 'cause for a failure or refusal by the purchaser thereof to accept delivery of and pay for the Notes in accordance with the terms of this Official Notice of Sale. All expenses in relation to the printing of CUSIP numbers on the Notes shall be paid for by the County, provided, however, that the CUSIP Service Bureau charge for the assignment of said numbers shall be the responsibility of and shall be paid for by the Accepted Proposer(s). CERTIFICATE REGARDING REOFFERING PRICE: No later than two hours after award of the Notes and upon the delivery date of the Notes, the Accepted Proposer(s) must submit to the County a certificate or certificates specifying the reoffering price at which at least 10%"of the Notes of such proposal were sold (or were offered in a bona fide public offering and as of the date of award of the Notes to the Accepted Proposer(s)were reasonably expected to be sold) to the public. Such certificate or certificates shall be in form and substance satisfactory to Bond Counsel and 'shall include such additional information as may be requested by Bond Counsel. DOCSSF1:838503.5 $ RIGHT OF CANCELLATION: The Accepted Proposer(s) shall have the right, at its/their option, to cancel the contract of purchase if the County shall fail to execute the Notes >> and tender the same on or before sixty(60)days after the award thereof.` NO GOOD FAITH DEPOSIT NEEDED: No Good Faith Deposit will be required. STATEMENT OF TRUE INTEREST COST: Each Proposer is requested, but is not required,to state in its proposal the true interest cost in dollars, which shall be considered as informative only and not binding. OFFICIAL 'STATEMENT: The County will approve a Preliminary Official Statement relating to the Nates, which the County will certify to be "deemed final" as of its date for purposes of SECRule 15c2-112, except for the omission of certain pricing ;and related information, and has authorized the use of the final Official Statement in connection with the sale of the Notes. Up to twenty-five (25) copies of the final Official',Statement per $50 million of Notes purchased will be supplied within seven (7) business days to the purchaser(s) of the Notes for this purpose at the expense of the County. RESALE IN OTHER 'STATES: The Accepted Proposer(s) will assume responsibility for taking any action necessary to qualify the Notes for offer and sale in jurisdictions other than California,'and for complying'with the laws of all jurisdictions on resale of the Notes, and shall indemnify and hold harmless the County and its officials and supervisors from any loss or damage resulting from any failure to comply with any such law. CALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSION: The Accepted Proposer(s) will be required, pursuant to State law (California Government Code Section 5856), to pay any fees of the California Debt and Investment Advisory Commission ("CDIAC"). CDIAC will invoice the Accepted Proposer designated by the County as lead underwriter after the delivery of the Notes; however, if there are multiple successful Proposers, the County will direct CDIAC to invoice the County and the Proposers' purchase prices will be adjusted to account for their pro rata share of such fee. RATINGS IN EFFECT: Each proposal will be understood to be 'conditioned upon their being in place at the date of delivery'of the Notes a rating or ratings at least as high as the rating or ratings, if any, as were in place`with respect to the Notes at the time fixed for receiving proposals. CHANGE IN TAX-EXEMPT' STATUS: At any time before the Notes are tendered for delivery, the Accepted Proposer(s) may disaffirm and withdraw its proposal if the interest received by private holders of obligations of the same type and character as the Notes (as.' determined by Bond Counsel) shall be declared to be includable in gross income under present federal income tax laws, either by a federal court, or by legislation enacted subsequent to the date of this Official Notice of Sale. CLOSING DOCUMENTS: Each proposal will be understood to be conditioned upon the County's furnishing to the Accepted Proposers) without charge, concurrently'with DOGSSFI:838503.5 6 payment and delivery of the Notes, the following dosing papers, each dated the date of such delivery: (a) Legal Opinion: The legal opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel, described in this Official Notice of Sale under the heading"Legal Opinion -- Tax Exempt Status. (b) No Litigation Certificate: A certificate of the County that there is no litigation, pending concerning the validity of the Notes, the existence of the County or the entitlement of the County Officers thereof to their respective offices except as set forth in the Official Statement. (c) Certificate: A certificate of an official of the County stating that as of the date thereof, to the best of the knowledge and belief of said official, the Official Statement (excluding information on DTC)does not contain an untrue statement of a material fact or omit' to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made,not misleading. (d) Receipt: A receipt of the County showing that the purchase price of the Notes has been received by the County. (e) Disclosure Opinion: The legal'opinion of Lofton & Jennings, Disclosure, Counsel,described in this Official Notice of Sale under the heading "Legal Opinion Disclosure Counsel." (f) Continuing 'Disclosure Certificate: The 'Certificate described in this Official Notice of Sale under the heading"Continuing Disclosure: ADDITIONAL INFORMATION: An electronic copy of said Preliminary Official Statement and any other information concerning the proposed financing will be furnished upon,, request to either the financial advisor, Tamalpais Advisors, '.Inc., 3030 Bridgeway, Suite 340, Sausalito, California 94965, (415) 331-4473, or to the Capital Facilities Administrator of the County,(925)'335-1021. Dated: 'November ,2005. COUNTY OF CONTRA COSTA By; John R. Sweeten County Administrator and Clerk of the Board of Supervisors DOGssF1:838503.5 7 EXHIBIT A BID FORM PROPOSAL FOR THE PURCHASE OF COUNTY OF CONTRA COSTA,CALIFORNIA 2005-2006 TAX AND REVENUE ANTICIPATION NOTES,SERIES A December 1, 2005 From: Name of Proposer County of Contra Costa c/o PARITY Dear Sir: Pursuant to the;Official Notice of Sale,;dated November _, 2005, and in accordance with all terms and conditions of said Official Notice of Sale for the sale of the County of Contra Costa, California, 2005-2006:Tax and Revenue Anticipation Notes, Series A (the "Notes"), we offer to purchase the Notes, to be dated the date of issuance thereof(December 8, 2005) and to mature on December 7, 2006, in the principal amount set forth below (as a whole in the 'amount of $ or in part in increments of$5,000,000),as follows: Our calculation, made`as provided in the Official Notice of Sale, but not constituting',any part of this proposal, of the true interest cost with respect to each $5,000,000 increment of Nates is also provided in the following table. Optional Principal Interest Total Less Amount Premium Rate Interest Premium TIC (continued on next page) DOCSSFI:838503:5 This proposal is made subject to all the terms and conditions of said Official'Notice of Sale, all of which terms and conditions are made a part hereof as though set forth in full in this proposal. This proposal is subject to acceptance within thirty(3'0) hours after the expiration of the time for ' the receipt of proposals, as provided pursuant to said Official Notice of Sale. We understand'that proposals will be awarded'in increments of$5,000,000 up to $_,000,000 and then the remainder will be awarded out of the next $5,000,000 proposal so that all Notes are awarded. Therefore,we may be awarded Notes in an amount which is less than that requested by us. We also understand that the County has reserved the right to decrease the principal amount of the Notes awarded by not more than>10%of the principal amount thereof. We represent that we have full and complete authority to submit this proposal on behalf of our proposing syndicate and that the undersigned will serve as,the lead manager for the group if the Notes are awarded pursuant to this proposal. Respectfully submitted, Address: (Firm) Attn: Telephone#: Telecopy#: Email address: (Authorized Signature) Following is a list of the members of our account on whose behalf this proposal is made: nocssrl s38503.3 2 NOTICE OF INTENTION TO SELL NOTES COUNTY OF CONTRA COSTA, CALIFORNIA 2005-2006 TAX AND REVENUE ANTICIPATION NOTES, SERIES A NOTICE IS HEREBY GIVEN that the County of Contra Costa, California (the "County"), intends to receive electronic bids through the PARITY electronic bid submission system for the sale of the above Notes on Thursday, December 1,2005, at the hour of 10:00 a.m., local time (or on such other date and time as may be determined by the County as provided below). NOTICE IS"HEREBY FURTHER GIVEN that the Notes will, be offered for public sale subject to all the terms and conditions of the Official Notice of Sale for the Notes, as set forth in the Preliminary Official Statement relating to the Notes. An electronic copy of the Preliminary Official Statement will be furnished upon request to Tamalpais Advisors, Inc., 3030 Bridgeway, Suite 340, Sausalito, California 94965, Financial Advisor to the County (telephone (415) 331-4473, fax(415) 331-4479);email: jbuckley@tamadvisors.com. Any sale date, time and terms of the Notes may be changed by the County by notice thereof through The Bond Buyer Wire, no later than 1:00 p.m., Pacific time, on the business'day prior to the then-scheduled date for receipt of bids or on such date if no legal bid or bids' are received. Legal Opinion: Orrick, Herrington & Sutcliffe LLP, San Francisco, California. Dated: November 2005. /s/John R. Sweeten County Administrator and Clerk of the Board of Supervisors, County of Contra Costa, State of California P; "Preliminary, subject to change. DOCSSF 1:83&479.5 LW DRAFT#4 w y 10/24/05 4 PRELIMINARY OFFICIAL STATEMENT DATED NOVEMBER 15,2005' NEW ISSUE-BOOK.ENTRY ONLY RATINGS: Moody's: Standard&Poor's: ro = In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond'Counsel to the County, based upon an analysis of 0 w 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 Notes is excluded from gross'income for ti federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of c California personal income taxes. The amount treated as interest on the Notes and excluded from gross income may y m depend upon the taxpayer's election under Internal Revenue Service Notice 94-84. In the further opinion of Bond Counsel, interest on the Notes is not a specific preference item for purposes of the federal individual or corporate y 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 accrual or receipt of d� interest on, the Notes. See "TAX MATTERS. Por S_,000,000* o - COUNTY OF CONTRA COSTA,CALIFORNIA E v 2005-2006 TAX AND REVENUE ANTICIPATION NOTES,SERIES A o INTEREST RATE: % o YIELD: % s CUSIP NO.: 4 ., e y Dated: Date of Delivery Due: November 16,2006 „ C The County of Contra Costa, California(the "County") 2005-2006 Tax and Revenue Anticipation Notes, Series A o (the"Notes") are being issued to finance the seasonal cash flow'requirements of the County during the fiscal year o ending June 30, 2006. The Notes will be issued as fixed-rate notes in fully registered form. The Notes, when issued,will be registered'in the name of Cede&Co.,as nominee for The Depository Trust Company("DTC"),New C York,New York,;which will act"as securities depository for the Notes. Purchases of the Notes will be made only through DTC Participants under the book-entry system maintained by DTC in the denominations of$5,000 or any £° a integral multiple thereof. Purchasers will not receive certificates representing their ownership interest in the Notes purchased. v 2 The Notes will be dated the date of delivery thereof and will not be subject to redemption prior to maturity. The °x sod Notes will bear interest at a fixed rate per annum from their dated date. Interest on the Notes is payable on , 0 2006 and at the maturity of the Notes. Principal of the Notes is payable at the maturity of the Notes. ' In accordance with California law,the Notes are general obligations of the County,but are payable only out of the taxes,income, revenue,cash receipts and other General Fund moneys of the County attributable to the Fiscal Year y 2005-06 and legally available for payment thereof. The Notes are equally and ratably secured by a pledge of certain v unrestricted taxes,income,revenue,cash receipts'and other moneys. The County is not authorized,however,to levy o or collect any tax for the repayment of the Notes. See"THE NOTES—Security for the Nates." This cover pages contains certain information for quick reference only and is not a summary of the transaction. c Investors must read the entire Official Statement to obtain information essential to the making of an informed s investment decision. a The Notes are offered when, as and if issued by the County and accepted'by the purchaser(s), subject to the approval of validity by Orrick, Herrington & Sutcliffe LLP, San Francisca California, Bond Counsel. Certain other legal matters will be passed upon for the County by County Counsel and by Lofton & Jennings, U San Francisca California,Disclosure Counsel. It is expected that the Notes will be available through the facilities o of DTC in New York,New York for delivery on or about December 8,2005. 'Z', BIDS TO BE RECEIVED;ELECTRONICALLY THROUGH PARITY'NO LATER THAN 10:00 A.M., CALIFORNIA TIME ON THURSDAY,DECEMBER 1,2005. SEE"OFFICIAL NOTICE OF SALE." W S h a Dated: 2005 *Preliminary,subject to change. 05034\pos-4 ........... .................................... ................... ............... ........... ........... ............ ................. ............ ..................... No dealer, broker, salesperson or other person has been authorized by the County or the Underwriter to give any information or to make any representations, other than those contained herein,in connection with the offering of the Notes and,if given or made,such information or representations must not be relied upon. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy the Notes nor shall there bel any sale of the Notes by any person in any jurisdiction in which or to any person to whom it is unlawful to make such an offer,solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers of the Notes. Estimates and opinions are included and should not be Interpreted as statements of fact. Summaries of documents do not purport to be complete statements of their provisions. The information and expressions of opinion 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 since the date bereof, TABLE OF CONTENTS Pliffe Page INTRODUCTION..................................................................I Article XIII B of the California Constitution :.:.°18 COUNTY OF CONTRA COSTA CASH'MANAGEMENT Article'XIII C and Article XIII D of the California PROGRAM..... ......... ......... ......... .........I Constitution...............................................................19 CONTINUING DISCLOSURE..............................................2 Proposition 62... .... ...... ......... ......... ........19 THENOTES...........................................................................3 Proposition IA... ......... ......... ........20 General.........................................................................3 Future Initiatives.......................................................21 Authority for Issuance..................................................3 COUNTY INFORMATION..................... .... ....: .........21 Purpose of Issue...........................................................3 TAX MATTERS,..................................... ......... .........21 Security for the Notes...................................................3 LEGAL MATTERS............................................................23 Lien in Bankruptcy. ......... ......... ........4 LEGALITY FOR INVESTMENT IN CALIFORNIA..........23 Investment of the Repayment Fund..............................5 FINANCIAL ADVISOR......................................................23 Available Sources of Payment......................................5 RATINGS............................................................................24 Cash Flow Projections..................................................6 LITIGATION.......................................................................24 CONTRA COSTA COUNTY TREASURER'S SALE OF THE NOTES........................................................24 INVESTMENT POOL.........................................12 ADDITIONAL INFORMATION.........................................24 SUMMARY OF CERTAIN PROVISIONS OF THE RESOLUTION....................................................14 APPENDIX A— GENERAL COUNTY ECONOMIC AND Resolution to Constitute Contract..............................14 DEMOGRAPHIC INFORMATION .................A-1 Representations and Covenants of the County...........14 APPENDIX B'= COUNTY FINANCIAL INFORMATION..........B-1 Paying Agent and Note Registrar....::' 14 APPENDIX C— SUMMARY OF THE COUNTY Exchange and Transfer of the Notes...........................14 INVESTMENT POLICY........ .....:.... .....C-1 Permitted Investments................................................15 APPENDIX D— PROPOSED FORM OF OPINION OF CERTAIN RISK FACTORS.................................................16 BOND COUNSEL ......................................D-1 County Financial Stress.............................................16 APPENDIX E— EXCERPTS FROM THE AUDITED FINANCIAL Pension Plan..............................................................16 STATEMENTS OF THE COUNTY FOR THE State Financial Condition...........................................17 FISCAL YEAR ENDED JUNE 30,2004........E-1 CONSTITUTIONAL AND STATUTORY LIMITATIONS APPENDIX F— FORM OF CONTINUING ON TAXES,REVENUES AND DISCLOSURE CERTIFICATE.......................F-I APPROPRIATIONS...........................................17 APPENDIX G— DTC AND THE BooK-ENTRY-ONLY Article XIII A of the California Constitution.............17 SYSTEM..................................................G-1 Legislation Implementing Article XIII A......'............18 IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COUNTY AND THE TERMS OF THE OFFERING,INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED,MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE NOTES TO CERTAIN DEALERS AND BANKS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICE STATED ON THE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICE MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. This Preliminary Official Statement is submitted in connection with the sale of the Notes referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Preliminary Official Statement and the information contained herein are in a form deemed final by the County for purposes of Rule 15c2-12 promulgated under the Securities and Exchange Act of 1934,as amended(except for omission of certain information permitted under Rule 1 5c2-12(l)). However,the information herein is subject to revision,completion or amendment in a final Official Statement. 05034\pos4 "!M. P., Y P;;;;. COUNTY OF CONTRA COSTA,CALIFORNIA BOARD OF SUPERVISORS OF THE COUNTY Gayle B.Uilkerna (District 2) Chair John M.Gioia Mary N.Piepho (District 1) (District 3) Vice Chair Mark DeSaulnier Federal D.Glover (District 4) (District 5) COUNTY OFFICIALS John R. Sweeten Clerk of the Board and County Administrator Stephen J.Ybarra William J. Pollaeek Auditor-Controller Treasurer-Tax Collector Silvan Marchesi Gus Kramer Stephen L.Weir County Counsel Assessor County Clerk-Recorder SPECIAL SERVICES Orrick,;Herrington&Sutcliffe LLP Tamalpais Advisors,Inc. San Francisco,California Sausalito,California Bond Counsel Financial Advisor Lofton&:Jennings San Francisco,California Disclosure Counsel 05034\pos-4 ii $_,000,000* COUNTY OF CONTRA COSTA,CALIFORNIA 2005-2006 TAX AND REVENUE ANTICIPATION NOTES,SERIES A INTRODUCTION The purpose of this Official Statement, which includes the front cover and the attached Appendices, is to provide certain information concerning the sale and delivery of $_,000,000* in aggregate principal amount of 2005-2006 Tax and Revenue Anticipation Notes, Series:A(the"Notes")of the County of ContraCosta, California(the "County"). Issuance of the Notes will provide moneys to help meet current (Fiscal Year 2005-06) County General Fund expenditures, including current expenses, capital expenditures and the discharge of other obligations or indebtedness of the County. The Notes are authorized by and are being issued in accordance with Article 7.6, Chapter 4, Part 1, Division 2, Title 5 (commencing with Section 53850) of the Government Code of the State of California(the"Act"), and a resolution adopted by the Board of Supervisors of the County(the`Board of Supervisors") on October 18, 2005 and referenced as "Resolution Authorizing the Issuance and Sale of Not to Exceed $_,000,000 County of Contra Costa, California 2005-2006 Tax and Revenue Anticipation Notes" (the "Resolution"). If circumstances warrant, the County may issue in Fiscal Year 2005-06 an additional series of 2005-2006 Tax and Revenue Anticipation Notes(the"Series B Notes")in an amount not to exceed $,000,000. The Series B"Notes, if issued, would be issued prior to January 1,2006,would have a maturity date not more than 13 months thereafter,and would be secured by the same security pledge as the Notes. See "THE NOTES-Security for the Notes." The Resolution provides, among other things,'that the issuance of the Series B Notes may occur only if such issuance does not cause a reduction in the ratings from Moody's Investors Service ("Moody's") or Standard & Poor's Ratings Services,A Division of the McGraw-Hill Companies("S&P")on the Notes. The Notes are issued subject to the terms and conditions of the Resolution. Pursuant to California law, the Notes and the interest thereon are general obligations of the County payable from the taxes, income, revenue, cash receipts and other General Fund moneys received by the County attributable to Fiscal Year 2005-06 and lawfully available therefor. The Notes and the interest thereon are secured by a pledge of certain unrestricted taxes, income, revenue, cash receipts and other moneys of the County attributable to Fiscal Year 2005-06 as specified in the Resolution. See "THE'NOTES—Security for the Notes." COUNTY OF CONTRA COSTA CASH MANAGEMENT PROGRAM County General Fund expenditures tend to occur in level amounts throughout the fiscal year. Conversely, receipts have followed an uneven pattern primarily as a result of secured property tax installment delinquency dates in December and April and as a result of delays in payments from other governmental agencies, the two largest sources of County revenues. As a result, the General Fund cash balance prior to Fiscal Year 1979-80 had typically been negative for most of the year and had been covered by interfund borrowings pursuant to Section 6 of Article XVI of the California Constitution and intrafund borrowings. "Interfund borrowing" is borrowing from specific funds of other governmental entities whose funds are held in the County Treasury. Such borrowing, pursuant to the California Constitution, may not occur after the last Monday in April of each year and shall be repaid before any other obligation of the County. The County does not intend to engage in interfund borrowing for the General Fund nor has it done so since the implementation of the General Fund cash management program in Fiscal Year 1979-80. "Intrafund borrowing" is borrowing for General Fund purposes against funds *Preliminary,subject to change. 05034\pos-4 ... .... ....... ... . . . .... .. ::,, s ,• , ,:::,:. held in trust by the County. Because such General"Fund intrafund borrowings caused disruptions in the General Fund's management of pooled investments, beginning in Fiscal Year 1979-80 the County has regulated its cash flow by issuing tax and revenue anticipation notes for the General Fund and by using intrafund and/or interfund borrowing, if necessary, only after note proceeds have been exhausted. The County has utilized intrafund borrowing from time to time,however,it does not anticipate usingintrafund borrowing to cover General Fund cash needs,in any other periods during Fiscal Year 2005-06. All notes previously'issued'in connection with the County's cash management program were repaid on their respective maturity dates. The Notes represent the twenty-seventh short-term financing program, which the County has undertaken to meet its cash flow requirements. The County has never defaulted on the payment of principal of or'interest'on any of its short-term or long-term obligations. Set forth below is a summary of the County's short-term financing programs since Fiscal Year 1997-9g HISTORY OF COUNTY OF CONTRA COSTA SHORT-TERM FINANCING PROGRAMS Date of Issuance Par Value Maturity Date July 1, 1997 $130,000,000 July 1, 1998 July 1, 1998 107,315,000 October 1, 1999 July 1, 1999 88,000,000 September 29,2000 July 3,'2000 55,000,000 October 1,2001 August 1,2001 70,000,000 October 4,2002 October 17,2002 55,000,000 November 14,2003 CONTINUING DISCLOSURE The County will agree to provide notices, during the time the Notes are outstanding, of the occurrence of certain enumerated events, if material, in compliance with Rule 15c2-12 of the Securities and Exchange Commission(the"Rule"). The specific nature of the notices of material events and certain other terms of the continuing disclosure obligation are described in APPENDIX F"FORM OF CONTINUING DISCLOSURE CERTIFICATE." The County has never'failed to comply in any material respect with any prior undertaking'under the Rule. 05034\pos-4 2 THE NOTES General The Notes will be issued in fully registered form in the aggregate principal amount of $_,000,000*. When issued,the Notes will be registered in the name of Cede&Co., as nominee for The Depository Trust Company ("DTC"), New York, New York, which will act as securities depository for the Notes. Purchasers will not receive certificates representing their ownership interest in the Notes purchased. See APPENDIX G—"DTC AND THE BOOK-ENTRY-ONLY SYSTEM." Beneficial ownership interests in the Notes may be transferred only in accordance with the rules and procedures of DTC. The Notes will be dated the date of issuance thereof and will pay interest on ;2006 and at maturity on ,2006. The Notes are not subject to redemption prior to maturity. The Notes will be issued,in denominations of $5,000 each or any integral multiple thereof ("Authorized Denominations") and will bear interest at the rate per annum set forth on the cover page hereof. Interest on the Notes will be computed on the basis of twelve 30-day months and a 360-day year, Interest due on , 2006 will be payable to the person in whose name the Note is registered as of the close of business on , 2006 (the "Record Date"), such interest to be paid by check mailed to such registered owner. Principal and interest payable at maturity will be payable in immediately available funds, upon presentation and surrender of the Notes at the office of the Treasurer-Tax Collector of the County in Martinez,California,as initial paying agent(the"Paying Agent")with respect to the Notes. Authority for Issuance The Notes are issued under the authority of the Act and pursuant to the Resolution and are subject to the terms and conditions of the Act and the Resolution. Purpose of Issue The Notes are being,issued to finance the County's General Fund cash flow requirements during Fiscal Year 2005-06 (July 1, 2005 through June 30, 2006). County General Fund expenditures tend to occur in level amounts throughout the Fiscal Year. Conversely,receipts have followed an uneven pattern primarily as a result of secured property tax installment delinquency dates in December and April and as.a result,of delays in payments from other governmental agencies, the two largest sources of County revenues. The proceeds received from the sale of the Notes will allow'the County to cover:periods of deficits resulting from such uneven flow of revenues and are an alternative to borrowing from County- held pooled income funds. The proceeds of the Notes will be invested in the Contra Costa County Treasurer's Investment Pool (the "County Pool") until expended. See "CONTRA COSTA COUNTY TREASURER'S INVESTMENT POOL." Security for the Notes The 2005-2006 Tax and Revenue Anticipation Notes issued under the Resolution (in the aggregate principal amount of$_,000,000* for the Notes and up to an aggregate principal amount of $,000,000* for the Series B Notes)are secured by a pledge of taxes, income,revenue,cash receipts and other moneys which are received by the County for the General Fund for the Fiscal'Year 2005-06 and which are lawfully available for the payment of current expenses and other obligations of the County (the "Unrestricted Revenues"). As security for the payment of the principal of and interest on the Notes and Series B Notes, the County pledges to deposit in trust in a special County fund designated as the * Preliminary,subject to change. 050341pos-4 3 "2005-2006 Tax and RevenueAnticipation Note Repayment Fund" (the "Repayment Fund") an amount equal to fifty percent(50%) of the aggregate'principal amount of the Notes and Series B Notes from the first Unrestricted Revenues received by the County in the accounting period beginning December 13,2005 and ending January 12, 2006, inclusive; and an amount equal to fifty percent (50%) of the aggregate principal amount of the Notes and. Series B Notes plus an amount(net of anticipated earnings on moneys in the Repayment'Fund)sufficient to make up any deficiency in the Repayment Fund with respect to the prior pledge period and to pay the interest on the Notes and the Series B Notes due on and prior to maturity from the first Unrestricted Revenues received by the County in the accounting period beginning April 13,2006 and ending May 11,2006,inclusive. Accordingly,pursuant to Section 53856 of the Government Code of the State°of California (the "Government Code"),the principal of the Notes and the Series B Notes and the interest'thereon'are a first lien and charge against,and are payable from,such pledged moneys. In addition to such pledged moneys, pursuant to Section 53857 of the Government Code, the Notes are general obligations of the County, and; to the extent not paid from Unrestricted Revenues of the County pledged for the payment thereof shall be paid with interest thereon only from any other moneys of the County lawfully available therefor. The County is not authorized to levy or collect any tax fortherepayment of the Notes or the Series B Notes. In accordance with the terms of the Resolution, if insufficient Unrestricted Revenues are received by the County by the third business day prior to the end'of any pledge period to permit deposit into the Repayment Fund of the full amount of the pledged revenues required to be deposited with respect to such pledge period, then the amount of any deficiency in the Repayment Fund is required to be satisfied and made up from any other moneys of the County lawfully available for the payment of the principal of the Notes and the interest thereon, as provided in Sections 53856 and 53857 of the Government Code, on such date or thereafter on a daily basis, when and as such pledged revenues'and other pledged moneys are received by the County. The Resolution provides that such amounts may not be used for any other purpose and may be invested:in Permitted Investments. See "=Investment of the Repayment Fund" and "SUMMARY OF CERTAIN PROVISIONS OF THE RESOLUTION—Permitted Investments.,' If for any reason amounts in the Repayment Fund are insufficient to pay both the Notes and the Series B Notes in full, such amounts shall be applied pro rata to the payment of the Notes and the Series B Notes based on the total principal of and interest payable upon the Notes and the Series B Notes at the respective maturities thereof, taking into account anticipated earnings to be received on'amounts in the Repayment Fund prior to the final maturity dates thereof. As more particularly described under "COUNTY OF CONTRA COSTA CASH MANAGEMENT PROGRAM," the County may, under certain circumstances, undertake interfund borrowing to fund shortages in the General Fund. While the County does not expect to utilize any such interfund borrowing, Section 6 of Article XVI of the California Constitution requires that any such borrowing be repaid from revenues before any other obligation of the County(including the Notes)is paid from such revenues. Lien in Bankruptcy On January 24, 1996, the United States Bankruptcy Court for the Central District of California held in the case of County of Orange v. Merrill'Lynch that a State statute providing for a priority of distribution of property held in trust conflicted with, and was preempted by, federal bankruptcy law. In that case,the court addressed the priority of the disposition of moneys held in a county investment pool upon bankruptcy of the county,but was not required to directly address the State statute that provides for the lien in favor of holders of tax and revenue anticipation notes. The County is in possession of the taxes and other revenues that will be set aside in the Repayment Fund and pledged to repay the Notes. The Repayment Fund may invested in the County Pool. In the event of a petition for the adjustment of 05034\pos-4 4 debts of the County under Chapter 9 of the federal bankruptcy code,a court might hold that the owners of the Notes (the"Owners")do not have a valid and/or prior lien on Repayment Fund amounts deposited in the County Pool and may not provide the;Owners with a priority interest in such amounts. In that circumstance, unless the Owners could "trace" the funds from the Repayment Fund that have been deposited in the County Pool, the Owners would be unsecured (rather than secured) creditors of the County.. There can be no assurance that the Owners could successfully so "trace" the pledged taxes and other revenues. Investment of the Repayment Fund Moneys in the Repayment Fund will be invested in one or more instruments of the types included in Permitted Investments. See "SUMMARY OF CERTAIN PROVISIONS OF THE RESOLUTION-Permitted Investments." The proceeds of any;such investments shall be-retained in the Repayment Fund until paymentof principal of and interest on the Notes and the Series B Notes (or provision therefor)has been made, at,which time any excess amount shall be deposited by the Treasurer in the General Fund of the County. Available Sources of Payment The Notes, in.accordance with California law, are general obligations of the County, but are payable only out of the taxes, income, revenue, cash receipts and other moneys;received for the General Fund of the County attributable to Fiscal Year 2005-06 and legally available for payment thereof. Under the Act,no obligations,including the Notes,may be issued thereunder if the principal thereof and interest thereon 'exceeds 85% of the estimated amount of the then-uncollected taxes, income, revenue, cash receipts and other moneys which will be available for payment of such principal and interest. The principal amount of Notes and estimated interest thereon equals approximately $ million which represents approximately_%o of the estimated sources available for payment of the Notes. The County estimates that the total moneys available for payment of the Notes and the Series B Notes will be in excess of$ million as indicated in the table that follows. Except for pledged amounts, these moneys will be expended during the course of the Fiscal Year, and no assurance can be given that any moneys, other than the pledged amounts, will be available to pay the Notes and the Series B Notes and the interest thereon. For detailed information regarding estimated debt service coverage at each respective pledge period, see Table 4—"County of Contra Costa Monthly General Fund and Teeter Ilan Cash Flow Fiscal Year 2005-06." (REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK). 05034\pos-4 5 Table 1 COUNTY OF CONTRA COSTA ESTIMATED GENERAL FUND UNRESTRICTED REVENUEs FISCAL YEAR 2005-06(t) Amount Sources ($in 000's) Estimated Unrestricted Available Cash Balance at November 17,2005 Property Taxes Other Taxes Licenses,Permits and Franchises Fines,Forfeitures and Penalties Use of Money and Property Aid from Other Governmental Agencies Charges for Current Services Other Unrestricted Revenue Total Less amount pledged for payment of the Notes and Series B Notes(2) Net Total in excess of pledged revenues Reflects revenues set forth in the Fiscal Year 2005-06 Adopted Budget which was approved on 2005. (a) Based on S__,000,000 aggregate principal.amount of Notes and Series B Notes plus an amount equal to interest thereon calculated at rate of %per annum,assuming delivery on ,2005. Source: County Auditor-Controller. Cash Flow Projections The Auditor-Controller has prepared the following three-year summary of month-end cash balances in the combined unrestricted and restricted portions of the General Fund. The County's historical and projected fiscal year end balancesin funds with which it may undertake intrafund borrowing ("Intrafimd Borrowing Capacity") is also presented. On the subsequent pages is a detailed presentation of the Fiscal Year 2004-05 General Fund cash flow and of the projected cash flow for Fiscal Year 2005-06 for the combined unrestricted and restricted'portions of the General Fund. The cash flow projections are based on the Fiscal Year 2005-06 Adopted Budget. See APPENDix B-"COUNTY FINANCIAL INFORMATION—Recent County General Fund Budgets."' A maximum cumulative cash flow deficit of approximately$_million is anticipated to occur in the unrestricted portion of the General Fund in Taking into account: (a) any unrestricted monies that are expected to be available from sources other than the General Fund' to address the projected deficit and (b) the likelihood that the projected cash flows are,susceptible to forecast error, the County has elected to issue the Notes in an amount that is equal to approximately _%o of its projected maximum cumulative cash flow deficit. 05034\pos-4 6 .......... ................................... ........... ........... ....................... ............................................... ........................ ................ The estimates of amounts and timing of receipts and disbursements in the cash flow tables are based on certain assumptions and should not be construed as statements of fact. The assumptions are based on present circumstances and currently available information and are believed to be reasonable. The assumptions may be affected by numerous factors and there can be no assurance that such estimates will be achieved. Table 2 COUNTY OF CONTRA COSTA GENERAL FUND MONTH-END CASH BALANCES AND INTRAFUND BORROWING CAPACITY"' FISCAL YEARS 2001-02 THROUGH 2003-04 in thousands) Ending Accounting Period(2) Mid -Month 2001-02(3) 2002-03 2003-04 1 August $29,734 2 September 102,803 3 October 84,459 4 November 81,452 5 December 71,826 6 January 80,376 7 February 79,791 8 March 69,841 9 April 75,622 10 May 80,029 11 June 52,271 12 AtJune 30 75,395 INTRAFUND BORROWING CAPACITY AtJune 30 $554,186 Period-end balances include the effects of intrafund borrowing net of deposits to the repayment funds relating to the short- term notes. "Intrafund Borrowing Capacity"reflects borrowable balances as of June 30th of each fiscal year. The County utilizes a twelve-period accounting system,with the first period beginning on July 1 and ending in the middle of August. The subsequent periods end in mid-September, mid-October and so forth until mid-June. The final accounting period runs from mid-June to the end of the fiscal year at June 30. Includes receipt in September 2001 of proceeds from the sale of$70,000,000 of 2001-02 Tax and Revenue Anticipation Notes,Series A. (REMAINDER OFTHIS PAGE INTENTIONALLY LEFT BLANK) 05034\pos-4 7 ;z ........ ................. Table 3 COUNTY OF CONTRA COSTA ACTUAL MONTHLY GENERAL FUND AND TEETER PLAN CASH FLAW FISCAL YEAR 2004-05 (all numbers in thousands) Aug 11 Sep 13 Oct 12 Nov 12 Dec 13 ACCOUNTING PERIOD ENDING 2004 2004 2004 2004 2004 BEGINNING BALANCE RECEIPTS: Property Taxes Teeter PlanRedemptions Other Taxes Licenses Fines&Forfeitures Use of Money Intergovernmental Charges Current Services Other Revenue Accrued Revenue Notes Sold Other Available Funds TOTAL RECEIPTS DISBURSEMENTS: General Government Public Protection Health;&Sanitation Public Assistance Education Public Ways, Accrued Expense TRANS Interest Repayment TRANs Principal Repayment Intrafund Borrowing Repayment Teeter Plan Buyout/Advances TOTAL DISBURSEMENTS ENDING BALANCE TRANS REPAYMENT FUND Beginning Balance Receipts Disbursements Ending'Balance 05034\pos4 8 Jan 12 Feb 11 Mar 11 Apr 12 May 11 Jun 13 Jun 30 Total 2005 2005 2005 2005 2005 2005 2005'' 2004-05 05034\pos4 9 Table 4 COUNTY OF CONTRA COSTA' MONTHLY GENERAL FUND AND TEETER PLAN CASH FLOW FISCAL YEAR 2005-06 (all numbers in thousands) Actual Actual. Proj. Proj. Proj. Proj. ACCOUNTING PERIOD ENDING Aug 11 Sep 13 Oct 12 Nov 14 Dec 12 Jan 12 2005 2005 2005 2005 2005 2006 BEGINNING BALANCE RECEIPTS: Property Taxes Teeter Plan Redemptions Other Taxes Licenses Fines&Forfeitures Use of Money Intergovernmental Charges Current Services Other Revenue Accrued Revenue Notes Sold Intrafund'Borrowing Other Available Funds TOTAL RECEIPTS DISBURSEMENTS: General Government Public Protection Health&Sanitation Public Assistance Education Public Ways Accrued Expense TRANS Interest Repayment TRANs Principal Repayment Intrafund Borrowing Repayment Teeter Plan Buyout/Advances TOTAL DISBURSEMENTS ENDING BALANCE INTRAFUND BORROWING CAPACITY ENDING BALANCE,INCLUDING INTRAFUND BORROWING`CAPACITY TRANs REPAYMENT FUND Beginning Balance Receipts Disbursements Ending Balance 05034\pos-4 10 Proj. Proj. Proj. Proj. Proj. Proj. Feb 13 Mar 13_ Apr 12 May 11 Jun 12 Jun 30 Total 2006 2006 2006 2006 2006 2006 2005-06 05034\pos-4 1� -., .. "`•` ..:: € € .€m" CONTRA COSTA COUNTY TREASURER'S INVESTMENT POOL State law requires that all moneys of the County, County school districts, and certain special districts in the County be held in the County Treasury by the Treasurer. The Treasurer has authority to implement and oversee the investment of such funds in the County Pool in accordance with Section 53600 et seq. of the Government Code. The Treasurer accepts funds only from agencies located within the County. The moneys on deposit are predominantly derived from local government revenues consisting of property'taxes, State and federal funding and other fees and charges. As of June 30, 2005, there were 40 participants in the County Pool, the largest being the County. The County, County agencies, and school and community college districts(who are involuntary members of the County Pool) represented an aggregate of approximately 87.16%of the CountyPool's investments as of June 30,2005. The Contra Costa County Investment Policy (the "Policy") governs the County's investments in the County Pool. The Policy has historically been more restrictive than that mandated;under the Government Code. Although the Policy permits reverse repurchase agreements between the County and primary dealers with the Federal Reserve Bank of New York, the County currently does not intend to engage in such transactions The County has an oversight committee (the "Treasury Oversight Committee") that meets quarterly to monitor and report on all investment activities of the Treasurer's Office. The current Policy was revised by the Treasury Oversight Committee,submitted by the Treasurer and approved by the Board of Supervisors on June 7, 2005. All funds of the County and investment activities are governed by the Policy, which sets'`forth the following 'primary objectives, in order of priority: 1. Preservation of capital. 2. Liquidity_funds shall be invested only until the date of anticipated need or for a lesser period. 3. Yield— generation of a favorable return on investment without compromise of the first two objectives. For a summary of the Policy,see APPENDIX C—"SummARY OF THE COUNTY INVESTMENT POLICY." As of June 30,2005,investments in the County Pool were held for the following local agencies in the indicated amounts: Table 5' CONTRA COSTA COUNTY INVESTMENT'POOL INVESTMENTS HELD BY TYPE OF LOCAL AGENCY (AS OF JUNE 30,2005) Percent Number Local Aeenev Par'Value. of Total of Agencies County of Contra Costa and Agencies $1,160,659,211.92 56.96% 1 School Districts 532,775,423.00 26.14 19 Community College District 82,785,297.00 4.06 1 Other Public Agenciest 261,571,590.00 12.84 19 TOTAL $2,037,791,521.92 100.00% 40 t Sanitation;Fire and Transportation Authorities,and two Joint Power Authorities are the only voluntary participants in the Pool. 05034\pos-4 12 .............. ............. ........... ............ ....................... As of June 30,'2005, the Pool had approximately 15%of its assets invested in U.S. Treasury and federal agency securities. Another approximately 42% of the Pool's assets were invested in highly liquid short-term money market instruments (repurchase agreements, certificates of deposit, bankers' acceptances, and commercial paper). As of June 30, 2005, the detailed composition, cost, and market value of the Pool were as follows: Type of Investment cost Market Value %,of Total Cash $79,160,771.31 $79,160,771.31 3.88% U.S.Treasuries 51,836,355.00 53,111,730.05 2.55 U.S.Agencies 798,725,581.93 796,327,464.40 39.23 Money Market Instruments 855,781,084.66 856,028,890.19 42.05 Other 249,902,685.70 250,216,568.07 12.29 TOTAL $2,035,406,478.60 $2,034,845,424.02 100.00% The Pool is highly liquid, with 95.33% of the portfolio having a maturity of less than one year and an average weighted days to maturity of 58.75 days. The maturity distribution of the Pool's portfolio as of June.30,2005 is presented in the following table. Amount %of Term to Maturity (Cost Basis) Total"' Less than I year $1,940,404,981 95.33% I to 2 years 61,080,675 3.00 2+years to 3 years 24,663,823 1.21 3+years to 4 years 3,493,646 0.17 4+years to 5 years 5,433,539 0.27 Greater than 5 years(2) 329,815 0.02 TOTAL $2,035,406,479 100.00% (1) Column does not total due to independent rounding. (2) Represents bond proceeds of School Districts. The mix of investments is designed to ensure that sufficient liquid funds are available to meet disbursement requirements. Funds on hand at the end of each of the past five fiscal years in excess of disbursement requirements were as follows: Fiscal Year Available Funds Ending June 30 in millions) 2001 $1,505 2002 1,527 2003 1,860 2004 1,844 2005 2,037 05034\pos4 13 ....... . . ..... ...........�. W., ...............w. P.,--P: PP! SUMMARY OF CERTAIN PROVISIONS OF THE RESOLUTION The following is a summary"of certain provisions of the Resolution. This summary is not to be considered a full statement of the terms of the Resolution and accordingly is qualified by reference thereto and is subject to the full text thereof. Except as otherwise defined herein, capitalized terms used in this Official Statement without definition have the respective meanings set forth in the Resolution. Resolution to Constitute Contract The provisions of the Notes and of the Resolution constitute a contract between the County and the registered owners of the Notes and the Series B Notes, and such provisions may be enforceable by mandamus or any other appropriate suit, action or proceeding at law or in equity in any court of competent jurisdiction, and, upon issuance of the Notes will be irrepealable. "See "THE NOTES—Lien in Bankruptcy." Representations and Covenants of the County The County determines pursuant to the Resolution that with respect to Fiscal Year 2005-06, the amount of $_,000,000 (the maximum authorized principal amount of the Notes) when added to the interest estimated to be payable thereon, does not exceed 85% of the estimated amount of the uncollected taxes,income,revenue,cash receipts,and other moneys of the County for the General Fund of the County attributable to Fiscal Year 2005-06 and be available for the payment of the principal of and the interest on the Notes and the Series B Notes. In order to maintain the exclusion from gross income for federal income tax purposes of interest on the Notes, the County covenants to comply with each applicable requirement of the Internal Revenue Code of 1986, as amended, necessary to maintain the exclusion of interest on the Notes from gross income for federal income tax purposes and the County agrees to comply with the requirements of the Tax Certificate of the County as such Tax Certificate may be amended from time to time. The County further covenants that it will make all calculations relating to any rebate of excess investment earnings on the Note proceeds due to the United States Department of the Treasury in a reasonable and prudent fashion and will segregate and set aside the amounts such calculations indicate may be required to be paid to the United States Department of the Treasury from revenues attributable to the 2005-2006 Fiscal Year or from any other lawfully available moneys'. See"TAX MATTERS. Notwithstanding any other provision of the;Resolution to the contrary, upon the County's failure to observe,or refusal to comply with,the foregoing tax covenants,no one other than the owners or former owners of the Notes and the Series B Notes will be entitled to exercise any right or remedy with respect to such covenants under the Resolution. Paying Agent and Note Registrar The Treasurer`;,will initially"act as Paying Agent and as Note Registrar for the Notes. This appointment does not preclude the County from appointing a financial institution to act as Paying Agent. Any such successor Paying Agent will be or have co-paying agent relationships with one or more banks or trust companies in New York,New York or Los Angeles,California or San Francisco,California. Exchange and Transfer of the Notes The registered owners of the Notes which;are evidenced by registered certificates may transfer such Notes upon the books maintained by the Note Registrar,but only in accordance with the Resolution. 05034\pos 4 14 The County,and any Paying Agent may deem and treat the registered owner of any Note as:the absolute owner of such Note, regardless of whether such Note is overdue, for the purpose of receiving payment thereof and for all other purposes, and all such payments so made to any such registered owner upon his or her order will satisfy and discharge the liability upon such Note to the extent of the sum or sums so paid,and neither the County nor any Paying Agent will be affected by any notice to the contrary. Cede&Co., as nominee of DTC,or such other nominee of DTC or any successor securities depository or the nominee thereof,will be the registered owner of the Notes as long as the beneficial ownership of the Notes is held in book-entry form in the records of such securities depository See APPENDIX G---"DTC AND THE BooK-ENTRY-ONLY-SYSTEM." Permitted Investments Moneys on deposit in the Repayment Fund will be retained therein until applied to the payment of the principal of and 'interest on the Notes. Such amounts may not be used for any other,purposes, although they may be invested in Permitted Investments, except that no such investment (other than the Contra Costa Treasurer's Investment Pool) shall have a maturity date later than the maturity date of the respective Notes or Series B Notes expected to be paid with the proceeds of such investments. The Resolution specifically designates the following investments as Permitted Investments,;subject to certain limitations more fully described in the Resolution: (1) United States Treasury notes, bonds, bills or certificates of indebtedness, or those for which the full faith and credit of the United States are pledged for the payment of principal and interest. (2) Obligations of instrumentalities or agencies of the United States of America limited to the following: (a);the Federal Home Loan Bank Board (FHLB); (b),the Federal Home Loan Mortgage Corporation (FHLMC) (c) the Federal National" Mortgage Association (FNMA); (d)-Federal Farm Credit,Bank (FFCB); (e) Government National Mortgage Association (GNMA); (f) Student Loan Marketing Association (SLMA); (g) Federal Agricultural Mortgage Association (FRM); and (h) guaranteed portions of Small Business Administration(SBA)notes. (3) Bills of exchange or time drafts drawn on and accepted by a commercial bank,otherwise known as bankers' acceptances. Purchases of bankers' acceptances may not exceed a maturity of 180 days. The financial institution must have a minimum short-term rating of "P-1" and "A-1" by Moody's and S&P, respectively, and a long-term rating of no less than"A." (4) Commercial paper of"prime" quality of the highest ranking or of the,highest letter and numericalrating ("P-l" or "A-1") as provided for by Moody's or S&P, respectively. Eligible paper is further limited to issuing corporations that are organized and operating within the United States and having total assets in excess of five hundred million dollars ($500,000,000). Such commercial paper may not mature later than 270 days after purchase. (5) Negotiable certificates of deposits issued by a nationally or state-chartered bank or a state or federal association(as defined by Section 5102 of the California Financial Code)or by a state-licensed branch of foreign bank in each case which has, or which is a subsidiary of a parent company which has, the highest letter and numerical rating from Moody's 1")and S&P("A-1"),respectively. 050341pos-4 15 ..........h,;:;: :: W :,......... �,:. .. , . . .F - .F : -�f.... F . .h:-::::::::,..,,:tom.. , . :; . :. (6) Investments in repurchase agreements of any securities listed in (1) through (4) above. Investments in repurchase agreements is limited to financial institutions having a rating of "Aa" or "AA" or better from Moody's and S&P, respectively. The term of the repurchase agreement may:not exceed 30 days and must consist of obligations of the United States Government,its agencies and instrumentalities,described in clause two(2) above with a market value of 102 percent or more of the invested amount. (7) Deposits in the State of California Treasurer's Local Agency Investment Fund(LAIF); (8) The Contra Costa County Treasurer's Investment'Pool. CERTAIN RISK.FACTORS Described below are certain factors, which could impact the ability of the County to pay debt service on the Notes. See also APPENDIX A—"GENERAL COUNTY ECONOMIC AND DEMOGRAPHIC INFORMATION" and APPENDIX B—"•COUNTY FINANCIAL INFORMATION"for certain financial'and other information concerning the County. The following information does not purport to be an exhaustive listing of the risks and other considerations which may be relevant to an investment in the Notes. County Financial Stress A variety of circumstances affecting the County(and other counties in the State)have resulted in significant financial stress on the County over the last few years. Certain of these circumstances are described in Appendix B, and include (i) the financial condition of the State, which may result in decreased revenues from the State to the County; (ii) significant increases in labor costs of the County, including amounts required to be paid by the County to fund current and future health and retirement benefits, resulting from the :resolution of litigation related thereto as well as renegotiation of labor agreements and enhancement of retirement benefits and the resulting impact on the required annual General Fund contribution to its employee pension plan;and(iii)post retirement health care benefits. On June 28, 2005, the Board of Supervisors adopted a budget for the Fiscal Year 2005-06 that provides for approximately $551 million in spending reductions compared to the adopted budget for Fiscal Year 2004-05. Pension Plan Over the last few years, the County has experienced significant increases in the amount that it is required to contribute annually to the Contra Costa County Employees' Retirement Association ("CCCERA"). The required General Fund contributions were approximately $108.7 million, $118.2 million and $90.6 million in Fiscal Year '2002-03, Fiscal Year 2003-04 and Fiscal Year 2004-05, respectively. The required contribution for Fiscal Year 2005-06 is estimated to be approximately $ . These increases are due to a variety of factors, including market losses and earnings shortfalls in the CCCERA investment portfolio, changes the existing law regarding the definition of the term "compensation earnable"and enhancements to the retirement benefits of employees. 05034\pos-4 16 In 1997, the Supreme Court of the State rendered a decision in,Ventura County Deputy Sheriff's Association et al. v. Board of Retirement of Ventura County Employees' Retirement Association, and County of Ventura(Ventura)holding,among other things,that certain items such as vacation buy-back be included in the calculations that determine the amount of retirement benefits a retiree is 'eligible to receive. Two lawsuits on similar issues were filed against the County by certain retired County employees. These lawsuits were consolidated into one case, Vernon D. Paulson, et al. v. Board of Retirement of the Contra Costa County Employees'Retirement Association, et al. and that case has been settled. The level of future required contributions depends on_a variety of factors, including future CCCERA investment portfolio performanceand additional changes in retirement benefits. There can be no assurances that the required annual General Fund contribution to CCCERA will not continue to significantly increase, and that such increases will not materially'adversely affect the financial condition of the County. For additional information regarding CCCERA see APPENIDix B—"COUNTY FINANCIAL INFORMATION.-Pension Plan and"—Impact of the Ventura Decision." State Financial Condition Approximately 25.6% of the County's Fiscal Year 2005-06 General Fund Budget:.consists of payments from the State. Therefore,the finances the County may be adversely impacted by the financial condition of the State. For information regarding the State budget, see APPENDIX B-"COUNTY FINANCIAL INFORMATION—State Budget Acts." CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES, REVENUES AND APPROPRIATIONS 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 percent of the voters voting on the proposition. Article XIII A`defines frill 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. 05034\pos-4 17 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 I%property tax is automatically levied by,the County and distributed according to aformula 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. 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 11'1, 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 thenadjustedannually 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 I I I 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. For Fiscal Year 2005-06,the County's Article XIII B limit is estimated to be $5,896,187,344 and budget appropriations subject to limitation are estimated to be $273,325,175, The County has never exceeded'its Article XIII B appropriations limit and does not anticipate having any difficulty in operating within the appropriations limit: 05034\pos-4 18 .......................... ................................... ................ .......................... ............................ Article XIII C and Article X111 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 adds Articles XIII C and XIII D to the California Constitution and contains a number of interrelated provisions affecting the ability of the County to levy and collect both existing and future taxes, assessments, fees and charges. The interpretation and application of Proposition 218 likely will be determined by the courts with respect to a number of the matters discussed below,and it is not possible at this time to predict with certainty the outcome of such determination. Article X111 C requires that all new local taxes be submitted to the electorate before they become effective. Taxes for general governmental purposes of the County require a majority vote and taxes for specific purposes, even if deposited in the County's General Fund,require a two-thirds vote. Further, any general purpose tax which the County 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 which must beheld within two years of November 5, 1996. The County believes that no existing County imposed taxes deposited into its General Fund will be affected by the voter approval requirements of Proposition 218, although as indicated below certain tax levies may be affected by Proposition 62. The voter approval requirements of Proposition 218 reduce the flexibility of the County to raise revenues for the General Fund, and no assurance can be given that the County will be able to impose, extend or increase such taxes in the future to meet increased expenditure needs. Article XIII D also adds several provisions making it generally more difficult for local agencies to levy and maintain fees, charges, and assessments for municipal services and programs. These provisions include,among other things,(i)a prohibition against assessments which exceed the reasonable cost of the proportional special benefit conferred on a parcel, (ii) a requirement that assessments must confer a "special benefit," as defined in Article XIII D, over and above any general benefits conferred, (iii) a majority protest procedure for assessments which involves the mailing of notice and a ballot to the record owner of each affected parcel, a public hearing and the tabulation of ballots weighted according to the proportional financial obligation of the affected party, and (iv)a prohibition against fees and charges which 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. The County estimates that in Fiscal Year 2005-2006 it will collect no such fees and assessments. Article XIII C also removes limitations on the initiative power in matters of reducing or repealing local taxes, assessments, fees or charges. No assurance can be given that the voters of the County will not, in the future,approve an initiative or initiatives which reduce or repeal local taxes, assessments, fees or charges currently comprising a substantial part of the County's General Fund. If such repeal or reduction occurs, the County's ability to repay the Notes and the Series B Notes could be adversely affected. Proposition 62 On September 28, 1995, the California Supreme Court, in the case of Santa Clara County Local Transportation Authority v. Guardino, upheld the constitutionality of Proposition 62. In this case, the court held that a countywide sales tax of one-half of one percent was a special tax that, under Section 53722 of the Government Code, required a two-thirds voter approval. Because the tax received an affin-native vote of only 54.1%,this special tax was found to be invalid. The decision did not address the question of whether or not it should be applied retroactively. 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, which was passed in November 1986. On June 4,2001,the California Supreme Court released its decision in one of these cases,Howard Jarvis Taxpayers Association v. City of La Habra, et al. ("La Habra'). In this case, the court held that public agency's continued imposition and collection of a tax is an ongoing violation, 050341pos-4 19 M. -o P .?......... upon which the'statute'of limitations period begins anew with each collection. The court also held that, unless another statute or constitutional rule provided differently, the statute of limitations for challenges to taxes subject to Proposition 62 is three years. Accordingly, a challenge to a tax subject to Proposition 62 may only be made for those taxes received within three years of the date the action is brought. The County no taxes to which Proposition 62 could apply. Proposition 1A The California Constitution and existing statutes give the legislature authority over property taxes, sales taxes and 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, it has not provided in recent years'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 lA that 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 lA generally prohibits the State from shifting to schools or community colleges any share of property tax revenues allocated to a county for any fiscal year under the laws in effect as of November 3, 2004. The measure also specifies that any change in how property tax revenues are shared among local governments within a county must'be approved by two-thirds of both houses of the Legislature (instead of by majority vote). Finally, the measure prohibits the State from reducing the property tax revenues provided to a county as replacement for the local sales tax revenues redirected to the State and pledged to pay debt service on State deficit-related 'bonds approved by voters in March 2004. If the State reduces the VLF rate below its current 'level of 0.65% of the vehicle value, Proposition IA requires the State to provide local governments with equal replacement revenues. Proposition IA provides two significant exceptions to the above restrictions regarding sales and property taxes. First, beginning in Fiscal Year 2008-09,the State may shift to schools and community colleges up to 8%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 their property tax losses, with interest, within three years. Second, Proposition IA allows the State to approve voluntary exchanges of local sales tax and property tax revenues among local'governments'within a county. Proposition lA 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. Beginning in;Fiscal Year 2005-06; 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 IA expands the definition of what constitutes a mandate to encompass State action that transfers to cities, counties and 050341pos-4 20 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 IA 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 aresult, Proposition IA could result in fewer changes to local government revenues than otherwise would have been the case. Future Initiatives Article XIII A, Article XIII B, Article XHI`'`C, Article VIII D, and Proposition 62 and IA, were adopted as measures that qualified for the ballot through California's initiativeprocess. From time to time other initiative measures could be adopted,further affecting the County's revenues.' COUNTY INFORMATION For a discussion of the economic and demographic profiles of the County, see APPENDIX A "GENERAL COUNTY ECONOMIC AND DEMOGRAPHIC INFORMATION." For information on the County's finances,see APPENDIX B—"CO. NTY FINANCIAL INFORMATION"and APPENDIX E—"EXCERPTS FROM THE AUDITED FINANCIAL STATEMENTS OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30,2004." It is expected that the Audited Financial Statements of the County for the Fiscal Year Ended June 30, 2005 will be available on or before February 28,2006. TAX MATTERS In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the County ("Bond Counsel"),based on 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 Notes 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 (the "State")' personal income taxes. Bond Counsel is of the further opinion that interest on the Notes 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 adjustedcurrent earnings in calculating federal corporate alternative minimum.taxable income. A complete copy of the proposed form:of the,opinion of Bond Counsel is set forth in Appendix D hereto. Notice 94-84, 1994-2 C.B. 559, states that the Internal Revenue Service (the "IRS") is studying whether the amount of the payment at maturity on short-term debt obligations (ie.,debt obligations with a stated fixed rate of interest which mature not more than one year;from the date of issue)that is excluded from gross income for federal income tax purpose is (i) the stated interest payable at maturity;or(ii)the difference between the issue price of the short-term debt obligations (the "original issue discount").' For this purpose, the issue:,price of the short-term debt obligations is the first price at which a substantial amount of the short-term debt obligations is sold to the public(excluding bond houses,brokers,or similar persons or organizations acting in the capacity of underwriters,placement agents or wholesalers). Until the IRS provides further guidance with respect to tax-exempt short-term debt obligations, taxpayers may treat either the stated interest,payable'at maturity or the original issue discount as interest that is excluded 05034\pos-4 21 :� : :, from gross income for federal income tax purposes:. However,taxpayers trust treat the amount to be paid at maturity on all tax-exempt short-term debt obligations in a consistent manner. Noteholders should consult their own tax advisors with respect to the tax consequencesof ownership of Notes if the Noteholder elects original issue discount treatment. 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 Notes. The County has made certain representations and has covenanted to comply with certain restrictions designed to insure that interest on the Notes 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 Notes being included'in gross income for federal'income tax purposes,possibly from the date of original issuance of the Notes. 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) after the date of issuance of the Notes may adversely affect the value of,or the tax status of interest on,the Notes. One of the covenants'of the County referred to above requires the County to reasonably and prudently calculate the amount, if any, of excess investment earnings on the proceeds of the Notes which must be rebated to the United States,to set aside from lawfully available sources sufficient moneys to pay such amounts and to otherwise do all things necessary and within its power and authority to assure that interest on the Notes is excluded from gross income for federal income tax purposes. Under the Code, if the County spends 100% of the proceeds of the Notes within six months after issuance, there is no requirement that there be a rebate of investment profits in order for interest on the Notes to be excluded from gross income for federal income tax purposes. The Code also provides that such proceeds are not deemed spent until all other available:moneys (less"a reasonable working capital reserve)are spent. The County expects to satisfy this expenditure test or,if it fails to do so to make any required rebate payments from moneys received or accrued during Fiscal Year 2005-06. To the extent that any rebate cannot be paid from such moneys, the law of California is unclear as to whether such covenant would require the County to pay any such rebate. This would be an issue only if it were determined that the County's calculations of expenditures of Note proceeds or of rebatable arbitrage profits,if any,were incorrect. Certain requirements and procedures contained or referred to in the Resolution and other relevant documents may be changed and certain actions (including, without limitation, defeasance of the Notes) may be taken or omitted,under the circumstances and subject to the terms and conditions set forth in such documents. Bond Counsel expresses no opinion as to any Note or the interest thereon if any such change occurs or action is taken or omitted upon the advice or approval of bond counsel other than Orrick, Herrington&Sutcliffe LLP. Although Bond Counsel is of the opinion that interest on the Notes is excluded from gross income for federal income tax purposes and is exempt from State personal income taxes, the ownership or disposition of, or the accrual or receipt of interest on, the Notes may otherwise affect a Noteholder's federal or state tax liability. The nature and extent of these other tax consequences will depend upon the particular tax status of the Noteholder or the Noteholder's other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. Future legislation, if enacted into law, or clarification of the Code, may cause interest on the Notes to be subject, directly or indirectly, to federal income taxation, or otherwise prevent beneficial owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such future legislation or clarification of the Code may also affect the market price for, or marketability of, the,Notes. Prospective purchasers of the Notes should consult their awn tax advisers regarding any pending or proposed federal tax legislation, as to which Bond Counsel expresses no opinion.` 050341pos4 22 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 Notes 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 County, or about ;the effect of future changes in the Code, the applicable regulations,theinterpretationthereof or the enforcement thereof by the IRS. The County has covenanted, however,to comply with the requirements of the Code. Bond Counsel's engagement with respect to the Notes ends with the issuance of the Notes, and, unless separately engaged, Bond Counsel is not obligated to defend the County or the Noteholders regarding the tax-exempt status of the Notes in the event:of an'audit examination by the IRS. Under current procedures, parties other than the County and its appointed counsel, including the Noteholders,' 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 Notes is difficult, obtaining an independent review of IRS positions with which the County legitimately disagrees,may not be practicable. Any action of the IRS, including but not limited to selection of the Nates for audit, or the course or result of such audit, or an audit of Notes presenting sinular tax issues may affect the market price for, or the marketability of, the Notes, and may cause the County or the Noteholders to incur, significant expense. LEGAL MATTERS Bond Counsel's employment is limited to a review of the legal proceedings required for the authorization of the Notes and to rendering the opinion set forth in Appendix D hereto. Bond Counsel takes no responsibility for the accuracy, completeness or fairness of this Official Statement. Certain legal matters will be passed upon for the County by the County Counsel and for the County and .the Underwriter by Lofton&Jennings, San Francisco,California,Disclosure:Counsel. Compensation paid to Bond Counsel and Disclosure Counsel is contingent on the sale of the Notes. LEGALITY FOR INVESTMENT IN CALIFORNIA Under provisions of the California Financial Code, the Notes are legal investments ;for commercial banks in the State to the'extent that the Notes, in the informed opinion of the investor bank, are prudent for the investment of 'funds of its depositors and, under provisions of the California Government Code,are eligible to secure deposits of public moneys in the State. FINANCIAL ADVISOR The County has retained Tamalpais Advisors,Inc., Sausalito,California,as Financial Advisor for the sale of the Notes. Tamalpais Advisors,Inc. is an independent financial advisor and is not engaged in the business of underwriting, trading or distributing municipal or other financial securities. Compensation paid to the Financial Advisor is contingent on the delivery of the Notes. 05034\pos-4 23 .... -..-.... .. ... ..-: .. .« «... RATINGS The County has obtained a rating of" "on the-<Notes from Moody's and a rating of" "on the Notes from S&P. Certain informationwas supplied by the County to the rating agencies to be considered in evaluating the Notes.. The ratings issued reflect only the views of the rating agencies, and any explanation of the significance of such ratings should be obtained from the rating agencies. There is no assurance that any rating will be'retained for any given period of time or that the same will not be revised downward or withdrawn entirely by the respective rating agency if in its judgment,circumstances so warrant. Other than as provided in the Continuing Disclosure Certificate, the County undertakes no responsibility either to bring to the attention of the owners of any Notes any downward revision or withdrawal of any rating obtained or to oppose any such revision or withdrawal. Any such downward revision or withdrawal of the ratings obtained may have an adverse effect on the market price of the Notes. LITIGATION No litigation is pending or threatened against the County concerning the validity of the Notes, and a certificate of the County Counsel to that effect will be furnished to the purchaser at the time of the original delivery of the Notes. The County is not aware of any litigation pending or threatened against the County questioning the political existence of the County or contesting the County's ability to levy and collect ad valorem taxes or contesting the County's ability to issue and repay the Notes. There are a number of lawsuits and claims pending against the County. The aggregate amount of the uninsured liabilities of the County and the timing of any anticipated payments of judgments which may result from suits and claims will not,in the opinion of the County Counsel and the County Auditor- Controller,materially affect the County's finances or impair its ability to repay the Notes. SALE OF THE NOTES The Notes were sold at competitive bid on December 1, 2005. The Notes were awarded to . The Notes will be purchased at a purchase price of$ . The Official Notice of Sale provides that the obligation to purchase the Notes is subject to certain terms and conditions set forth in the Official Notice of Sale, including,among others the approval of certain legal matters by Bond Counsel. The underwriter(s) of the Notes have represented to the County that the Notes have been re-offered to the public at the yield shown on the cover page hereof. Based on such representation,compensation paid to the underwriter with respect to the Notes is $ ADDITIONAL INFORMATION The purpose of this Official Statement is to supply information to prospective purchasers of the Notes. Summaries and explanations of the Notes, the Resolution, and statutes and documents contained herein do not purport to be complete, and reference is made to said documents and statutes for a full and complete statement of thein provisions. This Official Statement is not to be construed as a contract between the County and any purchasers or owners of the Notes. 05034\pos 4 24 The County regularly prepares a variety of reports, including audits, budgets and related documents, as well as certain monthly activity reports. Any owner of a Note may obtain a copy of any such report, as:available, from the County;by writing to the Capital Facilities Administrator, County Administrator's Office, 651 Pine Street, 11t` Floor, ',Martinez, California 94553, or by calling (925)335-1021. All data contained herein have been taken or constructed from County records and other sources.' Appropriate County officials,'acting in their:official capacity, have reviewed this Official Statement and have determined that as of the date hereof the information containedhereinis, to the best of their knowledge and belief,true and correct in all material respects and does not contain an untrue statement of a material factor omit to state a material fact necessary in order to make the statements made herein, in the light;of the circumstances under which they are made,not misleading. An appropriate County official will execute a certificate to this effect upon delivery of the Notes. This Official Statement and its distribution have been duly authorized and approved by the Board of Supervisors of the County. COUNTY OF CONTRA COSTA By: John R.;,Sweeten County Administrator and Clerk of the Board of Supervisors 05034\pos-4 25 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 shorelinesare 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, Clerk-Recorder, District Attorney-Public Administrator, Sheriff-Coronerand Treasurer-Tax Collector. A County Administrator appointed by the 'Board of Supervisors runs the day-to-day business of the County. The current County Administrator is John R. Sweeten. Population The County is the ninth most populous county in California, with its population reaching approximately 1,020,898 as of January 1,2005. This represents an increase of approximately_7.6% compared to the County's population in 2000. The'availability of rapid transit, close proximity to major employment hubs in San Francisco and Oakland,and relatively affordable existing and new housing have combined to attract more residents to the County over the past decade. While population grew in every city in the County during the last decade,population growth has been strongest in unincorporated areas as well as in the eastern portion of the County, particularly in Antioch,Brentwood and Clayton. 05034\pos-4 A-'1 .................... ............ ........... The following is a summary of the County's population levels since 2000. Table A-1 COUNTY OF CONTRA COSTA POPULATION"' (AS OF JANUARY 1) 2000121 2001 2002 2003 2004 2005 Antioch 90,532 93,337 96,878 99,422 101,097 101,049 Brentwood 23,302 25,152 29,685 33,094 37,246 40,912 Clayton 10,762 10,960 10,993 10,994 11,045 10,982 Concord 121,872 123,586 124,963 125,104 125,484 124,798 ( Danville2) 41,715 42,787 43,067 43,269 43,450 43,273 El Cerrito 23,171 23,462 23,547 23,561 23,517 23,407 Hercules 19,488 19,867 20,169 20,515 21,814 23,360 Lafayette 23,908 24,185 24,447 24,433 24,421 24,317 Martinez 35,866 36,390 36,769 36,938 36,985 36,818 Moraga 16,290 16,490 16,529 16,531 16,516 16,435 Oakley(2) 25,619 26,064 26,196 27,036 27,670 28,265 12) Orinda 17,599 17,811 17,860 17,854 17,849 17,797 Pinole 19,039 19,366 19,457 19,555 19,638 19,604 Pittsburg 56,769 58,086 60,000 61,146 61,791 62,605 Pleasant Hill 32,837 33,256 33,409 33,719 33,786 33,638 Richmond 99,216 100,561 101,212 101,502 102,162 103,012 San Pablo 30,256 30,629 30,689 30,842 31,187 31,344 San Ramon") 44,722 45,973 46,887 47,120 48,855 51,027 Walnut Creek 64,296 65,687 65,980 66,080 66,466 66,501 Balance of County 151,557 153,208 154,681 157,496 157,956 161,754 Incorporated 797,259 813,649 828,737 838,715 850,988 859,144 TOTAL 948,816 966,857 983,418 996,211 1,008,944 1,020,898 California 33,873:086 34,441,561 351008,671 35,691,442 36,271,091 36281.07358 Totals may not equal sums due to independent rounding. As of April 1. Dates of incorporation:Danville(7/l/82);Orinda(7/l/85);San Ramon(711/83),and Oakley(1999);the 1990 Census Report created 1980 population levels for all of these cities except Oakley prior to official incorporation. Source: United States Census for year 2000;State Department of Finance for 2001-2005. Industry and Employment The County has one of the fastest growing work forces among Bay Areacounties, with growth in its employment base being driven primarily by the need to provide services to an increasing local population. The County has experienced an immigration of white-collar jobs due to the relocation of companies from costlier locations in the Bay Area. 05034\pos4 A-2 As shown below, the County's civilian labor force was 507,700 in 2004. With average 2004 unemployment rates of 5.4% and 6.2% for the County and the State, respectively, the County has achieved a lower unemployment rate than the State in each of the past five years. Table A-2 COUNTY OF CONTRA COSTA EMPLOYMENT AND UNEMPLOYMENT OF RESIDENT LABOR FORCE WAGE AND SALARY EMPLOYMENT BY INDUSTRY ANNUAL AVERAGES(IN THOUSANDS) 2000, 2001 2002 2003 2004 County Civilian Labor Force(1) 501.0 508.10 512.3 511.6 507.7 Employment 483.3 487.5 483.1 480.5 480.1 Unemployment 17.8 20.5' 29.2 31.1 27.6 Unemployment Rate: County 3.6%q 4.0% 5.7% 6.1% 5.4% State of California 5.0010 5.0% 6.7% 6.8% 6.2% Wage and Salary Employment(2) 2000 2001 2002 2003 2004 Agriculture 2.2 2.1 2.1 2.0 0.9 Mining and Construction 28.8 30.1 28.0 27.5 29.2 Manufacturing 23.4 22.8 21.9 20.6 21.0 Wholesale Trade 9.2 9.7' 10.1 9.3 9.1 Retail Trade .42.7 43.2 43.4 42.2 43.2 Transportation,and Public Utilities 8.9 8.9 9.3 7.9 7.2 Information 17.4 16.8' 16.0 13.8 14.0 Finance,Insurance,and Real Estate 26.3 28.6 30.8 32.4 32.3 Professional,and Business Services 54.1 48.8 48.0 45.1 45.9 Education and Health'Services 38.3 39.5 40.3 40.4 41.6 Leisure and Hospitality 25.9 26.6 29.1 29°.8 30.2 Other Services 11.2 11.5 13.6 13.3 14.1 Government 48.2 49.6rr 50.5 50.2 49.2 ToTAL(3) 336.6 333.3' 343.2 334.3 338.0 (1) Based on place of residence. (z) Based'on place of work. (3) <"Tota1'may not be precise due to independent rounding. Source: State of California,'Employment Development Department,and Labor Market Information Division,March 2004' benchmark. 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 County's heavy manufacturing is located along the County's northern boundary fronting on the Suisun and San Pablo Bays;,leading to San Francisco Bay and the Pacific Ocean. The 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 located in the East Bay and their employment levels. 05034\pos-4 A-3 Table A-3 MAJOR EMPLOYERS TAT TBE EAST BAY WITH EMPLOYEES IN THE COUNTY til Primary Location Firm in County Product or Service Employment U.S.Postal Service Countywide Postal Services 10,000' Chevron/Texaco(2) Countywide Energy,Oil&Gas 8,730 County of Contra Costa t2i Martinez County Government 8,381 Safeway Countywide. Supermarkets 7,922`' Bank of America CountywideBanking 7,081 SBC Communications Inc. San Ramon Telecommunications 10,600 Pacific Gas&Electric Countywide' Gas&Electric Service 3,000' Kaiser Permanente Medical CenterWalnut Creek,Martinez Health Care 4,730 Lucky Stores Countywide' Supermarkets 4,631 Bio-Rad Laboratories Inc. Hercules Biotech tests 5,200 Wells Fargo&Co. Countywide' Banking 4,000 AT&T Countywide Telecommunications 4,000 Mt.Diablo Unified School District(2) Concord K-12 Education 3,600 Western Contra Costa School District(2) Richmond K-K-12 Education 3,360 John Mur/Mt.Diablo Health System(2) Walnut Creek Health Care 4,900 Longs Drug Stores(2) Walnut Creek Retail Drug Stores 2,900 Cooperjsion/Ocular Sciences Inc. Concord Contact lenses 3,144 San Ramon Valley Unified School District Danville K-12 Education 2,200 Contra Costa Newspapers{2� Walnut Creek Newspaper Publishing 1,417 Round Table Franchise Corp. Countywide Pizza Restaurants 1,230 Tosco Martinez Oil Refinery 1,200 Hill Physicians Med.Group Countywide Health Care 1,050 USS Posco Industries Pittsburg Steel Manufacturing 1,000 PMI Walnut Creek Mortgage Insurance 100 Shell Martinez Refining Co.(Equilon) Martinez Oil Refinery 930 €p Sources: Office of County Administrator;County Auditor,and various published sources,including San Francisco Chronicle, May 2002;East Bay Business Times,Book of Lists,2005;San Francisco Business Times,Book of Lists;2005. Data is for the reported entity's latest fiscal year. (z) Headquartered in the County. Effective Buying Income "Effective buying income" ("EBI") is a classification developed exclusively by Sales & Marketing Management magazine to distinguish it from other sources reporting,income statistics. EBF is defined as "money income" less personal tax and nontax payments- a number often referred to as "disposable" or"after-tax" income. Money income is the aggregate of wages and salaries, net farm and nonfarm self-employment income, interest, dividends,net rental and royalty income, Social Security and railroad retirement income, other retirement and disability income, public assistance income, unemployment compensation, Veterans Administration payments, alimony and child support, military family allotments, net winnings from gambling and other periodic income. Money'income does not include money received from the sale of property (unless the recipient is engaged in the business of selling property); the value of"in-kind" income such as food stamps, public housing subsidies, medical care,employer contributions for persons,etc'.;withdrawal of bank deposits;money borrowed;tax refunds; ' exchange of money between relatives living in the same household; gifts and lump-sum inheritances, insurance payments, and other types of lump-sum receipts. EBI is computed by deducting from money income all personal income taxes (federal,'state and local), personal contributions to social insurance (Social Security and federal retirement payroll deductions), and taxes on owner-occupied nonbusiness real estate. 05034\pos 4 A-4 The total effective buying income for the County in 2004, as reported by Sales & Marketing Management in its Survey of Buying Power,was $25,962,828 and the median household effective buying income was $54,862. This compares to 2004 median household effective buying incomes of$51,015 for the City and County of San Francisco, $50,431 for Alameda County, $60,516 for San Mateo County, $62,584 for Santa Clara County and$38,311 for Las Angeles County. Table A-4 below presents the latest available total effective buying income and median household effective buying income for the County, the State and the 'nation for the calendar years 2000 through 2004. Table A-4 COUNTY OF CONTRA COSTA EFFECTIVE BUYING INCOME CALENDAR YEARS 2000-2004' Total Effective Median Household Buying Income Effective Year and Area CS In 000's) Bnyine Income 2004 County $25,962,828 $54,862 State 674,721,020 42,924 United States 5,466,880,008 38,201 2003 County' $24,571,388 $54,448 State 647,879,427 42,484 United States 5,340,682,818 38,035 2002 County $23,902,953 $56,507 State 650,521,407 43,532 United States 5,303,481,498 38,365 2001 County $28,823,698 $60,189 State 652,190,282 44,464 United States 5,230,824,904 39,129 2000 County $21,772,470 $53,234 State 590,376,683 39,492 United States 4,877,786,658 37,233 t Most recent data available. Source: Sales&Marketing Management,Survey of Buying Power. 050341pos-4 A-5 Commercial Activity Commercial activity comprises an important part of the County's economy, with taxable transactions totaling approximately$12.2 billion in 2003,the most recent year for which complete annual data is available. Presented in Table A-5 below is a summary,of taxable transactions in the County since 1999. Table A-5 COUNTY OF CONTRA COSTA TAXABLE TRANSACTIONS' 1999 To 2003# ($IN::000'S) 1999 2400 2001 2002 20031 Apparel Stores $304,915 $338;215 $346,190 $357,690 $377,571 General Merchandise Stores 1,467,490 1,625,482 1,683,803 1,684,336 1,720,973' Specialty Stores 1,259,681 1,278,513 1,229,075 1,307,403` 1,241,320 Food Stores 509,062 544,489 583,947 584,948 589,826 Packaged Liquor Stores 54,563 62,907 68,428 70,304 70,956 Eating and Drinking Places 764,682 832,962 878,955 903,540 928,874 Home Fumishings and Appliances 414,384 471,944 467,402 473,024486,829 Building Materials and Farm Implements 749,681 840,546 850,622 876,203 925,708 Service Stations 669,467 820,701 792,340 747,291 763,870 Automotive and Vehicle Dealers,Parts and Supplies 1,524,336 L833,660 1,959,801 1,952,583 1,831891 Total Retail Outlets $7,718,261 $8,649,419' $8,942,822 $9,044,346 $9,025,114 Business and Personal Services 467,124 542,103 540,959 517,165 512,140 All Other Outlets 2,929,091 3,139,038 2,772,940 2,597,913 2,686,041 TOTAL ALL OUTLETS $11,114,476 $12,330,560 ' $12,256,721 $12,159,424 $12,223,295 t Most recent annual data available. Source: State Board of Equalization. Much of the County's„commercial"activity is concentrated in central business districts of its cities and unincorporated towns. Regional shopping centers, numerous smaller centers and several "big box warehouse stores serve County residents. The County is served'by all major banks including Bank of America and Wells Fargo Bank. In addition there are numerous local banks and branches of smaller California and foreign banks. There are over 30 savings and loan associations in the County, including Washington Mutual,World Savings and California Federal. Construction Activity The value of residential building activity increased by 13.29%in Fiscal Year 2004-05 from Fiscal Year 2003-04 levels. The increase was attributable'to an increase in residential construction primarily in Antioch,Brentwood,Pittsburgh,and Oakley. Within the County, Antioch,Brentwood, Oakley-and Pittsburgaccounted for approximately 46% of all new homes constructed in the County during the first eight months of calendar year 2005. 05034\pos-4 A-6 ,. ::: f: - : ....................................................................................................... The following Table A-6 provides a summary of building permit valuations and number of new dwelling units authorized in the County since Fiscal Year 1995-96: Table A-6 COUNTY OF CONTRA COSTA BUILDING PERMIT VALUATIONS FISCAL YEARS 1995-96 THROUGH 2004-05 Valuation($in thousands) Number of New Dwelling Units Fiscal Residential Single Multiple Year (New) Family Family Total 1996 $584,108 3,094 450 3,580 1997 582,793 3,105 381 3,486 1998 738,939 3,144 999 4,142 1999 852,256 3,909 504' 4,413 2000 841,990" 3,692 1,071 4,763 2001 921,370 4,144 776' 4,920 2002 952,507 3,848, 800 4,648 2003 1,275,245 4,753 972' 5,725 2004 1,444,739 5,063 820' 5,883 2005 1,349,900 4,846 646 5,492 Source:Economic Sciences Corporation. Approximately$ billion of construction projects are currently approved or underway in the County,including a $3.0 billion development known as "Dougherty Valley" that will add approximately 11,000 new dwelling units to the County's housing stock, the development of other major subdivisions that will add new homes with an estimated value of$_billion and construction projects totaling more than $1.1 billion on three major bridges. Approximately $_ billion of projects are pending approval,including$_billion of construction spending on approximately residential units. On August 1,2000 the Board of Supervisors unanimously adopted an amendment to the Contra Costa County General Plan, 1995-2010, modifying the boundaries of the County's Urban Limit Line. This action reduced the growth limit line by 22 square miles, by removing approximately 14,000 acres from future development. The two regions primarily affected by this amendment were eastern Contra Costa County and the Tassajara Valley in the south-central part of the County. Two cities within the County lost lawsuits challenging the environmental justifications for the boundary shift. The County anticipates that other parties may also file lawsuits or take'other actions challenging the boundary shift. Consequently, the actual number of acres ultimately removed from future development may be less than 14,000 acres. 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 to Interstate 5, the major north-south highway from Mexico to Canada. Interstate 680 connects the central County communities to the rest of the Bay Area and portions of the Central Valley of the State via State Routes 4 and 24, the County's major east-west arteries. 05034\pos-4 A-7 ............................. Caltrans is currently widening Interstate 80 in the western portion of the County at a cost of $200 million,has constructed a replacement span on the Carquinez Bridge on Interstate Highway.80 and Martinez Bridge on Interstate Highway 680 at a cost is constructing a replacement span on the Benicia of$1.1 billion. The Benicia Martinez Bridge project is expected to be completed and open for traffic in late 2006: Ground transportation is available to County residents from the following service providers: • Central Contra Costa Transit Authority provides local bus service to the central area of the County including Walnut Creek, Hill and Concord. Pleasant I • BART connects the County to Alameda County, San Francisco and Daly City and Colina 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. BART completed an extension to the San Francisco International Airport which opened in June 2003. AC Transit, provides local bus service and connects Contra Costa communities to San Francisco and Oakland. 0 Other bus service is provided by Greyhound. 0 Commuter rail service is provided by the Capital Corridor, with daily runs'...between the Bay Area and Sacramento that stop at the new 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 the inland farm section. Commercial water transportation and docking facilities are available through a number of port and marina locations in the County. The Port of Richmond on San Francisco Bay and several privately owned industrial docks on both San Pablo and Suisun Bays serve the heavy industry located in the area. The Port of Richmond, owned and operated by the City of Richmond, covers 202 acres and handles nearly 20 million metric tons annually. The majority of the shipments are bulk liquids with the remainder consisting of scrap metal,autos,and gypsum rock. Major scheduled airline passenger and freight transportation for County residents is available at either Oakland or San Francisco International Airports, located about 20 and 30 miles,respectively, from the County. In addition there are two general aviation fields,one at Byron and the other at Concord. (REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) 05034\pos-4 A-8 P-T Agriculture The County is comprised of 482,000 acres, with 126,338 or 26.2% of these acres allocated to farmlands and harvested cropland. In 2004, the total gross value of agricultural products and craps reached$94,753,200. The value of agricultural production since 2000 is set forth in Table A-7 below. Table A-7 " COUNTY OF CONTRA COSTA AGRICULTURAL PRODUCTION,2000 TO 2004 Cron 2000 2001' 2002 2003 2004 Nursery Products $32,105,200 $37,509,500 $35,385,000 $33,686,000 $28,341,400 Livestock&Poultry' 8,829,000 7,424,000 15,603,000 (1) (1) Field crops 9,162,000 12;140,000 10,095,000 10,382,000 14,642,000 Vegetable&Seed Crops 17,026,400 16,055,000 17,723,100 20,941,900 21,359,000 Fruit&Nut Crops 18,050,000 15,609,600 14,550,300 13,025,900 15,907,400 Livestock(') 7,425,000 8:777300 6397,700 30,531,700 14.502,000 TOTAL $92,597,600 $97,515,400 $100,154;100 $108,567,500 $94,753,220 (1) In 2003,this category was combined with the Livestock category. (2) Includes,apiary,poultry products and livestock products. Source: Contra Costa County Department of Agriculture. Environmental Control Services Water. The East Bay Municipal Utilities District ("EBMUD") and the Contra Costa County Water District ("CCCWD") supply water to the County. EBMUD supplies water to the western part of the County. Approximately 89%of its supply is from the Mokelumne River watershed stored at the«69;4 billion gallon capacity Pardee Ilam 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 gallonsper 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 CCCWD obtains its water from the Sacramento'-San Joaquin Delta and serves approximately 500,000 customers in Concord, Pleasant Hill, Martinez, Clayton, Pittsburg and Antioch. It is entitled under a contract with the U.S. Water and Power Resources Service to 195,000 acre-feet per year. Water sold 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, CCCWD constructed the Los Vaqueros Reservoir with a capacity of 100,000 acre-feet south of the City of Antioch Sewer. Sewer services for the County are provided by approximately 20 sanitation districts and municipalities. Federal and State environmental requirements,plus grant money available from these two sources,have resulted'in about 14 agencies upgrading,expanding and/or building new facilities within the past three years. 05034\pos-4 A-9 Flood Control. The Contra Costa County Flood Control District (the "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. Corps of Engineers and the State Department of Water Resources. The 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 Public school education in the County is availablethrough nine'elementary school districts, two high school districts and seven unified school districts. These districts provide 142 elementary schools, 45 middle, charter,junior high and intermediate schools, 28 high schools, and a number of preschools, adult schools, and special education facilities. In addition,there are 110'private schools with six or more students in the County..' School enrollment in December 2004 numbered approximately 165,562 students in public schools and 18,998 in regular graded private schools. Higher education is available in the County through a combination of two-year community colleges and four-year colleges. The Contra Costa County Community College District has campuses in Richmond, Pleasant Hill and Pittsburg. California'State University East Bay (formerly California State University Hayward)operates'a branch campus,called Contra Costa Center,in the City of Concord where date afternoon and evening classes in business, education and liberal arts are offered. St.Mary's College of California, a'four-year private institution, is located on a 100-acre campus in Moraga. Also located within the County is the John F.Kennedy University with campuses in Pleasant Hill and Pittsburg and the UC Berkeley Extension Contra Costa Center in San Ramon. In addition,County;residents are within easy commuting distance of the University of California,;Berkeley. There are twelve privately operated hospitals and one -public hospital in the County, with a combined total of approximately 1,900 beds. Four of the private hospitals are run by Kaiser, the largest' health maintenance organization in the United States. Kaiser has opened a new hospital in Richmond with new critical care beds, surgical suites and a full service emergency department. The Walnut Creek- based John Muir/Mt.Diablo Health System is planning to build a new campus in Brentwood. The public hospital is Contra,Costa Regional Medical Center("CCRMC"),a 164-bed facility that the County rebuilt and opened to the public in 1998 on the 'existing campus in Martinez. Since completion of the hospital in 1998, the County completed a public health/clinical laboratory in 2001, converted the former Los Medanos Hospital into the Pittsburg Health Center, completed construction of an ambulatory care clinic on the campus of CCRMC,' expanded clinics in Antioch, Concord and Brentwood and is in the planning stage of replacing a clinic in Richmond. 05034\pos 4 A-10 ::, . .. 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'receives from the State in Fiscal Year 2005-06 and in subsequent fiscal years is likely to be affected by the financial condition of the State. State Budgets Currently, approximately 25.6% of.the County's Fiscal Year 2005-06 General Fund Budget consists of payments from the State. The financial`condition of the State has an impact on the level of these revenues. In past years the State reduced revenues to counties to help solve the State's budget problems. The State has also diverted other revenues such as cigarette taxes and trailer coach in lieu taxes from counties to the State. Property tax revenues..received by local governments declined more than 50% following passage of Proposition :13. Subsequently, the California' 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 certain governmental'functions by the State to assist municipal issuers to raise revenues. Total local assistance from the State'General Fund was budgeted at approximately 75%of General Fund expenditures in recent years, including the effect of implementing reductions in certain aid programs. To reduce State'General Fund support for school districts,the Fiscal Year 1992-93 and 1993-94 Budget Acts caused local governments to transfer$39 billion of property tax revenues to school districts, representing loss of the post-Proposition 13 "bailout aid. Local governments have in return received greater'revenues and greater flexibility to operate health and welfare programs. 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 laical governments may be reduced. Any such reductions.in State aid could compound the serious fiscal constraints already experienced by 'many local governments, particularly counties. The following information concerning has been obtained from publicly available information on the State Department of Finance, the State Treasurer and the California Legislative Analyst Ogee 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 information and discussion of 03034\post B-1 ........... factors underlying the State's projections, see the aforementioned websites. The County believes such information to be reliable, however, the County takes no responsibility as to the accuracy or completeness thereof and has not independently verified such information. State Budget Acts Fiscal Year 2004-05. The 2004-05 Budget Act(the "State 2004 Budget Act' was adopted by the Legislature on July 29, 2004, along with a number of implementing measures, and signed by Governor Schwarzenegger on July 31, 2004. In approving the budget,the Governor vetoed $116 million in appropriations (including $80 million in General Fund appropriations). The State 2004 Budget Act -05 largely reflected the proposals contained in the May Revision to 2004 Governor's Budget, the including the use of$2=billion of proceeds of the economic recovery bonds issued in Fiscal Year 2003-04. Under the State 2004 Budget Act,General Fund revenues were projected to increase 3.6%, from $74.6 billion in Fiscal Year 2001-04(which includes approximately $2.3 billion in tobacco securitization bond proceeds)to $77.3 billion in Fiscal Year 2004-05. The revenue projections assumed a continuing rebound in California's economy as reflected in several key indicators. Excluding the impact of the economic recovery bonds, General Fund expenditures were estimated to increase by 6.7%, from $75.6 billion in Fiscal Year 2003-04 to $80.7 billion in Fiscal Year 2004-05. The June 30, 2005 reserve was projected to be$768 million,compared to an estimated June 30,2004 reserve of$2.198 billion. The State 2004 Budget Act and related legislation dramatically changed the State-local fiscal relationship. Pursuant to Proposition 1A, the VLF was reduced from 2% to 0.65% of the value of the vehicle. In order to protect local governments, the reduction in VLF revenue tocities and counties from this rate change was to be replaced by an increase in the amount of property tax they receive. only, the replacement property Under Proposition 1A, for Fiscal Years 2004-05 and 2005-06 taxes that cities and counties receive would be reduced by $700 million. In future year s, Iocal governments would receive the fall value of the VLF revenue that they would have received under current law. Also for these two Fiscal Years,Proposition 1 A would require redevelopment agencies to shift$250 million in property tax revenue they would otherwise receive to schools, and special districts would shift $350 million to schools. For a more detailed description of Proposition 1A, see"CONSTITUTIONAL AND STATUTORY LimiTATioNs ON TAxEs,REvENuEs AND APPROPRIATIONS Proposition IA." Fiscal Year 2005-06. The 2005-06 Budget Act (the "State 2005 Budget Act") was adopted by the Legislature on July 7,2005,along with a number of implementing measures,and signed by Governor -D reduce appropriations by$190 s ine item veto authority t Schwarzenegger on July 11,2005 after using his I million. The 2005 State Budget Act reflects an improving State fiscal picture brought aboutby better- than-expected etterthan-expected growth in General Fund revenues. The 2005 State Budget Act funds the Proposition 42 n transfer of general fund sales taxes to transportation special funds, and includes significant increases in both K-12 and higher education. The 2005 State Budget Act does not use any of the remaining $3.7 billion in deficit-financing bonds authorized by Proposition 57 in March 2004, and the State prepaid the $1.2 billion VLF "gap" loan that was due to local governments in Fiscal Year 2006-07 in August 2005. At the same time,2005 State Budget Act includes approximately$6 billion in savings and related budget solutions in order to maintain budgetary balance. About one-half of the solutions is from holding Fiscal Year 2004-05 Proposition 98 funding at the level anticipated in the 2004 State Budget Act.Another o, $450 million is from reductions in social services programs,mostly from the suspension of c st-0 f-living adjustments for California Work Opportunity and Responsibility to Kids and Supplemental Security 05034\pos-4 B-2 rim.:?; iio r.iN r Income/State Supplementary Program grants. The 2005 State Budget Act also includes $525 million in one-time revenues from the refinancing of'a previous tobacco-settlement backed bond. It counts on a $428 million loan from Merrill Lynch to fund the Faterno lawsuit settlement (relating to flood-related damage that occurred in 1986). Finally,it retains$380 million in transportation-related sales tax proceeds (Public Transportation Account"spillover"funds)in the General Fund. After taking into account the higher revenues and other offsetting factors'(including higher Proposition 98 funding requirements under current law) the resulting operating shortfall for Fiscal Year 2005-06 is estimated at$4.9 billion. A Special Election scheduled for November 8, 2005' will include, among other matters, Proposition 76, entitled"The California Live Within.Our.Means Act" ("Proposition 76"). If approved by State voters, Proposition 76 will, among other things, amend the State Constitution to require that the spending levels authorized in the prior-year's budget act retrain in effect until a new budget is enacted and grant the Governor the power to (i) declare a fiscal emergency based on his administration's fiscal estimates (a fiscal emergency will be proclaimed when the Governor's administration finds that the General Fund revenues have fallen by at least 1.5%below the administration's estimates or the balance of the State's reserve fund will decline by more than one-half between the beginning and the end of the Fiscal Year) and (ii) unilaterally reduce spending'when an agreement cannot be reached on how to address the fiscal emergency.' The reductions may apply to all General'Fund'spending, except for (1) expenditures necessary to comply with federal laws and regulations, (2) appropriations whose reduction would violate contracts:to which the State is already a party and(3)payment of principal and interest that is due on outstanding debt. Any General Fund ',spending related to contracts, collective bargaining agreements,or entitlements for which payment obligations arise after the effective date of Proposition 76 if approved, would be subject to these reductions. In particular, Proposition 76 would permit the Governor to reduce the amount of money available to fund an entitlement program. When the funding remaining after such reduction is exhausted, the State's the obligation to fund the entitlement for the remainder of the Fiscal Year would cease. As of the date of this=Official Statement, it cannot be determined whether,when or in what final form Proposition 76 or any other proposals having an impact on local agency finance may be approved by the voters and/or enacted by the Legislature and signed by the Governor or whether State voters will approve any other amendments to the State Constitution. County Budget Process The County is required by State law to adopt a balanced budget by August 30 of each year, although the Board of Supervisors may, by resolution, extend the date on a permanent basis or for a limited period,to October 2. The County's budget process involves a number of steps. First, upon release of the Governor's Proposed Budget in January, the County Administrator prepares 'a preliminary forecast of the County's budget based on current' year expenditures, the assumptions and projections contained in the Governor's Proposed Budget and other projected revenue trends. Second, the County Administrator prepares"a preliminary budget that is presented to the Board of Supervisors. The Board of Supervisors holds public`hearings and the County Administrator then prepares the County's Proposed Budget: Third, the County Administrator presents the County's Proposed Budget to the Board of Supervisors. Absent the adoption of a final County budget by June 30, the current existing budget is continued into the new fiscal year until a final budget is adopted. 05434\pos-4 B-3 Fourth, between January and the time the State adopts its own budget,legally due no,later than June 15,representatives of the County Administrator monitor,review and analyze the State budget and all adjustments made by the State legislature. Upon adoption of the final State budget, the County Administrator recommends revisions to the County's Proposed Budget to align County expenditures with approved State revenue. After conducting public hearings and deliberating the details of the budget,the Board of Supervisors adopts the County's Final Budget by August 30, or by October 2 if the Board'?of Supervisors has adopted a resolution to extend the deadline. In order to ensure that the budget remains in balance throughout the Fiscal Year, the County Administrator monitors actual expenditures and revenue receipts each month. In the event of a projected year-end deficit,steps are taken, in accordance with the State Constitution,to reduce expenditures. On a quarterly basis, the County Administrator's staff prepares a report that details the activity within each budget category and provides summary information on the status of the budget. Actions that are necessary to ensure a healthy budget status at the end of the fiscal year are recommended in the quarterly budget status reports. Other items which have major fiscal impacts are also reviewed quarterly. The County's ability to increase its revenues is limited by State laws that prohibit the imposition of fees to raise general revenue, except to recover the cost of regulation or provisions of services. See "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES,REVENUES AND APPROPRIATIONS" in the forepart of this Official Statement. The County Administrator expects to convene workshops with respect to the County's Fiscal Year 2006-07 budget in January 2006 and anticipates that the County will adopt its Fiscal Year 2006-07 budget in late June 2006. Recent County General Fund Budgets Set forth below is a description of the County's comparative budgetary and expenditure experience for Fiscal Years 2403-04through 2005-06. For a summary of the actual audited financial results of the County for Fiscal Year 2003-04,' see "EXCERPTS FROM THE AUDITED FINANCIAL STATEMENTS OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30, 2004" in Appendix E to this Official Statement. Fiscal Year 2003-04. The County's Fiscal Year 2003-04 Actual Budget was approximately % higher than the prior Fiscal Year. Total actual revenues in Fiscal Year 2003-04 were 2.9%higher and total''actual expenditures were 0.6%higher than the actual budgeted amounts'for Fiscal year 2002-03. Property Taxes increased$23,507,000 in Fiscal Year 2003-04 as a result of an 8.1%increase in assessed valuation due to a strong real estate market and increased construction activity in the eastern portion of the County. Increases in expenditures were due primly to healthcare costs and increased capital projects'. Fiscal Year 2t!©�-d 5.; The County's Fiscal:Year 2004-05 Actual Budget was approximately 2.3 % higher than the actual budget for the prior Fiscal Year. The County closed a projected $53 million budget deficit primarily through the implementation of 10% reductions in all County departments, requiring departments to absorb increases in wage and benefit costs that were not offset by revenues through staff reductions, and the use of one resources, specifically'fund balance in the amount of $19.3 million. Actual revenues in Fiscal Year 2004-05 were approximately 1.4%higher and total actual expenditures were approximately 1.5%higher than the actual budgeted amounts for Fiscal year 2003-04. The County participated in a securitization of certain of the VLF "backfill"revenues clue from-the State as a participant in the California Statewide Communities Development Authority Revenue Anticipation Notes(Vehicle License fee Program)financing. These notes were issued on March 17,2005 05034\pos-4 B-4 and defeased on August 4, 2005 as a result of the early repayment by,the State of the VLF'"backfill" amounts required under Proposition IA. See "CONSTITUTIONAL AND STATUTORY LIMITATION ON TAXES,REVENUES AND APPROPRIATIONS—Proposition IA." Table B-1 COUNTY OF CONTRA'COSTA GENERAL FUND BUDGET FOR FISCAL YEARS 2004-05 AND 2005-06# ($IN 000'5) Final Actual Budget Budget 2004-05 2005-06 Requirements General Government $151648, $145,654 Public Protection 304,832 330,588 Health and Sanitation 251,921 266,558 Public Assistance 365,975' 375,992 Education 302 332, Public Ways and Facilities 53,501 92,668 Recreation and Culture 0 375 Reserves and Debt Service 2 10,000' TOTAL REQuiRlyI mws Available Funds Property Taxes $209,797 $218,831 Fund Balance'Available 26,695 44,488 Other Taxes 25,185 25,594 Licenses,Permits and Franchises 12,736 13,928 Fines,Forfeitures and Penalties 16,620 15,490 Use of Money and Property 5,571 3,565 Intergovernmental 533,001 598,228 Charges for Current Services, 196,934 196,657 Other Revenue 101,641 110,387 TOTAL AVAILABLE FUNDS $1,128,181 $1,222,168 t This table presents budget information for the General Fund only. Source: County Auditor-Controller. Fiscal Year 2405-06. The County's'Fiscal Year 2005-06 Adopted Budget, adopted on June 28, 2005 is 8.33%higher than the Fiscal Year 2004-05 Actual Budget. The County closed a projected$50-60 million General.Fund budget gap by requiring that all County departments absorb salary and benefit cost increases without increasing individual budget allocations and through the use of$43 million in ane-time resources'(fimd balance). The County expects its revenues to grow at normal levels and is taking steps to reduce workers compensation costs and employee compensation costs. 05034\pos-4 B-5 Ad'Valorem Property:,Taxes The County administers the property tax levy and collection system for the County and all local' governments in the County. Taxes are levied for each fiscal year on taxable real and personal property that is situated' in the County as of the preceding January 1. For assessment and collection''purposes, property is classified either as"secured"or"unsecured,"and is listed accordingly on separate parts of the assessment roll. The "secured roll" is that part of the assessment roll containing State assessed property and property secured by a lien on real property which is 'sufficient, in the opinion of the Assessor, to secure payment of the taxes. Other property is assessed on the"unsecured roll: Property taxes on the secured roll are due in two installments, on November 1 and February l of each fiscal year. If unpaid,such taxes become delinquent on December 10 and April 10,respectively,and a.-10%penalty attaches to any delinquent payment. In addition,property on the secured roll with respect to which;taxes are delinquent is declared to be in default on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of the:delinquent taxes and the delinquency penalty, plus a redemption penalty of one and one half percent per month to the time of redemption. If taxes are unpaid for a period of five years or more, the tax-defaulted property is declared to be subject to the Treasurer's power of sale and may be subsequently sold by the Treasurer.' Legislation established the "supplemental roll" in 1984, which`directs the Assessor to re-assess real property, at market value, on the date the property changes ownership or upon completion of construction. Property on the supplemental roll is eligible for billing 30 days after the reassessment and notification to the new assessee. The resultant charge (or refund)is a one-time levy on the increase (or decrease) in value for the period between the date of the change in ownership or completion'of construction and the date of the next regular tax roll upon which the assessment is entered. Billings are made on a monthly basis and are due on the date mailed. If mailed between the months of July through'October,the first installment becomes delinquent on December 10 and the second on April 10. If mailed within the months of November through June, the first installment becomes delinquent on the last day of the month following the month of billing. The second installment becomes delinquent on the last day of the fourth month following the date the first installment is delinquent. Property taxes on the unsecured roll are due as of the January 1 lien date and become delinquent, if unpaid, on August 31. A 10%penalty attaches to delinquent taxes on property on the unsecured roll, and an additional penalty of one and one-half percent per month begins to accrue beginning November 1. The taxing authority has four ways of collecting unsecured personal property taxes: (1) by filing a civil action against the taxpayer; (2)by filing a certificate in the office of the County'Clerk specifying certain facts in order to obtain.:a judgment lien on certain property of the taxpayer; (3) by filing a certificate of delinquency for recordation in the County Recorder's office, in order to obtain a lien on certain property 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 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 "-The Teeter Plan— Tax Losses Reserve Fund") into which all county-wide delinquent penalties are deposited. The County has used this method since Fiscal Year 1950-5 L Major property tax assessment appeals by businesses and the oil industry total approximately $ billion in disputed value, with potential loss of revenue in the millions to various units'of County 05034\pos=4 B-6 : : :: local government. €7f the total amount, approximately $ billion was attributable to appeals by oil refineries pertaining to assessments through the Fiscal Year tax roll. The assessed values for the remaining refineries through the Fiscal Year tax roll are still under appeal and being disputed by the County.` Heavy industry accounted for 12.01% of the collected property taxes in the County in Fiscal Year 2004-05 A recent history of County tax levies, delinquencies and the Tax Losses Reserve Fund cash balances as of June 30th is shown in Table B-2 below. Table B-2 COUNTY OF CONTRA COSTA SUMMARY OF ASSESSED VALUATIONS AND AD VALOREM PROPERTY TAXATION FOR FISCAL YEARS 1996-97 THROUGH 2005-06 Balance in Secured Current Tax %Levy Tax Losses Fiscal Year Assessed Property Delinquencies Delinquent Reserve Fund June 301 Valuation Tax Levies (June 30) (June 30): (June 301 1996-97 $69,242,099,630 $869,580,974 $18,057,023 2.08% $17,154,539 1997-98 70,314,800,892 892,581,453 15,547,736 1.74 19,508,732 1998-99 73,699,554,452 939,437,116 15,375,159 1.64 21,550,142 1999-00 78,346,533,416 981,579,866 15,904,158 1.62 23,054,893 2000-01 84,627,977,952 1,062,831,354 16,738,410 1.57 24,535,061 2001-02 93,499,199,701 1,187,173,140 20,551,776 1.73 27,032,058 2002-03 100,925,700,794 1,293,561,117 25,574,249 1.98 30,347,321 2003-04 109,072,548;285 1,402,895,299'. 27,325,421 1.95 20,167,593 2004-05 118,776,276,503 1,584,132,373' 26,598,823 1.68 23,134,013 2005-06(est.) 131,125,213,168 1,716,000,000' N/A N/A N/A Source: County Auditor-Controller. The Teeter Plan In 1949, the California Legislature enacted an alternative method for the distribution of secured property taxes to local agencies. This method, known as the Teeter Plan, ,is set forth in Sections 4701-4717 of Revenue and Taxation Code of the State of California(the"Law"). 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(defined below)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 County was the first Teeter Plan county in the State. Tax Losses Reserve Fund. Pursuant to the Law, the County is required to establish a tax losses reserve fund(the"Tax Losses Reserve Fund")to cover losses that may occur in the amount of tax liens as a result of special sales of tax-defaulted property (Le., 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 05034\pas-4 B-7 draw down their tax lasses 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 July 1, 2005, the balance in the Tax Losses Reserve Fund was $23.I million. Approximately $9.0 million of the reserve was transferred to the County's General Fund in Fiscal Year 2004-05, In addition,, pursuant to the Law, the 'County has established a tax resources account to compensate for losses that may occur as a result of uncollected current property taxes. Largest Taxpayers The ten largest taxpayers in the County, as shown on the Fiscal;Year 2004-05 secured tax roll, and the approximate amounts of their property tax payments are shown below. These ten taxpayers paid a total of$116.17 million in taxes, or approximately'7.83%of the County's Fiscal Year 2004-05 secured tax collection. Table B-3 COUNTY OF CONTRA COSTA' TEN LARGEST PROPERTY TAXPAYERS FISCAL YEAR 2004-05 %of Total Taxpayer Total Taxes County Tax Rollt Chevron $36,944,380.76 2.49% Equilon Enterprise 19,782,275.84 1.33 Tesoro Petroleum 11,902,257..60 0.80 PG&E 11,081,046.16 0.75 Tosco Corporation 8,956,146.40 0.60 Pacific Bell 6,876,068.92 0.46 Wndemere 6,842,710.98 0.46 Sunset Land Company 5,957,235.94 0.40 Walnut Creek Mutual 4,964,723.90 0.33 USS Pasco 2,864.382.96 0.19 TOTAL.TEN LARGEST TAXPAYERS 116,171,229.46 7.83 Other Taxpayers 1,368,058,435.00 92.17 TOTAL $1,484,229,664.46 100.00010 f Column does not total due to rounding: Source: County Treasurer-Tax Collector. 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 05034\pos 4 B-8 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). For Fiscal Year 2004-05, approximately 2.3% of the County's total net assessed valuation constitutes ,property subject to 'State assessment by the SBE, for which approximately $_,_,000 of property taxes were collected in Fiscal Year 2004-05. The portion of Fiscal Year 2004=05 tax collections through the SBE assessment'methodology attributable to the County General Fund was approximately$4.7 million. Pursuant to Assembly Bill 81 (California Legislature 2001-2002 Regular Session), commencing with the January 1, 2003 property tax lien.:date, the SBE assesses certain electric generation facilities. The legislation provides that the assessed value and revenues derived from such assessed property is allocated to local jurisdictions in the same manner as locally assessed property based on the location of the property and not under the unitary property formulae. The County estimates that, should cities annex property:,underlying existing ,power plants, the resultant revenue allocation could annually decrease County General Fund revenue by approximately $15 million based on the current fiscal year. Vehicle License Fee Vehicle license fees are assessed in the amount of 2%of a vehicle's depreciation market value for the privilege of operating a vehicle on California's public highways. A program to offset (or'reduce) a portion of the vehicle:license fees'("VLF") paid by vehicle owners was established by Chapter 322, Statutes of 1998. Beginning January 1, 1999, a permanent offset of 25% of the VLF paid.by vehicle owners became operative. Approximately three-fourths of the VLF revenues are general revenues and can be used for any purpose,with the remaining funds used to pay for"realignment" Health and Social Services programs. Various pieces of legislation increased the amount of the offset in subsequent years to the existing statutory level of 67.5%0.of 2%(resulting in the current effective rate of 0.65%). Beginning in Fiscal Year 2004-05, the State-local:agencies agreement permanently reduced the VLF rate to 0.65%o and eliminated the State General Fund offset program. In connection with the offset of the VLF,the Legislature authorized appropriations from the State General Fund to "backfill" the offset so that the local governments, which receive all of the vehicle license fee revenues,would not experience any loss of revenues. The legislation that established the VLF offset program also provided that if there were insufficient State General Fund moneys to fully"backfill" the VLF offset, the percentage offset would be reduced proportionately (i.e., the license fee payable by drivers would be increased) to assure that local governments would not be disadvantaged. In June 2003, the Director of Finance under the Davis Administration ordered the suspension of VLF offsets due to a determination that insufficient General Fund moneys would be available for this purpose, and,beginning in October 2003, VLF paid by vehicle owners were restored to the 1998 level. However, the offset suspension was rescinded by Governor Schwarzenegger on November 17, 2003, and offset payments to local governments resumed. Local governments received "backfill" payments totaling $3.80 billion in Fiscal Year 2002-03. "Backfill"payments totaling$2.65 billion were paid to local governments in Fiscal Year 2003-04. The State-local agencies agreement also provided for the repayment in August 2006 of approximately$1.2 billion that was not received by local governments during the time period between the suspension of the offsets and the implementation of higher fees. This repayment obligation is codified by Proposition IA, which was approved by the voters in the November 2004 General Election and was prepaid to local'agencies on August 2004. For a description of Proposition 1A, see "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES,REVENUES AND APPROPRIATIONS—Proposition'1 A." 05034\pos-4 B'-9 _..._._. The County's Fiscal Year 2005-06 budget anticipates receipt of$108.3 million in VLF. The County utilizes the general VLF revenues (approximately $76.3 million) to fund various Countywide programs,and utilizes"realignment"VLF revenues($32.1 million)to fund health service programs. Table B-4 COUNTY OF CONTRA COSTA SUMMARY OF VLF FEES FISCAL YEARS 1995'96 THROUGH 2004-05 Deposited to Motor Deposit to Local Vehicle License Fiscal Year Revenue Fundal Fee Account(2) Total Revenue 1995-96 $15,651,707 $36,614,239 $52,261,946 1996-97 16,910,364 39,085,174 55,995,538 1997-98 17,129,977 42,168,476 59,298,453 1'998-99 17,723,553 46,166,972 63,890,525 1999-00 19,595,602 51,685,195 71,280,797 2000-01 19,735,677 57,918,303771653,980 ` 63,144,169 84,780,970 2001-02 21,636,801 2002-03 21,507,171:. 65,595,184 87,102,355 2003-04 21,707,468;, 53,259,070 74,966,538 2004-OS{} 32,100,000 76,300,000 108,300,000 Represents amounts used to fund health services programs. (a)'' Represents amounts used to fund'countywide programs. (3)' Budgeted amount. (REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK)` 05034\pos 4 B-10 o mw .. ... .. #,,,, . Redevelopment Agencies The California Community Redevelopment Law authorizes 'city or county redevelopment agencies to issue bonds payable from the allocation of tax revenues resulting from increases in full cash values of properties within designated project areas. In'effect,`.local taxing authorities other than the redevelopment agency realize tax revenues only on the "frozen" tax base. The following Table B-5' shows redevelopment agency full cash value increments and talc allocations for agencies 'within the County. Table B-5 COUNTY OF CONTRA COSTA' COMMUNITY REDEVELOPMENT AGENCY PROJECTS FULL CASH VALUE INCREMENTS AND TAX ALLOCATIONS(t> FISCAL.YEARS 1995-96 THROUGH 2004-65 Full Cash Total Tax Fiscal Year Base Year>>Value(2) Value Increment(3} Allocations(4) 1995-96 $3,050,167,516 $5,338,764;454 $57,210,695 1996-97 3,195,085,095 5,493,724,548 58,807,082 1997-98 2,198,412,524 5,687,404;922 60,454,787 1998-99 2;343,330,103 6,080,461,083 64,427,525 1999-00 2,480,670,587 6,660,417;603 69,321,686 2000-01 2,704,690,573 7,446,872,533 76,886,217 2001-02 3;578,860,177 8,835,385;357 91,289,481 2002-03 3,433,942,598 10,070,678,634 103,955,708 2003-04 3,600,771,960 11,4€13,833,690 116,813,986 2004-05 2,881,589,675 12,875,417,794 131,478,464 (1� Full cash values for all redevelopment projects above the"frozen"base year valuations. These data represent growth in full cash values generating tax revenues for use by the community redevelopment agencies.. (2) The Base Year Values for Fiscal Years. 1997-98 through 2004-05 were reduced to exclude project areas with negative increment. (3) Does not include unitary and operating non-unitary utility roll values which are determined by the State Board of Equalization on arcounty-wide basis. (4) Actual tax revenues collected by the County which have been or will be paid to the community redevelopment agencies. Source: County Auditor-Controller. Accounting Policies,Reports and Audits Except as mentioned below, 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 and fiduciary funds use the modified accrual basis of accounting. This system recognizes revenues when they become available and measurable. Expenditures, with the exception of unmatured interest on general long-term debt, are-recognized'when the fund liability is incurred. Proprietary funds use the accrual basis of accounting, whereby revenues are recognized when they are earned and become measurable, while expenses are recognized when they are incurred. The 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. 05034\pos-4 B-11 The California Government Code requires every county,to prepare an;annual financial report. The 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, local autonomous districts 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 E—"EXCERPTS FROM THE AUDITED FINANCIAL STATEMENTS OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE,30,2004.11 In addition to the above-mentioned audits, the County Grand Jury may also conduct management audits of certain offices of the County. Funds accounted for by the County are categorized as follows Government Funds. Government funds are used to account for all or most of the County's general government activities, including the collection and disbursement of earmarked monies (special revenue funds), the acquisition or construction of general fixed assets-(capitalprojects funds) and the servicing of general long-term obligations (debt service funds). The General Fund is used to account for the revenues and expenditures of the County that are not accounted for by other funds. Proprietary Funds. Proprietary funds are`used'to account for activities similar to those in the private sector, where the measurement focus is upon determination of net income and capital maintenance. Goods or services from such activities can be provided either to outside parties (enterprise funds)or to other departments or agencies primarily'within the County(internal service funds). Fiduciary Funds. Fduciary'funds are used to account for assets held by the County in a trustee capacity`.:or as an agent for individuals, private organizations, other governments, and/or other funds. These include the Pension and Investment Funds,the Expendable'frust Fund and agency funds:` Presented in Table B-6 on the following page is the County's Schedule of 'Revenues, Expenditures and Changes in Fund Balances for the County General Fund as of June 30th for the five most recent fiscal years for which audited financial statements are available. More detailed information from the County's audited financial report for the fiscal year ending June 30,2004 appears in Appendix E to this Official Statement. (REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) 95034\pos-4 B-12 Table B-6 COUNTY OF CONTRA COSTA GENERAL FUNIS SCHEDULE OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES-BUDGET AND ACTUAL-BUDGETARY BASIS FISCAL YEARS 1999-00 THROUGH 2003-04 (IN THOUSANDS) 1999-00 2000-01 2001-02 2002-03 2003-04 REvENuES Taxes $116,540 $184,513 200,571 $211,866 $210,032 Licenses,permits&franchises 8,623 14,823 23,782 13,614 17,593 Fines,:forfeitures&penalties 15,029 14,364 14,508 14,007 27,443 Use of money&property 14,858 19,029 10,527 7,312 5,412 Intergovernmental revenues 465,245 452,351 506,352 505,878 508,679 Charges for services 143,566' 160,130 155,713 173,062 186,508 Other revenue 27,923 18,078 74;613 75,776 88,489 TOTALREvENUEs 791,784 863,288 986,066 1,001,515 1,044,156 EXPENDI`T'um General government 100,734 106,250 128,375 133,565 131,387 Public protection 215,919 225,008 254,070 284;683 294,449 Health&sanitation 156,441 153,961 172,613 193,337 204,188 Public assistance 244,934 273,403 315,112' 326,917 335,236 Education 145 151" 205 257 306 Public ways and facilities 20,140 24,092 45,679 34,733 38,419 Interest 3,878 3,133 2,215 1,145 432 Capital outlay 3,301 1,2,69 7,415 2,620 1,973 TOTAL ExPENDITURES 745,492 787,267 925,684 977,257 1,006,390 Excess of Revenues over(under)Expenditures 46,292 . 76,021 60,382 24,258 37,766 OTHER FINANCING SOURCES(USES) Operating transfers in 31,294 23,485 23,568 26,017 30,288' Operating transfers out (55,993) (68,889) (76,347) (84,735) (87,978) Capital lease financing 5,500 1,269 7,415 3,627 1,973' TOTAL OTHER FINANCING SOURCES(USES) (19,199) (44,135) (42,872) (55,091) (55,717) NET CHANGE IN Furor BALANCES 27,093 31,886 17,510 (30,833) (17,951) FUND BALANCE AT BEGINNING OF YEAR, as Previously Reported 85,430 112,721 144,607 169,402` ' 138,569 Adjustment to beginning fund balance 199 0 7,285 0 (732) FUND BALANCE AT BEGINNING OF YEAR, as Restated 85,430 112,721 151,892' 169,402 137,837 Residual equity'transfers in 199 ;0 0 0 0' Residual equity transfers out 0 0 0 0 0,' FUND BALANCE AT END OF YEAR $112,721 $144,607 169,402 138,569 $119,886 Source: County Auditor-Controller. 05034\pos 4 B-13 County'Employees A summary of County,;employees follows: Table B-7 COUNTY OF CONTRA COSTA COUNTY EwLOYEEsf As of Number of June 3d Employees 1996 6,856 1997 6,974 1998 7,215 1999 7,749' 2000 8,325 2001 8,640 2002': 8,779 2003- 8,785 2004 8,670 2005 8,381 1 Represents full-timeequivalent employees. Excludes temporary or seasonal employees. Source:'County Auditor-Controller. Contract Negotiations County and District employees are represented in 36 bargaining units by 13 labor organizations, the principal ones being Local'One of the Contra Costa County Employees Association ("CCCEA') and Local 2700 of the American Federation of State County and Municipal Employees 'AF SCME' which, combined,represent approximately 50%of all County employees in a variety of classifications.' The County and 11 of the labor organizations, representing approximately 85% of the County workforce, entered into an extension'of the memoranda of understanding that provided wage increases and retirement enhancements. The Memorandums of Understanding (the "MOUs") of the employee organizations representing employees with miscellaneous retirement benefits(AFSCME Locals 512 and 2700, California Nurses Association, CCCEA Local One, Physicians' and Dentists' of Contra Costa County, SEIU Local 535 and Western Council of Engineers) expired September 30, 2005. Negotiations with each of these bargaining units is ongoing. Wage and retirement benefit provisions for employees with safety retirement in the miscellaneous employee organizations of CCCEA Local One and SEIU Local 535 expire September 30,2006: The MOUs of employee organizations representing employees with safety retirement benefits were extended three years from the then-current expiration as follows;:. Deputy Sheriff's Association, Management and Rank & File Units, and District Attorney Investigator's Association, September 30, 2005; IAFF Local 1230, Fire Suppression''Unit (CCCFPD), March 31, 2006; United Chief Officers' Association, June 30, 2006; and IAFF Local 1230, East Diablo Firefighters Unit, December 31, 2005. Negotiations with each,.of these bargaining units is underway. A memorandum of understanding with the Oakley-Knightsen Firefighters 'Association who represent the reserve firefighters employed by the East Contra Costa Fire Protection District(formerly the Oakley-Knightsen Fire Protection District)had been extended to September 30,2004 and negotiations'are underway. A memorandum of understanding with SEIU Local 250 which represents In-Horne Supportive 05034\pos-4 B-14 Services Workers with the In-Home Supportive Services Public Authority, providing wage increases of 5.6%and dentalbenefits,had been extended to June 30,2005 and is currently being negotiated. Pension Plan Description. The Contra Costa County Employees' Retirement Association (the "Association") is a cost-sharing multiple-employer defined pension benefit plan governed by the County Employees' Retirement Law of 1937, as amended. The plan was established on July'1, 1947 covers substantially all of the employees of the County, its 'special'districts, the Housing Authority of the County and 18 other member agencies. The plan provides for retirement, disability, and death and survivor benefits, in accordance with the County Employees' Retirement Law. Annual cost-of-living adjustments to retirement benefits can be granted by the:Board of Retirement as provided by State statutes. The Board of'Retirement is responsible for the general management of the Association and is comprised of I l'members,one of whom is a safety alternate and one of whom is a retiree alternate. Four members are appointed by the Board of Supervisors; four members, including'the safety alternate, are elected by the active membership of the Association;and two members,including the retiree alternate are elected by retirees. The County Treasurer serves as an ex-officio member of the Board of Retirement. Members of the Board of Retirement,with the exception of the County Treasurer, serve three-year terms of office,with no term limits. The Board of''Retirement has exclusive control of all retirement system investments and is responsible for establishing investment objectives, strategies and policies. The State Constitution and the Act authorize the Board of Retirement to invest in any investment deemed prudent in the opinion of the Board of Retirement. See"Investment Policy of the Association." The Association is divided into seven separate benefit sections in accordance with the Act. These sections are known as: General Tier I-Enhanced; General 'Pier I-Non-Enhanced;General Tier II; General Tier III-Enhanced;General Tier III-Non-Enhanced; Safety-Enhanced and Safety-Non-Enhanced. On October 1,,2002,' the Board of Supervisors adopted Resolution No. 2002/608, providing enhanced benefit changes equal to 3%of eligible salary per year of service to safety employees retiring at age 50(commonly known as 3%at 50)and 2%of eligible salary per year:of service to general employees retiring at age :.55 (commonly known as '2% at 55), effective July 1, 2002 and January, 1, 2003, respectively. The enhanced benefits did not apply to bargaining units represented by the California Nurses Association or to the nonrepresented employees within similar classifications'as employees'in bargaining units`represented by the California Nurses Association,;or to the supervisors and managers of those employees until January 1, 2005. In addition, each special district that is a participant of the Association and whose staff are not County employees covered by Resolution No. 2002/608, could elect to participate in the enhanced benefits. Legislation was signed by; the Governor in 2002 which 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 Il service who elected to transfer to Tier III coverage. As of December 31, 2003, Tier II includes;only the employees'described above for whom the County did not adopt the enhanced benefits and employees of one special district 'agency. County employees who were moved to Tier III effective October 1, 2002, continue to have Tier IT benefits for 05434\pos-4 B°-I5 service prior to that date unless the service is converted to Tier 111. The Safety section covers all employees in active law enforcement,active fire suppression work or certain other"safety"classifications as designated by the Board of Retirement. Effective November 1, 2002, an additional flat monthly retiree benefit of$200 is being provided for all former members who retired prior to January 1, 1983,and are currently receiving pension benefits (including spousal continuance benefits). The cost of this benefit improvement, as determined by the actuary of the Association was$22,955,000 and has been funded by the Association. Service retirement benefits are based on age, length of service and final average salary. For the Tier 1, Tier III`and Safety sections, the retirement'benefit is based on the 12 highest consecutive pay months,in accordance with Government Code Section 31462. For Tier 11,the benefit is'based on a three- year average salary. CCCERA Funding Status. The actuarial report prepared by the Association's independent actuary, The Segal Company„reflects the financial'status of the Association as of December 31, 2004. The market value of the plan's assets as of such date was $3,718,615,896 and the return on assets was 12.27%. The value of the plan's unfunded actuarial accrued liability ("UAAL") as of December 31, 2004 is estimated by,the actuary to;be $807,384,825 using a 7.9% actuarial rate of return. This includes the County's portion of the liability ($519.2 million) as well as that of the other entities comprising the Association. The GASB Statement No. 25 liabilities calculated for 2004, as shown in the Actuarial Valuation and Review as of December 31,2004,showed that the funded ratio was approximately 82.0%. The Act authorizes the Board of Retirement to grant annual automatic and ad hoc cost-of-living (a"COLA') increases to all eligible retired members. The Act requires the Board of Retirement to grant an annual automatic COLA, effective April'I of each year. This'benefit is based on the San Francisco an Jose area Consumer Price Index and is limited to 3% for Tier I, Tier III and Safety members, and 4% for Tier 11 members. The Government Code allows the granting of a supplemental cost-of-living benefit, on a prefunded basis to eligible retirees whose-unused Consumer Price Index increase''accumulations equal or exceed 20%. This supplemental is a permanent part of the retirees' monthly benefit and is known as"New Dollar Power." In 2000, Governor Davis signed legislation that permits 1937 Retirement Act counties to provide increased retirement benefits equal to (a)3%e of eligible salary per year of service to safety employees retiring at age 54,and(b)2%of eligible salary per year of service to regular employees retiring at age 55. If approved by the County Board of Supervisors, the cost of such benefits would have to be paid by the employers,employees or CCCERA or some combination of all three. The Board of Retirement requested an actuarial study which refined projections;regarding cost of such benefits. The actuary completed the study and found that the UAAL would increase by $199,000,000 if the new benefits were approved. The annual cost to pay for the new benefit and to amortize the UAAL would be$29,192,072 Representatives of the employer and the employees have been in negotiations discussing the approval of the new benefit and what resources will be used to pay for it. A Memorandum of Understanding("MOU")addtessing'the source of payment for these additional benefits for safety;employees and for general and miscellaneous employees was recently drafted. Pursuant to the MOU, $100,000,000 of the cost of the benefit would be funded from CCCERA's unrestricted reserves and safety employees would pay the remaining $99.0 million from a portion of the cost of 'living 'adjustment ("COLA") increases included in their compensation. The MOU sets forth a four year agreement'beginning on July 1,2002 under which safety employees will receive 5%to 6°f°COLAs out of which 2.25%is applied toward the new benefit in year 1, with additional 2.25% increments applied in years 2 through '4. The MOU provides a three year 05034\pos-4 B-16 agreement beginning on October 1, 2002 for general and miscellaneous members under which they will receive a5%COLA in year 1 and 3%COLAs in years 2 and 3. The actuarial valuation and review of December 31, 2004 updated the amount of unrecognized net investment gains and losses to be booked by ,the Association over the next 4.5 years. The total unrecognized investment gain as of December 31, 2004 was approximately $32.447 million. See Table B-7—"Market Stabilization Account(Deferred Return)." A portion of these amounts will be added or subtracted to the URAL of the County over the five year market stabilization period. The Association has established and maintains various reserves and designations from member and County contributions and the accumulations of investment income thereof,after satisfying investment and administrative expenses, including a Market Stabilization Account: The Market Stabilization Account represents the deferred'return developed by the smoothing of realized and unrealized gains and losses based on five-year smoothing. This method smoothes only the semi-annual deviation of total market return (net of expenses) from the applicable return target per annum. An 8.35% assumed rate was used in determining contribution rates for the period January 1,2003,through.Tune 30,2004. As of December 31,2003 the Market Stabilization Account was in a negative position due to market losses over three of the four prior years. As of December 31, 2004, the net balance in the Market Stabilization Account was $32,447,222. See Table B-7—"Market Stabilization Account (Deferred Return). The assumed rate of return from July 1, 2004 through June 30,2005 was 8.00%and is 7.9%for the period July 1,2005 through June 30 2006. Table B-8 sets forth the balances as of December 31,2004,in reserves and designated net assets: Table B-8 CONTRA COSTA COUNTY EMPLOYEES'RETIREMENT ASSOCIATION' RESERVES AND DESIGNATED NET ASSETS ASSUMING A 7.9%n ACTUARIAL RATE of RETURN (AS OF DECEMBER 31,2004) Cateaory Amount Valuation Reserves $3,673,858,074 Post Retirement Death Benefit 12,310,600 Statutory Contingency Reserve(one percent) 0 Market Stabilization Account 32,447,222 NET ASSETS HELD IN TRUST FOR PENsioN BENEFITS $3,718,615,896 Source: Association Comprehensive Annual'Financial Report for the Year Ended December 31,2004. 05034\pos 4 B-17 Table B-9 sets forth the schedule for recognizing estimated deferred gains and losses. The actual amounts recognized in future years may vary depending.on whether the rate of return on the Association's assets is equal to the assumed 7.9%rate of return, Table B-9 CONTRA COSTA COUNTY EMPLOYEES'RETIREMENT ASSOCIATION MARKET STABILIZATION ACCOUNT(DEFERRED RETURN) (ASOF JUNE 30,2005) Amount Applied to: Remaining Endine Period Amount 2005 2006 2007 2008 2009 June 2001 $(41,678,346) ;$(41,678,346) — — — December 2001 (56,180,849) (37,453,899) $(18,726,950) - June 2002 (92,953,562) (46,476,781), (46,476,781) — — December 2002 (134,531,322) (53,812,529) (53,812,529) $(26,906,264) — — June 2003 76,322;786 25,440,929 25,440,929 25,440,929 — December 2003 170,506,975 48,716,279 48,716,279 48,716,279 $24,358,139 — June 2004 (45,741,670) (11,435,418) (11,435,418) (11,435,418) (11,435,418) — December 2004 171,025,735 38,005,719" 38,005,719 38,005,719 38,005,719 $19,002,859 June 2005 !47,961,581) (5,329,065)' (10.658,129) (10,658.129) (10,658.129) (10;658,129) TOTAL $38,155,190 $(44,676,088) $(28,946,880) $63,163,115 $40,270,312 $8,344,730 Source: Association records. The revenues of the Association by source,net assets at the end of the year and the total return on market value for the five years ending December 31 2004 is set forth in Table B-10. Table B-1fl CONTRA COSTA COUNTY EMPLOYEES'RETIREMENT ASSOCIATION SCHEDULE OF REVENUES,NET ASSETS AT MARKET VALUE AND RETURN ON MARKET VALUE 2000 THROUGH 2004 Source of Revenues Net Assets at Total Investment Market Value Return Year Employee Employer Income/ End of on Market (December 31) Contributions Lo Contributions ss , Xea_rt') Value(3) 2000 $15,463,367 $52,986,645 $30,409,387 $2,931,261,879 0.8% 2001 18,681,239 55,182,505 (114,531,847) 2,704,728,752 (4.2) 2002 26,605,875 57,474,043 (267,980,549) 2,365,537,423 (10.3) 2003 51,602,939 108,728,047(4) 608,574,613 3,313;494,947 23.4 2004 65,297,397 118,245,418'' 416,012,994 3,718,615,896 12.3 (1') Net of investment expenses. (2) Net of benefits paid,administrative costs,refund of contributions and other deductions. See also APPENDIX B— "COMPREHENswE'ANNUAL FINANCIAL REPORT OF THE AssoCIATioN FOR THE FISCAL YEAR ENDED DECEMBER 31,2004." (3) Before deduction of administrative fees and investments costs. (4) Excludes proceeds in the amount of$319,094,719 of pension obligation bonds issued by the County in 2003. Sources:, Association Comprehensive Annual Financial Reports for the years Ended December 31,2000 through 2004 and Actuarial'Valuation Reports as of December 31,2000 through"2004. 05634\pos-4 B-18 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 July 28,'2004(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-11. Table B-11 CONTRA COSTA COUNTY EMPLOYEES'RETIREMENT ASSOCIATION INVESTMENT POLICY ASSET ALLOCATION TARGETS (AS OF[APRIL]2005) Current Investment Asset Tyne Allocation Allocation Ranee Domestic Equity 39°10 35%to 55%: International Equity 12 7 to 13 Domestic Fixed Income 29 25'to 40 International Fixed Income 4 3t 7 Real Estate 10 5 to 12 Alternative Investments 5 0 to 7 Cash — 1 0 to 2 TOTAL IOU% The Association contracts with 35 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. In April 2005 the Association adopted new asset allocation targets, increasing the target for the domestic equity to 43%, and decreasing the international equity target to 10;.5%, the domestic fixed income target to 23%, the real estate target to 9% and the cash equivalent target to 0.5%. A 2% target allocation was also established for commodities and high yield fixed income. The new target allocations will be reflected in a revision to the Investment Policy expected to be adopted in 2005. The Association issues a stand-alone financial report, which is available at its office"located at 1355 Willow Way, Suite 221, Concord, California 94520. For additional information on the County's pension plan, see APPENDIX E—'EXCERPTS FROM TBE S AUDITED FINANCIAL STATEMENTS OF THE COUNTY FOR.THE FISCAL YEAR ENDED JUNE 30,2004." Impact of the Ventura Decision, :On August 14, 1997, the Supreme Court of the State;of California rendered a decision:in the matter of Ventura County Deputy Sheriff's Association v. Board of Retirement of Ventura County Employees'Retirement Association which held that compensation not paid in cash, 'even if not earned'-by all employees in the same grade or class, must'" be included'in "compensation earnable" and "final compensation" on which an employee's pension is based. This California Supreme Court decision became final on October 1, 1997, requiring, among other things, certain items such as vacation buy-back to be included in the calculations that determine the retirement benefits that a retiree is eligible to receive. The court decision pertains to defined pension plans'.governed by the County Employees' Retirement Law of 1937, such as the pension plans of many counties in the State, including,the County. In addition, two lawsuits against the County on similar issues have been filed by certain retired County employees. The CCCERA has settled its litigation of these two cases that were consolidated into one case, entitled Vernon D.Paulson, et al v. Board of Retirement of the Contra Costa Employees'Retirement Association, et al 05034\pos 4 B-19 The consolidated lawsuit was brought on behalf of a class'of retired members of the Association regarding the inclusions and the exclusions from "final" compensation that are used in calculating members' retirement benefits'as a result of the Ventura decision. A settlement agreement has been entered into with all parties and a petitioners' class has been certified consisting of all retired members of the Association,whose'effective retirement date was on or before September 30, 1997 (i.e., the period prior to the October 1, 1997 effective date of the Ventura decision); On May 20, 2003, the actuary for CCCERA completed the final true-up for the Paulson settlement. The total settlement cost was $149,346;218. After making certain transfers, the net Paulson liability was $34,230,204, of which $24,821,154 was the responsibility of the County. The County elected to amortize this payment over 19.5 years commencing August 1,2004. Post Retirement Benefits The County pravides'post-retirement medical and dental''benefits to employees based upon the bargaining unit contracts. To be eligible, the retiring employee is required to have been a member in a participating health plan on the date of retirement. The cost of the premiums associated with these benefits is recognized on spay-as-you-go basis when the County makes the contribution. The number of employees participating in this benefit program and the contribution made by the County are set forth in Table B-12. Table B-12 CONTRA COSTA COUNTY POSTRETIREMENT BENEFIT SUMMARY Fiscal Year Number of County Contribution (As of June 30) Particivating Employees ($in!0001s) 2401 3;906 $13,815 2002 4,040 16,335 2003 4,386 20,644 2004 4,633 25,216 2005 4,890 26,543 In June 2004,the Governmental Accounting Standards Board("GASB")issued Statement No.45 ("GASB 45"), which addresses how state and local governments should account for and report their costs and obligations related to post-employment health care and other non-pension benefits("OPEB"). GASB 45 generally requires that employers account for and report the annual cost of OPEB and the outstanding obligations and commitments'related to OPEB in essentially the same manner as they currently do for pensions. Annual OPEB cost for most employers will be based on actuarially determined amounts that,if paid on an ongoing basis,generally would provide sufficient resources to pay benefits as they come due. The provisions of GASB 45 may be applied prospectively and do not require governments to:fund their OPER plans. An employer may establish its OPEB liability at zero as of the beginning'of the initial year of implementation. However, the unfunded actuarial liability is required to be amortized over future periods on the ''income statement. GASB 45 also established disclosure requirements for information about the plans in which an employer participates; the funding policy followed, the actuarial valuation process and assumptions, and for certain employers, the extent to which the plan has been funded over time. These disclosure requirements will be effective for the County's Fiscal Year ending June 30,2008. 05034\pos-4 B-2Q GASB 45 is likely to result in a substantial increase in the annual expense recognized by the County for post-retirement health care benefits. The amount of the liability and the increase in the annual expense to be recognized has not yet been determined by the County. In September 2005 the County issued a request for proposals for actuary services to determine the County's OPEB liability. 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, the last issue having been redeemed in Fiscal Year"197778. The County has no authorized'and unissued 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 2028. Certain of the lease obligations of the County reflect annual payments made for debt service on lease revenue bonds and certificates of participation issued to finance capital projects. For a summary of the:County's lease obligations as of June 30, 2004, see APPENDIx E---"EXCERPTS FROM THE AUDITED FINANCIAL STATEMENTS OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30,2004—Notes to General Purpose Financial Statements." Pension Obligation Bonds. The,, County has issued pension obligation bonds to refund debentures issued to evidence its statutory obligation to make pension payments with respect to its UAAL to CCCERS. See also"—Pension Plan." (REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) 050341pos 4 B-2'1 Fiscal year debt service for the County's lease obligations and pension obligation bonds outstanding as of October 1,2005 is shown in Table B-13 below. Table B-13 COUNTY OF CONTRA COSTA OUTSTANDING LEASE OBLIGATIONS AND PENSION OBLIGATION BONDS Fiscal Year Ending Total Lease Total POB Total 6/30 Debt Service Debt Service Debt Servicef 2006 $32,538,742 $49,675,044 $82,213,786' 2007 32,540,864 52,060,99984,601,863' 2008 32,591,520 52,064,234 84,655,754 2009 30,748,109 55,312,572 86,W,680' 2010 28;317,219 56,135,041 84,452,260 2011 28,343,640 59,549,809 875893,449» 2012 28,344,386 63,262,284 91,606,670 2013 28,362,805 67,939,535 96,302,340' 2014 28;007,805 68,401,566 96,400,371 2015 28;248,526 35,409,894 63,458,419 2016 28,040,370 36,914,525` 64,954,895 2017 25,647,577 38,484,360 64,131,937 2018 25,132,588 40,114,901'. 65,247,489rr 2019 25,072,861 41,821,636 66,894,497: 2020 21,826,243 43,600,400' 65,426,642 2021 21,813,197 45,452,243' 67,265,4401 2022 19,060,666 47,382,397 66,443,063 2023 19,082,916 - 19,082,916' 2024 9,132,437 _ 9,132,437 2025 8,609,394 - 8,609,394 2026 6,810,795 _ 6,810,795'' 2427 5,584,538 - 5,5,84,538 2028 3,081.750 - 3.081,750 TOTALt�1 -S5-.lb-U&243 $853.581.440' $1,370,320 3 (t) Excludes deductions based upon estimated reimbursement from the State'for County hospital debt service:.and estimated earnings on various debt service and debt service reserve funds. (2) Totals do not add due to independent rounding. Source: County Administrator's Office. 050341pos 4 B-22 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-14 below is a direct and overlapping debt report (the "Debt Report') prepared by California Municipal Statistics., Inc. that summarizes such indebtedness as of October 1, 2005. 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 marketsby public agencies whose boundaries overlap the boundaries of the County. Such long.-terra obligations generally are not payable from revenues of the County (except as indicated) nor are they necessarily obligations secured by land within the County. In many cases, long-term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency. (REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) 03034\pos 4 B-23 Table B-14 CONTRA COSTA COUNTY, DEBT STATEMENT 2005-06 Assessed Valuation: $131,052,763,852 (includes unitary utility valuation)' Redevelopment Incremental Valuation 14 502.557.953 Adjusted Assessed Valuation: $115,550,205,899 OVERLAPPING TAX AND ASSESSMENT DEBT: %Applicable Debt 1011105 Bay Area Rapid Transit District 36.651% $ 36,651,000 East Bay Municipal Water District and Special District No.1 50.367&6.377 3,989,745 Contra Costa Community College District 100. 90,000,000 Martinez Unified School District 100. 32,596,085 Mt.Diablo Unified School District 100. 167,285,000 Pittsburg Unified School District 100. 44,575,000 San Ramon Valley Unified School District 100. 117,051,127 West Contra Costa Unified School District 100. 375,064,380 Acalanes and Liberty Union High School Districts 100. 183;335,725 Brentwood Union School District 100. 50,175,690. Lafayette School District 100.`` 25;530,000 Walnut Creek School District 100. 29,890,000 Other School Districts Various 56,339,404' Cities and City Special Tax Districts100. 19,704,977' East Bay Regional Park District 46.472 64,249,864 West Contra Costa Healthcare District Parcel Tax Obligations 100. 26,000,000 Community Facilities Districts 100, 279,751,801 1915 Act Assessment Bonds(Estimate) 100. 431,292.624 TOTAL GROSS OVERLAPPING TAX AND ASSESSMENT DEBT $2,033,482,422 Less: East Bay Municipal Utility District(100%self-supporting) 1:526.194' TOTAL NET OVERLAPPING TAX AND ASSESSMENT DEBT $2,031,946,228 DIRECT AND OVERLAPPING GENERAL FUND DEBT: Cants Costa County General Fund Obligations 100. % $ 314,965,000 Contra Costa County Pension Obligations 100. 554,735,000 Contra Costa County Office of Education Cerfiricates'of Participation 100 L695000 000 Alarneda-Contra Costa Transit District Certificates ofI'articipation 11..906 2,363,936 Antioch Unified School District Certificates of Participation 100: 15,350,812' Other School District General Fund Obligations Various 38,179,517 City of Antioch General Fund Obligations 100. 30,345,616 City of Concord General Fund and Judgment Obligations 100. 36,450,000 City of Richmond General Fund Obligations 100. 44,394,688 City of Richmond Pension Obligations' 100. 24,515,000 City of San Ramon General Fund Obligations 100. 20;295,000 Cather City General Fund Obligations' 100. 49,146,860 Contra Costa County Fire Protection District Pension Obligations' 100, 129;900,000 Other Special District Certificates of Participation 100. 11.180.000 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $1,273,516,429 GROSS COMBINED TOTAL DEBT $3,306,998,851' (1) NET COMBINED TOTAL DEBT $3,305,462,657: (1) Excludes tax and revenue anticipation notes,enterprise revenue,mortgage revenue and tax allocation bonds and non-bonded capital leaser obligations. Ratios to 2005-06 Assessed Valuation': Total Gross Overlapping Tax and Assessment Debt......... .................1.55°l° Total Net Overlapping Tax and Assessment Debt...... ... ........ . .,........1.55% Ratios to Adjusted Assessed Valuations Combined Direct Debt ($869;700,000)................................. ..........0.75°1° Gross Combined Total Debt. ......... ............ .....:.. ..............2.84°l0 Net Combined Total Debt........ ......... ..........: ........ ............2.84% STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30!05` $0 Source: California Municipal'Statistics,Inc. 05034\pos-4 B-24 Future Financings The County may undertake a $15 million financing to construct a new building for the District Attorney's office and may undertake other smallerfinancings for various capital improvements over the next few years. Insurance and Self-Insurance Programs The County self-insures its unemployment, dental, management long-term disability and employee medical insurance plans. The County self-insures its workers' compensation exposure to $750,000 per occurrence and purchases commercial' insurance to provide protection for up to an additional $150 million per occurrence. For its public and ,automobile liability exposures, the County purchases $25` million of commercial insurance,excess of a$1 million per occurrence self-insured retention. The County's airports are protected by commercial liability insurance policy that provides up to $100 million in coverage that is subject to neither a'deductible nor a self-insured retention. With respect to the medical malpractice liability exposure at the Regional Medical Center, the County purchases$11.5 million of commercial insurance that is excess of a$500,000 per occurrence self- insured retention. The County's buildings, equipment and other property are commercially insured for losses up to $600 million per occurrence,which is subject to a$50,000'deductible to cover its property except for loss caused by earthquake or flood. Loss caused by earthquake is insured to $375,000 and is subject to a minimum. 5% deductible. Loss caused by flood is insured to $600 million and is subject to a $100,000 minimum and $500,000 maximum'deductible within a 1'00-year flood plain, otherwise the deductible is $25,000. The County also maintains a separate insurance policy to cover the Sheriff-Coroner's two helicopters up to$50 million. All claims,with the exception of dental claims,are handled by County staff. During the last three (3)years, one (1) fire loss and two (2) medical malpractice liability claims have been incurred by the County that will involve payment by a commercial insurance company. Except for the County's airports and a portion of the excess workers' compensation insurance,the commercial insurance has been purchased through the California'State Association of Counties' Excess Insurance Authority, a joint powers authority, whose purpose is to obtain"group" commercial insurance for its membership,which includes the County. Internal Service Funds are used to account for all self-insurance activities. It is the County policy to periodically infuse capital into each Fund to sufficiently cover the payment of claims, including those that either will or may require payment sometime in the future. As of June 30, 2005,the Internal Service Funds had approximately$74.7 million in assets and$117.5 million in liabilities. [Explain$42.7 deficit.] 05034\pos-4 B-25 Current and future liabilities for the workers' compensation,public liability, automobile liability, and medical malpractice liability funds are determined annually by an outside actuarial firm, while the others are determined by county management personnel. In the County's opinion the Internal Service Funds are sufficiently funded,with an allowance for future investment income,to pay both known claims and those that may have been incurred but are not presently known. For additional information on the County's insurance coverage, see APPEND IX E--"EXCERPTS FROM THE AUDITED FINANCIAL STATEMENTS OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30, 2004—Notes to General Purpose Financial Statements:' (REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK) 05034\pos-4 B-26 APPENDIX C' SUMMARY OF THE COUNTY INVESTMENT POLICY 05034\pos-4 C-1 .............. ......................... ............................. ........... APPENDIX D PROPOSED FORM OF.OPINION OF BOND COUNSEL 05034\pos-4 D-1 .................. .......... APPENDIX E EXCERPTS FROM THE AUDITED FINANCIAL STATEMENTS OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30,2004 05634\pos- E-1 APPENDIX F FORM OF CONTINUING DISCLOSURE.CERTIFICATE COUNTY OF CONTRA COSTA,CALIFORNIA 2005-06 TAX AND REVENUE ANTICIPATION NOTES, SERIES A 005 This Continuing Disclosure Certificate(the"Disclosure Certificate")is executed and de livere d by the County of Contra Costa, California (the "County") in connection with the issuance of$ 000,000 aggregate principal amount of its County of Contra Costa, California 2005-2006 Tax and Revenue Anticipation Notes, Series A (die "Notes")pursuant to Resolution authorizing the issuance of the Notes adopted by the Board of Supervisors of the County on 2005 (theand in "Resolution"); connection therewith the County covenants and agrees as follows: SECTION 1. Purpose of the Disclosure Certificate. The Disclosure Certificate is being executed and delivered by the County for the benefit of the Holders (defined ined below) of the Notes and in order to assist the Underwriter of the Notes in complying with S.E.C.Rule 15c2-12. SECTION 2. Definitions. In addition to the definitions set forth above and in the Resolution, which apply to any capitalized term used in the Disclosure Certificate unless otherwise defined herein,the following capitalized terms shall have the following meanings: "Central Post Office"shall mean the Disclosure USA website maintained by the Municipal Advisory Council of Texas or any successor thereto,or any other organization or method approved by the staff or members of the Securities and Exchange Commission as an intermediary through which issuers i may,in compliance with the Rule,make filings required by this Continuing Disclosure Certificate "Beneficial Owner" shall mean any person which has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Note or Notes, including persons holding Notes through nominees or depositories. "Holders" shall mean either the registered owners of the Notes, or, if the Notes are registered in the name of The Depository Trust Company or another recognized depository, any Bencficial Owner or applicable participant in its depository system. "Listed Event"shall mean any of the events listed in Section 3(a)of the Disclosure Certificate. "National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. The National Repositories currently approved by the Securities and Exchange Commission can be found at the following website: http://www.sec.gov/info/municipal/nrmsir.htin. "Repository"shall mean each National Repository and each State Repository. "Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exch ange Commission from time to time. r under the Securities Exchange Act of 1934,as the same may be amended f "State Repository"shall mean any public or private repository ty or enti designated by the State of California as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of the Disclosure Certificate,there is no State Repository. 05034\pos4 F-1 "Tax-exempt "shall mean that interest on the Notes is excludedfrom;gross income for federal income tax purposes,whether or not such interest is includable as an item of tax preference or otherwise includable directly or indirectly for purposes of calculating'any other tax liability, including any alternative minimum tax or environmental tax. "Underwriter''shall mean and any other original underwriters of the Notes, if any,required to comply with the Rule in connection'with the offering of the Notes. SECTION 3. Reporting ofLstedEvents. (a) Pursuant to the provisions of this section, to the extent applicable, the County shall give notice of the occurrence of any of the following events with respect to the Notes,if material: (i) principal and interest payment delinquencies. (ii) non-payment related defaults. (iii) modifications to the rights of the Holders. (iv) optional,contingent or unscheduled note calls. (v) defeasances. (vi) rating changes. (vii) adverse tax opinions or events adversely affecting the tax-exempt status of the Notes. (viii) unscheduled draws on the debt service reserves reflecting financial difficulties. (ix) unscheduled draws on the credit enhancements reflecting financial difficulties. (x) substitution of the credit or liquidity providers or their failure to perform. (xi) release,substitution or sale of property securing repayment of the Notes. (b) Whenever the County obtains knowledge of the occurrence of a Listed Event, the County shall as.soon as possible determine if the occurrence of such event would be material. (c) If the County determines that the occurrence of a Listed Event would be material, the County shall promptly file a notice of such occurrence with each Repository. (d) Notwithstanding any other provision of this Continuing Disclosure Certificate, the City reserves the right to make any of the aforementioned filings through the Central Post Office. 05034\pos-4 F-2 SECTION 4. Termination of Reporting Obligation. ; The County's obligations :under the Disclosure Certificate shall terminateupon the defeasance,prior redemption or payment in full of all of the Notes. SECTION 5. Additional Information. Nothing in the Disclosure Certificate shall be deemed to prevent the County from disseminating any other information, using the means of dissemination set forth in the Disclosure Certificate or any other means of communication, or including any other information in any notice of occurrence of a Listed Event, in addition to that which is required by the Disclosure Certificate. If the County chooses to include any information in any notice of occurrence of a Listed Event in:addition to that which is specifically required by the Disclosure Certificate,the County shall have no obligation under the Disclosure Certificate to update such information or include it in any future notice of occurrence of'a Listed Event. SECTION 6. Default.. In the event of a failure of the County to comply with any provision of the Disclosure Certificate, the Underwriter or any Holder 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 the Disclosure Certificate; provided, that the sole remedy under the Disclosure Certificate in the event of any failure of the County to comply with the Disclosure Certificate shall be an action to compel performance hereunder. SECTION 7. Beneficiaries. The Disclosure Certificate shall inure solely to the benefit of the County,the Underwriter and the Holders,and shall create no rights in any other person or entity. Dated: 12005. COUNTY OF CONTRA COSTA By John Sweeten, County Administrator and Clerk of the Board of Supervisors 05034\pos=4 F-3 I.Pop . APPENDIX G DTC AND THE BOOK-ENTRY-ONLY SYSTEM The following; description of the procedures and record keeping with respect to beneficial ownership interests in the Notes, payment of principal, redemption premium, if any,,,and interest with respect to the Notes to DTC, its Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Notes 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 understands 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 P'articipants are on file with DTC. DTC will act as securities depository for the Notes. The Notes will be executed and delivered as fully registered bonds registered in the name of Cede& Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered Note'certificate will be executed and delivered for each maturity date of the Notes,each in the aggregate principal amount due on such maturity date,and will be deposited with DTC. DTC,the world's largest depository, is a limited-purpose trust company organized under the New York Banking Law, a' "banking organization" within the meaning of the New York'Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform`.Commercial Code, and a"clearing agency"registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934.DTC holds and provides asset servicing;for over 2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 85 countries that DTC's participants ("Direct'Participants")' deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other'securities transactions in deposited securities, through electronic computerized book-entrytransfers and pledges between Direct Participants' accounts.,This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets" Clearing Corporation, (respectively,`NSCC",'"GSCC', "MBSCC","'and"EMCC','also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers,Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants").DTC has Standard&Poor's highest rating:AAA. The DTC Mules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of the Notes under the DTC system must be made by or through Direct Participants, which will receive a credit for the Notes on DTC's records. The ownership interest of each actual purchaser of each Security ("Beneficial Owner")'is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are,however,expected to receive written confirmations providing details of 05034\pos-4 G-1 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 Notes are to beaccomplished 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 Notes,except in the event that use of the book-entry system for the Notesis discontinued. To facilitate subsequent transfers, all Notes 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 Notes 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 Notes; DTC's records reflect only the identity of the Direct Participants to whose accounts such Notes 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 Notes may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Notes such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of the Notes may wish to ascertain that the nominee holding the Notes 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. Neither DTC nor Cede& Co. (nor any other DTC'nominee) will consent or vote with respect to the Notes unless authorized by a Direct Participant in accordance with DTC's 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 Nates are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments of principal',of,premium, if any, and interest evidenced by the Notes 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, 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 forth or registered in "street name," and will be the responsibility of such Participant and not of DTC (nor its nominee),the County, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal of premium, if any, and interest evidenced by the Notes to Cede,&.Co. (or such other nominee as may be requested by an authorized representative of DTC)is the responsibility of the County,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. 05034\pos-4 G-2 Disclaimers AS LONG AS A BOOK.-ENTRY ONLY SYSTEM,-IS USED FOR THE NOTES, THE COUNTY WILL SEND NOTICES TO HOLDERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY PARTICIPANT, OR OF ANY PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENTOR EFFECT WILL NOT AFFECT THE VALIDITY OR SUFFICIENCY OF THE PROCEEDINGS RELATING TO ANY OTHER ACTION PREMISED ON SUCH NOTICE. THE COUNTY HAS NO RESPONSIBILITY OR LIABILITY FOR ANY ASPECT OF THE RECORDS RELATING TO OR PAYMENTS MADE ON ACCOUNT OF BENEFICIAL OWNERSHIP, OR FOR MAINTAINING, SUPERVISING OR REVIEWING ANY RECORDS RELATING TO BENEFICIAL OWNERSHIP OF INTERESTS IN THE NOTES. THE COUNTY CANNOT GIVE AND DOES NOT GIVE ANY ASSURANCES THAT DTC WILL DISTRIBUTE PAYMENTS TO DTC PARTICIPANTS OR THAT PARTICIPANTS OR OTHERS WILL DISTRIBUTE PAYMENTS WITH RESPECT TO THE NOTES RECEIVED BY DTC OR ITS NOMINEES AS THE HOLDER THEREOF OR OTHER NOTICES'TO THE BENEFICIAL OWNERS, OR THAT THEY WILL DO SO ON A'TIMELY BASIS, OR THAT DTC WILL SERVICE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT. 45439\pos-9 G-3