HomeMy WebLinkAboutMINUTES - 03051996 - C42 TO: BOARD OF SUPERVISORS Contra
t
FROM: Costa
Phil Batchelor "
County
7' r
r•�
fJ�CT;:
DATE:
February 27, 1996
SUBJECT:
Refunding of the Merrithew Memorial Hospital Certificates of Participation
SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION
RECOMMENDATIONS:
ADOPT resolution approving the forms and execution of the documents and other
actions relating to the refunding of the Merrithew Memorial Hospital Certificates of
Participation, Series 1992.
BACKGROUND:
The Board determined to proceed with the refinancing of the 1992 financing for the
Hospital Replacement Project and authorized the consultants to prepare the
necessary documents to carry out the refunding. The current resolution approves
the forms of the documents and authorizes their execution.
Approval of the resolution allows the process to proceed to the next step but does
not commit the County to completing the financing. The decision to actually sell new
Certificates for the refunding will depend upon the market conditions reaching a
point where sufficient savings can be realized. It is important for the process to
continue so that the County is fully positioned to proceed when and if the market
conditions are favorable.
CONTINUED ON ATTACHMENT: YES SIGNATURE: A aez�
-RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE
APPROVE OTHER
SIGNATURE(S):
ACTION OF BOARD ON March 5 , 1996 APPROVED AS RECOMMENDED X_ OTHER
IT IS BY THE BOARD ORDERED that REsolution No. 96/84 is ADOPTED. J
VOTE OF SUPERVISORS
!� I HEREBY CERTIFY THAT THIS IS A TRUE
UNANIMOUS(ABSENTv ) AND CORRECT COPY OF AN ACTION TAKEN
AYES: NOES: AND ENTERED ON THE MINUTES OF THE BOARD
ABSENT: ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN.
ATTESTED March 5 , 1996
Contact: De Bell 646-4093 PHIL BATCHELOR,CLERK OF THE BOARD OF
Cc: County Administrator SUPERVISORS AND COUNTY ADMINISTRATOR
Health Services Director
Auditor-Controller
Treasurer-Tax Collector BYDEPUTY
Orrick, Herrington & Sutcliffe (via CAO)
Prager, McCarthy & Sealy (via CAO)
DRAFT
2/26/96
RESOLUTION NO. 9 6/8 4
OF THE BOARD OF SUPERVISORS OF THE
COUNTY OF CONTRA COSTA
CALIFORNIA
RESOLUTION APPROVING FORMS OF AND EXECUTION OF A FIRST
AMENDMENT TO FACILITY LEASE (MERRITHEW MEMORIAL HOSPITAL
REPLACEMENT PROJECT), A FIRST SUPPLEMENTAL TRUST AGREEMENT, A
LETTER OF INSTRUCTIONS, A CONTRACT OF PURCHASE AND A CONTINUING
DISCLOSURE AGREEMENT; APPROVING EXECUTION AND DELIVERY OF
CERTIFICATES OF PARTICIPATION (MERRITHEW MEMORIAL HOSPITAL
REPLACEMENT PROJECT), REFUNDING SERIES OF 1996; APPROVING FORM OF
AND DISTRIBUTION OF OFFICIAL STATEMENT FOR SAID CERTIFICATES OF
PARTICIPATION; ELECTING TO GUARANTEE RENTAL PAYMENTS WITH MOTOR
VEHICLE LICENSE FEES; AND AUTHORIZING TAKING OF NECESSARY ACTIONS
AND EXECUTION OF NECESSARY CERTIFICATES.
WHEREAS, this Board of Supervisors has heretofore determined that it would
be in the best interest of the County of Contra Costa (herein called the "County") to proceed
with a certificate of participation financing for the refunding of outstanding Certificates of
Participation (Merrithew Memorial Hospital Replacement Project), Series of 1992 (herein
called the."1992 Certificates"), which were issued to finance the construction, acquisition and
equipping of the county hospital in Martinez, California, together with site development,
equipment and improvements (the "Project");
WHEREAS, Contra Costa County Public Facilities Corporation, a California
nonprofit public benefit corporation (herein called the "Corporation"), has been incorporated
by a group of public spirited citizens of the County for the specific and primary purpose of
providing financial assistance to the County by financing and refinancing the acquisition,
construction, improvement and remodeling of public buildings and facilities;
SF2-55067.2
WHEREAS, by its Articles of Incorporation and by its Bylaws no part of the
net earnings, funds or assets of the Corporation shall inure to the benefit of any director
thereof or any other person, firm or corporation, except the County;
WHEREAS, it is proposed that the County enter into a "First Amendment to
Facility Lease (Merrithew Memorial Hospital Replacment Project)", tentatively dated as of
April 1, 1996 (herein called the "First Amendment to Facility Lease") with the Corporation;
WHEREAS, under the First Amendment to Facility Lease, the County would
be obligated to make base rental payments to the Corporation for the lease of the Project;
WHEREAS, Section 25350.55 of the California Government Code authorizes
this Board to elect to guarantee rental payments to be made by the County pursuant to the
Facility Lease; and
WHEREAS, it is proposed that all rights to receive such base rental payments
will be assigned without recourse by the Corporation to U. S. Trust Company of California,
N.A., as trustee (herein called the "Trustee"), pursuant to an agreement, entitled "First
Amendment to Assignment Agreement", tentatively dated, as of April 1, 1996 (herein called
the "First Amendment to Assignment Agreement");
WHEREAS, it is further proposed that the Corporation, the County and the
Trustee enter into a supplemental trust agreement, tentatively dated as of April 1, 1996
(herein called the "First Supplemental Trust Agreement"), pursuant to which said trustee
will execute and deliver certificates of participation (herein called the "1996 Certificates") in
an amount equal to the aggregate principal components of such payments, each evidencing
and representing a fractional undivided interest in such payments, and will use the proceeds
to defease the 1992 Certificates;
SF2-55067.2 2
WHEREAS, this Board of Supervisors hereby determines that it would be in
the best interest of the County for the Corporation and the County to enter into an agreement
entitled "Contract of Purchase" (herein called the "Purchase Contract"), pursuant to which
Smith Barney Inc., BA Securities, Inc., and Bear, Stearns & Co. Inc. (herein called the
"Underwriters") will purchase the 1996 Certificates;
WHEREAS, a form of Continuing Disclosure Agreement (herein called the
"Continuing Disclosure Agreement"), is on file with the Clerk of the Board of Supervisors;
WHEREAS, a form of Official Statement describing the 1996 Certificates is
on file with the Clerk of the Board of Supervisors;
WHEREAS, this Board has been presented with the form of each document
hereinafter referred to, relating to the 1996 Certificates, and the Board has examined and
approved each document and desires to authorize and direct the execution of such documents
and the consummation of such financing;
WHEREAS, the County has full legal right, power and authority under the
Constitution and the laws of the State of California to enter into the transactions hereinafter
authorized; and
NOW, THEREFORE, BE IT RESOLVED by the Board of Supervisors of the
County of Contra Costa, as follows:
Section 1. The County hereby specifically finds and declares that the actions
authorized hereby constitute and are with respect to public affairs of the County and that the
statements, findings and determinations of the County set forth above are true and correct.
Section 2. The form of First Amendment to Facility Lease (Merrithew
Memorial Hospital Replacement Project), tentatively dated as of April 1, 1996, on file with
sF2-55067.2 3
the Clerk of the Board of Supervisors, is hereby approved and the Chairman of the Board of
Supervisors and the Clerk of the Board of Supervisors are hereby authorized and directed to
execute and deliver the First Amendment to Facility Lease in substantially said form, with
such changes therein as such officers may require or approve, such approval to be
conclusively evidenced by the execution and delivery thereof; provided, however, that the
aggregate principal component of base rental payments payable under the First Amendment
to Facility Lease shall not exceed $160,000,000, the maximum annual base rental payments
payable under the First Amendment to Facility Lease shall not exceed $12,000,000, the term
of the First Amendment to Facility Lease (including any extensions) shall not exceed
November 1, 2032 and the true interest cost ("TIC") of the interest component of base rental
payments payable under the First Amendment to Facility Lease shall not exceed 6%. Among
the changes authorized to be made to such First Amendment to Facility Lease are such
changes as are necessary in the event the County Administrator, upon consultation with the
Underwriters, determines it is desirable to (i) accommodate one or more of the methods or
modes of determining the principal and interest components of the Base Rental Payments
represented by the 1996 Certificates or other financing techniques as may be provided for in
the Official Statement, or (ii) obtain municipal bond insurance.
Section 3. The Board hereby elects, pursuant to Government Code Section
25350.55, to guarantee rental payments to be made by the County under the Facility Lease
and authorizes and directs the County Administrator of the County to notify the Controller of
the State of California of such election, which notice shall include a schedule of lease
payments to be made by the County under the Facility Lease and shall identify a trustee
appointed by the County to effectuate the payment provisions pursuant to such guarantee.
SF2-55067.2 4
For purposes of effectuating the payment provisions pursuant to Government Code
Section 25350.55, the Board hereby appoints the Trustee for the 1996 Certificates as trustee.
Section 4. The form of First Supplemental Trust Agreement by and among
U.S. Trust Company of California, N.A., as trustee, the Corporation and the County,
tentatively dated as of April 1, 1996, on file with the Clerk'of the Board of Supervisors, is
hereby approved. The Chairman of the Board of Supervisors and the Clerk of the Board of
Supervisors are hereby authorized and directed to execute and deliver the First Supplemental
Trust Agreement in substantially said form, with such changes therein as such officers may
require or approve, such approval to be conclusively evidenced by the execution and delivery
thereof. Among the changes authorized to be made to such First Supplemental Trust
Agreement are such changes as are necessary in the event the County Administrator, upon
consultation with the Underwriters, determines it is desirable to (i) accommodate one or
more of the methods or modes of determining the principal and intorest components of the
Base Rental Payments represented by the 1996 Certificates or other financing techniques as
may be provided for in the Official Statement, or (ii) obtain municipal bond insurance.
Section 5. The form of 1992 Certificates Letter of Instruction, by and among
the Corporation, the County and the Trustee, tentatively dated as of April 1, 1996, on file
with the Clerk of the Board of Supervisors, is hereby approved. The Chairman of the Board
of Supervisors and the Clerk of the Board of Supervisors are hereby authorized and directed
to execute and deliver the 1992 Certificates Letter of Instruction in substantially said form,
with such changes therein as such officers may require or approve, such approval to be
conclusively evidenced by the execution and delivery thereof. The Board hereby authorizes
and approves a forward purchase agreement of securities in connection with the 1992
SF2-55067.2 5
Certificates Letter of Instructions. The Board hereby finds that such forward purchase
agreement will reduce the amount and duration of interest rate risk in connection with'the
investment of the escrow fund pursuant to the 1992 Certificates Letter of Instructions.
Section 6. The form of Purchase Contract by and among Smith Barney Inc.,
BA Securities, Inc., Bear, Stearns & Co. Inc., the County and the Corporation, on file with
the Clerk of the Board of Supervisors, is hereby approved. The County Administrator is
hereby authorized and directed to execute and deliver the Purchase Contract in substantially
said form, with such changes therein as such officer may require or approve, such approval
to be conclusively evidenced by the execution and delivery thereof and pursuant thereto to
sell not to exceed $160,000,000 1996 Certificates to the Underwriters for the purchase price
set forth in the Purchase Contract, said price to be not less than the principal amount
represented by the 1996 Certificates less an underwriting discount of not exceeding .0399%
(exclusive of any original issue discount or premium).
Section 7. The form of Official Statement describing the 1996 Certificates, on
file with the Clerk of the Board of Supervisors, is hereby approved. The Chairman of the
Board of Supervisors of the County is hereby authorized and directed to execute and deliver
a final Official Statement in substantially said form, with such additions thereto or changes
therein as the County Counsel's Office or Orrick, Herrington & Sutcliffe and the Law
Offices of Pamela S. Jue, Co-Special Counsel, may require.or approve, such approval to be
conclusively evidenced by the execution and delivery thereof.
Section 8. The Underwriters are hereby authorized to distribute copies of the
Official Statement to persons purchasing the 1996 Certificates and other interested parties.
The distribution of the Preliminary Official Statement by the Underwriters is hereby
SF2-55067.2 6
authorized and approved. The County Administrator is hereby authorized and directed to
execute a certificate confirming that the Preliminary Official Statement has been "deemed
final" by the County for purposes of Securities and Exchange Commission Rule 15c2-12.
Section 9. The execution and delivery, pursuant to the First Supplemental
Trust Agreement, of not to exceed $160,000,000 aggregate principal amount of the County
of Contra Costa, California, Certificates of Participation (Merrithew Memorial Hospital
Replacement Project), Refunding Series of 1996, evidencing and representing fractional
undivided interests in the rights to receive base payments payable by the County pursuant to
the First Amendment to Facility Lease, payable in the years and in the amounts with interest
components with respect thereto as specified in the Trust Agreement as executed, is hereby
authorized and approved. The sale of the 1996 Certificates to the Underwriters pursuant to
the terms and conditions of the Purchase Contract is hereby approved.
Section 10. The form of Continuing Disclosure Agreement by and between
the County and the Trustee, on file with the Clerk of the Board of Supervisors, is hereby
approved. The County Administrator is hereby authorized and directed to execute and
deliver the Continuing Disclosure Agreement in substantially said form, with such changes
therein.as such officer may require-or approve, such approval to be conclusively evidenced
by the execution and delivery thereof.
Section 11. The officers of the_County are hereby authorized and directed,
jointly and severally, to do any and all things which they may deem necessary or advisable in
order to consummate the transactions herein authorized and otherwise to carry out, give
effect to and comply with the terms and intent of this Resolution. The Chairman of the
Board of Supervisors, the Clerk of the Board of Supervisors, the Administrator of the
SF2-55067.2 7
County, the Deputy Administrator of the County and the officers of the County be and they
are hereby authorized and directed to execute and deliver any and all certificates and
representations, signature certificates, no-litigation certificates, tax and rebate certificates, the
letter of representations to The Depository Trust Company and certificates concerning the
contents of the Official Statement distributed in connection with the sale of the 1996
Certificates, necessary and desirable to accomplish the transactions set forth above. In
addition, the Chairman of the Board of Supervisors and the Clerk of the Board of
Supervisors are hereby authorized to execute and deliver amendments to the Site Lease, dated
as of May 1, 1992, by and between the Corporation and the County, in the event such
amendments are necessary in order to accomplish the financing. Such amendments may
include, but are not limited to, amendments necessary to extend the term of the Site Lease
(including any extensions) to a date not to exceed November 1, 2032 and to amend the
description of the Demised Premises for Project Phase I.
Section 12. All actions heretofore taken by the officers and agents of the
County with respect to the sale, execution and delivery of the 1996 Certificates are hereby
approved and confirmed.
SM-55067:2 8
Section 13. This Resolution shall take effect from and after its date of
adoption.
PASSED AND ADOPTED this 5th day of March, 1996.
C e Board of Supervisors
ount of Contra Costa, California
[Seal]
ATTEST: Philip J. Batchelor, Clerk of the
Board of Supervisors and County Administrator
Lo By
Depu y Clerk of the Board of
Supervisors of the County of
Contra Costa, State of California
SF2-55067.2 9
96/84
CLERK'S CERTIFICATE
I,JeanneeMagi`ibDeputy Clerk and Chief Clerk of the Board of Supervisors
S
of the County of Contra Costa, hereby certify as follows:
The foregoing is a full, true and correct copy of a resolution duly adopted at a
regular meeting of the Board of Supervisors of said County duly and regularly held at the
regular meeting place thereof on the 5th day of March, 1996, of which meeting all of the
members of said Board of Supervisors had due notice and at which a majority thereof were
present; and at said meeting said resolution was adopted by the following vote:
AYES: Supervisors Rogers , DeSaulnier, Torlakson and Smith
ABSENT: Supervisor Bishop
NOES: None
ABSTAIN: None
An agenda of said meeting was posted at least 72 hours before said meeting at
6-,1 Pine qt-,.Martinez, California, a location freely accessible to members of the public,
and a brief general description of said resolution appeared on said agenda.
I have carefully compared the same with the original minutes of said meeting
on file and of record in my office; the foregoing resolution is a full, true and correct copy of
the original resolution adopted at said meeting and entered in said minutes; and said
resolution has not been amended, modified or rescinded since the date of its adoption, and
the same is now in full force and effect.
SF2-55067.2
c.11,2,1
WITNESS my hand and the seal of the County of Contra Costa this 5 tllay of
March, 1996.
Jeanne Ma/61 io,Deputy Clerk4',,'
of the Board of Supervisors
of the County of Contra Costa,
State of California
[Seal]
SF2-55067.2 2
AFFIDAVIT OF POSTING OF AGENDA
STATE OF CALIFORNIA )
ss.
COUNTY OF CONTRA COSTA )
Barbara S. Grant hereby declares that [s]he is a citizen of the United
States of America, over the age of 18 years; that acting for the Board of Supervisors of the
County of Contra Costa [s]he posted on March 1_, 1996 at 651 Pine Street
Martinez, California, a location freely accessible to members of the public, an agenda for
the regular meeting of the Board of Supervisors of Contra Costa County to be held on
March 5 , 1996, a copy of which is attached hereto.
Dated: March, 1996.
I declare under penalty of perjury that the
foregoing is true and correct.
Barbara S. CGff, Deputy Clerk
z
SF2-55067.2
B&W Draft-2/27/96
U•^
o� PRELIMINARY OFFICIAL STATEMENT DATED , 1996
NEW ISSUE—FULL BOOK ENTRY ONLY
In the opinion of Orrick,Herrington&Sutcliffe and Pamela S.Jue,Attorney at Law,Co-Special Counsel,based on existing laws,regulations,rulings and
-Sai court decisions and assuming, among other matters, compliance with certain covenants, the portion of each Base Rental Payment designated as and
°= constituting interest paid by the County under the Facility Lease and received by the Owners of the 1996 Certificates 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. Such
n ti interest is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes,although Co-Special Counsel observes
ami that it is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Co-Special Counsel expresses no opinion
wregarding other tax consequences related to the ownership or disposition of the 1996 Certificates or accrual or receipt of the interest portion of the Base
co o Rental Payments. See "TAX MATTERS"herein.
N $
CERTIFICATES OF PARTICIPATION
(MERRITHEW MEMORIAL HOSPITAL REPLACEMENT PROJECT)
REFUNDING SERIES OF 1996
ora Evidencing Fractional Undivided Interests of the Registered Owners Thereof in Base Rental Payments to be Made by the
R COUNTY OF CONTRA COSTA, CALIFORNIA
y to the
`g CONTRA COSTA COUNTY PUBLIC FACILITIES CORPORATION
p Dated: 1, 1996 Due: November 1,as shown below
r o The 1996 Certificates are being issued to finance the advance refunding and defeasance of the County's Certificates of Participation(Merrithew Memorial
c i Hospital Replacement Project)Series of 1992(the"1992 Certificates"). See"PLAN OF REFUNDING." The 1992 Certificates were issued to finance the
o.o design and construction of the replacement of Merrithew Memorial Hospital,the primary county hospital located in the City of Martinez,California. See
E b "THE PROJECT."
a Interest with respect to the 1996 Certificates will be payable on May 1 and November 1 of each year, commencing November 1, 1996. The 1996
Certificates will be initially delivered in book-entry form, registered in the name of Cede&Co. as nominee of DTC. Principal,prepayment premium, if
• ti any,and interest with respect to the 1996 Certificates will be paid by U.S.Trust Company of California,N.A.,Los Angeles,California,as Trustee,to DTC.
'o DTC is required to remit such principal and interest to its Participants for disbursement to the beneficial owners of the 1996 Certificates. See"THE 1996
CERTIFICATES -Book-Entry-Only System." The 1996 Certificates are subject to optional and mandatory prepayment as described herein.
° The 1996 Certificates are being executed and delivered pursuant to a Trust Agreement,dated as of May 1, 1992,among the County of Contra Costa(the
"County"),the Contra Costa County Public Facilities Corporation(the"Corporation"),and the Trustee,as amended by a First Supplemental Trust Agreement,
y y dated as of 1, 1996, among the County,the Corporation, and the Trustee (as amended,the"Trust Agreement").
° o _
The 1996 Certificates represent fractional undivided interests in Base Rental Payments payable by the County pursuant to a Facility Lease, dated as of
May 1, 1992,as amended by a First Amendment to Facility Lease,dated as of 1, 1996(as amended,the"Facility Lease"). The County has
° y agreed in the Facility Lease to make all Base Rental Payments subject to abatement of such Base Rental Payments in the event of material damage to or
destruction or condemnation of the Project and the Demised Premises. The County has covenanted in the Facility Lease to take such action as may be
Enecessary to include such rental payments in its annual budgets and to make the necessary annual appropriations therefor.
THE OBLIGATION OF THE COUNTY TO MAKE THE BASE RENTAL PAYMENTS DOES NOT CONSTITUTE AN OBLIGATION OF T14E
° ,Q COUNTY FOR WHICH THE COUNTY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OF FOR WHICH THE COUNTY HAS
o LEVIED OR PLEDGED ANY FORM OF TAXATION. NEITHER THE 1996 CERTIFICATES NOR THE OBLIGATION OF THE COUNTY TO MAKE
o BASE RENTAL PAYMENTS UNDER THE FACILITY LEASE CONSTITUTES A DEBT OF THE COUNTY OF CONTRA COSTA, THE STATE
°' $ OF CALIFORNIA ORANY POLITICAL SUBDIVISION THEREOF,WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT
N
LIMITATION OR RESTRICTION.
U V
MATURITY SCHEDULE*
U 7
a) C3
$ Serial Certificates
id Certificate Payment Date Principal Interest Price or Certificate Payment Date Principal Interest Price or
�a.•� (November 1) Amount Rate Yield (November 1) Amount Rate Yield
ami is O
N
CQ P
S QP
$ %Term Certificate due November 1, ,Yield %
c (Plus Accrued Interest from 1, 1996)
con The 1996 Certificates will be offered when,as and if executed and delivered and received by the Underwriters,subject to approval by Orrick,Herrington&
° ° o Sutcliffe,San Francisco,California and Pamela S.Jue,Attorney at Law, San Francisco,California,Co-Special Counsel. Certain other legal matters will
c 3 be passed upon for the Underwriters by Brown&Wood,San Francisco,California, and for the County and the Corporation by County Counsel: The
Certificates, in book-entry form,will be available for delivery in New York,New York on or about 1996.
� o
o SMITH BARNEY INC.
Y •Y BA SECURITIES, INC. BEAR, STEARNS & CO. INC.
C 5
c'0 1996
THIS COVER PAGE CONTAINS INFORMATION FOR REFERENCE ONLY. IT IS NOT A SUMMARY OF THE ISSUE. INVESTORS MUST READ
�. o THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT
C o DECISION.
Preliminary,subject to change.
N ° 3
s �
17000\00219\43405.4
No dealer, broker, salesperson or other person has been authorized by the County,the Corporation,
or the Underwriters to give any information or to make any representation other than those contained
herein and, if given or made, such other information or representation must not be relied upon as having
been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell or
the solicitation of any offer to buy nor shall there be any sale of the 1996 Certificates by a person in any
jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers of the 1996
Certificates. Statements contained in this Official Statement which involve estimates,forecasts or matters
of opinion, whether or not expressly so described herein, are intended solely as such and are not to be
construed as representations of facts.
The information set forth herein has been obtained from the County and from other sources and
is believed to be reliable but is not guaranteed as to accuracy or completeness., The information and
expressions of opinions herein are subject to change without notice and neither the delivery of this Official
Statement nor any sale made hereunder shall, under any circumstances, create any implication that there
has been no change in the affairs of the County since the date hereof. This Official Statement is submitted
in connection with the sale of the 1996 Certificates referred to herein and may not be reproduced or used,
in whole or in part, for any other purpose, unless authorized in writing by the County. All summaries of
the documents and laws are made subject to the provisions thereof and do not purport to be complete
statements of any or all such provisions. All capitalized terms used herein, unless noted otherwise, shall
have the meanings prescribed in the Trust Agreement and the Facility Lease. This Official Statement,
including any supplement or amendment hereto, is intended to be deposited with one or more nationally
recognized municipal securities information repositories.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 1996
CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
17000\00219\43405.4
COUNTY OF CONTRA COSTA, CALIFORNIA
BOARD OF SUPERVISORS
Jeffrey Smith
(District 2)
Chair
Jim Rogers Gayle Bishop
(District 1) (District 3)
Mark De Saulnier Tom Torlakson
(District 4) (District 5)
COUNTY OFFICIALS
Philip J. Batchelor
Clerk of the Board and County Administrator
Kenneth J. Corcoran Alfred P. Lomeli
Auditor-Controller Treasurer-Tax Collector
Victor J. Westman Stephen L. Weir
County Counsel County Clerk-Recorder
CONTRA COSTA COUNTY PUBLIC FACILITIES CORPORATION
i
John E. Whalen Linton L. Emerson, Jr.
President and Director Secretary and Director
Gerald Feagley Ronald R. McCreary
Treasurer and Director Director
CO-SPECIAL COUNSEL FINANCIAL ADVISOR
Orrick, Herrington & Sutcliffe Prager, McCarthy & Sealy
San Francisco, California San Francisco, California
Pamela S. Jue, Attorney at Law
San Francisco, California
TRUSTEE
U.S. Trust Company of California, N.A.
Los Angeles, California
17000\00219\43405.4
TABLE OF CONTENTS
Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PLAN OF REFUNDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ESTIMATED SOURCES AND USES OF FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
THE PROJECT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
THE 1996 CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Book-Entry Only System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Prepayment Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Notice of Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Selection of Certificates for Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Effect of Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES . . . . . . . . . . . . . . . . 12
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Base Rental Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Source of Revenues for Base Rental Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Pledge of Base Rental Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
State Intercept Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Certificate Reserve Fund Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Additional Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
RISK FACTORS . . . . . ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Full Faith and Credit Not Pledged . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Noncompletion of Project; Abatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Cost Overruns; Construction Delays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Limited Recourse on Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
No Acceleration Upon Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
No Liability of Corporation to the Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Effect of Termination of Facility Lease on Transfer of Certificates and Tax Exemption . . 25
Risk of Earthquake . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Factors Affecting the Health Care Industry . . . . . . . . . . . . : . . . . . . . . . . . . . . . . . . . . 25
Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Book-Entry System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON
TAXES AND APPROPRIATIONS . . . . . . . . . . . . . . . . . . . . 29
Article XIIIA of the California Constitution . . . . . .'. . . . . .. . . . . . . . . . . . . . . . . . . . . 29
Legislation Implementing Article XIIIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Article XIIIB of the California Constitution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
17000\00219\43405.4 i
c.�z
Proposition 62 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Future Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
THE CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Powers and Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
THE COUNTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
RATINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
CONTINUING DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
VERIFICATION OF MATHEMATICAL COMPUTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 35
UNDERWRITING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
MISCELLANEOUS INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
APPENDIX A - GENERAL COUNTY, ECONOMIC, AND DEMOGRAPHIC
INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
APPENDIX B - COUNTY FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . B-1
APPENDIX C - FINANCIAL STATEMENTS OF THE COUNTY FOR THE
FISCAL YEAR ENDED JUNE 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . C-1
APPENDIX D - SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL
LEGAL DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-I
APPENDIX E - FORM OF OPINION OF CO-SPECIAL COUNSEL . . . . . . . . . . . . . . . . . . E-1
APPENDIX F - FORM OF CONTINUING DISCLOSURE AGREEMENT . . . . . . . . . . . . . F-1
17000\00219\43405.4 11
C,
OFFICIAL STATEMENT
CERTIFICATES OF PARTICIPATION
(MERRITHEW MEMORIAL HOSPITAL REPLACEMENT PROJECT)
REFUNDING SERIES OF 1996
Evidencing the Fractional Undivided Interests
of the Owners Thereof
in Base Rental Payments to be Made by the
COUNTY OF CONTRA COSTA, CALIFORNIA
to the
CONTRA COSTA COUNTY PUBLIC FACILITIES CORPORATION
INTRODUCTION
This Official Statement (which includes the cover page and Appendices hereto) (the "Official
Statement") provides certain information concerning the sale and delivery of Certificates of Participation
(Merrithew Memorial Hospital Replacement Project), Refunding Series of 1996 (the "1996 Certificates"),
in an aggregate principal amount of$ * evidencing the fractional undivided interests of the
registered owners (the "Owners") thereof in Base Rental Payments (defined herein) to be made by the
County of Contra Costa(the "County"), as rent for the Project (as defined herein). The Project will be
leased by the County pursuant to a Facility Lease,dated as of May 1, 1992, between the County, as lessee,
and the Contra Costa County Public Facilities Corporation (the "Corporation"), as lessor, as amended by
a First Amendment to Facility Lease, dated as of 1, 1996, between the County and the
Corporation (as amended, the "Facility Lease").
The 1996 Certificates are being executed and delivered to finance the advance refunding of the
County's Certificates of Participation (Merrithew Memorial Hospital Replacement Project) Series of 1992
(the "1992 Certificates"). See "PLAN OF REFUNDING." The 1992 Certificates were executed and
delivered on May 13, 1992 in the original principal amount of $125,584,011.80, comprised of
$119,540,000 principal amount of current interest certificates(the"1992 Current Interest Certificates")and
$6,044,011.80 initial amount of. capital appreciation certificates (the "1992 Capital Appreciation
Certificates"). The 1992 Certificates were executed and delivered to finance the design and construction
of the replacement of the Merrithew Memorial Hospital (the "County Hospital") in the City of Martinez,
California. See "THE PROJECT."
The County has leased to the Corporation, pursuant to a Site Lease, dated as of May 1, 1992,
between the County and the Corporation (the "Site Lease"), the site for construction and installation of
Phase I of the Project (as described herein). Such site and all real property subsequently leased by the
County to the Corporation under the Site Lease in connection with the Project are herein referred to as
the "Demised Premises."
i Preliminary, subject to change.
17000\00219\43405.4
�2
The County of Contra Costa lies northeast of San Francisco and is the ninth most populous county
in California. The County seat is in the City of Martinez. Major industries in the County include oil
refining and telecommunications.
The 1996 Certificates will be executed and delivered pursuant to a Trust Agreement, dated as of
May 1, 1992, among the County, the Corporation, and U.S. Trust Company of California, N.A., Los
Angeles,California, as trustee(the"Trustee"),as amended by a First Supplemental Trust Agreement, dated
as of 1, 1996, among the County, the Corporation, and the Trustee (as amended, the "Trust
Agreement"). Pursuant to an Assignment Agreement, dated as of May 1, 1992, as amended by a First
Amendment to Assignment Agreement, dated as of 1, 1996, (as amended, the "Assignment
Agreement"), the Corporation has assigned to the Trustee, for the benefit of the Owners, substantially all
of its rights under the Facility Lease and the Site Lease, including its right to receive and collect rental
payments (the "Base Rental Payments") from the County under the Facility Lease and its right, as may
be necessary, to enforce payment of Base Rental Payments.
The County may incur in the future additional obligations under the Facility Lease,and may cause
the execution of one or more additional series of Certificates (the "Additional Certificates"), secured on
a parity with the 1996 Certificates, to finance additional capital improvements to be included in the
Project. See "SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES - Additional
Certificates." The 1996 Certificates, together with any Additional Certificates executed pursuant to the
Trust Agreement, are herein referred to as the "Certificates."
The County has covenanted under the Facility Lease that as long as the Project and the Demised
Premises are available for the County's use and occupancy, it will take such action as may be necessary
to include all Base Rental Payments and Additional Payments(as defined below) in its annual budgets and
to make the necessary annual appropriations therefor. See "SECURITY AND SOURCES OF PAYMENT
FOR THE CERTIFICATES." As additional security for the 1996 Certificates, the County has elected to
secure the payment of Base Rental Payments due by the County under the Facility Lease by providing
a mechanism pursuant to which the State Controller will make such payments to the Trustee from (and
to the extent of) vehicle license fees held for the account of the County in the event that the County fails
to make such payments when due. See "SECURITY AND SOURCES OF PAYMENT FOR THE
CERTIFICATES - State Intercept Program."
Base Rental Payments are subject to complete or partial abatement resulting from substantial
interference with the use and possession by the County of the Project and the Demised Premises caused
by damage to or destruction or condemnation of the Project or the Demised Premises. See "RISK
FACTORS." Abatement of Base Rental Payments under the Facility Lease could result in Certificate
Owners receiving less than the full amount of principal and interest represented by the Certificates, except
to the extent proceeds of insurance are available or there are moneys in the Certificate Reserve Fund or
Lease Fund (as described herein) to make Base Rental Payments (or a portion thereof) during periods of
abatement.
Summaries of certain provisions of the principal legal documents relating to the Certificates and
the Facility Lease are contained in Appendix D. The summaries and descriptions in this Official Statement
of the Trust Agreement, the Facility Lease,the Site Lease and other agreements relating to the Certificates
are qualified in their entirety by reference to such documents, and the descriptions herein of the
Certificates are qualified in their entirety by the form thereof and the information with respect thereto
included in such documents. All capitalized terms used herein, unless noted otherwise, shall have the
meanings prescribed in the Trust Agreement and Facility Lease.
17000\00219\43405.4 2
PLAN OF REFUNDING
Concurrently with the delivery of the 1996 Certificates, the 1992 Certificates will be advance
refunded. The moneys required to advance refund the 1992 Certificates will come from the net proceeds
of the 1996 Certificates and certain other available funds. Such funds will be applied to the purchase of
direct obligations of the United States of America (the "Government Securities"). The Government
Securities will be held by the Trustee, and will mature at such times and in such amounts so that, together
with an initial cash deposit, sufficient moneys will be available (i) to pay, when due, the principal and
interest with respect to the 1992 Current Interest Certificates to and including November 1, 2002, (ii) to
prepay the 1992 Current Interest Certificates on November 1, 2002 at a prepayment price equal to the
principal amount of the 1992 Current Interest Certificates then outstanding plus a prepayment premium
of 2% of such principal amount, and (iii) to pay the principal and Accreted Interest with respect to the
1992 Capital Appreciation Certificates when due.
Neither the maturing principal of such Government Securities nor the interest income thereon will
be available to pay the Base Rental Payments or the 1996 Certificates.
17000\00219\43405.4 3
ESTIMATED SOURCES AND USES OF FUNDS
The Proceeds to be received from the sale of.the 1996 Certificates are estimated to be applied as
set forth below.
Sources
1996 Certificate Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Less: Original Issue Discount . . . . . . . . . . . . . . . . . . . . . .
Less: Underwriters' Discount . . . . . . . . . . . . . . . . . . . . . .
Funds related to 1992 CertificatesM . . . . . . . . . . . . . . . . . . . . .
Accrued Interest(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Uses
1992 Certificates Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . $
Acquisition and Construction Fund
Certificate Reserve Fund(')
Lease Fund(') . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs of Issuance(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Uses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Represents unspent balances in the Certificate Reserve Fund and the Lease Fund.
(2) Represents interest on the 1996 Certificates from 1, 1996 to the delivery date thereof.
(3) Certificate Reserve Requirement.
(4) Represents interest on the 1996 Certificates from 1, 1996 to the delivery date thereof and
capitalized interest on the 1996 Certificates to approximately 1, 199_.
(5) Includes Underwriters' discount, bond insurance premium, legal fees, printing costs, and other costs
of issuance.
THE PROJECT
Background
The Contra Costa County Hospital was established in 1914. The major portions of the current
main hospital were constructed in the 1940's and 1950's. The last ward dating from 1914 was demolished
in 1994 as part of the initial construction activity for the new facility. Though still in service, a majority
of the hospital's physical plant and systems are both out-of-date and at or beyond the limits of their
projected "useful life." Many of the facilities generally do not meet the standards of current health, safety,
building and engineering codes, although code divergences have been allowed under "grandfather"
concepts. Working closely with State and federal officials, the County has already taken action to rectify
code violations in order to keep the facilities certified. Moreover, when the new County Hospital is
completed, the County anticipates that all facilities located on the existing campus will meet or exceed
certification requirements.
17000\00219\43405.4 4
c.42-1
The County receives funds from the federal Medicare program, the State of California Medi-Cal
program ("Medi-Cal") and private payor payments from the operation of the County Hospital. The
Medicare system reimburses hospitals for inpatient operating costs for services provided for Medicare
beneficiaries at a predetermined fixed rate established by the federal government, which rate is subject to
revision. Under the Medi-Cal program, the State of,California selectively contracts with hospitals to.
provide acute inpatient services to Medi-Cal patients. Such selective contracting is made on a flat to per
diem basis for all services provided to Medi-Cal beneficiaries and, generally, such payments have not
increased in relation to inflation, costs, or other factors.
The Board of Supervisors of the County(the 'Board") originally adopted the recommendation to
construct a new County Hospital in August, 1983 and reevaluated the hospital construction proposal in
April, 1985. The evaluation effort culminated in the presentation of a report entitled "The Future of
Publicly-Sponsored Health Services" to the Board of Supervisors in January, 1986. The report included
a summary of various options reviewed by the hospital task force, including maintaining the status quo,
remodeling the existing hospital structure, rebuilding the hospital, closing the hospital, creating a county-
wide hospital district, leasing space in other facilities, transferring governance to a nonprofit organization
and contracting for services in other hospitals.
As a consequence of the task force's recommendation and upon further analysis of the physical
and medical programming aspects of the hospital, the Board of Supervisors determined to proceed with
partial replacement of the hospital with a new five story structure dedicated to the delivery of medical
services while continuing to utilize existing buildings for administration,food service, laboratory and other
support services. The approved project of 144 beds reflected the Board policy to proceed with a blended
solution of new construction and contracting with other facilities for needs beyond the capacity of the
replacement facility.
Location of the Project
The Project site is located on the current campus of the Merrithew Memorial Hospital in the City
of Martinez. The location is on Alhambra Street and is accessible from Highway 4 and Interstate 680.
The site is composed of approximately 16.2 acres, on the majority of which existing hospital operations
will continue to be conducted as the new hospital is being constructed. The County has owned the site
for approximately 120 years and has determined that it is unencumbered and free of any liens.
Replacement of Merrithew Memorial Hospital
The architectural firm of Kaplan/McLaughlin/Diaz was selected in 1989 to prepare the planning
and design documents for construction of the new facility. An overall master plan for the campus was
approved and the first phase, the replacement hospital, was authorized to proceed in 1991. Final
construction plans were filed with the State of California during 1993 and bids were taken for site work,
demolition and utility relocation for the construction project. Bids for the building construction were
requested in July 1994 after final approval by the Office of State Health Planning and Development.
The Project will provide a new, five-floor facility that will serve a full-service teaching and
tertiary care hospital. The new hospital will be a public hospital owned and operated by the County. In
its new quarters. Merrithew Memorial Hospital will continue its current affiliation with the University
of California, Davis Medical School.
17000\00219\43405.4 5
The Project will consist of a single new hospital building, landscaping, equipment and related
facilities. Comprising approximately 210,000 square feet, the building was planned for 144 inpatient beds
and an emergency room capable of handling 36,000 emergency visits per year.
Litigation Regarding the Project
During the planning process in April 1993 an administrative complaint was filed with the federal
Office for Civil Rights, Department of Health and Human Services by the NAACP Legal Defense and
Education Fund ("LDF") claiming that the location of the replacement facility discriminates against
minorities and violates Title VI of the Civil Rights Act of 1964. In June 1993 the LDF requested a
suspension of the Project which was denied by the State Department of Health and the Federal Department
of Health and Human Services. In April 1994 the LDF filed a lawsuit in federal District Court in San
Francisco, California seeking a temporary restraining order("TRO")for the Project. The TRO was denied
by the Court. In April 1994 the federal Office of Civil Rights released their letter of findings related to
the LDF discrimination allegations and found no violation of civil rights with respect to the hospital
location. In May 1994 the Board reaffirmed it's decision to proceed with the Project.
A federal court judge issued an injunction effective August 1, 1994 ordering a suspension of any
activity on the Project until a hearing could be held on the lawsuit filed by LDF as to the access to the
proposed central county facility by low-income residents in the East and West County areas. The
injunction halted the site work on the Project except for site safety and winterization of the area and,
required a suspension of the construction bidding. On November 29, 1994, the federal judge ruled in
favor of the County, commended the County's efforts to increase access to health care for poor and
minority patients, and lifted the injunction. The court action allowed the on-site contractor to re-
commence work on utility relocation and site configuration.
The LDF filed an appeal to the order dissolving the preliminary injunction with the U.S. Ninth
Circuit Court of Appeals. The Ninth Circuit Court of Appeals affirmed the district court's order and
denied the appeal of the LDF. A hearing is set for March 29, 1996 on the County's motion for summary
judgement on all remaining claims by the LDF.
Status of Construction
The Board of Supervisors readvertised the construction project in December 1994 and approved
the bids in February 1995. The low bid for the construction was submitted by Centex-Golden
Construction Company of San Diego with a bid of$39,500,000. The low bid was $5.3 million under
the architects estimate of$44,800,000 for the project.
Construction continues on the Project with approximately 35% of the Project completed as of
February 1, 1996. All of the structural steel is in place and installation of the plumbing and ductwork is
commencing. The contractor is on schedule and is expected to complete the construction by August 1997.
The favorable bid for construction has allowed an increase in contingency reserves and the Project is well
within the budget of$81,800,000 for total Project costs.
The Board of Supervisors took action on February 13, 1996 to change the mix of beds within the
new facility to include the acute psychiatric program on the campus. The change will include completion
of the previously planned shelled-in area on the fifth floor for an additional 30 medical beds and
reconfiguration of the fourth floor to provide for 43 acute psychiatric beds with appropriate program
space. The changes will result in a new total of 156 beds for the facility with no change in the physical
17000\00219\43405.4 6 -
size of the building. The acute psychiatric program will be relocated from existing substandard buildings
adjacent to the new building to the reallocated space on the fourth floor.
Project Management
The County has retained O'Brien Kreitzberg and Associates as the Construction Managers for the
Project. Working with the Contractor, the Construction Manager has formulated a critical-path timetable
and responsibility schedule for the Pproject, and will be managing the Project until completion. After
initiation of construction but prior to the fabrication of the structural steel for the Project, the State of
California issued revised seismic requirements for steel frame buildings as a result of what was learned
from the Northridge earthquake in southern California in January 1994. Some changes were made to the
structural steel framing for the Project and a revised welding procedure was implemented. Implementation
of the new requirements and procedures brings the Project in conformance with the very latest code
requirements for seismic safety. All of the structural steel has been fabricated and is in place on the site.
The Project continues on schedule with minor variations. The change for the fourth and fifth
floors is being negotiated with the contractor and is now anticipated to extend the schedule by a maximum
of one month. Since virtually all of the concrete work was completed prior to the erection of the steel
frame in January, the Project has been and remains-almost unaffected by weather considerations. The
Project completion date is scheduled for August 1997.
Project Cost
The Project budget for the design, construction, installation, equipment and project management
is approximately $82 million. The budgeted amount includes adequate construction contingency as well
as funds for state-of-the-art communications and data systems. The changes for the acute psychiatric
program are estimated to add $5.4 million to the project. Sufficient funds are available within the
Construction Fund from accumulated interest earnings on construction balances and from savings of
approximately $5.0 million in the actual construction contract amount versus the architect's estimate.
To date, contracts have been awarded for design services, construction management, specialized
services, pre-construction, site clearing, utility relocations and the building construction. The main
construction contract is approximately 35% complete.
The following table sets forth Project costs incurred by the County through January 1996 and
projects monthly funding requirements for the completion of the Project. The County anticipates that
sufficient funds will be available in the Acquisition and Construction Fund, together with estimated
earnings thereon, to meet the indicated schedule.
MERRITHEW MEMORIAL HOSPITAL REPLACEMENT PROJECT
Project Costs Through 1996 and Estimated Future Project Costs
(in Millions)
[TABLE TO BE ADDED.]
17000\00219\43405.4 7
THE 1996 CERTIFICATES
General Provisions
The Certificates evidence and represent the fractional undivided interests of the Owners thereof
in Base Rental Payments to be made by the County under the Facility Lease.
The Certificates will be prepared in the form of fully registered Certificates and, when executed
and delivered, will be registered in the name of Cede & Co., as nominee of The Depository Trust
Company, New York, New York ("DTC"). DTC will act as securities depository of the Certificates.
Ownership interests in the Certificates may be purchased in book-entry form only, in the denominations
hereinafter set forth. See "Book-Entry Only System", below.
Ownership interests in 1996 Certificates will be in $5,000 denominations or any integral multiple
thereof. Interest represented by the 1996 Certificates will be calculated on the basis of a 360-day year
composed of twelve 30-day months and is payable on May 1 and November 1 (each a "Payment Date")
of each year, commencing November 1, 1996. The 1996 Certificates will evidence and represent interest
from 1, 1996. The 1996 Certificates will mature on the dates and in the principal amounts,
and the interest represented thereby shall be computed at the rates, all as set forth on the cover page of
this Official Statement (each a "Certificate Payment Date").
Book-Entry Only System
The Depository Trust Company("DTC"),New York, will act as securities depository for the 1996
Certificates. The 1996 Certificates will be executed and delivered as fully-registered certificates registered
in the name of Cede&Co. (DTC's partnership nominee). One fully-registered certificate will be executed
and delivered for each Certificate Payment Date of the 1996 Certificates, each in the aggregate principal
amount due on such Certificate Payment Date, and will be deposited with DTC.
DTC 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 securities that its participants("Participants")deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. DTC
is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American
Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system
is also available to others such as securities brokers and dealers, banks, and trust companies that clear
through or maintain a custodial relationship with a Direct Participant,either directly or indirectly("Indirect
Participants"). The Rules applicable to DTC and its participants are on file with the Securities and
Exchange Commission.
Purchases of 1996 Certificates under the DTC system must be made by or through Direct
Participants, which will receive a credit for the 1996 Certificates on DTC's records. The ownership
17000\00219\43405.4 8
interest of each actual purchaser of each 1996 Certificate ("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, but Beneficial Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their holdings, from the Direct or
Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the 1996 Certificates are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive 1996 Certificates
representing their ownership interests, except in the event that use of the book-entry system for the 1996
Certificates is discontinued.
To facilitate subsequent transfers, all 1996 Certificates deposited by Participants with DTC are
registered in the name of DTC's partnership nominee, Cede& Co. The deposit of 1996 Certificates with
DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC
has no knowledge of the actual Beneficial Owners of the 1996 Certificates; DTC's records reflect only
the identity of the Direct Participants to whose accounts such 1996 Certificates are credited, which may
or may not be the Beneficial Owners. The 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.
Neither DTC nor Cede & Co. will consent or vote with respect to the 1996 Certificates. Under
its usual procedures, DTC mails an Omnibus Proxy to the issuer of the securities 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 1996 Certificates are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
Principal and interest payments with respect to the 1996 Certificates will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the payable date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe that it will not receive payment on
the payable date. Payments by Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the accounts of customers in bearer form
or registered in "street name," and will be the responsibility of such Participant and not of DTC, the
Trustee, the Corporation or the County, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal and interest to DTC is the responsibility of the Corporation
or the Trustee,fiscal agent or other designated agent, disbursement of such payments to Direct Participants
.shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be
the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with respect to the 1996
Certificates at any time by giving reasonable notice to the Trustee and the County. Under such
circumstances, in the event that a successor securities depository is not obtained, physical certificates are
required to be printed and delivered.
In the event the County and the Trustee determine not to continue the DTC book-entry only
system or DTC determines to discontinue its services with respect to the 1996 Certificates and the County
does not select another qualified securities depository, the County shall deliver one or more 1996
17000\00219\43405.4 9
c
Certificates in such principal amount or amounts, in authorized denominations, and registered in whatever
name or names, as DTC shall designate. In such event, transfers and exchanges of 1996 Certificates will
be governed by the provisions of the Trust Agreement.
AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE 1996 CERTIFICATES,
THE TRUSTEE WILL SEND ANY NOTICE OF PREPAYMENT OR OTHER NOTICES TO
HOLDERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY PARTICIPANT, OR OF
ANY PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS
CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OR SUFFICIENCY OF THE
PROCEEDINGS RELATING TO THE PREPAYMENT OF THE 1996 CERTIFICATES CALLED FOR
PREPAYMENT OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE.
THE COUNTY, THE TRUSTEE, THE CORPORATION AND THE UNDERWRITERS HAVE
NO RESPONSIBILITY OR LIABILITY FOR ANY ASPECTS 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 1996 CERTIFICATES.
THE COUNTY, THE TRUSTEE, THE CORPORATION AND THE UNDERWRITERS
CANNOT AND DO NOT GIVE ANY ASSURANCES THAT DTC WILL DISTRIBUTE PAYMENTS
TO DTC PARTICIPANTS OR THAT PARTICIPANTS OR OTHERS WILL DISTRIBUTE PAYMENTS
WITH RESPECT TO THE 1996 CERTIFICATES RECEIVED BY DTC OR ITS NOMINEES AS THE
HOLDER OR ANY PREPAYMENT NOTICES OR OTHER NOTICES TO THE BENEFICIAL
HOLDERS, 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.
The foregoing description of the procedures and record keeping with respect to beneficial
ownership interests in the 1996 Certificates, payment of principal, prepayment premium, if any, and
interest with respect to the 1996 Certificates to DTC, its Participants or Beneficial Owners, confirmation
and transfers of beneficial ownership interests in the 1996 Certificates and other related transactions by
and between DTC, its Participants and the Beneficial Owners is based solely on the County's and the
Trustee's understanding 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 and the
Trustee understand that the current "Rules"applicable to DTC are on file with the Securities and Exchange
Commission and that the current "Procedures" of DTC to be followed in dealing with Participants are on
file with DTC.
Prepayment Provisions
Extraordinary Prepayment
The 1996 Certificates are subject to prepayment on any date prior to their respective Certificate
Payment Dates, as a whole, or in part by lot within each Certificate Payment Date so that the aggregate
annual amounts of principal and interest represented by the Certificates which shall be payable after such
prepayment date shall correspond to the principal components and interest components of the reduced Base
Rental Payments resulting from an insured loss to or governmental taking of the Demised Premises and
the Project or portions thereof, from prepaid Base Rental Payments made by the County from funds
17000\00219\43405.4 10
J
received by the County due to such insured loss or governmental taking, if such amounts are not used to
repair or replace the Demised Premises and the Project in accordance with the provisions of the Facility
Lease, under the circumstances and upon the conditions and terms prescribed in the Trust Agreement and
in the Facility Lease, at a prepayment price equal to the sum of the principal amount thereof plus accrued
interest represented thereby to the date fixed for prepayment, without premium. See "SECURITY AND
SOURCES OF PAYMENT FOR THE CERTIFICATES - Insurance."
Optional Prepayment
The 1996 Certificates payable on or after November 1, are subject to prepayment prior to
their respective Certificate Payment Dates, at the option of the County, as a whole, or in part in any order
of Certificate Payment Dates specified by the County,and by lot within any such Certificate Payment Date
if less than all of the 1996 Certificates of such Certificate Payment Date are prepaid, from any source of
available funds, on any date on or after November 1, , at the following prepayment prices(expressed
as a percentage of the principal amount represented thereby) plus accrued interest represented thereby to
the date fixed for prepayment, as follows:
Prepayment Dates Prepayment Prices
through %
throgh ,
and thereafter
Mandatory Prepayment
1996 Certificates with a Certificate Payment Date of November 1, are subject to mandatory
prepayment prior to their stated Certificate Payment Date in part on November 1 of each year on and after
November 1, , by lot, from and in the amount of the principal components of Base Rental Payments
applicable thereto and due and payable on such dates, at a prepayment price equal to the sum of the
principal amount represented thereby plus accrued interest to the date of prepayment, without premium
according to the following schedule (subject to modification in the event of optional prepayment or
extraordinary prepayment):
Prepayment Date Principal
(November 1) Amount
Maturity.
17000\00219\43405.4 1 1
Notice of Prepayment
So long as the Book-Entry system is used for the 1996 Certificates, the Trustee will give any
notice of prepayment or any other notices required to be given to Owners only to DTC. Any failure of
DTC to advise any DTC Participant, or of any DTC Participant to notify the Beneficial Owner, of any
such notice and its content or effect will not affect the validity of the prepayment of the 1996 Certificates
called for prepayment or any other action premised on such notice. Beneficial Owners may desire to make
arrangements with a DTC Participant so that all notices of prepayment or other communications to DTC
which affect such Beneficial Owners, including notification of all interest payments, will be forwarded
in writing by such DTC Participant. See"THE 1996 CERTIFICATES -Book-Entry Only System"herein.
In the event that the Book-Entry system shall no longer be used, notice of prepayment is to be
mailed, first class postage prepaid, to the respective Owners of any 1996 Certificates designated for
prepayment at their addresses appearing on the registration books required to be kept by the Trustee not
less than 30 nor more than 60 days prior to the prepayment date. Each notice of prepayment shall state
the prepayment date, the prepayment place and the prepayment price, shall designate the serial numbers
of the Certificates to be prepaid, and in the case of each Certificate called for prepayment in part, state
the amount which is to be prepaid. Any notice mailed as provided in the Trust Agreement shall be
conclusively presumed to have been given, whether or not such Owner receives the notice.
Selection of Certificates for Prepayment
Whenever less than all the Outstanding Certificates payable on any one Certificate Payment Date
are to be prepaid on any one date, the Trustee shall select the Certificates of such Certificate Payment
Date to be prepaid from the Outstanding Certificates payable on such Certificate Payment Date by lot in
any manner that the Trustee deems fair. For purposes of such selection, Certificates shall be deemed to
be composed of$5,000 portions, and any such portion may be separately prepaid.
Effect of Prepayment
From and after the date of prepayment of the Certificates in accordance with the Trust Agreement,
interest represented by the Certificates called for prepayment shall cease to accrue, such Certificates shall
cease to be entitled to any benefit or security under the Trust Agreement, and the Owners of such
Certificates shall have no rights in respect thereof except to receive payment of the prepayment price
represented thereby. The Trustee shall, upon surrender for payment of any of the Certificates to be
prepaid, pay such Certificates at the prepayment price thereof. All Certificates prepaid pursuant to the
provisions of the Trust Agreement shall be cancelled by the Trustee and shall not be redelivered.
SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES
General
Pursuant to the Facility Lease,the Corporation leases the Demised Premises and the Project to the
County. As rental for the use and occupancy of the Demised-Premises and the Project, the County
covenants to pay Base Rental Payments to the Trustee. The Base Rental Payments are composed of
principal and interest components represented by the Certificates.
17000\00219\43405.4 12
Each Certificate represents a fractional undivided interest in the Base Rental Payments. The
County has covenanted in the Facility Lease to include all Base Rental Payments in its annual budgets and
to make the necessary annual appropriations therefor. The Trustee, as assignee of the Corporation, will
receive such Base Rental Payments for the benefit of the Certificate Owners. Additionally, the
Corporation, pursuant to the Assignment Agreement, will assign all of its rights to receive Base Rental
Payments to the Trustee for the benefit of the Owners of the Certificates. By the 15th day of the month
immediately preceding each semi-annual Payment Date, the County must pay to the Trustee Base Rental
Payments (to the extent required under the Facility Lease)which will be sufficient to pay, when due, the
principal and interest represented by the Certificates.
Under the Facility Lease, the County agrees to pay Additional Payments for the payment of all
expenses and all administrative costs of the Corporation related to the Demised Premises and the Project,
including expenses of the Trustee, and fees of accountants, attorneys and consultants. A Trust
Administration Fund is established under the Trust Agreement for the payment of all administrative costs
of the Corporation and the County is obligated under the Facility Lease to maintain a minimum balance
of$5,000 in the Trust Administration Fund, which was funded initially from 1992 Certificate proceeds.
The County is responsible for repair and maintenance of the Project during the term of the Facility Lease.
Except to the extent of amounts held by the Trustee in the Lease Fund or in the Certificate
Reserve Fund are otherwise available to the Trustee for payments in respect of the Certificates, the Base
Rental Payments shall be abated proportionately, during any period in which by reason of any damage
to or destruction of the Demised Premises and the Project, there is substantial interference with the use
and occupancy of the Demised Premises and the Project by the County, in the proportion in which the
initial cost of that portion of the Demised Premises and the Project rendered unusable bears to the initial
cost of the whole of the Demised Premises and the Project. Such abatement shall continue for the period
commencing with such damage or destruction and ending with the substantial completion of the work of
repair or reconstruction. In the event of any such damage or destruction, the Facility Lease shall continue
in full force and effect and the County waives any right to terminate the Facility Lease by virtue of any
such damage or destruction.
In the event of a taking of less than the whole of the Demised Premises and the Project by
condemnation, there will be a partial abatement of the rental due under the Facility Lease in an amount
equivalent to the amount by which the annual payments of principal and interest represented by the
Certificates then Outstanding will be reduced by the application of the award [and eminent domain] to the
prepayment of Outstanding Certificates.
Should the County default under the Facility Lease, the Trustee, as assignee of the Corporation
under the Facility Lease, may terminate the Facility Lease and recover certain damages from the County,
or may retain the Facility Lease and hold the County liable for all Rental Payments thereunder (without
acceleration) on an annual basis. See "APPENDIX D - SUMMARY OF CERTAIN PROVISIONS OF
.PRINCIPAL LEGAL DOCUMENTS - Facility Lease - Default; Remedies." Rental Payments may not
be accelerated. See "RISK FACTORS."
Base Rental Payments
Base Rental is calculated on an annual basis, for twelve-month periods commencing on April 1
and ending on March 31, and each annual Base Rental Payment includes two interest components,payable
on April 15 and October 15 of each rental payment period, and one principal component, payable on
October 15 of each rental payment period (commencing on October 15, �, except that the first Base
17000\00219\43405.4 13
Rental Payment period shall commence on the date of recordation of the Facility Lease and shall end on
March 31, 1997 and the first annual payment of Base Rental shall consist of one interest component,
payable on October 15, 1996. Each Base Rental Payment installment shall be payable on the 15th day
of the month immediately preceding its due date and any interest or other income with respect thereto
accruing prior to such due date shall belong to the County and shall be returned by the Corporation to the
County on May 1 and November 1 of each year. Each annual Base Rental Payment (to be payable in
installments as aforesaid) shall be for the use of the Demised Premises and the Project following
completion of construction thereof for the twelve-month period commencing on April 1 of the period in
which such installments are payable.
The Trust Agreement requires that Base Rental Payments be deposited in the Base Rental Payment
Fund maintained by the Trustee. Pursuant to the Trust Agreement, on May 1 and November 1 of each
year, commencing November 1, 1996, the Trustee will transfer such amounts as are necessary to the
Interest Fund, the Principal Fund or the Prepayment Fund, as the case may be, to pay principal and
interest with respect to the Certificates as the same shall become due and payable.
THE OBLIGATION OF THE COUNTY TO MAKE BASE RENTAL PAYMENTS IS A
SPECIAL OBLIGATION OF THE COUNTY, AND DOES NOT CONSTITUTE A DEBT OF THE
COUNTY OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION
THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT
LIMITATION OR RESTRICTION OR AN OBLIGATION FOR WHICH THE COUNTY IS
OBLIGATED TO LEVY OR PLEDGE, OR HAS LEVIED OR PLEDGED, ANY FORM OF
TAXATION.
The following page shows the rental payment schedule for the 1996 Certificates.
17000\00219\43405.4 14
c.�z
RENTAL PAYMENT SCHEDULE
Annual Semi-Annual Total
Principal Interest Semi-Annual
Payment Date Payments Payments(l) Requirement
The interest components to plus a portion of the interest component due
are funded from proceeds of the 1996 Certificates.
17000\00219\43405.4 15
C 442
Source of Revenues for Base Rental Payments
The County expects to receive moneys from capital cost reimbursement as a result of the
acquisition of the Project which will be used in their entirety to supplement amounts in the County's
General Fund available for the payment of Base Rental Payments. The following are anticipated sources
of moneys as a result of the construction and acquisition of the Project.
(a) SB 1732. Senate Bill 1732, later amended by Senate Bill 2665, was adopted as Section
14085.5 of the California Welfare and Institutions Code by the State Legislature in 1988.
Commonly referred to as "SB 1732,"this legislation, which has received concurrence by
the federal Health Care Financing Authority, permits hospitals which contract to provide
inpatient hospital services under the State's Medi-Cal program ("Medi-Cal"), or which
contract with county organized health systems, and which meet specified criteria, to
receive reimbursement, in addition to their medical reimbursement, from the State for a
portion of the costs of certain capital projects. Supplemental reimbursement received
under SB 1732 is required to be placed by the hospital in a special account exclusively
for debt service with respect to bonds issued to finance any such capital project. The
obligations of the State to make supplemental reimbursement pursuant to SB 1732 are
subject to passage of annual appropriations therefor through the normal State budget
process.
For any fiscal year during which a hospital is eligible to receive the supplemental
reimbursement under SB 1732, the amount of supplemental reimbursement is calculated
annually by multiplying the amount of annual debt service with respect to bonds issued
to finance the project by the ratio of the hospital's total paid Medi-Cal patient days to
total patient days, except that in no instance shall the percentage figure determined
pursuant to the ratio of the total paid Medi-Cal patient days to total patient days be
decreased by more than 10% of the initial ratio prior to retirement of the debt.
The State has informed the County that the County Hospital currently meets the
requirements and regulations with respect to eligibility for receipt of supplemental
reimbursements for a portion of the cost of the Project, and the County anticipates that
upon performance of certain stipulated conditions the Project will qualify for supplemental
reimbursement payments calculated pursuant to SB 1732. Based upon data available as
of , 1996, the supplemental reimbursement for the Project would equal
approximately % of the eligible debt service with respect to the Project. However,
the State has the ability to adjust the supplemental reimbursement annually as described
in the paragraph above, subject to the limitation that it shall not be reduced to less than
approximately 47.5% of the eligible debt service, even if the County's Medi-Cal
participation rate were to fall below that percentage. The County cannot predict,
however, whether the State will appropriate in its annual budgets the supplemental
reimbursement payments payable to the County. Under the Facility Lease, the County
has covenanted and pledged that all supplemental reimbursements received by the County
pursuant to SB 1732 shall be used for the payment of Base Rental Payments.
As with all Medi-Cal payments, the supplemental reimbursements under SB 1732 are
dependent on the continued existence of the Medi-Cal programs and appropriations for
the program through the State budget process. In addition, since approximately 50% of
SB 1732 funds are derived from federal Medicaid appropriations, discontinuance of such
17000\00219\43405.4 16
federal reimbursement is not within the control of the State. Eligible costs,moreover, are
defined differently under the federal program and do not include the cost of some
outpatient service facility costs. Accordingly, there can be no assurance that either the
State or federal payments under the provisions of SB 1732 will continue for the life of
the 1996 Certificates. See "RISK FACTORS - Factors Affecting the Health Care
Industry" herein.
(b) Medicare Payment. In addition to payments received as reimbursement for the County
Hospital's inpatient operating costs for services provided to Medicare beneficiaries, the
Federal Medicare program -reimburses providers for capital related costs including
depreciation and interest.
(c) SB 855. Senate Bill 855 was passed by the California Legislature and signed into law
by Governor Wilson during July 1991. The bill provides for supplemental Medi-Cal
payments to hospitals which serve a disproportionately high percentage of Medi-Cal and
other low-income patients. These hospitals are called "disproportionate share hospitals"
and comprise a medical service "safety net" for the State's uninsured and underinsured
patients. Generally, the higher the percentage of services provided to indigent patients
by a disproportionate share hospital, the higher the hospital's supplemental payment rate
will be under SB 855. Funding for the supplemental payment is derived one-half from
State sources and one-half from federal matching funds.
The County anticipates receiving in excess of$3.5 million per year under SB 855. The
Board of Supervisors of the County has adopted an order that, beginning in fiscal year
and continuing through , $3.5 million of the County Hospital's
annual supplemental payment, together with interest earnings thereon, will be reserved as
a special fund for cost overruns and other capital needs with respect to the Project.
Amounts in the special fund will be available for capital improvements, expenses and
obligations with respect to the County Hospital.
Although the County anticipates the receipt of moneys in connection with the construction and
acquisition of the Project from the above-mentioned sources, the amount, timing and the continuation of
payments in the future cannot be projected with any degree of certainty. To the extent any such moneys
are received by the County, the County anticipates that such moneys will be available to supplement the
amounts in the General Fund to be appropriated on an annual basis for the payment of Base Rental
Payments.
Pledge of Base Rental Payments
In accordance with the Trust Agreement,the Base Rental Payments are irrevocably pledged to and
shall be used for the punctual payment of the interest and principal represented by the Certificates
(including Additional Certificates deliveredcpursuantto the Trust Agreement), and the Base Rental
Payments shall not be used for any other purpose while any of the Certificates (including Additional
Certificates) remain Outstanding. This pledge constitutes a first and exclusive lien on the Base Rental
Payments.in accordance with the terms of the Trust Agreement.
All Base Rental Payments are paid directly by the County to the Trustee to be held in trust by the
Trustee in the Base Rental Payment Fund for the benefit of the County until deposited in the Interest
Fund, Principal Fund or Prepayment Fund, whereupon they are held in trust by the Trustee for the benefit
17000\00219\43405.4 17
of the holders of the Certificates. The County has covenanted under the Facility Lease that as long as the
Project and the Demised Premises are available for the County's use and occupancy, it will take such
action as may be necessary to include all Base Rental Payments and Additional Payments for such
properties in its annual budgets and to make the necessary annual appropriations therefor.
State Intercept Program
Pursuant to the provisions of the California Government Code (Section 25350.55) (herein the
"State Intercept Program"), the County has elected to further secure the payment of Base Rental Payments
under the Facility Lease by providing a mechanism by which the State Controller will make such
payments directly to the Trustee from vehicle licensing fees to which the County is entitled pursuant to
California Revenue and Taxation Code (Sections 11001-11005) (herein the "Vehicle License Fee
Allocation Statute"), excluding that portion deposited to the Vehicle License Fee Account of the Local
Revenue Fund and allocated for the County pursuant to California Welfare and Institutions Code Section
17604. Under the provisions of the State Intercept Program, the County Board of Supervisors must notify
the State Controller of the election, which notice must include a payment schedule and designation of a
trustee appointed for the purpose of implementing the payment procedures.
On or before each Payment Date, if the County has insufficient funds to make the installment of
Base Rental Payment due on such date, the County is required to notify the Trustee. Upon receipt of such
notification, the Trustee is required to immediately notify the State Controller and to request from the
State Controller the amount by which the Base Rental Payment due exceeds the amount on deposit in the
Base Rental Payment Fund.
The State Controller is required to make such apportionment to the Trustee from moneys credited
to the Motor Vehicle License Fee Account in the Transportation Tax Fund to which the County is entitled
at that time pursuant to the Vehicle License Fee Allocation Statute and will thereupon reduce, by the
amount so transferred, the subsequent allocation or allocations to which the County would otherwise be
entitled under that statute.
While this payment mechanism is intended to facilitate a 'county's timely payment of lease
payments, it does not obligate the County(or the State Controller) to make any payment in the event of
a situation giving rise to an abatement of obligations under the Facility Lease. See "RISK FACTORS -
Noncompletion of Project; Abatement" below. The County in the future may elect to have additional
obligations secured under the provisions of the State Intercept Program.
Vehicle license fees imposed for the operation of vehicles on state highways are collected by the
State Department of Motor Vehicles. These license fees are deposited monthly in the State Treasury:
twenty-four and one-third percent of the fees are transferred to the credit of the Local Revenue Fund and
the remainder to the credit of the Motor Vehicle License Fee Account (the "Account") in the
Transportation Tax Fund. Pursuant to the Vehicle License Fee Allocation Statute, moneys in the Account
are statutorily appropriated to cities and counties in accordance with a formula provided in the California'
Government Code, which is generally based upon population. In the last five fiscal years, the County
received the following amounts as its share of motor vehicle license fees from the Account in accordance
with the Vehicle License Fee Allocation Statute:
17000\00219\43405.4 18
COUNTY OF CONTRA.COSTA
SUMMARY OF MOTOR VEHICLE LICENSE FEES
Payments from
Vehicle License Payments from Motor Vehicle
Fiscal Year Fee Revenues Local Revenue Fund License Fee Account')
1990-91 $31,786,706 $ 0 $31,786,706
1991-92 47,168,660 15,212,932 31,955,728
1992-93 49,727,432 16,363,405 33,364,027
1993-94 49,573,511 16,617,120 32,956,391
1994-95(2) 52,110,707 17,600,024 34,510,683
Subject to the State Intercept Program.
(2) As a result of change in accounting methodology, reflects 13 months rather than 12 months.
ARTICLE XI, SECTION 15 OF THE CALIFORNIA CONSTITUTION REQUIRES THAT
VEHICLE LICENSE FEES BE ALLOCATED TO CITIES AND COUNTIES. THE MANNER IN
WHICH VEHICLE LICENSE FEES ARE ALLOCATED TO CITIES AND COUNTIES UNDER THE
VEHICLE LICENSE FEE ALLOCATION STATUTE MAY BE MODIFIED BY THE STATE
LEGISLATURE IN ITS DISCRETION, AND SUCH MODIFICATION MAY REDUCE AMOUNTS
DEPOSITED TO THE ACCOUNT FOR THE BENEFIT OF THE COUNTY. ACCORDINGLY,THERE
CAN BE NO ASSURANCE THAT LICENSE FEE REVENUES HELD IN THE ACCOUNT WILL BE
SUFFICIENT TO MAKE BASE RENTAL PAYMENTS WITH RESPECT TO THE 1996
CERTIFICATES.
Certificate Reserve Fund Requirement
The amount of$ will remain in the Certificate Reserve Fund following delivery of
the 1996 Certificates. Moneys in the Certificate Reserve Fund will be applied solely for the payment of
Base Rental Payments due and payable by the County if and when rental shall be abated or when other
moneys of the County are not otherwise available to make such Base Rental Payments; provided that
certain excess amounts in the Certificate Reserve Fund will be transferred to the Acquisition and
Construction Fund until completion of the Project and thereafter to fund the Trust Administration Fund
to its required level; provided that if the Trust Administration Fund is at the required level, any excess
will be transferred to the County. The Certificate Reserve Fund is pledged to the payment of Base Rental
Payments. r
The Trust Agreement requires that, as a condition to the execution and delivery of Additional
Certificates, an amount shall be deposited in the Certificate Reserve Fund so that following such deposit
there shall be on deposit in the Certificate Reserve Fund an amount at least equal to the Certificate
Reserve Fund Requirement. For the definition of the term "Certificate Reserve Fund Requirement," see
"APPENDIX D - SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS -
Definitions." The Certificate Reserve Fund Requirement may be provided by a policy of insurance issued
by a municipal bond insurance company obligations insured by which have a rating by Moody's Investors
Service and by Standard & Poor's Corporation which is in one of the two highest ratings then issued by
17000\00219\43405.4 19
COUNTY OF CONTRA COSTA
SUMMARY OF MOTOR VEHICLE LICENSE FEES
Payments from
Vehicle License Payments from Motor Vehicle
Fiscal Year Fee Revenues Local Revenue Fund License Fee Account(')
1990-91 $31,786,706 $ 0 $31,786,706
1991-92 47,168,660 15,212,932 31,955,728
1992-93 49,727,432 16,363,405 33,364,027
1993-94 49,573,511 16,617,120 32,956,391
1994-95(2) 52,110,707 17,600,024 34,510,683
Subject to the State Intercept Program.
(2) As a result of change in accounting methodology, reflects 13 months rather than 12 months.
ARTICLE XI, SECTION 15 OF THE CALIFORNIA CONSTITUTION REQUIRES THAT
VEHICLE LICENSE FEES BE ALLOCATED TO CITIES AND COUNTIES. THE MANNER IN
WHICH VEHICLE LICENSE FEES ARE ALLOCATED TO CITIES AND COUNTIES UNDER THE
VEHICLE LICENSE FEE ALLOCATION STATUTE MAY BE MODIFIED BY THE STATE
LEGISLATURE IN ITS DISCRETION, AND SUCH MODIFICATION MAY REDUCE AMOUNTS
DEPOSITED TO THE ACCOUNT FOR THE BENEFIT OF THE COUNTY. ACCORDINGLY,THERE
CAN BE NO ASSURANCE THAT LICENSE FEE REVENUES HELD IN THE ACCOUNT WILL BE
SUFFICIENT TO MAKE BASE RENTAL PAYMENTS WITH RESPECT TO THE 1996
CERTIFICATES.
Certificate Reserve Fund Requirement
The amount of$ . will remain in the Certificate Reserve Fund following delivery of
the 1996 Certificates. Moneys in the Certificate Reserve Fund will be applied solely for the payment of
Base Rental Payments due and payable by the County if and when rental shall be abated or when other
moneys of the County are not otherwise available to make such Base Rental Payments; provided that
certain excess amounts in the Certificate Reserve Fund will be transferred to the Acquisition and
Construction Fund until completion of the Project and thereafter to fund the Trust Administration Fund
to its required level; provided that if the Trust Administration Fund is at the required level, any excess
will be transferred to the County. The Certificate Reserve Fund is pledged to the payment of Base Rental
Payments.
The Trust Agreement requires that, as a condition to the execution and delivery of Additional
Certificates, an amount shall be deposited in the Certificate Reserve Fund so that following such deposit
there shall be on deposit in the Certificate Reserve Fund an amount at least equal to the Certificate
Reserve Fund Requirement. For the definition of the term "Certificate Reserve Fund Requirement," see
"APPENDIX D - SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS -
Definitions." The Certificate Reserve Fund Requirement may be provided by a policy of insurance issued
by a municipal bond insurance company obligations insured by which have a rating by Moody's Investors
Service and by Standard & Poor's Corporation which is in one of the two highest ratings then issued by
17000\00219\43405.4 19
4.
said rating agencies or by a Letter of Credit issued by a bank qualified under the terms of the Facility
Lease.
If at any time the.balance in the Certificate Reserve Fund shall be reduced below the Certificate
Reserve Fund Requirement, the first payments of Base Rental Payments thereafter payable by the County
and not needed to pay Base Rental Payment interest and principal components payable to the Certificate
Owners on the next Base Rental Payment due date shall be used to increase the balance in the Certificate
Reserve Fund to the required Certificate Reserve Fund Requirement.
Additional Certificates
The County may incur additional lease obligations to finance public health care facilities and
buildings in the County and additions, extensions or improvements thereto which are added to the Project
pursuant to an agreement amending or supplementing the Facility Lease entered into pursuant to the terms
of the Trust Agreement("Subsequent Phases of the Project"). The County anticipates that such additional
lease obligations, if any, will be incurred under the Facility Lease and will involve the execution and
delivery of Additional Certificates under the Trust Agreement and supplements thereto (each a
"Supplemental Trust Agreement"). Neither the Facility Lease nor the Trust Agreement in any manner
limit the amount of additional lease obligations payable from amounts legally available from the County's
General Fund or other revenue sources.
The Trust Agreement provides that Additional Certificates may be executed and delivered
thereunder subject to the following conditions:
(a) The County and the Corporation shall not be in default under the Trust Agreement
or any Supplemental Trust Agreement or under the Site Lease or the Facility Lease;
(b) A Supplemental Trust Agreement shall require that the proceeds of the sale of
such Additional Certificates shall be applied (i) to the construction or acquisition of Subsequent
Phases of the Project, provided that a Subsequent Phase of the Project shall have a scheduled
completion date on or before March 1, 1997, and the acquisition and construction costs of all
Subsequent Phases of the Project not located in the City of Martinez, California shall not, in the
aggregate, exceed $20,000,000, (ii) if necessary, for the completion of the Project or rebuilding
or replacement of the Project following a casualty loss, or(iii) for the refunding or repayment of
any Certificates then Outstanding, including the payment of costs and expenses of and incident
to the authorization and sale of such Additional Certificates. A Supplemental Trust Agreement
may also provide that a portion of such proceeds shall be applied to the payment of the interest
components due or to become due with respect to said Additional Certificates during the estimated
period of any construction and for a period of not to exceed twelve months thereafter;
(c) A Supplemental Trust Agreement shall provide that from such proceeds or other
sources an amount shall be deposited in the Certificate Reserve Fund so that following such
deposit there shall be on deposit in the Certificate Reserve Fund an amount at least equal to the
Certificate Reserve Fund Requirement;
(d) The Additional Certificates shall be payable as to principal on November 1 of
each year in which principal components are due and shall be payable as to interest as specified
in a Supplemental Trust Agreement;
17000\00219\43405.4 20
(e) The aggregate principal amount of Certificates at any time Outstanding shall not
exceed any limit imposed by law or by the Trust Agreement or by any Supplemental Trust
Agreement;
(f) The Facility Lease shall have been amended, if necessary, so that the Base Rental
Payments payable by the County thereunder will equal the principal and interest components
represented by such Additional Certificates and all other Certificates to be Outstanding after such
Additional Certificates are executed and delivered, payable at such times and in such manner as
may be necessary to provide for the payment of the principal and interest represented by such
Certificates;
(g) A supplemental Trust Agreement shall provide for Certificate Payment Dates and
mandatory prepayments of Certificates in amounts sufficient to provide for payment of the
Certificates when principal and interest components of Base Rental Payments are due;
(h) The Facility Lease shall have been amended so as to lease to the County the Phase
of the Project being financed from the proceeds of such Additional Certificates;
(i) All construction to be financed from the proceeds of such Additional Certificates
shall either be performed pursuant to a construction contract or contracts between the Corporation
and a contractor or, where permitted by statute, shall be performed by the County by force
account or by its own staff. Each construction contract shall provide for a.guaranteed maximum
price for the construction to be performed thereunder, which price shall be in an amount clearly
available from the proceeds of said Additional Certificates and any other moneys legally available
therefor; and
(j) If the proceeds of such Additional Certificates are to be used, in whole or in part,
to finance construction on real property not described in the Site Lease, (1) the Site Lease shall
have been amended so as to lease to the Corporation such additional real property; and (2) the
Facility Lease shall have been amended so as to lease to the County such additional real property.
In addition,before any Additional Certificates shall be executed and delivered, there shall be filed
with the Trustee an opinion of nationally recognized bond counsel to the effect that, among other things,
the execution and delivery of the related amendment to the Facility Lease and the related Supplemental
Trust Agreement, when duly executed by the County and the Corporation, will be valid and binding
obligations of the County.
Additional Certificates will be secured on a parity basis with the 1996 Certificates. Failure to pay
any Base Rental Payment because of damage or destruction to, or failure to complete construction of, a
Subsequent Phase of the Project financed with the proceeds of Additional Certificates, could result in a
proportionate default in payment of the 1996 Certificates.
Insurance
The Facility Lease requires the County to maintain or cause to be maintained,throughout the term
of the Facility Lease (but during the period of construction of any Phase of the Project only if such
insurance is not provided by a contractor under a construction contract as required by the Facility Lease),
insurance against loss or damage to any structures constituting any part of the Project by fire and
lightning, with extended coverage insurance, vandalism and malicious mischief insurance and sprinkler
17000\00219\43405.4 21
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system leakage insurance. Such extended coverage insurance shall, as nearly as practicable, cover loss
or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are
normally covered by such insurance. Such insurance shall be in an amount equal to the replacement cost
(without deduction for depreciation) of all structures constituting any part of the Project, excluding the
cost of excavations, of grading and filling, and of the land (except that such insurance may be subject to
deductible clauses for any one loss of not to exceed $5,000), or in the alternative, shall be in an amount
and in a form sufficient (together with moneys in the Certificate Reserve Fund), in the event of total or
partial loss, to enable all Certificates then Outstanding to be prepaid.
In the event of any damage to or destruction of any part of the Project caused by the perils
covered by such insurance, the Corporation, except as hereinafter provided, shall cause the proceeds of
such insurance to be utilized for the repair, reconstruction or replacement of the damaged or destroyed
portion of the Project, to at least the same condition as they were in prior to the damage or destruction,
insofar as the same may be accomplished by the use of said proceeds. The Trustee shall hold such
proceeds in the Insurance and Condemnation Fund and shall permit withdrawals upon written request for
such purposes. Any balance of said proceeds not required for such repair, reconstruction or replacement
shall be treated by the Trustee as Base Rental Payments. Alternatively, the Corporation, at its option,with
the written consent of the County, and if the proceeds of such insurance together with any other moneys
then available for the purpose are at least sufficient to prepay an aggregate principal amount represented
by Outstanding Certificates equal to the amount of Outstanding Certificates attributable to the portion of
the Project so destroyed or damaged (determined by reference to the proportion which the construction
cost of such portion of the Project bears to the construction cost of the Project), may elect not to repair,
reconstruct or replace the damaged or destroyed portion of the Project and thereupon shall cause said
proceeds to be used for the prepayment of Outstanding Certificates pursuant to the provisions of the Trust
Agreement.
The Corporation and the County covenant to promptly apply for federal disaster aid or State
disaster aid in the event that the Project is damaged or destroyed as a result of an earthquake occurring
at any time. Any proceeds received as a result of such disaster aid shall be used to repair, reconstruct,
restore or replace the damaged or destroyed portions of the Project, or, at the option of the County and
the Corporation, to prepay outstanding Certificates if such use of such disaster aid is permitted.
The Facility Lease requires the County to maintain or cause to be maintained,throughout the term
of the Facility Lease (but during the period of construction of any Phase of the Project only if such
insurance is not provided by a contractor under a construction contract as required by the Facility Lease),
rental interruption or use and occupancy insurance to cover loss,total or partial, of the rental income from
or the use of the Project as the result of any of the hazards covered by the fire and extended coverage
insurance required by the Facility Lease described in the preceding paragraphs, in an amount sufficient
to pay the part of the total rent attributable to the portion of the Project rendered unusable (determined
by reference to the proportion which the construction cost of such portion bears to the acquisition and
construction cost of the Project) for a period of at least two years, except that such insurance may be
subject to a deductible clause of not to exceed $1,000. Any proceeds of such insurance shall be used by
the Trustee to reimburse to the County any rental theretofore paid by the County under the Facility Lease
attributable to such structure for a period of time during which the payment of rental under the Facility
Lease is abated, and any proceeds of such insurance not so used shall be applied to pay Base Rental
Payments and Additional Payments.
As an alternative to providing the fire and extended coverage insurance and rental interruption
insurance,or any portion thereof, required by the Facility Lease,the County may provide a self insurance
17000\00219\43405.4 22
method or plan of protection if and to the extent such self insurance method or plan of protection shall
afford reasonable coverage for the risks required to be insured against, in light of all circumstances,giving
consideration to cost, availability and similar plans or methods of protection adopted by public entities in
the State other than the County(provided that, in the case of rental interruption insurance, a self insurance
fund shall be maintained and accounted for on a separate basis by the County and such self insurance fund
shall be fully funded). Before another method or plan may be provided by the County,there shall be filed
with the Trustee a certificate of an actuary, insurance consultant or other qualified person, stating that, in
the opinion of the signer, the substitute method or plan of protection is in accordance with the
requirements of the Facility Lease and, when effective, would afford reasonable coverage for the risks
required to be insured against(provided that, in the case of rental interruption insurance, such certificate
must state that the method or plan is fully funded). There shall also be filed a Certificate of the County
(as.defined in the Trust Agreement) setting forth the details of such substitute method or plan. In the
event of loss covered by any such self-insurance method, the liability of the County under the Facility
Lease shall be limited to the amounts in the self insurance reserve fund or funds created under such
method. The County is not planning to self-insure at this time although it may do so in the future.
The County is also required to obtain certain liability insurance coverage in protection of the
Corporation and the Trustee as described under "APPENDIX D - SUMMARY OF CERTAIN
PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS - Facility Lease."
RISK FACTORS
The following factors, along with the other information in this Official Statement, should be
considered by potential investors in evaluating the purchase of 1996 Certificates. However,the following
does not purport to be an exhaustive listing of risks and other considerations which may be relevant to
investing in the 1996 Certificates. In addition, the order in which the following information is presented
is not intended to reflect the relative importance of any such risks.
Full Faith and Credit Not Pledged
The obligation of the County under the Facility Lease does not constitute an obligation of the
Corporation or of the County for which the County is obligated to levy or pledge any form of taxation
or for which the County has levied or pledged any form of taxation. The obligation of the County to
make Base Rental Payments and Additional Payments does not constitute a debt or indebtedness of the
Corporation, the County, the State or any of its political subdivisions, within the meaning of any
constitutional or statutory debt limitation or restrictions.
Noncompletion of Project; Abatement
1
In the event the construction of any component of any Phase of the Project is not completed
within the time for which capitalized interest has been provided for such Phase, or in the event of loss or
substantial interference in the use and occupancy of the Demised Premises and the Project by the County
caused by damage or destruction or condemnation of the Project and the Demised Premises, Base Rental
Payments will be subject to abatement. In the event that the Project and the Demised Premises, if
damaged or destroyed by an insured casualty, could not be replaced during the period of time that
proceeds of the County's rental interruption insurance will be available in lieu of Base Rental Payments
plus the period for which funds are available from the Certificate Reserve Fund or the Lease Fund, or in
the event that casualty insurance proceeds or condemnation proceeds are insufficient to provide for
17000\00219\43405.4 23
complete repair or replacement of such component of the Project or prepayment of the Certificates, there
could be insufficient funds to make payments to Owners in full.
Because the Certificates will be secured on a parity basis, an abatement with respect to a
Subsequent Phase of the Project, if any, could result in a partial failure to make payments on the 1996
Certificates.
Cost Overruns; Construction Delays
There can be no assurance that construction of the Project will be completed within its estimated
budget or by its expected completion date. Pursuant to the Trust Agreement, Additional Certificates can
be executed and delivered upon compliance with certain conditions to pay the costs of completing the
Project, but there is no assurance that the County can cause the Trustee to execute and deliver Additional
Certificates. See"SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES -Additional
Certificates" herein. If the County is unable to take possession of the Project, the County will be under
no legal obligation to make Base Rental Payments with respect to the Project.
Limited Recourse on Default
If the County defaults on its obligations to make Base Rental Payments with respect to the Project,
the Trustee, as assignee of the Corporation, may (subject to the restrictions described below) retain the
Facility Lease and hold the County liable for all Base Rental Payments on an annual basis and will have
the right to re-enter and re-let the Project. In the event such re-letting occurs, the County will be liable
for any resulting deficiency in Base Rental Payments. Alternatively, the Trustee may terminate the
Facility Lease with respect to the Project and proceed against the County to recover damages pursuant to
the Facility Lease.
Due to the specialized nature of the Project, no assurance can be given that the Trustee will be
able to re-let any component of the Project so as to provide rental income sufficient to make principal and
interest payments with respect to the Certificates in a timely manner, and the Trustee is not empowered
to sell the Project for the benefit of the Owners of the Certificates. In addition, due to the governmental
function of the Project, it is not certain whether a court would permit the exercise of the remedies of
repossession and re-letting with respect thereto. Any suit for money damages would be subject to
limitations on legal remedies against counties in California, including a limitation on enforcement of
judgments against funds needed to serve the public welfare and interest.
No Acceleration Upon Default
If the County defaults on its obligations to make Base Rental Payments, the Trustee may have
limited ability to re-let the Project so as to preserve the tax exempt nature of the interest component of
the Base Rental Payments and the Certificates. In the event of a default, there is no available remedy of
acceleration of the total Base Rental Payments due over the term of the Facility Lease. The County will
only be liable for Base Rental Payments on an annual basis, and the Trustee would be required to seek
a separate judgment in each fiscal year for that fiscal year's rental payments.
No Liability of Corporation to the Owners
Except as expressly provided in the Trust Agreement, the Corporation shall not have any
obligation or liability to the Owners of the Certificates with respect to the payment when due of the Base
17000\00219\43405.4 24
Rental Payments by the County, or with respect to the performance by the County of other agreements
and covenants required to be performed by it contained in the Facility Lease or the Trust Agreement, or
with respect to the performance by the Trustee of any right or obligation required to be performed by it
contained in the Trust Agreement.
Effect of Termination of Facility Lease on Transfer of Certificates and Tax Exemption
No opinion has been rendered with respect to the applicability of the registration requirements of
the Securities Act of 1933, as amended, to any Certificate subsequent to termination of the Facility Lease
due to an Event of Default. If the Facility Lease is terminated following a default, no assurance can be
given that the Certificates may be transferred by their owner without compliance with the registration
provisions of the Securities Act of 1933, as amended, or that an exemption from such provisions will be
available.
No opinion has been rendered as to the treatment for federal or State of California income tax
purposes of any moneys received by an Owner of Certificates subsequent to a termination of the Facility
Lease due to an Event of Default. No assurance can be given that any moneys received by the Owners
of such Certificates subsequent to such event will be excluded from gross income for federal income tax
purposes or exempt from State of California personal income taxes.
Risk of Earthquake
There are several earthquake faults in the greater San Francisco bay area that potentially could
result in damage to buildings, roads, bridges, and property within the County in the event of an
earthquake. Past experiences, including the 1989 Loma Prieta earthquake, have resulted in minimal
damage to the infrastructure and property in the County. Earthquake faults that could affect the County
are the San Andreas and Hayward Faults west of the County and the Calaveras Fault within portions of
the County. The Facility Lease does not require the County to maintain insurance on the Project against
certain risks such as earthquakes. The Project will be constructed to meet or exceed applicable earthquake
requirements. If the Project were damaged or destroyed due to earthquake or flood or other catastrophic
events which are not covered under the hazard or rental interruption insurance required by the Facility
Lease, an abatement of Base Rental Payments would likely occur and continue until the Project was
repaired or replaced. See "SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES -
General" above.
Factors Affecting the Health Care Industry
General. The viability of the County Hospital and its services may have a direct bearing on the
practical ability of the Trustee to pursue remedies under the Trust Agreement and the Facility Lease,
including but not limited to the ability of the Trustee to reenter the Project and the Demised Premises and
relet them. Competition from other hospitals now or hereafter located in the service area of the County
Hospital may adversely affect the revenues or value of the County Hospital. Adoption of legislation that
could establish rate setting agencies with statutory control over hospitals and jurisdictions without such
controls may adversely affect the County Hospital.
Thus, factors affecting the County Hospital and the health care industry in general may
significantly impact the ability, or practicality, of the Trustee electing to reenter and relet the Project and
the Demised Premises in the event of default by the County under the Facility Lease.
17000\00219\43405.4 25
Federal and State Legislation. The County Hospital is subject to federal regulatory actions and
legislative and policy changes by those governmental and private agencies that administer Medicare and
Medi-Cal (Medicaid) programs and other third party payors, and actions by, among others, the Joint
Commission on Accreditation of Healthcare Organizations, and other federal, State and local government
agencies. There can be no assurance that such agencies and legislative bodies will not make regulatory,
or legislative policy changes that could adversely affect the County Hospital's utilization of its health
facilities or its ability to generate revenues, including a reduction or elimination of supplemental
reimbursements paid to the County under SB 1732.
Legislation or regulatory actions have been enacted;proposed, or discussed which would, among
other things:
• Reduce Significantly the Overall Level of Medicare Reimbursement. In an effort to
balance the federal budget by 2002, Congress passed a budget compromise that would
have resulted in significant reductions in Medicare spending, including reductions in
hospital prospective payment system rates, capital reimbursement payments, as well as
disproportionate share payments. This measure was vetoed by President Clinton on
December 6, 1995, without sufficient Congressional votes to override the veto. As a
result, calendar year 1995 ended without a federal budget for the following year. It is
unclear to what extent the final federal budget will impact Medicare spending. However,
it is anticipated that the budget will call for significant cuts which could have a material
adverse impact on the financial results of the County Hospital.
In addition, the Medicare program provides additional payment for hospitals that serve a
disproportionate share of indigent patients, such as the County Hospital. There can be no
assurance that payments for disproportionate share will not be decreased or eliminated in
the future. As noted above, efforts to balance the federal budget are likely to result in
reductions in such reimbursement.
• Reduce Medicaid Funding and/or Federal Shift Funding for Medicaid to Block Grants
to the States. Medicaid is a program of medical assistance,funded jointly by the federal
government and the states, for certain needy individuals and their dependents. Under
Medicaid, the federal government provides grants to states that have medical assistance
programs that are consistent with federal standards. As described above in relation to the
Medicare program and SB 1732, the Medi-Cal program also provides additional
reimbursement for disproportionate share hospitals, of which the County Hospital is one.
The federal budget impasse described above with respect to the Medicare program has
also resulted in uncertainty with respect to rates of Medicaid spending. Although it
remains unclear at this time, it is anticipated the final federal budget will result in
significant decreases in Medicaid spending which could result in a reduction in federal
disproportionate share payments and have a material adverse impact on the revenues of
the County Hospital.
• Reduce State Medi-Cal Funding. Although California's current fiscal year began on
July 1, 1995, the State Legislature failed to pass a budget resolution prior to such date.
Accordingly, the State began its 1995-1996 fiscal year without a final budget. The
Legislature's failure to adopt a State budget resulted in delays in State payments to
vendors and providers of Medi-Cal services. If the County Hospital experiences such
17000\00219\43405.4 26
J12
delays in the future from future budget impasses, there could be a significant negative
impact on the County Hospital's cash flow until such payments are received.
[In addition, as part of the State budget negotiations, the California Legislature has
considered amending the Medi-Cal program to require the provision of subacute care
services to Medi-Cal beneficiaries whose conditions no longer require the intensity of
acute care hospital services. If such amendments are implemented, the Legislature
anticipates that the number of Medi-Cal inpatient hospital days experienced throughout
the State will decrease and the State will save approximately$30 million in the first fiscal
year such amendments are effective. At this time, the financial impact such amendments
will have on the County Hospital is unclear and will likely vary based on the County
Hospital's ability to provide subacute care services to Medi-Cal beneficiaries for a cost
below that which is necessary to provide acute care services.]
It is likely that Congress and the State Legislature will continue to reduce outlays for the
Medicare and Medi-Cal programs, respectively. Accordingly, in addition to the above
amendment, the California Legislature may, in the future, consider other provisions that
would result in reductions in payments to Medi-Cal providers with respect to various
services covered by the Medi-Cal program. It is also possible that these programs will
be the subject of cost reduction and payments experimentation, probably involving
managed care. Healthcare reform may consolidate Medi-Cal programs into one or more
broad-based programs, and the effect of such consolidation is uncertain.
• Expand Managed Care Initiatives. In August 1993, the State of California announced
its intention to move large numbers of Medi-Cal beneficiaries into managed care payment
systems, with the goal of doubling the number of Medi-Cal beneficiaries enrolled in
managed care by 1995. Currently, the State of California anticipates that approximately
50% of the Medi-Cal population will be enrolled in health maintenance organizations
("HMOs") by June 1996. The initiative is intended to increase Medi-Cal beneficiaries'
access to primary care, thus reducing the use of hospital emergency rooms for ambulatory
care and reducing inpatient hospitalizations.
The State of California has initially designated twelve counties for managed care
expansion[, including Contra Costa County.] During or after the implementation of the
State of California's managed care plans, Medi-Cal payments to participating hospitals
may be capitated so that the hospitals receive a predetermined, periodic rate for each
Medi-Cal beneficiary. In effect, this payment methodology will transfer economic risk
for the cost of a patient's care to the provider. The economic risk will depend on the
number of Medi-Cal program beneficiaries involved in a particular area, their health
status, the amount of the capitation payment, reinsurance levels and potentially other
factors. These Medi-Cal risk contracts could prove beneficial to hospital providers by
increasing the aggregate Medi-Cal hospital payment over current rates. However, it is
also possible that they will have the effect of reducing total payments and thus negatively
affect a participant hospital's financial condition. Until the details and extent of the
proposed Medi-Cal managed care program are known, the County cannot determine the
potential impact of these changes on the County Hospital.
• Reduce or Eliminate Maintenance of Effort Requirements. Historically, counties have
been required by State law to provide health care for the uninsured as well as jailed
17000\00219\43405.4 27
inmates. Recent State legislation (SB 681) has allowed counties to put a ceiling on their
maintenance of effort expenditures, potentially forcing these counties to restrict indigent
access to emergency services. Other proposed bills would make it entirely discretionary
for counties to provide health care to the indigent and uninsured. If enacted, these bills
could have the effect of eliminating the maintenance of effort requirement and allowing
counties to significantly cut back on their health care expenditures. Any significant
change in the health care delivery policies could, among other effects, adversely affect the
availability of disproportionate share funding such as SB 1732.
Other legislative or regulatory action might include:
• Establish a national health insurance program pursuant to which hospitals may enter into
an agreement with a designated state agency to provide services to individuals eligible for
program benefits;
• Set new standards for medical staff peer review, potentially increasing hospital exposure
to litigation and/or liability regarding medical staff disputes;
• Prohibit many hospital-physician joint business ventures which are typical of the health
care industry, and limit the permissibility of many other hospital-physician employment,
contractual and business relationships;
• Effectively reintroduce a new federally mandated health planning process through which
capital improvements would require more extensive government approval;
• Prohibit patient referral arrangements between physicians and providers in which referring
physicians have certain financial interests;
• Increase the probability of labor union organization and activity in the health care
industry;
• Restrict rate increases by private hospitals; and
• Impose provider taxes on hospitals at the federal or state level.
Because of the many possible financial effects that could result from enactment of any bills or
regulatory actions proposing to regulate the health care industry, it is not possible at this time to predict
with assurance the effect of such bills or regulatory actions, if any, on the business of the County Hospital.
There can be no assurance that the County Hospital (or its value to the Trustee in the exercise of its
remedies in the event of default) will not be materially adversely affected by these bills or regulatory
actions.
Hazardous Substances
Owners and operators of real property may be required by law to remedy conditions of the
property relating to releases or threatened releases of hazardous substances. The federal Comprehensive
Environmental Response,Compensation and Liability Act of 1980, sometimes referred to as "CERCLA"
or the "Superfund Act," is the most well known and widely applicable of these laws, but California laws
with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner
17000\00219\43405.4 28
C.�z
(or operator) is obligated to remedy a hazardous substance condition of property whether or not the owner
(or operator)has anything to so with creating or handling the hazardous substance. Further, such liabilities
may arise not simply from the existence of a hazardous substance but from the method of handling it.
All of these possibilities could significantly and adversely affect the operations and finances of the County
Hospital.
The County, which has owned the site of the Project for approximately 120 years, knows of no
existing hazardous substances which require remedial action on or near the Demised Premises. However,
it is possible that such substances do currently or potentially exist and that the County is not aware of
them. The Project budget includes a remaining contingency of over $ for any such remediation.
See "THE PROJECT."
Book-Entry System
Beneficial Owners of the 1996 Certificates may experience some delay in the receipt of
distributions of principal of and interest represented by the 1996 Certificates since such distributions will
be forwarded by the Trustee to DTC and DTC will credit such distributions to the accounts of the
Participants which will thereafter credit them to the accounts of the Beneficial Owners either directly or
indirectly through indirect Participants. Neither the Corporation,the County nor the Trustee will have any
responsibility or obligation to assure that any such notice or payment is forwarded by DTC to any
Participants or by any Participant to any Beneficial Owner.
In addition, since transactions in the 1996 Certificates can be effected only through DTC
Participants, indirect participants and certain banks, the ability of a Beneficial Owner to pledge 1996
Certificates to persons or entities that do not participate in the DTC system, or otherwise to take actions
in respect of such 1996 Certificates, may be limited due to lack of a physical certificate. Beneficial
Owners will not be recognized by the Trustee as registered Owners for purposes of the Trust Agreement,
and Beneficial Owners will be permitted to exercise the rights of registered Owners only indirectly through
DTC and the Participants. See "THE 1996 CERTIFICATES - Book-Entry System."
CONSTITUTIONAL AND STATUTORY LINIITATIONS ON
TAXES AND APPROPRIATIONS
Article XIIIA of the California Constitution
In 1978 California voters approved Proposition 13, adding Article XIIIA to the California
Constitution. Article XIIIA was subsequently amended in 1986, as discussed below. Article XIIIA 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.
Article XIIIA defines full cash value to mean "the county assessor's valuation of real property as shown
on the 1975/76 tax bill under "full cash" or thereafter, the appraised value of real property when
purchased, newly constructed, or a change in ownership have 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 XIIIA has subsequently 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, to provide that
17000\00219\43405.4 29
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there would be no increase in the "full cash value" base in the event of reconstruction of property damaged
or destroyed in a disaster.
Legislation Implementing Article XIIIA
Legislation has been enacted and amended a number of times since 1978 to implement Article
XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax(except
to pay voter-approved indebtedness). The 1% property tax is automatically levied by the county and
distributed according to a formula among taxing agencies. The formula apportions the tax roughly in
proportion to the relative shares of taxes levied prior to 1979.
Increases of assessed valuation resulting from reappraisals of property due to new construction,
change in ownership or from the 2% annual adjustment are allocated among the various jurisdictions in
the "taxing area" based upon their respective "situs." Any such allocation made to a local agency
continues as part of its allocation in future years.
Article XIIIB of the California Constitution
On October 6, 1979, California voters approved Proposition 4, known as the Gann Initiative,
which added Article XIIIB to the California Constitution. Propositions 98 and 111, approved by the
California voters in 1988 and 1990, respectively, substantially modified Article XIIIB. The principal
effect of Article XIIIB 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
XIIIB provided that the "base year' for establishing an appropriations limit was the 1978/79 fiscal year,
which was then adjusted annually to reflect changes in population, consumer prices and certain increases
in the cost of services provided by these public agencies. Proposition 111 revised the method for making
annual adjustments to the appropriations limit by redefining changes in the cost of living and in
population. It also required that beginning in fiscal year 1990/91 each appropriations limit must be
recalculated using the actual 1986/87 appropriations limit and making the applicable annual adjustments
as if the provisions of Proposition 111 had been in effect.
Appropriations subject to limitations of a local government under Article XIIIB 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 XIIIB 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 XIIIB 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 XIIIB 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.The County
17000\00219\43405.4 30
is of the opinion that debt service on the Certificates and capital outlays for the Project are excluded from
the limits imposed by Proposition 111.
The County's Article XIIIB limit for the 1994/95 Fiscal Year budget was $1,066,956,669, and
1995/96 Fiscal Year budget appropriation subject to limitations are expected to be approximately
$153,070,763. For Fiscal Year 1995/96, the County therefore anticipates that it will be under its limit by
$1,251,654,728. The County has never exceeded its Article XIIIB appropriations limit.
The Corporation's payments with respect to the Certificates are not subject to an appropriations
limit.
Proposition 62
On September 28, 1995, the California Supreme Court affirmed the lower court decision in Santa
Clara County Local Transportation Authority v. Guarding (the "Santa Clara Case"). The action held
.invalid a half-cent sales tax to be levied by the Santa Clara County Local Transportation Authority
because it was approved by a majority but not two-thirds of the voters in Santa Clara County voting on
the tax. The California Supreme Court decided the tax was invalid under Proposition 62, a statutory
initiative adopted at the November 4, 1986 election that (a) requires that any new or higher taxes for
general governmental purposes imposed by local governmental entities be approved by a majority vote
of the voters of the governmental entity voting in an election on the tax, (b) requires that any special tax
(defined as taxes levied for other than general governmental purposes) imposed by a local governmental
entity be approved by a two-thirds vote of the voters of the governmental entity voting in an election on
the tax, (c) restricts the use of revenues from a special tax to the purposes or for the service for which the
special tax was imposed, (d) prohibits the imposition of ad valorem taxes on real property by local
governmental entities except as permitted by Article XIII A of the California Constitution, (e) prohibits
the imposition of transaction taxes and sales taxes on the sale of real property by local governmental
entities, (f) required that any tax imposed by a local governmental entity on or after August 1, 1985 be
ratified by a majority vote of the voters voting in an election on the tax within two years of November 5,
1986 or be terminated by November 15, 1988 and (g) requires a reduction of ad valorem property taxes
allocable to the jurisdiction imposing a tax not in compliance with its provisions equal to one dollar for
each dollar of revenue attributable to the invalid tax, for each year that the tax is collected.
In deciding the Santa Clara Case on Proposition 62 grounds, the Court disapproved the decision
in City of Woodlake v. Logan, 230 Cal.App.3d 1058 (1991) ("Woodlake"), where the Court of Appeal
had held portions of Proposition 62 unconstitutional as a referendum on taxes prohibited by the California
Constitution. The California Supreme Court determined that the voter approval requirement of
Proposition 62 is a condition precedent to the enactment of each tax statute to which it applies, while
referendum refers to a process invoked only after a statute has been enacted. Numerous taxes to which
Proposition 62 would apply were imposed or increased without any voter approval in reliance on
Woodlake. The Court noted as apparently distinguishable, but did not confirm, the decision in Cily of
Westminster v. County of Orange, 204 Cal.App.3d 626 (1988), that held unconstitutional the section of
Proposition 62 requiring voter approval of taxes imposed during the "window period" of August 1, 1985
until November 5, 1986. Proposition 62 as an initiative statute does not have the same level of authority
as a constitutional initiative, but is akin to legislation adopted by the State Legislature.
The County does not believe that it has enacted any "tax"which would be rendered invalid under
Proposition 62 or otherwise require voter ratification.
17000\00219\43405.4 31
Future Initiatives
Article XIIIA, Article XIIIB and Proposition 62 were adopted as measures that qualified for the
ballot through California's initiative process. From time to time other initiative measures could be
adopted, further affecting the County's revenues.
THE CORPORATION
The Corporation was organized on November 12, 1981, as a nonprofit public benefit corporation
pursuant to the Nonprofit Public Benefit Corporation Law of the State of California(Title 1, Division 2,
Part 2 of the California Corporations Code). The Corporation's principal place of business is in the
County.
Powers and Purposes
The purpose of the Corporation is to provide financial assistance to the County by financing the
acquisition, construction, improvement and remodeling of public buildings and facilities and the
acquisition of equipment for the County and for the Contra Costa County Board of Education, together
with parking, site development, landscaping, utilities, equipment, furnishings, improvements and all
appurtenant and related facilities.
Under its Articles of Incorporation, the Corporation has all powers conferred upon nonprofit public
benefit corporations by the laws of the State of California, with the limitation that the Corporation shall
never engage in any activity.other than such activities as may be incidental to the purpose of carrying out
the primary purpose for which the Corporation was formed.
Organization .
The Corporation functions as an independent entity. The Board of Directors that governs the
Corporation consists of five persons who are approved by the County and who receive no compensation.
The Corporation has no employees. All staff work is performed by the County.
Financial Statements
A copy of the Corporation's latest financial statements will be provided upon request directed to:
Contra Costa County, County Administrator, 651 Pine Street, Martinez, California 94553.
17000\00219\43405.4 32
THE COUNTY
Contra Costa County was incorporated in 1850 as one of the original 27 counties of 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 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 Suisun and San Pablo Bays. The western and northern
shorelines are highly industrialized, while the interior sections are suburban/residential, commercial and
light industrial.
The County has a general law form of government. A five-member Board of Supervisors, each
of whom is elected to a four-year term, serves as the county's legislative body. Also elected are the
County Assessor, Auditor-Controller, Clerk-Recorder, District Attorney-Public Administrator, Sheriff-
Coroner and Treasurer-Tax Collector. A County Administrative Officer appointed by the Board of
Supervisors runs the day-to-day business of the County.
For certain economic, demographic and financial information with respect to the County, see
Appendix A - "GENERAL COUNTY, ECONOMIC AND DEMOGRAPHIC INFORMATION,"
Appendix B - "COUNTY FINANCIAL INFORMATION" and Appendix C - "FINANCIAL
STATEMENTS OF THE COUNTY FOR THE FISCAL YEAR ENDED JUNE 30, 1995."
RATINGS
The 1996 Certificates are rated "_" by Moody's Investors Service and "_" by Standard &
Poor's Corporation. Such ratings reflect only the views of such rating agencies. An explanation of the
significance of such ratings may be obtained from the rating agency furnishing the same at the following
addresses: Moody's Investors Service, 99 Church Street, New York, New York 10007; Standard &
Poor's Corporation, 25 Broadway, New York, New York 10004. There is no assurance that such ratings
will continue for any given period of time or that they will not be revised downward or withdrawn entirely
by the rating agencies if, in the judgment of such rating agencies, circumstances so warrant. Any such
downward revision or withdrawal of such ratings may have an adverse effect on the market price of the
1996 Certificates.
LITIGATION
At the time of delivery of and payment for the 1996 Certificates, the County and the Corporation
will each certify that there is no action, suit, litigation, inquiry or investigation before or by any court,
governmental agency, public board or body served, or to the best knowledge of the County or the
Corporation threatened, against the County or the Corporation in any material respect affecting the
existence of the County or the Corporation or the titles of their officers to their respective offices or
seeking to prohibit, restrain or enjoin the sale, execution or delivery of the 1996 Certificates, the Trust
Agreement, the Facility Lease, the Assignment Agreement, the Site Lease or the payment of Base Rental
Payments or challenging, directly or indirectly, the proceedings to lease the Project from the Corporation.
The County does not have any major claim pending against it. The aggregate amount of the
uninsured liabilities of the County which may result from all claims will not, in the opinion of the County,
17000\00219\43405.4 33
CL I j/
materially affect the County's finances or impair its ability to make Base Rental Payments under the
Facility Lease.
TAX MATTERS
In the opinion of Orrick, Herrington & Sutcliffe and Pamela S. Jue, Attorney at Law, Co-Special
Counsel, based on existing laws, regulations, rulings and court decisions,the portion of each Base Rental
Payment designated as and constituting interest paid by the County under the Facility Lease and received
by the Owners of the 1996 Certificates is excluded from gross income for federal income tax purposes
under Section 103 of the Internal Revenue Code of 1986 (the "Code") and is exempt from State of
California personal income taxes. A complete copy of the proposed form of opinion of Co-Special
Counsel is set forth in Appendix E hereto.
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 that represented by the
1996 Certificates. The County has covenanted to comply with certain restrictions designed to assure that
the interest portion of each Base Rental Payment will not be included in federal gross income. Failure
to comply with these covenants may result in the interest portion of each Base Rental Payment being
included in federal gross income, possibly from the date of issuance of the 1996 Certificates. The opinion
of Co-Special Counsel assumes compliance with these covenants. Co-Special 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 1996 Certificates may affect the tax status of the interest
portion of any Base Rental Payment.
Co-Special Counsel,is further of the opinion that the interest portion of each Base Rental Payment
is not a specific preference item for purposes of the federal individual or corporate alternative minimum
taxes. Co-Special Counsel observes, however, that such interest with respect to the 1996 Certificates is
included in adjusted current earnings when calculating corporate alternative minimum taxable income.
Certain agreements,requirements and procedures contained or referred to in the Trust Agreement,
Facility Lease and other relevant documents may be changed and certain actions (including, without
limitation, defeasance of the Facility Lease)may be taken or omitted,under the circumstances and subject
to the terms and conditions set forth in such documents, upon the advice or with the approving opinion
of nationally recognized bond counsel. Co-Special Counsel expresses no opinion as to any 1996
Certificate or the interest portion of any Base Rental Payment if any such change occurs or action is taken
upon the advice or approval of counsel other than Co-Special Counsel.
Although Co-Special Counsel has rendered an opinion that the interest portion of each Base Rental
Payment paid by the County under the Facility Lease and received by the Owners of the 1996 Certificates
is excluded from federal gross income,the ownership or disposition of the 1996 Certificates, or the accrual
or receipt of such interest, may otherwise affect a 1996 Certificate Owner's tax liability. The nature and
extent of these other tax consequences will depend upon the 1996 Certificate Owner's particular tax status
and the 1996 Certificate Owner's other items of income or deduction. Co-Special Counsel expresses no
opinion regarding any such other tax consequences.
17000\00219\43405.4 34
LEGAL MATTERS
Orrick, Herrington & Sutcliffe, San Francisco, California, and Pamela S. Jue, Attorney at Law,
San Francisco, California, Co-Special Counsel, will render an opinion with respect to the validity of the
County's obligations under the Facility Lease. Copies of such approving opinion will be available at the
time of delivery of the 1996 Certificates. Co-Special Counsel undertake no responsibility to the purchasers
of the 1996 Certificates for the accuracy, completeness, or fairness of this Official Statement. Certain
legal matters will be passed upon for the Underwriters by Brown & Wood, San Francisco, California.
The form of the legal opinion proposed to be delivered by Co-Special Counsel is included as Appendix E
to this Official Statement.
CONTINUING DISCLOSURE
The County will undertake all responsibilities for any continuing disclosure to Owners of the 1996
Certificates as described below.
The County and the Trustee will enter into a Continuing Disclosure Agreement, to be dated the
date of delivery of the 1996 Certificates (the "Continuing Disclosure Agreement"), which provides for
certain disclosure obligations on the part of the County. Under the Continuing Disclosure Agreement, the
County will covenant for the benefit of Owners and Beneficial Owners of the 1996 Certificates to provide
certain financial information and operating data relating to the County by not later than 270 days after the
end of its fiscal year (which fiscal year currently ends on June 30), commencing with the report for the
fiscal year ending June 30, 1996(the "Annual Report"),and to provide notices of the occurrence of certain
enumerated events (the "Listed Events"), if material. The Annual Report will be filed with. each
Nationally Recognized Municipal Securities Information Repository and with any then-existing State
Repository for the State of California (collectively, the "Repositories"). Currently, there is no State
Repository for the State of California. The notices of material events will be filed with the Repositories.
These covenants will be made in order to assist the Underwriters in complying with the Rule. For a form
of the Continuing Disclosure Agreement, see Appendix F - "Form of Continuing Disclosure Agreement."
VERIFICATION OF MATHEMATICAL COMPUTATIONS
The accuracy of(a) the mathematical computations of the adequacy of the maturing principal of
and interest earned on the direct obligations of the United States of America to provide for (i) the
payment, when due, of the principal and interest with respect to the 1992 Current Interest Certificates to
and including November 1, 2002, (ii) the prepayment of the 1992 Current Interest Certificates on
November 1, 2002 at a prepayment price equal to the principal amount of the 1992 Current Interest
Certificates then outstanding plus a prepayment premium of 2% of such principal amount, and (iii) the
payment, when due, of the principal and Accreted Interest with respect to the 1992 Capital Appreciation
Certificates and (b) the mathematical computations of the actuarial yield on such direct obligations and
on the 1996 Certificates, which computations support the conclusion by Co-Special Counsel that the 1996
Certificates are not "arbitrage bonds" under Section 148 of the Code will be verified by Causey Demgen
& Moore, Inc., independent accountants.
17000\00219\43405.4 35
UNDERWRITING
The 1996 Certificates are to be purchased by Smith Barney,BA Securities,Inc., and Bear, Stearns
& Co. Inc. (collectively, the "Underwriters"). The Underwriters have agreed, subject to certain terms and
conditions set forth in the Contract of Purchase, to purchase the 1996 Certificates at a price of
$ (equal to the principal amount of the 1996 Certificates less the Underwriters' discount and
the original issue discount), plus accrued interest. The Underwriters will purchase all of the 1996
Certificates if any are purchased. The 1996 Certificates may be offered and sold to certain dealers
(including dealers depositing,said 1996 Certificates into investment trusts)and others at prices lower than
the initial public offering price, and the public offering price may be changed from time to time by the
Underwriters.
MISCELLANEOUS INFORMATION
References are made herein to certain documents and reports which are brief summaries thereof
which do not purport to be complete or definitive and reference is made to such documents and reports
for full and complete statements of the contents thereof.
17000\00219\43405.4 36
Any statements in this Official Statement involving matters of opinion, whether or not expressly
so stated, are intended as such and not as representations of fact. This Official Statement is not to be
construed as a contract or agreement between the County and the purchasers or Owners of any of the 1996
Certificates.
The execution and delivery of this Official Statement has been duly authorized by the County.
COUNTY OF CONTRA COSTA
Philip J. Batchelor
County Administrator
By:
Deputy County Administrator
17000\00219\43405.4 37
APPENDIX A
GENERAL COUNTY, ECONOMIC AND DEMOGRAPHIC INFORMATION
General
Contra Costa County (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 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 Suisun and San Pablo
Bays. The western and northern shorelines are highly industrialized, while the interior sections are
suburban/residential, commercial and light industrial.
A large part of the interior of the County is served by the Bay Area Rapid Transit District
('BART"),a situation that has encouraged the expansion of both residential and commercial development.
In addition, economic development along the Interstate 680 corridor in the County has been so substantial
that three cities-- Concord, Walnut Creek and San Ramon-- placed among the top four cities accounting
for the greatest percentage increases in jobs in the entire Bay Area from 1985 through 1990.
County Government
The County has a general law form of government. A five-member Board of Supervisors, each
of whom is elected to a four-year term, serves as the county's legislative body. Also elected are the
County Assessor, Auditor-Controller, Clerk-Recorder, District Attorney-Public Administrator, Sheriff-
Coroner and Treasurer-Tax Collector. A County Administrative Officer appointed by the Board of
Supervisors runs the day-to-day business of the County.
Population
The County's population grew 21.5 percent during the 1980's, a moderate acceleration from the
17.7 percent growth rate achieved in the decade of the 1970's. The County's population growth ranked
first among the nine Bay Area counties for the 1980- 1990 period and was slightly below the 24.9 percent
growth rate for the entire State of California.
As detailed in the table below, population growth within the County was positive during the
1980's in every city except Orinda. Cities experiencing the strongest growth include Hercules,
Brentwood, Clayton, Antioch, Pleasant Hill, San Ramon and Martinez. Population growth in Concord,
the County's largest city, was relatively static by comparison during the 1980's.
Of particular significance is the population increases in the western portion of the County,
particularly in Pinole, Richmond and San Pablo. Each of these older cities experienced population
declines during the 1970's, but a number of factors have gradually reversed the population erosion. The
availability of rapid transit, close proximity to the major employment hubs in San Francisco and Oakland,
and relatively affordable existing and new housing have combined to attract more residents to these cities.
The unincorporated regions of the County registered a 17.8 percent increase in population during
the 1980's after having dropped by 21.2 percent during the 1970's.
17000\00219\43411.3 A-1
The California State Department of Finance reported that the County's population stood at 883,400
as of January 1995, an increase of 10 percent since 1990. The strongest growth is concentrated in the
eastern portions of the County, particularly in Clayton, Antioch and Brentwood, although strong growth
was noted in Hercules and Richmond in the western part of the County.
County of Costa Contra
Population(')
Special
Census
1960 1970 1975 1980 1990 1995
Antioch 17,305 28,060 33,215 42,683 60,900 74,900
Brentwood 2,186 2,649 3,662 4,434 7,500 11,850
Clayton -- 1,385 1,790 4,325 7,150 8,950
Concord 36,208 85,164 94,673 103,763 110,900 114,500
Danville' -- -- -- 26,143 31,200 36,550
El Cerrito 25,437 25,190 22,950 22,731 22,850 23,800
Hercules . 310 252 121 5,963 16,400 19,050
Lafayette -- 20,484 19,628 20,837 23,450 24,100
Martinez 9,604 16,506 18,702 22,582 31,700 35,900
Moraga -- 14,205 14,418 15,014 15,850 16,650
Orinda -- -- -- 17,070 16,650 17,250
Pinole 6,064 15,850 15,337 14,253 17,000 18,550
Pittsburg 19,062 20,651 24,347 33,465 47,250 51,600
Pleasant Hill -- 24,610 25,398 25,547 31,550 32,250
Richmond 71,584 79,043 70,126 74,676 86,600 93,000
San Pablo 19,687 21,461 19,392 19,750 25,000 26,600
San Ramon' -- -- -- 20,511 35,100 40,900
Walnut Creek 9,903 39,844 46,034 54,033 60,400 63,400
Unincorporated 191,680 163,035 173,036 128,551 150,100 173,600
Total 409,030 558,389 582,829 656,331 797,600 883,400
California 15,717,204 18,136,045 21,185,000 23,668,145 28,558,000 32,344,000
Totals may not equal sums due to independent rounding.
Dates of incorporation: Danville(7/1/82); Orinda(7/1/85); San Ramon (7/1/83). The 1990 Census Report
created 1980 population levels for these cities prior to official incorporation.
Source: United States Census: 1960-1990; State Department of Finance: 1995
Industry and Employment
The County has one of the fastest-growing work forces among Bay Area counties, 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. The combined impact of population growth and
immigration has resulted in significant job creation in the County, with the job base having grown 50
percent since 1980. Due to the recent economic recession in California, however, the County's wage and
salary job base fell by 1,800 jobs in 1993.
17000\00219\43411.3 A-2
As shown below, the County's labor force stood at 449,100 in 1994. With average 1994
unemployment rates of 6.4 percent and 8.6 percent 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.
County of Contra Costa
Employment and Unemployment of
Resident Labor Force
Wage and Salary Workers by Industry
Annual Averages (in thousands)
1990 1991 1992 1993 1994
Civilian Labor Force(l) 442.6 435.6 436.0 440.0 449.1
Employment 425.5 412.0 409.8 410.9 420.5
County Unemployment 17.1 23.6 26.2 29.1 28.6
Unemployment Rate:
County 3.9% 5.4% 6.0% 6.6% 6.4%
State of California 5.5% 7.5% 8.5% 9.2% 8.6%
Wage and Salary Employment(2) 1990 1991 1992 1993 1994
Agriculture 1.3 1.2 1.3 1.3
Mining and Construction 24.2 21.2 19.6 19.8
Manufacturing 31.7 31.1 30.1 27.3
Transportation and Public Utilities 20.0 20.0 18.6 19.2
Wholesale Trade 11.1 11.0 11.0 10.6
Retail Trade 61.6 58.8 56.3 56.1
Finance, Insurance, and Real Estate 27.3 26.8 27.5 27.7
Services 77.3 78.2 78.5 80.2
Government 43.7 43.9 44.1 43.0
TOTAL(3) 298.2 292.2 287.0 285.2
(1) Based on place of residence. The data are benchmarked to 1994. Because of the redesign of the
current population survey,data for 1994 and later years are not comparable with prior years' data.
(2) Based on place of work.
(3) "Total" may not be precise due to independent rounding.
Source: State of California, Employment Development Department, Labor Market Information Division.
Major Employers
Major industries in the County include petroleum refining, steel manufacturing, prefabricated
metals, chemicals, electronic equipment, paper products, services and food processing. Most of the
County's heavy manufacturing is located along the County's northern boundary fronting on the Suisun
and San Pablo Bays leading to San Francisco Bay and the Pacific Ocean. Descriptions of major
employers in selected industries follow.
17000\00219\43411.3 A-3
Petroleum and Petroleum Products. The production of petroleum products formed the initial
basis of industrial development in the County. Currently, four companies manufacture products from
crude oil.
The largest in terms of capacity is Chevron Corporation's Richmond Refinery, which began
operations in 1902 and is the company's oldest and third-largest refinery. The Richmond refinery, located
on 3,000 acres, has a capacity of 365,000 barrels per day. The refinery produces a complete line of
petroleum products and imports the bulk of the crude oil from Alaska. Shipping facilities include the
company's own wharf, which is capable of handling four tankers at a time, making it the largest in the
Bay Area in terms of tonnage. Chevron operates a fleet of 37 tankers, of which seven are for intrastate
business. Petroleum products are also shipped by truck and by two railroad carriers as well as distributed
by pipeline. The company has completed construction of a $160 million natural-gas-fired cogeneration
plant to fulfill its own requirements for electricity and steam.
A number of Chevron's divisions are located throughout the County. Chevron Research and
Technology Company is in Richmond and is the only non-geological research arm of the company. This
facility is used by Chevron Research in its continuing program to improve the efficiency of conventional
auto, aircraft and marine fuels. Chevron Accounting Division is located in a 400,000 square foot building
in Concord and serves as a finance and computer center for Chevron's entire domestic operations. In
1987, a San Ramon facility was opened and houses 3,900 employees involved in computer, marketing,
consumer services and other administrative functions.
Chevron currently has the seventh largest worldwide workforce of any employer in the Bay Area
and is the largest employer in the County, reporting approximately 45,758 people on its worldwide
payrolls as of December, 1994. The company has nearly 10,000 employees located among its various
facilities in the County.
Shell Oil Company("Shell") began operating in.Martinez in 1915. The Shell Oil and Chemical
Martinez Manufacturing Complex, located on 1,100 acres, is a combined oil refinery and industrial
chemical production plant. It is one of three Shell facilities on the West Coast which supply all Shell
products to the western states. The complex currently has the capacity to process about 145,000 to
160,000 barrels of crude oil per day. About 70-80 percent of this crude oil is transferred via the
company's pipeline from California oil fields,while the remainder is shipped from Alaska. Shell's docking
facilities can handle two tankers and two barges simultaneously. Finished petroleum products are shipped
via a company owned pipeline, Southern Pacific Railroad's pipeline, and by rail car and truck. Shell is
in the construction phase of a $1 billion upgrade to the Martinez complex that will enable it to produce
cleaner burning gasoline in compliance with new federal and state laws.
Shell employees in the County total approximately 930, of whom approximately 880 work at the
Martinez complex and 50 work at a retail district office in Concord.
Union Oil Company("Unocal") operates an oil refinery at Rodeo between the cities of Richmond
and Martinez, and a distribution terminal for Northern California at Richmond. The oil refinery, which
began operations in 1896, occupies 1,100 acres and processes up to 100,000 barrels of raw materials per
day. There are 600 full-time employees at the refinery and 75 at the distribution terminal. Unocal also
operates a chemical plant on Franklin Canyon Road near Highway 4 in the County.
17000\00219\43411.3 A-4
LLI
Tosco Refining Company, a wholly owned subsidiary of Tosco Corporation, operates a refinery
with a capacity of 150,000 barrels per day. The refinery, which has been in operation since 1913, uses
crude oil from the North Slope of Alaska, as well as the heaviest crude oil from California oil fields, and
refines it into high grade light fuel products. It is located on a 2,200-acre site and employs approximately
800 people. Tosco moved its corporate headquarters to Concord in the fall of 1990. The relocation added
another 135 employees to payrolls in the County.
In order to comply with State and federal clean air laws, the County's major oil refineries are
building new facilities to produce cleaner gasoline and other products. The refinery projects are known
as "Clean Fuels Projects." According to the Construction Industry Research Board, for every $1.0 billion
of investment,the projects are expected to generate 5,000 construction jobs and an additional 9,000 related
or spin-off jobs. Following are the locations and sizes of each of the six Clean Fuels Projects that employ
a significant number of County residents.
Investment
Company Cites ($ million)
Chevron Corp. Richmond $ 600
Exxon Corp. Benicia 200
Pacific Refining Co. Hercules 40
Tosco Corp. Avon 100
Shell Oil Co. Martinez 1,800
Unocal Corp. Rodeo 100
Total $2,840
[Grocery Stores. Safeway, the Bay Area's largest employer, reported 110,000 employees
worldwide as of December 1994, and 15,600 employees in the Bay Area. Safeway operates numerous
grocery stores in the County.]
Health Care. One of the Bay Area's largest private employers, Kaiser Permanente Medical
Group has approximately 3,300 employees in the County. Kaiser provides medical coverage to about one
in three Bay Area residents and operates hospital and clinic facilities in Richmond,Martinez, Antioch and
Walnut Creek and is exploring other sites,in the County for future construction.
Telephone Services. Pacific Telesis Group, the Bay Area's sixth largest employer, reported
51,590 worldwide employees as of December 1994, a reduction of 3,410 jobs compared to 1993. The
company has been trimming its worldwide workforce over the past four years as a result of cost
reductions, restructuring, and buyouts. The San Ramon Chamber of Commerce reported in early 1993
that the company's employment totals approximately 7,500 at its Bishop Ranch offices in the County.
17000\00219\43411.3 A-5
The following table provides a listing of large companies headquartered in the County and other
employers who account for at least 1,000 jobs in the County.
County of Contra Costa
Major Companies Headquartered in the County
and Employers With More Than 1,000 Employees
Firm Primary Locations Product Employment(')
Bank of America Concord Financial Services 17,328
Safeway Countywide Retail Food Outlets 15,600
Pacific Telesis San Ramon Telecommunications 14,350
Longs Drugs Store(2) Walnut Creek Drug Stores 12,877
Chevron Corporation Richmond, Concord, San Ramon Petroleum Products 10,000
County of Contra Costa(2) Martinez County Government 6,766
Kaiser Pennanente Medical Group Martinez, Walnut Creek Health Care Service 3,3001'1
Fibreboard(2) Concord Wood Products 3,000
Bio-Rad(2) Hercules Clinical Testing Equipment 2,300
Village Resorts Lafayette Resort Condominiums 1,8001'1
Central Garden Supply Lafayette Wholesale Garden Supplies 1,450
TakeCare(2) Concord Health Maintenance 1,403
Lesher Communications Inc. Walnut Creek Newspapers 1,2671'1
Naval Weapons Station(2) Concord Munitions Depot 1,175
North American Title Co. Walnut Creek Title Insurance 1,140(')
Fresenius USA(2) Walnut Creek Medical supplies 1,100
City of Concord(2) Concord City Government 1,025
C&H Sugar Co. Concord Sugar Refinery 1,00001
111 Estimates; may include entire Bay Area workforce
(Z) Headquartered in the County.
(3) As of April, 1993.
Source: The San Francisco Chronicle, "The Chronicle 100", April 1994; The San Francisco Examiner, "Examiner's Bay Area
Top 100", April 1994; San Ramon Chamber of Commerce; Contra Costa Times, "Top 50", July, 1992.
Impact of Military Base Closings
The U.S. Congress enacted legislation in 1990 to close a number of domestic and international
military bases, including several in the Bay Area. A total of four rounds of base closures were announced
between 1988 and March, 1995. The list of bases in Northern California with scheduled closure dates
included Presidio Army Base, Letterman Hospital, Treasure Island Naval Station, and Hunter's Point
Annex of Treasure Island Naval Air Station (San Francisco County), East Fort Baker (Marin County),
Alameda Naval Air Station, Oakland Naval Hospital, Alameda Naval Aviation Depot, and Naval Public
Works Center (Alameda County), Fort Ord (Monterey County), Moffett Field Naval Air Station (Santa
Clara County), Sacramento Army Depot and Mather Air Force Base (Sacramento County), Mare Island
Shipyard (Solano County), and Castle Air Force Base(Merced County).
According to the 1993 Report of the California Military published by the Base Reuse Task Force,
approximately 42,000 military positions and 26,000 civilian jobs are expected to be lost in Northern
California as these facilities are gradually closed beginning in 1995. In Southern California,
approximately 34,000 military positions and 9,000 civilian jobs are expected to be lost at seven military
17000\00219\43411.3 A-6
CY��
bases in Los Angeles,Orange, San Diego,Imperial, and San Bernardino Counties. The cumulative impact
of the defense cutbacks- including defense contractors, civilian workers, and jobs that depend on military
spending - includes the loss of an estimated 200,000 to 300,000 jobs in California at a cost of$5 billion
to $7 billion, although this cost is expected to be offset by the privatization and conversion of the closed
military facilities to commercial use over a period of time.
The cutbacks in nearby Northern California facilities are not expected to significantly affect the
County's economy. Furthermore, any negative economic impacts in the affected counties may be lessened
as the President's plan to provide transition relief and job training for affected personnel is implemented.
The only military installation located in Contra Costa County is the Naval Weapons Station in
Concord, a facility that is not slated for closure.
Median Income
As a consequence of its strong employment sector, the County achieves high rankings among all
California counties on a variety of income measurements. As reported in the 1995 Sales and Marketing
Management Survey of Buying Power, the County ranked third in terms of median household effective
buying income ($51,814) and third in terms of per capita income ($22,297) among California counties.
The medians for the State of California were $40,969 (household), and $17,275 (per capita).
17000\00219\43411.3 A-7
Commercial Activity
Commercial activity forms an important part of Contra Costa County's economy, with dollars
generated by taxable transactions totaling approximately$7.5 billion in each year from 1990 through 1994.
County of Contra Costa
Taxable Transactions
1990 to 1994
(in thousands)
1990 1991 1992 1993 1994
Apparel Stores $ 268,874 $ 270,580 $ 273,882 $ 276,507 $ 263,835
General Merchandise Stores 1,300,383 1,154,519 1,201,982 1,156,050 1,166,204
Specialty Stores 700,909 684,931 702,994 720,715 754,092
Food Stores 432,071 479,104 512,195 435,502 428,585
Packaged Liquor Stores 48,669 47,049 50,195 40,707 38,242
Eating and Drinking Places 513,257 533,763 546,431 549,473 563,770
Home Furnishings and
Appliances 268,755 257,102 265,447 273,110 270,691
Building Materials and Farm
Implements 497,273 443,869 432,665 461,036 492,850
Service Stations 528,802 481,101 519,478 510,835 507,073
Automotive and Vehicle
Dealers, Parts and Supplies 853,970 796,285 795,286 842,469 868,095
Total Retail Outlets $5,242,963 $5,148,303 $5,300,555 $5,266,404 $5,353,437
Business and Personal Services $333,588 $ 323,284 $ 308,261 $ 313,314 $ 326,664
All Other Outlets $1,888,513 $1,888,979 $1,956,354 $1,896,702 $ 2,138,064
Total All Outlets $7,465,064 $7,360,566 $7,565,170 $7,476,420 $ 7,818,165
Source: State Board of Equalization
17000\00219\43411.3 A-8
Taxable transactions are skewed toward the largest cities in the County, where the concentration
of retail establishments is greatest. Through 1994, the top five cities accounted for 51 percent of taxable
transactions while comprising only 42 percent of the County's population.
County of Contra Costa
Taxable Transactions of Top Five Cities
(in thousands)
1993 Taxable 1994 Taxable
City Transactions Transactions
Concord $1,505,116 $1,532,132
Walnut Creek 938,097 994,863
Richmond 696,905 725,405
Antioch 405,498 428,969
Pittsburg 292,883 328,475
TOTAL $3,838,499 $4,009,844
Source: State Board of Equalization
Much of the County's commercial activity is concentrated in central business districts of the cities
and unincorporated towns. In addition, four regional shopping centers and numerous smaller centers serve
County residents. The regional centers located in the cities of Richmond, Concord, Walnut Creek and
Antioch each are anchored by at least three major department stores. The largest regional shopping center
in the County is Sun Valley Shopping Center which features 130 stores including Macy's,Sears,Penney's
and Mervyn's. In addition, Price Costco, large warehouse stores, are located in Richmond and Martinez.
The County is served by all major banks including Bank of America NT&SA, Wells Fargo Bank,
and First Interstate Bank. In addition there are numerous local banks and branches of smaller California
and foreign banks. There are over 30 savings and loan associations in the County, including Home
Savings, Great Western, San Francisco Federal and California Federal.
Construction Activity
The value of building activity increased slightly in 1994, although it remains above the lowest
level reached in 1991 while the recent California recession was at its deepest point. Both the residential
and nonresidential construction sectors posted declines in terms of overall building valuation. However,
the number of single-family dwelling units increased by 20 percent in 1994, thereby resulting in the
highest number of total new dwelling units since 1991. The multi-family sector remained weak, with the
number of new dwelling units at its lowest point since the 1970's.
17000\00219\43411.3 A-9
f�•�'v
The following table provides a summary of building permit valuations and number of new
dwelling units authorized in the County since 1981.
County of Contra Costa
Building Permit Valuations 1981 - 1995
Valuation ($ millions) Number of New Dwelling Units
Residential
Year (New) Nonresidential Total Single Family Multiple Family Total
1981 $ 227,924 $ 205,905 $ 433,829 2,523 585 3,108
1982 201,256 218,496 419,752 1,930 858 2,788
1983 432,291 362,939 795,230 4,588 1,968 6,556
1984 408,562 445,003 853,565 4,162 2,255 6,417
1985 579,867 511,120 1,090,987 4,650 4,672 9,322
1986 808,639 325,046 1,133,685 6,186 6,766 12,952
1987 670,747 305,953 976,700 5,481 2,950 8,431
1988 785,925 214,201 1,000,126 5,853 2,171 8,024
1989 863,313 264,020 1,127,333 5,504 2,219 7,723
1990 560,193 252,443 812,636 3,132 1,149 4,281
1991 488,939 196,165 685,104 2,705 1,275 3,980
1992 638,714 207,099 845,812 3,279 614 3,893
1993 590,135 183,156 773,291 3,026 451 3,477
1994 699,395 166,160 865,555 3,682 230 3,912
19951'1 559,594 177,624 737,218 2,876 305 3,181
(1) Includes data only through November 1995.
Note: Totals may not be precise due to independent rounding
Sources: Data Resources Inc.: 1981 - 1988; Economic Sciences Corporation: 1989 - 1995.
In the last few years, office construction and leasing has been a much-publicized engine of the
County's economy, especially in the Bishop Ranch area of San Ramon along Interstate 680.
Approximately 76 percent of the 8.5 million square feet available at Bishop Ranch is currently leased on
a long-term basis to companies including Pacific Bell, Chevron Corporation, Toyota, United Parcel
Service, American Express, and Marriott Hotels. The remaining 24 percent of commercial space is
expected to be leased shortly to Chevron Corporation. At full occupancy, the 585-acre business park will
be the workplace for 26,000 employees. Bishop Ranch offers lower land and labor costs than San
Francisco and the East Bay and is surrounded by communities that provide a large labor pool to
immigrating companies.
In addition to residential and commercial construction, there are projects totaling $2.84 billion
being constructed by major oil refineries in the County (see "Major Employers - Petroleum and
Petroleum Products"). An additional $450 million of projects are being built by the Contra Costa Water
District and $588 million of projects are being built by Caltrans and the Bay Area Rapid Transit District
(see "Environmental Control Services - Water" and "Transportation").
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 County to San Francisco, Sacramento
17000\00219\43411.3 A-10
and points north to Interstate 5, the major north-south highway from Mexico to Canada. Interstate 680
connects .the central County communities to the rest of the Bay Area via State Routes 4 and 24, the
County's major east-west arteries.
On April 23, 1992,Caltrans began Northern California's largest freeway interchange reconstruction
project at the intersection of Interstate 680 and Highway 24 in Walnut Creek. The $315 million project
will add traffic lanes, an elevated bypass, and redesigned access patterns. With the majority of the work
being conducted at night, the project is scheduled to finish in 1996. Caltrans is also widening Interstate
80 in the western portion of the County at a project cost of$200 million.
In addition to private automobiles, ground transportation is available to county residents from the
following service providers:
• Central Contra Costa Transit Authority ("CCCTA") provides local bus service to the
central area of the County including Walnut Creek, Pleasant Hill and Concord.
• Bay Area Rapid Transit ("BART") connects the County to Alameda County, San
Francisco and Daly City in San Mateo with two main lines, one from the San Francisco
area to Richmond and the other to the Concord/Walnut Creek area. In May, 1992, BART
announced plans to extend service to Pittsburg and Antioch in the eastern portion of the
County. Construction of above-ground access down the middle of Highway 4 and the
widening of Highway 4 in the affected region will cost an estimated$506 million and will
provide approximately 5,000 jobs during the construction period. In addition, BART has
ordered an additional eighty transit cars, fifty of which are expected to be used in both
the Pittsburg extension and the Dublin extension in a nearby county. The eighty transit
cars will be built in a former steel facility in Pittsburg, adding an estimated 200 to 500
jobs in the County. BART is also constructing an extension to the City of Pleasanton in
nearby Alameda County at a cost of$517 million.
• . AC Transit, a daily commuter bus service based in Oakland, provides local service and
connects Contra Costa communities to San Francisco and Oakland.
• Other bus and rail passenger service is provided by Greyhound, Trailways Bus, and
Amtrak. In 1991, Amtrak introduced a special commuter line between Oakland and
Sacramento that makes several daily stops at the Martinez station.
• The Santa Fe and Southern Pacific Railroads' main lines service 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 Pablo 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 handled
25,873,770 metric tons in 1993. The majority of the shipments are bulk liquids with the remainder
consisting of scrap metal, autos, and gypsum rock.
17000\00219\43411.3 A-11
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 Antioch and the other at Concord.
Agriculture
The County is comprised of 470,400 acres, with over half(258,260) of these acres allocated to
farmlands and harvested cropland. In 1994, the total gross value of agricultural products and crops
reached $80.1 million, an all-time high for the County. Agricultural output grew by over $3.0 million
from 1993 to 1994, largely due to a substantial increase in Vegetable and Seed Crops. The value of
agricultural production since 1990 is illustrated in the table below.
County of Contra Costa
Agricultural Production, 1990-1994
1990 1991 1992 1993 1994
Nursery products $22,539,000 $23,464,000 $17,884,000 $24,940,000 $25,409,000
Livestock & poultry 7,045,000 5,262,500 4,065,100 7,045,100 3,656,000
Field crops 8,890,000 6,385,000 10,064,200 10,115,600 11,122,000
Vegetable & seed crops 12,390,400 16,722,000 16,234,270 16,067,500 20,242,500
Fruit and nut crops 8,566,100 12,756,100 13,191,100 13,131,700 13,156,900
Livestock, Apiary & 5,637,060 5,328,833 5,569,350 5,760,950 6,171,680
poultry products
Total $65,067,560 $69,918,443 $67,008,020 $77,060,850 $80,118,080
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, the second largest retail water
distributor west of the Mississippi,supplies water to the western part of the County. Ninety-five percent
of its supply is the Mokelumne River stored at the 68 billion gallon capacity Pardee Dam. EBMUD is
entitled to 325 million gallons per day under a contract with the State Water Resources Control Board,
plus an additional 325 million gallons per day under a contract with the U.S. Water and Power Resources
Service (formerly the U.S. Bureau of Reclamation). EBMUD does not plan to draw on its federal
entitlement for the foreseeable future.
CCCWD obtains its water from the Sacramento-San Joaquin Delta and serves 400,000 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 is currently constructing the Los Vaqueros Reservoir south of the City
of Antioch at an estimated project cost of$450 million.
17000\00219\43411.3 A-12
Since 1987,and up until 1993,Northern California experienced below average rainfall. Beginning
as early as 1989, EBMUD's and CCCWD's Boards of Directors implemented voluntary and mandatory
water conservation programs to compensate for short-term deficiencies in supply. The programs
succeeded due to vigorous public information campaigns,the implementation of rate incentives and excess
use charges, the adoption.of conservation ordinances, and the promotion of water reuse and reclamation
for appropriate purposes.
All of California experienced above-average rainfall in the 1993 rain season, resulting in
EBMUD's declaration in early 1993 that the drought was officially ended. Following a close-to-normal
1994 rain season, rainfall has been well above-average in 1995, resulting in ample water supplies
throughout California.
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.
Flood Control. The Contra Costa County Flood Control District has been in operation since 1951
to plan, build, and operate flood control projects in unincorporated areas of the County except for the
Delta area on its eastern border. The Delta is interspersed with inland waterways which fall under the
jurisdiction of the U.S. Corps of Engineers and the State Department of Water Resources. The County
has experienced no major flooding in urbanized areas since October 1962. The District has recently
completed construction of the West Antioch Capacity Improvement Project.
Education and Community Services
Graded public school education in the County is available through nine elementary school districts,
two high school districts, and seven unified school districts. These districts provide 125 elementary
schools, 29 middle, junior high, and intermediate schools, 24 high schools, and a number of preschool,
adult school, and special education facilities. In addition, there are 101 private schools with six or more
students in the County. School enrollment in the fall of 1995 numbered approximately students
in public schools and 16,300 students 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 at Hayward opened a branch campus,
called Contra Costa Center, in the City of Pleasant Hill where late afternoon and evening classes in
business,education and liberal arts are offered. In addition, the California State University currently has
a campus under construction in Concord. 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, in Walnut Creek, is John
F. Kennedy University. In addition, County residents are within easy commuting distance of the
University of California at Berkeley.
There are nine privately operated hospitals and one public hospital in Contra Costa County, with
a combined total of 1,900 beds. Three of the private hospitals are run by Kaiser Permanente, the largest
health maintenance organization in the United States. The public hospital is Merrithew Memorial
Hospital, a 192-bed facility that the County is currently replacing on the existing campus in Martinez.
17000\00219\43411.3 A-13
APPENDIX B
COUNTY FINANCIAL INFORMATION
Funding of Certain Programs by the State of California
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. 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.
In fiscal year 1991-92 the State and county governments collectively developed a program
realignment system to remove State funding for certain programs from the State budget process, and at
the same time, give countries enhanced program flexibility in the administration of certain health and
welfare programs. Under this plan, the sales tax was increased by 1/2-cent and dedicated to the support
of specific health and welfare programs administered by counties. In addition, vehicle license fees were
increased and this increase was similarly dedicated to supporting these programs. Thus, counties now
receive these funds under a fixed formula under State law and the flow of these funds is no longer subject
to the State budget process. The program shifted approximately $2.2 billion out of the State budget
process.
There is risk for county governments in this program realignment if sales tax and vehicle license
fee revenue are not realized as expected. If this occurs, it will be the responsibility of county government
to manage these programs within available funding levels utilizing more flexible program administrative
capacity than has previously been permitted.
The State Budget
Fiscal Years 1990-91 through 1993-94
During the four fiscal years from 1990-91 through 1993-94, the State of California experienced
budget deficits largely attributable to the most severe economic recession in California since the 1930's.
Diminished revenues and increased expenditures among nearly all categories of the State's General Fund
budget resulted in a cumulative budget deficit of approximately $30.0 billion over the four-fiscal-year
period. To close the budget gaps, the State at various times enacted tax and fee increases, temporary and
permanent changes in laws, shifts of funding responsibility, program reductions, one-time adjustments,
and accounting changes.
The most significant changes that impacted California counties during this period were (i) the
Fiscal Year 1991-92 realignment program that shifted $2.2 billion in health and welfare programs to
counties (see "Funding of Certain Programs by the State of California"), (ii) the Fiscal Year 1992-93
reduction of $1.3 billion in aid to local governments, and (iii) the Fiscal Year 1993-94 shift of about
$2.1 billion in property taxes from counties and $500 million from cities, special districts, and
redevelopment agencies to school and community college districts, reflecting termination of the State's
"bailout" of local governments following the property tax cuts mandated under the terms of Proposition
13 in 1978.
17000\00219\43411.3 B-1
The Fiscal Year 1993-94 property tax revenue losses for cities and counties were offset in part
by additional sales tax revenues and mandate relief. The temporary 1/2-cent sales tax was extended
through December 31, 1993 for allocation to counties for public safety programs. On November 3, 1993,
voters approved Proposition 172 to permanently extend the 1/2-cent sales tax for public safety purposes.
In addition, legislation was enacted to eliminate state mandates in order to provide local governments
flexibility in making their programs responsive to local needs. Legislation provided mandate relief for
local justice systems which affect county audit requirements, court reporter fees, and court consolidation;
health and welfare relief involving advisory boards, family planning, state audits and realignment
maintenance efforts; and relief in areas such as county welfare department self-evaluations, noise
guidelines and recycling requirements.
For Fiscal Year 1993-94, the County's share of property tax revenues declined by approximately
$58.5 million, largely as a result of the shift in property tax revenue to school districts (see "County
Budget Process - Fiscal Year 1993-94" herein). As a result of passage of Proposition 172, however, the
County restored approximately $19.1 million in revenue for the last six months of Fiscal Year 1993-94
and an estimated $38.2 million in Fiscal Year 1994-95. Thus, on balance, the net impact on an annual
fiscal year basis of the property tax shift has been a loss of approximately $20.3 million of County
General Fund revenue.
As discussed in the next section, the 1994-95 State Budget Act includes a rollover budget deficit
of$4.0 billion, a portion of which is attributable to a State budget deficit for the 1993-94 Fiscal Year.
Fiscal Year 1994-95
Background. The 1994-95 Fiscal Year represents the fifth consecutive year the Governor and
Legislature were faced with a very difficult budget environment to produce a balanced budget, many
program cuts and budgetary adjustments having already been made in the prior four years. The
Governor's Budget Proposal, as updated in May and June, 1994, recognized that the accumulated deficit
could not be repaid in one year, and proposed a two-year solution. The budget proposal set forth revenue
and expenditure forecasts and revenue and expenditure proposals which result in operating surpluses for
the budget for both 1994-95 and 1995-96, and lead to the elimination of the accumulated budget deficit,
estimated at about $1.8 billion at June 30, 1994, by June 30, 1996.
1994-95 Budget Act - Revenues. The 1994-95 Budget Act, signed by the Governor on July 8,
1994,projected revenues and transfers of$41.9 billion, $2.1 billion higher than revenues in 1993-94. This
reflected the Administration's forecast of an improving economy. Also included in this figure was the
projected receipt of about $360 million from the federal government to reimburse the State's cost of
incarcerating undocumented immigrants, most of which eventually was not received (see "The State
Budget-Fiscal Year 1994-95 - Subsequent Developments"). Another factor affecting the 1994-95 Budget
Act was that the Legislature failed to act on a proposal in the January 1994-95 Governor's Budget to
undertake an expansion of the transfer of certain programs to counties that would have transferred to
counties 0.5 percent of the State's current sales tax.
The 1994-95 Budget Act projected Special Fund revenues of $12.1 billion, a decrease of 2.4
percent from 1993-94 estimated revenues.
17000\00219\43411.3 B-2
c4z
1994-95 Budget Act - Expenditures. The 1994-95 Budget Act projected General Fund
expenditures of $40.9 billion, an increase of $1.6 billion over the 1993-94 Fiscal Year. The 1994-95
Budget Act also projected Special Fund expenditures of $12.3 billion, a 4.7 percent decrease from the
1993-94 Fiscal Year estimated expenditures. The principal features of the 1994-95 Budget Act were the
following:
L. Receipt of additional federal aid in the 1994-95 Fiscal Year of about $400 million for
costs of refugee assistance and medical care for undocumented immigrants, thereby offsetting a similar
General Fund cost. These funds ultimately were not budgeted by the federal government.
2. Reductions of approximately $1.1 billion in health and welfare costs. A 2.3 percent
reduction in Aid to Families with Dependent Children payments(equal to about$52 million for the entire
fiscal year) has been temporarily suspended by court order and certain health care funding actions in the
1994-95 Budget Act also were challenged in a court action.
3. A General Fund increase of approximately $38 million in support for the University of
California and $65 million for California State University. It was anticipated that student fees for both
the University of California and California State University would increase up to 10 percent.
4. Proposition 98 funding for K-14 schools was increased by $526 million from 1993-94
Fiscal Year levels, representing an increase for enrollment growth and inflation. Consistent with previous
budget agreements, Proposition 98 funding provided approximately $4,217 per student for K-12 schools,
equal to the level in the prior three years.
5. Legislation enacted with the 1994-95 Budget Act clarified laws passed in 1992 and 1993
which required counties and other local agencies to transfer funds to local school districts, thereby
reducing State aid. Some counties had implemented a method of making such transfers which provided
less money for schools if there were redevelopment agency projects. The new legislation banned this
method of transfer. If all counties had implemented this method, General Fund aid to K-12 schools would
have been $300 million higher in each of the 1994-95 and 1995-96 Fiscal Years.
6.' The 1994-95 Budget Act provided funding for anticipated growth in the State's prison
inmate population, including provisions for implementing recent legislation(the so-called "Three Strikes"
law) which requires mandatory life prison terms for certain third-time felony offenders.
7. Additional miscellaneous cuts ($500 million) and fund transfers ($255 million) totaling
in the aggregate approximately $755 million.
The 1994-95 Budget Act contained no tax increases. Under legislation enacted for the 1993-94
Budget, the renters' tax credit was suspended for two years (1993 and 1994). A ballot proposition to
permanently restore the renters' tax credit after this year failed at the June, 1994 election. The Legislature
enacted a further one-year suspension of the renters' tax credit, for 1995, saving about $390 million in
the 1995-96 Fiscal Year.
The 1994-95 Budget assumed that the State would use a cash flow borrowing program in 1994-95
which combined one-year notes and two-year warrants (the "Warrants"), which have now been issued.
Issuance of the Warrants allows the State to defer repayment of approximately $1.0 billion of its
accumulated budget deficit into the 1995-96 Fiscal Year. The Budget Adjustment Law, described below,
17000\00219\43411.3 B-3
enacted along with the 1994-95 Budget Act, is designed to ensure that the Warrants will be repaid in the
1995-96 Fiscal Year.
Subsequent Developments. The 1995-96 Governor's Budget, issued January 10, 1995, contains
a reforecast of revenues and expenditures for the 1994-95 Fiscal Year(see "The State Budget -Fiscal Year
1995-96"). The Department of Finance Bulletins for February and March 1995 report that combined
General Fund revenues for February 1995 were about$356 million below forecast, but combined revenues
for January and February were only about $82 million (or 0.3 percent) below the 1995-96 Governor's
Budget forecast. The largest component of the decrease is attributable to personal income tax receipts,
which were about$131 million(or 1.1 percent) below the two months' forecast. This decrease in personal
income tax receipts appears to be largely attributable to fourth quarter 1994 activity, probably in the
anticipation of tax reform, with some taxpayers shifting income into 1995 to the extent possible. The
withholding component comprised $77 million of this shortfall, but the Department of Finance does not
yet view this as significant. Additionally, sales and use tax receipts were very close to forecast for the
two-month period, while bank and corporation tax receipts were about$42 million(or 1.5 percent) below
the two months forecast. Miscellaneous revenues were about$117 million(or 6.2 percent) above forecast
for the two months, but the Department of Finance is not yet able to determine whether this gain is real,
or is instead attributable to cash flow factors.
Initial analysis of the federal Fiscal Year 1995 budget by the Department of Finance indicates that
about $98 million was appropriated for California to offset costs of incarceration of undocumented
immigrants, less than the $356 million which was assumed in the State's 1994-95 Budget Act. Because
of timing considerations in applying for these federal funds, the Department of Finance estimates that
about$33 million of these funds will be received during the State's 1994-95 Fiscal Year, with the balance
received in the following fiscal year. It does not appear that the federal budget contains any of the
additional $400 million in funding for refugee assistance and health costs which were also assumed in the
1994-95 Budget Act, but the Department of Finance expects the State to continue its efforts to obtain
some or all of these federal funds.
Budget Adjustment Law. Pursuant to the Budget Adjustment Law (the "Law"), the State
Controller is required to make a report by November 15, 1994 on whether the projected cash resources
for the General Fund as of June 30, 1995 will decrease more than $430 million from the amount projected
by the State in its Official Statement in July, 1994 for the sale of$4,000,000,000 of Revenue Anticipation
Warrants. On November 15, 1994, the State Controller issued the report on the State's cash position
required by the Budget Adjustment Law. The report indicated that the cash position of the General Fund
on June 30, 1995 would be $581 million better than was estimated in the July, 1994 cash flow projections
and, therefore, no budget adjustment procedures will be invoked for the 1994-95 Fiscal Year.
The State Controller's report identified a number of factors which have led to the improved cash
position of the State. Estimated revenues and transfers for the 1994-95 Fiscal Year other than federal
reimbursement for immigration costs were up about $650 million. The largest portion of this was in
higher bank and corporation tax receipts, but all major tax sources were above original projections.
However, most of the federal immigration aid revenues projected in connection with the 1994-95 Budget
Act and in July, 1994 cash flows will not be received, as indicated above, leaving a net increase in
revenues of$322 million.
On the expenditure side, the State Controller reported that estimated reduced caseload growth in
health and welfare programs, reduced school enrollment growth, and an accounting adjustment reducing
17000\00219\43411.3 B-4
a transfer from the General Fund to the Special Fund for Economic Uncertainties resulted in overall
General Fund expenditure reductions (again before adjusting for federal aid) of$672 million. However,
the July 1994 cash flows projected that General Fund health and welfare and education expenditures would
be offset by the anticipated receipt of$407 million in federal aid for illegal immigrant costs. The State
Controller now estimates that none of these funds will be received, so the net reduction in General Fund
expenditures is $265 million.
Finally, the State Controller indicated that a review of balances in special funds available for
internal borrowing resulted in an estimated reduction of such borrowable resources of$6 million. The
combination of these factors results in the estimated improvement of the General Fund's cash position of
$581 million. The State Controller's revised cash flow projections for 1994-95 have allocated this
improvement to two line items: an increase from $0 to $427 million in the estimated ending cash balance
of the General Fund on June 30, 1995, and an increase in unused borrowable resources of$154 million.
The State Controller's report indicated that there was no anticipated cash impact in the 1994-95
Fiscal Year for recent initiatives on "three strikes"criminal penalties and illegal immigration which were
approved by voters on November 8, 1994. At a hearing before a committee of the State Legislature on
November 15, 1994, both the Legislative Analyst and the Department of Finance concurred in the
reasonableness of the State Controller's report. (The Legislative Analyst had issued a preliminary analysis
on November 1, 1994 which reached a conclusion similar to that of the State Controller.) The State
Controller's report makes no projections about whether the Law may have to be implemented in 1995-96.
However, both the State Controller and the Legislative Analyst in the November 15 hearing noted that
the July, 1994 cash flows for the 1995-96 Fiscal Year place continued reliance on large amounts of federal
assistance for immigration costs, which did not materialize this year, indicating significant budget
pressures for next year. (See "The State Budget - 1994-95 Fiscal Year - Revenue and Expenditure
Assumptions.") The Department of Finance indicated that the budgetary issues identified in the hearing
would be addressed in the Governor's Budget proposal for the 1995-96 Fiscal Year.
Fiscal Year 1995-96
[To be updated.]
For the first time in five years, the State enters the upcoming fiscal year with strengthening
revenues based on an improving economy. On January 10, 1995, the Governor presented his 1995-96
Fiscal Year Budget Proposal (the "Proposed Budget"). The Proposed Budget estimates General Fund
revenues and transfers of$42.5 billion (an increase of 0.2 percent over 1994-95). This nominal increase
from the 1994-95 Fiscal Year reflects the Governor's realignment proposal and the first year of his tax
cut proposal (see the principal features of the Proposed Budget listed below for further discussions).
Without these two proposals, General Fund revenues would be projected at approximately $43.8 billion,
or an increase of 3.3 percent over 1994-95. Expenditures are estimated at $41.7 billion (essentially
unchanged from 1994-95). Special Fund revenues are estimated at$13.5 billion(10.7 percent higher than
1994-95) and Special Fund expenditures are estimated at$13.8 billion(12.2 percent higher than 1994-95).
The Proposed Budget projects that the General Fund will end the fiscal year at June 30, 1996 with a
budget surplus in the Special Fund for Economic Uncertainties of about$92 million, or less than 1 percent
of General Fund expenditures, and will have repaid all of the accumulated budget deficits.
17000\00219\43411.3 B-5
The following are the principal features of the Proposed Budget:
1. The principal feature of Proposed Budget is a proposed 15 percent cut in personal income
and corporate tax rates, which would be phased in at 5 percent per year starting in 1996. Existing
personal income tax rates,which are scheduled to drop from an 11 percent top rate to 9.3 percent in 1996,
would be continued during the time the overall tax cut takes effect. This proposal would reduce General
Fund revenues by $225 million in 1995-96, but the revenue reduction would reach $3.6 billion by
1998-99.
2. The Governor has proposed an expansion of the realignment program between the State
and counties, so that counties will take on greater responsibility for welfare and social services, while the
State will take on increased funding of trial court costs. The proposal includes transfer of about$1 billion
of State revenues, from sales taxes and trial court funding moneys, to counties. The net effect of the
shifts, however, is estimated to save the General Fund about $240 million.
3. The Governor proposes further cuts in health and welfare costs totaling about$1.4 billion.
Some of these cuts would require federal legislative approval.
4. Proposition 98 funding for school and community colleges will increase by about $1.2
billion, reflecting strong General Fund revenue growth. Per-pupil expenditures are projected to increase
by $61 to $4,292. For the first time in several years, a cost-of-living increase (2.2 percent) is added to
the enrollment growth factor. The Governor proposes to set aside about $514 million of the Proposition
98 funding increase to repay prior years' loans from the General Fund to schools. As the legality of these
loans is currently being challenged in a lawsuit, the Governor proposes to set the amount aside in escrow
until the litigation is resolved.
5. The Proposed Budget includes increases in funding for the University of California ($63
million General Fund) and the California State University system ($3 million General Fund). The
Governor has proposed a four-year funding "compact" for higher education units which includes both
annual increases in State funding and increases in student fees.
6. The Proposed Budget assumes receipt of $830 million in new federal aid for costs of
undocumented and refugee immigrants above commitments already made by the federal government. This
amount is much less than an estimated$2.8 billion which had been included in the Governor's pro-forma
two-year plan from last summer.
As noted earlier, the Proposed Budget will be subject to the Budget Adjustment or "trigger"
legislation enacted in June, 1994. The Proposed Budget contains a cash flow projection (based on all the
assumptions described above) which shows about $1 billion of unused borrowable resources at June 30,
1996; providing this amount of"cushion" before the budget "trigger" would have to be invoked.
However, a report issued by the Legislative Analyst in February, 1995 notes that the Proposed
Budget (and hence the margin of cushion under the "trigger") is subject to a number of major risks,
including receipt of the expected federal immigration aid and other federal actions to allow health and
welfare cuts, and the outcome of several lawsuits concerning previous budget actions which the State has
lost at the trial court level, and which are under appeal. This Legislative Analyst's Report also estimates
that, despite more favorable revenues, the two-year budget estimates made in July, 1994 are about $2
billion out of balance, principally because federal immigration aid appears likely to be much lower than
17000\00219\43411.3 B-6
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previously estimated. This shortfall is much smaller than the State has faced in recent years, and has been
addressed in the Proposed Budget.
May Revision. On May 22, 1995, the Governor released revised budget estimates (the "May
Revision") for Fiscal Year 1995-96. The May Revision generally retained the same priorities from
January, with the biggest change being a reduction from $835 million to$518 million in estimated federal
payments to the State for services to illegal aliens. Other revisions included a $210 million reduction in
estimated sales tax revenues for Fiscal Year 1994-95 due primarily to th6 impact of severe winter storms
and an increase in estimated Fiscal Year 1995-96 sales tax receipts of$147 million. In addition, other
key provisions retained in the May Revision include reduced adult dental care payments from Medi-Cal,
a cut in welfare grants by 15% for families containing an adult able to work, increased spending on the
State's colleges and universities from $8.9 billion to $9.1 billion, and increased funding for prisons by
$400 million.
The County is not able to predict the budget package that will ultimately be negotiated by the
Governor and the Legislature and, therefore cannot determine what impact, if any, the budget package in
fiscal year 1995-96 will have on the County's finances. The County remains committed, however, to
maintaining its historical track record of balanced budgets,financial prudence, and timely debt repayment,
including repayment of the Notes.
County Budget Process
The County is required by State law to adopt a balanced budget by August 30 of each year,
although the Board may, by resolution, extend on a permanent basis or for a limited period, the date to
October 2. The County's budget process involves a number of steps.
First, upon release of the Governor's Proposed Budget in January, the County Administrator
prepares a preliminary forecast of the County's budget based on current year expenditures,the assumptions
and projections contained in the Governor's Proposed Budget, and other projected revenue trends.
Second, the County Administrator presents the County's Proposed Budget to the Board of
Supervisors. Absent the adoption of a final County budget by June 30, the current existing budget is
continued into the new fiscal year until a final budget is adopted.
Third, between January and the time the State adopts its own budget, legally due no later than
June 15, representatives of the County Administrator monitor, review and analyze the State budget and
all adjustments made by the State legislature. Upon adoption of the final State budget, the County
Administrator recommends revisions to the Proposed Budget to align County expenditures with approved
State revenue. After conducting public hearings and deliberating the details of the budget, the Board
adopts the County's Final Budget by August 30, or by October 2 if the Board has adopted a resolution
to extend the deadline.
The signing of the 1994-95 State Budget by the Governor on July 8, 1994 enabled the County to
adopt its Final Budget for 1994-95 on September 20, 1994, ahead of the legally extended deadline of
October, 1994. See "Revenues and Expenditure Trends - Fiscal Year 1994-95" herein.
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
17000\00219\43411.3 B-7
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year-end deficit, immediate steps are taken, in accordance with the State Constitution, to reduce
expenditures. The County's ability to increase its revenues is limited by State laws which 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 and Appropriations" herein.
Revenues and Expenditure Trends
State and federally mandated expenditures in justice, health and welfare have grown at a greater
rate than the County's discretionary general purpose revenues over the last several years. At the same
time, decreased State revenues have resulted in fewer State funds being available to the County. The
result has been that the County has increased its contribution to maintain mandated services while optional
local services have been reduced. The Board has responded to this trend in part by instituting measures
to improve management,thereby reducing costs and increasing productivity and maintaining services with
diminished funding.
The County has implemented a number of programs to reduce costs, maximize revenues and
maintain sound business practices. The Board of Supervisors has committed-to maintain established
reserves and to spend "one time revenues" on "one time expenditures". As indicated earlier, periodic
reviews are made of actual receipts and expenditures in order to ensure that the budget remains in balance
throughout the fiscal year. 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 which 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. Set forth below is a description of the County's comparative budgetary and
expenditure experience since fiscal year 1993-94. For a summary of the actual audited financial results
of the County for fiscal year 1993-94, see "Financial Statements of the County for the fiscal year ended
June 30, 1994" in Appendix B attached hereto.
Fiscal Year 1993-94
As a result of the 1993-94 State Budget Act, a total of$2.1 billion of property tax revenue was
shifted from counties to public schools. To partially offset the impact of the property tax shift, counties
received approximately $700 million from the extension of a temporary 1/2-cent sales tax through
December 31, 1993 and received an additional $700 million between January 1, 1994 and June 30, 1994
due to voter approval of Proposition 172 that permanently extended the 1/2-cent sales tax at a special
statewide election in November, 1993.
In order for the County to maintain maximum budget flexibility in light of the property tax shift
and the uncertainty at the time over the long-term status of the 1/2-cent sales tax, the County designed
a three-phased budget cycle for the 1993-94 fiscal year.
Phase I occurred during May, 1993 and included, among other things,$20.5 million of budget cuts
adopted by the Board on May 25 in anticipation of reduced State funding sources.
The County implemented an additional $26 million of budget cuts during Phase II as a result of
the known reductions in county funding contained in the 1993-94 State Budget Act. Completion of
Phase II culminated in the adoption of the County's Final Budget by the Board on August 30, 1993.
17000\00219\43411.3 B-8
Due to the passage of Proposition 172 in November 1993 that provided additional funding to
counties for public protection purposes,the County did not undertake further budget cuts during Phase III
budget hearings in late 1993.
Fiscal Year 1994-95
The County faced a $24.2 million budget deficit in fiscal year 1994-95. The deficit was caused
by(i) State action shifting property tax revenue from the County to school districts,thereby reducing State
financing for some programs, and (ii) other uncontrollable cost increases and recession-driven revenue
decreases included in the County budget.
In response to the budget deficit, the Board held hearings in July and August 1994 and balanced
the budget by a combination of appropriation reductions and revenue increases to the extent of $24.2
million. The Board adopted the budget on September 20, 1994. A follow-up Board meeting was held
on October 11, 1994 to slightly adjust the adopted budget as required .by the State budget and local
priorities.
Fiscal Year 1995-96
[To be updated.]
In January 1995 a preliminary budget gap of$25.4 million was identified for the 1995-96 fiscal
year. To address the potential deficit, the Board adopted an accelerated budget schedule so that budget
reductions would occur in early June 1995 rather than in August 1995, thereby lessening the number of
employee layoffs by taking advantage of twelve months of cost savings. Additionally, three budget
workshops were held during April and May 1995 so that Board members could review the intricacies of
the County budget and further evaluate the options available to balance the budget.
Negotiations are currently underway between the County Administrator's staff and the staff of all
County Departments regarding budget reduction plans. Departments have been issued budget targets and
have been asked to prepare budget reduction plans by programs in priority order for cuts. As of the date
hereof, revenue and fund balance estimates are currently being revised to determine changes to the budget
shortfall estimate. For purposes of overall budget planning, the County has estimated that $22.8 million
of budget cuts will eventually be implemented by the Board. A "Contingency for Budget Reductions" in
the amount of$22.8 million has been incorporated in the table below to reflect these anticipated, but as
yet unallocated, budget cuts.
It is anticipated that a second round of budget hearings will be necessary in July or August 1995
to adjust the budgets of some departments due to the yet-unknown impact of the State budget. Current
expectations are that financing for Social Services and Health Services programs, and possibly financing
for the trial courts, will be affected. Relieving counties of unfunded program mandates may also become
a part of the State budget. The continuation of property tax revenue shifts from the County has not been
included in State budget legislation for fiscal year 1995-96 as it had been in the prior two fiscal years.
The County's Preliminary 1995-96 Budget reflects a "rollover" of the fiscal year 1994-95 budget as
adjusted for anticipated changes that include the $22.8 million of budget cuts.
17000\00219\43411.3 B-9
A comparison of the General Fund portion of the County's Preliminary 1995-96 Budget and the
Final General Fund Budget for fiscal year 1994-95 reflecting adjustments made through April, 1995 is
shown below.
County of Contra Costa
Rollover General Fund Budget with Anticipated Changes(')
For Fiscal Year 1995-96
Adjusted Rollover Anticipated Potential Preliminary
1994-95 Budget Changes for Budget Budget
Budget(') 1995-96 1995-96 Reduction 1995-96
REQUIREMENTS
General Government $81,027 81,027 2,354 83,381
Public Protection 218,374 218,374 7,182 225,556
Health and Sanitation 140,280 140,280 .1,920 142,200
Public Assistance 240,409 240,409 2,635 243,044
Education 9,695 9,695 209 9,904
Public Ways and Facilities 13,530 13,530 715 14,245
Recreation and Culture 1 1 1
Reserves and Debt Service 14,487 14,487 832 15,319
Contingency for Budget Reductions2( 2,834) (22,834)
Total Requirements $ 717,803 717,803 15,847 (22,834) 710,816
AVAILABLE FUNDS
Property Taxes $ 85,610 85,610 1,200 86,810
Fund Balance Available 26,019 26,019 (2,019) 24,000
Other Taxes 11,511 11,511 2,000 13,511
Licenses, Permits and Franchises 12,763 12,763 300 13,063
Fines, Forfeitures and Penalties 18,525 18,525 (9,300) 9,225
Use of Money and.Property 10,126 10,126 832 10,958
Intergovernmental 390,834 390,834 390,834
Charges for Current Services 131,238 131,238 131,238
Other Revenue 31,177 31,177 31,177
Total Available Funds $ 717,803 717,803 (6,987) 0 710,816
Includes General Fund,Library Fund, Land Development Fund, and Trial Court Operations Fund.
(2) Final Budget,as adjusted through April 12, 1995.
Source: County Auditor-Controller
Ad Valorem Property Taxes
Taxes are levied for each fiscal year on taxable real and personal property that is situated in the
County as of the preceding March 1. For assessment and collection purposes, property is classified either
as "secured" or "unsecured," and is listed accordingly on separate parts of the assessment roll. The
"secured roll" is that part of the assessment roll containing State assessed property and property secured
by a lien on real property which is sufficient, in the opinion of the Assessor, to secure payment of the
taxes. Other property is assessed on the "unsecured roll."
Property taxes on the secured roll are due in two installments, on November 1 and February 1 of
each fiscal year. If unpaid, such taxes become delinquent on December 10 and April 10, respectively, and
a ten percent 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.
17000\00219\43411.3 B-10
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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 due on the date mailed. If mailed between the months
of July through October, the first installment becomes delinquent on December 10th and the second on
April 10th. 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 March 1 lien date and become delinquent,
if unpaid, on August 31. A ten percent 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 4701-4717 of the California Revenue and Taxation Code. Pursuant to those sections, the
accounts of all political subdivisions that levy taxes on the County tax rolls are credited with 100 percent
of their respective tax levies regardless of actual payments and delinquencies. The County Treasury's cash
position (from taxes) is protected by a special fund (the "Tax Losses Reserve Fund") into which all
countywide delinquent penalties are deposited. The County has used this method since fiscal year
1950-51.
Historically,the County has borne the full cost of property assessment and revenue collection and
distribution. Senate Bill 2557, passed in 1990, allowed counties to charge cities, schools, special districts
and redevelopment agencies for their share of property tax administrative costs. This legislation was
subsequently repealed as to charges against school districts. In 1992, Senate Bill 1559 was passed which
reinstated the authorization for counties to charge a property tax administrative fee to schools, but the
amount of the fee is limited and is determined by State formula. In addition, the legality of the property
tax administrative charge has been challenged by the other affected taxing entities. While the County is
unable to predict the ultimate outcome of such litigation, the County has prevailed at the Court of Appeals
level on the issue of the viability of tax administrative charges to redevelopment agencies and at the
Superior Court level as to all other challenged fees. The amount in question, approximately $4 million
per year, does not represent a large proportion of the County's annual General Fund Budget, which
exceeds $700 million.
17000\00219\43411.3 B-11
A recent history of Contra Costa County tax levies, delinquencies and the Tax Losses Reserve
Fund cash balances as of June 30 is shown below.
County of Contra Costa
Summary of Assessed Valuations and
Ad Valorem Property Taxation for Fiscal Years 1984-85 Through 1995-96
Percentage
Current Levy Current Levy Tax Losses
Fiscal Secured Property Delinquent Delinquent Reserve Fund
Year Assessed Valuation Tax Levies June 30 June 30 Balance June 30
1984-85 $29,373,354,335 $356,956,194 $10,646,452 2.98% $18,166,548
1985-86 32,341,318,373 403,053,585 11,865,967 2.94 22,766,159
1986-87 35,941,605,782 436,570,280 12,330,764 2.82 17,393,902
1987-88 40,083,490,940 487,158,795 13,955,266 2.86 18,430,198
1988-89 44,101,311,276 535,212,918 13,387,564 2.50 20,125,551
1989-90 48,641,369,485 593,937,412 14,746,710 2.48 21,797,766
1990-91 543114,860,918 669,071,124 19,762,687 2.95 24,093,615
1991-92 58,422,186,087 714,963,082 24,787,991 3.47 26,558,333
1992-93 61,393,3203088 760,559,294 24,239,204 3.19 29,042,152
1993-94 63,427,696,578 794,435,830 20,652,106 2.60 31,225,565
1994-95 65,294,364,749 823,495,611 20,640,379 2.51 24,709,211
1995-96 67,146,461,590 850,000,000(') 21,250,000) 2.50(') 14,400,000(')
1996-97 68,500,000,000(')
Estimated
Source: County Auditor-Controller
During each fiscal year, the Tax Losses Reserve Fund is reviewed and when the amount of the
fund exceeds certain levels, the excess is credited to the County General Fund as provided by Section
4703 of the California Revenue and Taxation Code. Section 4703 allows any county to draw down the
Tax Losses Reserve Fund to a balance equal to (i) three percent of the total of all taxes and assessments
levied on the secured roll for that year, or (ii) 50% of the current year secured tax levy.
17000\00219\43411.3 B-12
Largest Taxpayers
The ten largest taxpayers in the County, as shown on the fiscal year 1994-95 secured tax roll, and
the approximate amounts of their property tax payments are shown below. These ten taxpayers paid a
total of$88.8 million in taxes, or about 11.3% percent of the County's 1994-95 secured tax collection.
County of Contra Costa
Ten Largest Property Taxpayers
Total Taxes Paid
Company 1994-95
Chevron USA $28,370,311.03
Pacific Gas & Electric Company 16,639,959.48
Pacific Bell 10,268,526.10
Shell Oil Company 9,262,910.22
Tosco Corporation 6,264,646.70
Unocal 5,267,274.12
USS Posco 4,627,800.10
Presley Homes 3,508,133.30
Bank of America 2,323,737.17
Kaiser Permanente 2,227,721.46
TOTAL $88,761,019.68
Source: County Treasurer-Tax Collector
17000\00219\43411.3 B-13
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 shows redevelopment
agency full cash value increments and tax allocations for agencies within the County.
Community Redevelopment Agency Projects
Full Cash Value Increments and Tax Allocations(')
Fiscal Years 1983-84 Through 1994-95
Fiscal Full Cash Value Total Tax
Year Base Year Value Increment Allocations(2)
1983-84 $ 834,968,224 $1,382,950,214 $15,949,939
1984-85 860,524,411 1,406,614,952 16,213,428
1985-86 896,827,692 1,660,846,273 19,399,159
1986-87 896,827,692 2,032,691,693 22,571,035
1987-88 969,566,378 2,618,912,341 28,863,403
1988-89 1,342,442,031 2,845,683,596(3) 33,282,273
1989-90 1,591,934,101 3,275,371,212(3) 35,326,113
1990-91 1,696,768,706 3,966,154,674(3) 42,171,285
1991-92 1,806,223,553 4,573,718,772(3) 48,590,841
1992-93 1,864,029,147 5,009,792,773(3) 53,485,897
1993-94 1,864,029,147 5,236,543,696(3) 55,748,579
1994-95 2,715,784,139 5,320,724,209(3) 56,677,717
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) Actual tax revenues collected by the County and subsequently paid to the community redevelopment
agencies.
(3) Does not include unitary and operating non-unitary utility roll values which, starting with Fiscal Year
1988-89, are determined by the State Board of Equalization on a countywide basis as provided by
Assembly Bill 454, Chapter 921, Statutes of 1987.
Source: County Auditor-Controller
Accounting Policies, Reports and Audits
The County's 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
17000\00219\43411.3 B-14
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, such
as those of school districts, which are accounted for on a cash basis.
The California Government Code requires every county to prepare an annual financial report. The
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. The County has had independent audits
for more than 40 years. Additionally, 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:
General County Funds. The general County funds consist of the General Fund and other
operating funds. The General Fund is used to account for the revenues and expenditures of the County
that are not accounted for by other funds. The other operating funds are used to account for the proceeds
from specific revenue sources (other than special assessments)or to account for the financing of specific
activities as required by law or administrative regulations.
Special District Funds Under Control of Board of Supervisors. These funds are used to
account for the transactions of fire protection districts,flood control and storm drainage districts,sanitation
districts and county service areas under the control of the Board.
Special District Funds Under Control of Local Boards and School District Funds. These
funds are used to account for cash received and disbursed and cash and investments held by the County
for districts controlled by local boards. These districts maintain their own accounting records supporting
their separate financial statements which are subject to separate audit under California law.
Trust and Agency Funds. Trust and Agency funds are used to account for money and other
assets received and held as trustee, custodian or agent for individuals and governmental agencies.
Presented on the following pages are the County's General Fund Balance Sheets for the four most
recent fiscal years and the Schedule of Revenues, Expenditures and Changes in Fund Balances as of
June 30, 1995, with comparative totals for June 30, 1994. More detailed information from the County's
audited financial report for the fiscal year ending June 30, 1995 appears in Appendix C to the Official
Statement.
17000\00219\43411.3 B-15
C��f2
County of Contra Costa
General Fund Balance Sheet
June 30, 1995
(With comparative totals for June 30, 1992, 1993 and 1994)
(in thousands)
1995 1994 1993 1992
ASSETS:
Cash and investments $ 117,317 $ 236,514 $ 222,616 $ 240,737
Accounts receivable and accrued revenues 56,268 45,654 43,419 41,120
Inventories 1,627 1,598 1,602 1,255
Due from other funds 35,380 45,533 36,791 56,535
Prepaid.expenses and deposits 2,854 3,901 8,037 5,060
Advances to other funds 598 783 1,441 2,539
TOTAL ASSETS $ 214,044 $ 333,983 $ 313,906 $ 347,246
LIABILITIES
Short term obligations $95,000 $140,000 $ 117,000 $ 75,000
Accounts payable and accrued liabilities 27,990 31,576 22,341 24,444
Due to other funds 14,768 18,642 25,972 42,412
Welfare program advances 14,639 12,809 11,640 9,084
Obligations under reverse repurchase agreements 0 74,050 81,502 151,875
Deferred revenue and credits 10,077 6,693 7,853 3,093
Total liabilities $ 162,474 $ 283,770 $ 266,308 $ 305,908
FUND EQUITY:
Reserved for:
Encumbrances $10,239 $11,639 $ 7,225 $ 7,867
Inventories 1,627 1,598 1,602 1,255
Prepaid items and other assets' 2,379 3,654 7,639 4,680
Advances to other funds 598 783 1,441 2,539
Unreserved:
Designated for future use 5,679 0 0 0
Designated for authorized expenditures 0 900 1,051 780
Designated for equipment replacement 0 2,921 1,692 2,568
Designated for trial court funding 0 495 495 495
Undesignated 31,048 28,223 26,453 21,154
TOTAL FUND EQUITY $ 51,570 $ 50,213 $ 47,598 $ 41,338
TOTAL LIABILITIES AND FUND EQUITY $ 214,044 $ 333,983 $ 313,906 $ 347,246
* Reserves are less than prepaid items and deposits because the General Fund advanced $247,333 of federal
program moneys to subgrantees who will be expending the funds within the first quarter of fiscal year 1994-95.
Source: County Auditor-Controller
17000\00219\43411.3 B-16
County of Contra Costa
General Fund
Schedule of Revenues, Expenditures and Changes in
Fund Balances - Budget and Actual - Budgetary Basis
Year ended June 30, 1995
(With comparative totals for June 30, 1994)
(in thousands)
June 30, 1995
Variance June 30,
Favorable 1994
Budget Actual (unfavorable) Actual
REVENUES
Taxes $ 89,666 $ 89,992 $ 326 $ 97,743
Licenses, permits & franchises 5,329 4,978 (351) 6,229
Fines, forfeitures & penalties 18,534 18,371 (163) 9,789
Use of money & property 10,021 12,693 2,672 12,279
Intergovernmental revenues 385,854 383,118 (2,736) 375,371
Charges for services 134,047 116,447 (17,600) 77,835
Other revenue 12,403 11,635 768 10,446
TOTAL REVENUES 655,854 637,234 (18,620) 589,692
EXPENDITURES
General government 79,992 67,825 12,167 63,890
Public protection 165,463 157,135 8,328 152,161
Health & sanitation 116,317 114,585 1,732 112,659
Public assistance 245,568 238,859 6,709 231,162
Education 126 122 4 102
Public ways and facilities 11,461 9,454 2,007 11,768
Recreation and culture 1 0 1 0
Interest 4,469 4,469 0 5,017
Capital outlay(l) 3,477 3,477 0 3,384
TOTAL EXPENDITURES 626,874 595,926 30,948 580,143
Excess (deficiency) of revenues over (under) expenditures 28,980 41,308 12,328 9,549
OTHER FINANCING SOURCES (USES)
Operating transfers in 24,266 24,266 0 28,022
Operating transfers out (79,147) (71,628) 7,519 (37,405)
Proceeds from issuance of debt 0 0 0 270,036
Retirement of UAAL obligation 0 0 0 (270,036)
Capital lease financing(') 0 3,477 3,477 3,384
TOTAL OTHER FINANCING SOURCES (USES) (54,881) (43,885) 10,996 (5,999)
Excess (deficiency) of revenues and other financing sources
over (under) expenditures and other financing uses (25,901) (2,577) 23,324 3,550
FUND BALANCE AT BEGINNING OF YEAR, as
Previously Reported 50,213 50,213 0 47,598
Adjustment to beginning fund balance 0 4,664 4,664 398
FUND BALANCE AT BEGINNING OF YEAR, as Restated 50,213 54,877 4,664 47,200
Residual equity transfers in 0 5 5 0
Residual equity transfers out 0 735 735 537
FUND BALANCE at end of year $24,312 $51,570 $27,258 $50.213
These entries are required by NCGA Statement 5 to disclose the value of fixed assets acquired during the year under
lease purchase agreements. The County does not appropriate these amounts since they apply to future years.
Source: County Auditor-Controller
17000\00219\43411.3 B-17
County Employees
A summary of County employment follows:
County of Contra Costa
County Employees(')
Number of Number of
As of Permanent As of Permanent
June 30 Employees June 30 Employees
1980 5,960 1988 6,317
1981 6,052 1989 6,463
1982 6,063 1990 6,635
1983 5,915 1991 7,008
1984 5,743 1992 7,080
1985 5,791 1993 6,689
1986 5,968 1994 6,658
1987 6,111 1995 6,822
Excludes temporary or seasonal employees.
Source: County Personnel Department
County employees are represented by 30 bargaining units of 11 labor organizations, the principal
ones being Local 1 of the County Employees Association and the Clerical Employees Union which,
combined, represent approximately 34 percent of all County employees in a variety of classifications.
The County has had a positive employee relations program, and has enjoyed successful
negotiations of cost effective agreements over the years. The County completed its latest contract
negotiations with labor representatives in January, 1994, with the agreement providing for, among other
things, a 1 percent salary increase effective July 1, 1994 and a 1 percent salary increase effective January,
1995. The agreement covers approximately 75 percent of the County's employees and expires in
September, 1995. [Need Update on agreement]
Retirement Programs
The information provided in this section which reflects data as of January 1, 1995, is preliminary
and has not been presented to, nor accepted by, the Employees' Retirement System Board.
The County has a retirement plan administered by the Employees' Retirement System of the
County that covers substantially all employees and to which contributions are made by both the County
and the employees. The plan provides basic death, disability and service retirement benefits based on
specified percentages of monthly salaries and, in addition,provides annual cost-of-living adjustments after
retirement. As of January 1, 1995 there were 6,047 active general members and 1,471 active safety
members(police and fire) including employees of certain other governmental agencies. Retired members
17000\00219\43411.3 B-18
total 4,48 5. Beginning August 1, 1980 the County Retirement System implemented a new system
whereby new general employees participate in a reduced program, paying roughly half of the premiums
and receiving half of the benefits at retirement. Existing general employees were permitted to transfer
to the new program for future credit only.
County contributions are based on percentages of salaries as determined by an actuary and adopted
by the Retirement Board. The County's policy is to fund expected basic benefits over the average
working lifetime of present members, except that unfunded prior service costs arising from plan
amendments, actuarial gains and losses or other factors are funded over a 15.5 year period from the
actuarial date of January 1, 1995. The actuary calculates the present value of the County's unfunded
actuarial accrued liability(UAAL) and the projected amortization schedule of the UAAL using a statistical
model that is driven by certain actuarial interest rate, inflation rate, salary scale, demographic, and
mortality rate assumptions.
In March 1994,the County issued Taxable Pension Obligation Bonds(the "Bonds")to finance the
$333.7 million estimated UAAL. While the Bonds extinguished the County's UAAL as of a given
moment, a variety of factors could result in the creation of a new UAAL in the future. Such factors
include deviations from expected inflation and salary growth rates, investment returns, and retiree
lifetimes. As of January 1, 1995 the County's UAAL was estimated to be a negative ($ 1.9 million).
Pursuant to the County Employees'Retirement Law of 1937, actuarial valuations of the retirement
system are required at least every three years. The County Retirement System's actuaries estimated the
minimum contribution provision for the year ended December 31, 1994 to be approximately$54.5 million.
The Retirement Board agreed to transfer approximately $15.7 million from its undistributed earnings
account against contributions from employer and employees for the cost of living program during calendar
year 1994. Contributions made by the County and by County employees for the year ended December
31, 1994, were approximately$25.1 million and $9.2 million, respectively. For the year ended December
31, 1994, total earnings of the County's Retirement Fund were $44.3 million, with payment to current
retired employees of$64.9 million.
In previous years, funding levels have been reported under"Plan Termination" assumptions which
would indicate that the Retirement Fund is approximately 108 percent funded at December 31, 1994. The
County has chosen to report fund levels under the Government Accounting Standards Board Statement
#5 - "Plan Continuation" assumptions. Subsequent to the County paying the proceeds of the Bonds into
the Retirement Fund, the Plan is 93% funded on the GASB 5-Plan Continuation basis.
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.
General Obligation Debt. The County has no direct general obligation bonded indebtedness,the
last issue having been redeemed in fiscal year 1977-78. The County has no authorized and unissued debt.
Lease Obligations. The County has made use of various lease arrangements with private
financing entities, nonprofit corporations, and the County Employees' Retirement Association for the use
and acquisition of capital assets. At June 30, 1994, the County had outstanding lease obligations of
17000\00219\43411.3 B-19
C.�2
$258.9 million, of which $247.6 million were capital lease obligations. These capital lease obligations
have terms ranging from 5 to 30 years. The longest capital lease ends in 2023. For a complete summary
of the County's lease obligations as of June 30, 1995, see "Appendix C - Audited Financial Statements
of the County for the Year Ended June 30, 1995 - Notes to General-Purpose Financial Statements -
Note 6 - Lease Commitments and Note 7 - Long-term Obligations" attached hereto.
Direct and Overlapping Debt. The County contains numerous municipalities, school districts
and special purpose districts, as well as the overlapping Bay Area Rapid Transit District and the East Bay
Municipal Utility District, which have issued general obligation bonded and lease indebtedness. Set forth
below is a direct and overlapping debt report (the 'Debt Report") prepared by California Municipal
Statistics Inc. that summarizes such indebtedness as of July 1, 1995. The Debt report is included for
general information purposes only. The County has not reviewed the Debt Report for completeness or
accuracy and makes no representations in connection therewith.
The Debt Report generally includes long-term obligations sold in the public credit markets by
public agencies whose boundaries overlap the boundaries of the County. Such long term obligations
generally are not payable from revenues of the County (except as indicated) nor are they necessarily
obligations secured by land within the County. In many cases, long-term obligations issued by a private
agency are payable only from the general fund or other revenues of such public agency.
As of July 1, 1995, and excluding the Notes, the County had outstanding publicly held long-term
debt obligations of$616.6 million; the County's total long-term net direct and overlapping debt as of that
date was $1.5 billion.
17000\00219\43411.3 B-20
CA-
Contra Costa County
Estimated Direct and Overlapping Bonded Debt
as of July'1, 1995
[TO BE UPDATED]
1994-95 Assessed Valuation: $59,973,729,196 (after deducting $5,320,635,553 redevelopment increment; includes
unitary utility valuation)
Debt as of
Direct and Overlapping Bonded Debt: % Applicable July 1, 1995
Contra Costa County'Authorities 100.000% $279,828,0121'1
Contra Costa County Pension Obligations 100.000 336,775,000
Contra Costa County Board of Education Certificates of Participation 100.000 4,540,000
Alameda-Contra Costa Transit District Certificates of Participation 12.147 3,256,611
San Francisco Bay Area Rapid Transit District 31.387 52,596,765
East Bay Municipal Utility District and Special District #1 48.820 & 5.998 12,630,599
Antioch Unified School District Certificates of Participation 100.000 8,063,809
San Ramon Valley Unified School District and Educational Facilities Corporation 100.000 79,560,000
Martinez Unified School District and Certificates of Participation 100.000 31,021,024
Acalanes and Liberty Union High School District 100.000 53,885,000
Brentwood Union School District Certificates of Participation 100.000 14,309,699
Other School Districts and School Building Corporations 100.0001ll 29,466,715
City of Concord and Authorities 100.000 14,836,304
City of Richmond General Fund Obligations 100.000 13,835,000
City of Antioch General Fund Obligation 100.000 19,407,967
City of Pleasant Hill and General Fund Obligations 100.000 14,355,000
City of Hercules and General Fund Obligations 100.000 8,705,000
City of San Ramon General Fund Obligations 100.000 23,710,585
Other City Authorities 100.000 14,042,002
Hospital Districts and Hospital Authorities 100.000 11,840,000
Sanitation and Sanitary Districts 100.000 2,100,000
San Ramon Valley Fire Protection District Certificates of Participation 100.000 10,090,000
East Bay Regional Park District 44.351 51,484,858
Other Special Districts 100.000111 7,711,169
Community Facilities Districts 100.000 135,195,000
1915 Act Assessment Bonds (Estimate) 100.000 328,874,250
Total Gross Direct and Overlapping Bonded Debt $1,562,120,369131
Less: East Bay Municipal Utility District and Special District #1 (100% self- 12,630,599
supporting)
San Ramon Unified School District Certificates of Participation (self- 16,685,000
supporting from GIC from Bayerische Landisbank)
Other self-supporting bonds 3,210,000
Total Net Direct and Overlapping Bonded Debt $1,529,594,770131
State School Building Aid Repayable as of 6/30/94: $0
(') Excludes tax and revenue anticipation notes.
12l Various, but mostly 100% applicable.
131 Excludes revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations.
Ratios to Assessed Valuation
Direct Debt ($616,603,012) 1.03%
Total Gross Debt 2.60%
Total Net Debt 2.55%
Source: California Municipal Statistics Inc.
17000\00219\43411.3 B-21
Future Financings
The County Capital Program includes long-range plans for additional and replacement court
facilities for both the Superior and Municipal Courts in the County.
Insurance and Self-Insurance Programs
The County is self-insured for claims relating to public liability(excluding the airport), automobile
accidents and medical malpractice. It is the County's policy to appropriate annually sufficient funds to
cover the estimated liability of the County for self-insurance claims to be made during the upcoming fiscal
year. Whenever a claim is made, the claim is evaluated and a portion of the appropriated funds is
reserved to satisfy the County's estimated liability for such claim. Although the County believes that its
past experience enables it to evaluate reasonably its liability for self-insurance claims, no assurance can
be made that the amount reserved for such purpose will be adequate, nor can there be any assurance that
the funds appropriated to satisfy claims arising during any fiscal year will be sufficient.
17000\00219\43411.3 B-22
DRAFT
2/26/96
CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement (the "Disclosure Agreement") is executed and
delivered by the COUNTY OF CONTRA COSTA, California (the "County") and U.S.
TRUST OF CALIFORNIA, N.A. (the "Trustee") in connection with the issuance of
$ Certificates of Participation (Merrithew Memorial Hospital Replacement
Project) Refunding Series of 1996 (the "Certificates of Participation"). The Certificates of
Participation are being issued pursuant to a First Supplemental Trust Agreement dated as of
1, 1996 by and among the County, the Contra Costa County Public Facilities
Corporation (the "Corporation") and the Trustee (the "Trust Agreement"). The County and
the Trustee covenant and agree as follows:
SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is
being executed and delivered by the County and the Trustee for the benefit of the Holders
and Beneficial Owners of the Certificates of Participation and in order to assist the
Participating Underwriters in complying with S.E.C. Rule 15c2-12(b)(5).
SECTION 2. Definitions. In addition to the definitions set forth in the Trust
Agreement, which apply to any capitalized term used in this Disclosure Agreement unless
otherwise defined in this Section, the following capitalized terms shall have the following
meanings:
"Annual Report" shall mean any Annual Report provided by the County pursuant to,
and as described in, Sections 3 and 4 of this Disclosure Agreement.
'Beneficial Owner" shall mean any person which has the power, directly or
indirectly, to vote or consent with respect to, or to dispose of ownership of, any Certificates
of Participation (including persons holding Certificates of Participation through nominees,
depositories or other intermediaries)..
"Disclosure Representative" shall mean the County Administrator, Deputy County
Administrator or his or her designee, or such other officer or employee as the County shall
designate in writing to the Trustee from time to time.
"Dissemination Agent" shall mean the Trustee, acting in its capacity as Dissemination
Agent hereunder, or any successor Dissemination Agent designated in writing by the County
and which has filed. with the Trustee a written acceptance of such designation.
"Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure
Agreement.
SF2-55583.1 40511-100-PCM-02/26/96
"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 are set forth in Exhibit B.
"Participating Underwriter" shall mean any of the original underwriters of the
Certificates of Participation required to comply with the Rule in connection with offering of
the Certificates of Participation.
"Repository" shall mean each National Repository and the State Repository. -
"Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as the same may be amended from
time to time.
"State" shall mean the State of California.
"State Repository" shall mean any public or private repository or entity designated by
the State as the state repository for the purpose of the Rule and recognized as such by the
Securities and Exchange Commission. As of the date of this Agreement, there is no State
Repository.
SECTION 3. Provision of Annual Reports.
(a) The County shall, or shall cause the Dissemination Agent to, not later
than nine months after the end of the County's fiscal year (presently July 1-June 30),
commencing with the report for the 1995-1996 Fiscal Year, provide to each Repository an
Annual Report which is consistent with the requirements of Section 4 of this Disclosure
Agreement. The Annual Report may be submitted as a single document or as separate
documents comprising a package, and may include by reference other information as
provided in Section 4 of this Disclosure Agreement; provided that the audited financial
statements of the County may be submitted separately from the balance of the Annual Report
and later than the date required above for the filing of the Annual Report if they are not
available by that date. If the County's fiscal year changes, it shall give notice of such
change in the same manner as for a Listed Event under Section 5(f).
(b) Not later than fifteen (15) Business Days prior to the date specified in
subsection (a) for providing the Annual Report to Repositories, the County shall provide the
Annual Report to the Dissemination Agent and the Trustee (if the Trustee is not the
Dissemination Agent). If by such date, the Trustee has not received a copy of the Annual
Report, the Trustee shall contact the County and the Dissemination Agent to determine if the
County is in compliance with the first sentence of this subsection (b).
(c). If the Trustee is unable to verify that an Annual Report has been
provided to Repositories by the date required in subsection (a), the Trustee shall send a
notice to each Repository, the Municipal Securities Rulemaking Board and the State
Repository, if any, in substantially the form attached as Exhibit A.
SF2-55583.1 2 40511-100-PCM-02/26/96
(d) The Dissemination Agent shall:
(i) determine each year prior to the date for providing the Annual Report the name
and address of each National Repository and the State Repository, if any; and
(ii) to the extent the County has provided the Annual Report to the Dissemination
Agent, file a report with the County and (if the Dissemination Agent is not the
Trustee) the Trustee certifying that the Annual Report has been provided pursuant to
this Disclosure Agreement, stating the date it was provided and listing all the
Repositories to which it was provided.
SECTION 4. Content of Annual Reports. The County's Annual Report shall contain
or include by reference the following:
1. The audited financial statements of the County for the prior fiscal year,
prepared in accordance with generally accepted accounting principles as promulgated
to apply to governmental entities from time to time by the Governmental Accounting
Standards Board. If the County's audited financial statements are not available by the
time the Annual Report is required to be filed pursuant to Section 3(a), the Annual
Report shall contain unaudited financial statements in a format similar to the financial
statements contained in the final Official Statement, and the audited financial
statements shall be filed in the same manner as the Annual Report when they become
available.
2. [Up-date of Official Statement sections to come].
Any or all of the items listed above may be included by specific reference to other
documents, including official statements of debt issues of the County or related public
entities, which have been submitted to each of the Repositories or the Securities and
Exchange Commission. If the document included by reference is a final official statement, it
must be available from the Municipal Securities Rulemaking Board. The County shall
clearly identify each such other document so included by reference.
SECTION 5. Reportingof Significant Events.
(a) Pursuant to the provisions of this Section 5, the County shall give,or
cause to be given, notice of the occurrence of any of the following events with respect to the
Certificates of Participation, if material:
1. principal and interest payment delinquencies;
2. non-payment related defaults;
3 modifications to rights of Holders of Certificates of Participation;
4. optional, contingent or unscheduled bond calls;
SF2-55583.1 3 40511-100-PCM402/26/96
5. defeasances;
6. rating changes;
7. adverse tax opinions or events adversely affecting the tax-exempt status
of the Certificates of Participation;
8. ' unscheduled draws on the debt service reserves reflecting financial
difficulties;
9. unscheduled draws on credit enhancements reflecting financial
difficulties;
10. substitution of credit or liquidity providers, or their failure to perform;
and
11. release, substitution or sale of property securing repayment of the
Certificates of Participation.
(b) The Trustee shall, promptly upon obtaining actual knowledge at its
principal corporate trust office as specified in Section 12 hereof of the occurrence of any of
the Listed Events, contact the Disclosure Representative, inform such person of the event,
and request that the County promptly notify the Trustee in writing whether or not to report
the event pursuant to subsection (f) provided that failure by the Trustee to so notify the
Disclosure Representative and make such request shall not relieve the County of its duty to
report Listed Events as required by this Section 5.
(c) Whenever the County obtains knowledge of the occurrence of a Listed
Event, whether because of a notice from the Trustee pursuant to subsection (b) or otherwise,
the County shall as soon as possible determine if such event would be material under
applicable federal securities laws.
(d) If the County has determined that knowledge of the occurrence of a
Listed Event would be material under applicable federal securities laws, the County shall
promptly notify the Trustee in writing. Such notice shall instruct the Trustee to report the
occurrence pursuant to subsection (f).
(e) If in response to a request under subsection (b), the County determines
that the Listed Event would not be material under applicable federal securities laws, the
County shall so notify the Trustee in writing and instruct the Trustee not to report the
occurrence pursuant to subsection (f).
(f) If the Trustee has been instructed by the County to report the
occurrence of a Listed Event, the Trustee shall file a notice of such occurrence with the
Municipal Securities Rulemaking.Board and the State Repository (the Repositories).
Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(4) and (5)
need not be given under this subsection any earlier than the notice (if any) of the underlying
SF2-55583.1 4 40511-100-PCM-02/26/96
event is given to Holders of affected Certificates of Participation pursuant to the Trust
Agreement.
(g) The Trustee may conclusively rely on an opinion of counsel that the
County's instructions to the Trustee under this Section 4 comply with the requirements of the
Rule.
SECTION 6. Termination of Rgporting,, Obligation. The County's obligations under
this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or
payment in full of all of the Certificates of Participation. If such termination occurs prior to
the final maturity of.the Certificates of Participation, the County shall give notice of such
termination in.the same manner as for a Listed Event under Section 5(f).
SECTION 7. Dissemination Agent. The County may, from time to time, appoint or
engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure
Agreement, and may discharge any such Agent, with or without appointing a successor
Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for
the content of any notice or report prepared by the County pursuant to this Disclosure.
Agreement. If at any time there is not any other designated Dissemination Agent, the Trustee
shall be the Dissemination Agent. The initial Dissemination Agent shall be First Trust of
California, National Association.
SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this
Disclosure Agreement, the County and the Trustee may amend this Disclosure Agreement
(and the Trustee shall agree to any amendment so requested by the County provided such
amendment does not impose any greater duties, nor risk of liability, on the Trustee), and any
provision of this Disclosure Agreement may be waived, provided that the following
conditions are satisfied:
(a) If the amendment or waiver relates to the provisions of Sections 3(a),
4, or 5(a), it may only be made in connection with a change in circumstances that
arises from a change in legal requirements, change in law, or change in the identity,
nature or status of an obligated person with respect to the Certificates of Participation,
or the type of business conducted;
(b) The undertaking, as amended or taking into account such waiver,
would, in the opinion of nationally recognized bond counsel, have complied with the
requirements of the Rule at the time of the original issuance of the Certificates of
Participation, after taking into account any amendments or interpretations of the Rule,
as well as any change in circumstances; and
(c) The amendment or waiver either (i) is approved by the Holders of the
Certificates of Participation in the same manner as provided in the Trust Agreement
for amendments to the Trust Agreement with the consent of Holders, or (ii) does not,
in the opinion of the Trustee or nationally recognized bond counsel, materially impair
the interests of the Holders or Beneficial Owners of the Certificates of Participation.
SF2-55583.1 5 40511-100-PCM-02/26/96
In the event of any amendment or waiver of a provision of this Disclosure Agreement, the
County shall describe such amendment in the next Annual Report, and shall include, as
applicable, a narrative explanation of the reason for the amendment or waiver and its impact
on the type (or, in the case of a.change of accounting principles; on the presentation) of
financial information or operating data being presented by the County. In addition, if the
amendment relates to the accounting principles to be followed in preparing financial
statements, (i) notice of such change shall be given in the same manner as for a Listed Event
under Section 5(f), and (ii) the Annual Report for the year in which the change is made
should present a comparison (in narrative form and also, if feasible, in quantitative form)
between the financial statements as prepared on the basis of the new accounting principles
and those prepared on the basis of the former accounting principles.
SECTION 9. .Additional Information. Nothing in this Disclosure Agreement shall be
deemed to prevent the County from disseminating any other information, using the means of
dissemination set forth in this Disclosure Agreement or any other means of communication,
or including any other information in any Annual Report or notice of occurrence of a Listed
Event, in addition to that which is required by this Disclosure Agreement. If the County
chooses to include any information in any Annual Report or notice of occurrence of a Listed
Event in addition to that which is specifically required by this Disclosure Agreement, the
County shall have no obligation under this Agreement to update such information or include
it in any future Annual Report or notice of occurrence of a Listed Event.
SECTION 10. Default. In the event of a failure of the County or the Trustee to
comply with any provision of this Disclosure Agreement, the Trustee may (and, at the
request of any Participating Underwriter or the Holders of at least 25% aggregate principal
amount of Outstanding Certificates of Participation, shall), or any Holder or Beneficial
Owner of the Certificates of Participation may take such actions as may be necessary and
appropriate, including seeking mandate or specific performance by court order, to cause the
County or Trustee, as the case may be, to comply with its obligations under this Disclosure
Agreement. A default under this Disclosure Agreement shall not be deemed an Event of
Default under the Trust Agreement, and the sole remedy under this Disclosure Agreement in
the event of any failure of the County or the Trustee to comply with this Disclosure.
Agreement shall be an action to compel performance.
SECTION 11. Duties,_Immunities and Liabilities of Trustee and Dissemination
Agent. The Dissemination Agent (if other than the Trustee or the.Trustee in its capacity as
Dissemination Agent) shall have only such duties as are specifically set forth in this
Disclosure Agreement, and the County agrees to indemnify and save the Dissemination
Agent, its officers, directors, employees and agents, harmless against any loss, expense and
liabilities which it may incur arising out of or in the exercise or performance of its powers
and duties hereunder, including the costs and expenses (including attorneys fees) of defending
against any claim of liability, but excluding liabilities due to the Dissemination Agent's
negligence or wilful misconduct. The obligations of the County under this Section shall
survive resignation or removal of the Dissemination Agent and payment of the Certificates of
Participation.
SF2-55583.1 6 40511-100-PCM-02126/96
SECTION 12. Notices. Any notices or communications to or among any of the
parties to this Disclosure Agreement may be given as follows:
To the County: County of Contra Costa
County Administrator's Office
651 Pine Street, 11th Floor
Martinez, CA 94553-0063
Attention: DeRoyce Bell, Deputy County Administrator
Telephone: (510) 646-4093
Fax: (510) 646-4098
To the Trustee: U.S. Trust of California, N.A.
555 South Flower Street, Suite 2700
Los Angeles, CA 90071
Attention: Deborah Young, Assistant Vice President
Telephone: (213) 488-4039
Fax: (213) 488-4029
Any person may, by written notice to the other persons listed above, designate a different
address or telephone number(s) to which subsequent notices or communications should be
sent.
SECTION 13. Beneficiaries. This Disclosure Agreement shall inure solely to the
benefit of the County, the Trustee, the Dissemination Agent, the Participating Underwriters
and Holders and Beneficial Owners from time to time of the Certificates of Participation, and
shall create no rights in any other person or entity.
SF2-55583.1 7 40511-100-PCM-02/26/96
SECTION 14. Counterparts. This Disclosure Agreement may be executed in several
counterparts, each of which shall be an original and all of which' shall constitute but one and
the same instrument.
Date:. , 1996.
COUNTY OF CONTRA COSTA, as Lessee
By
Chair of the Board of
Supervisors of the County of
Contra Costa, State of California
Attest:. Philip J. Batchelor, Clerk
of the Board of Supervisors
and County Administrator
By:
Deputy
Approved as to form:
County Counsel
U.S. TRUST OF CALIFORNIA, N.A, as Trustee
By
Authorized Officer
SF2-55583.1 8 40511-100-PCM-02/26/96
EXHIBIT A
NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT
Name of County: County of Contra Costa
Name of Certificates of Participation Issue: County of Contra Costa Certificates of
Participation (Merrithew Memorial Hospital Replacement Project) Refunding Series of 1996
Date of Issuance:
NOTICE IS HEREBY GIVEN that the County of Contra Costa has not provided an
Annual Report with respect to the above-named Certificates of Participation as required by
Section _ of the First Supplemental Trust Agreement dated as of 1, 1996, by
and among the County of Contra Costa, the Contra Costa County Public Facilities
Corporation and U.S. Trust of California, N.A. The County of Contra Costa anticipates that
the Annual Report will be filed by
Dated:
U.S. TRUST OF CALIFORNIA, N.A., on behalf
of COUNTY OF CONTRA COSTA
cc: County of Contra Costa
SF2-55583.1 A-1 40511-100-PCM-02/26/96
EXHIBIT B
Nationally Recognized Municipal Securities Information Repositories approved by the
Securities and Exchange Commission as of July 17, 1995:
Bloomberg Municipal Repository .
P.O. Box 840
Princeton, NJ 08542-0840
Internet address: MUNIS@bloomberg.doc
(609) 279-3200
FAX (609) 279-3235 (609) 279-5963
Contact: Dave Campbell
The Bond Buyer
Secondary Market Disclosure
395 Hudson Street, 3rd Floor
New York, NY 10014
Internet address: Disclosure@muller.com
(212) 807-3814
FAX (212) 989-9282
Contact: Thomas Garske
Disclosure, Inc.
Document Augmentation/
Municipal Securities
5161 River Road
Bethesda, MD 20816
(301) 951-1450
FAX (301) 718-2329
Contact: Barry Sugarman (301) 215-6015
JJ Kenny Information Services
The Repository
65 Broadway, 16th Floor
New York, NY 10006
(212) 770-4568
FAX (212) 797-7994
Contact: Joan Horai, Repository
Moody's NRMSIR
Public Finance Information Center
99 Church Street
New York, NY 10007-2796
(800) 339-6306
FAX (212) 553-1460
.Contact: Claudette Stephenson
(212) 553-0345
SF2-55583.1 B-1 40511-100-PCM402/26/96
c. �z
Donnelley Financial
Municipal Securities Disclosure Archive
559 Main Street
Hudson, MA 01749
(800) 580-3670
SF2-55583.1 B-2 40511-100-PCM-02/26/96
DRAFT
2/26/96
FIRST SUPPLEMENTAL TRUST AGREEMENT
(Supplemental to Trust Agreement dated as of May 1, 1992)
by and among
U.S. TRUST COMPANY OF CALIFORNIA, N.A.
and
CONTRA COSTA COUNTY PUBLIC FACILITIES CORPORATION
and
COUNTY OF CONTRA COSTA
Dated as of April 1, 1996
RELATING TO CERTIFICATES OF PARTICIPATION
(MERRITHEW MEMORIAL HOSPITAL REPLACEMENT PROJECT)
AND $ CERTIFICATES
OF REFUNDING SERIES OF 1996
SF2-54846.2
C 4LZ
TABLE OF CONTENTS `
Page
ARTICLE XII
SERIES OF 1996 CERTIFICATES
SECTION 12.01. Defmitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 12.02. Original Execution of 1996 Certificates . . . . . . . . . . . . . . 4
SECTION 12.03. Denominations and Dating of 1996 Certificates . . . . . . . . . 5
SECTION 12.04. Payment Dates of 1996 Certificates; Medium, Method and
Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 12.06. Delivery of 1996 Certificates . . . . . . . . . . . . . . . . . . . . 13
SECTION 12.07. Deposit of Proceeds of 1996 Certificates and Application
of Amounts Held Pursuant to Trust Agreement . . . . . . . 13
SECTION 12.08. Use of Moneys in the Refunding Expenses Fund . . . . . . . . 13
SECTION 12.09. Terms of Prepayment of 1996 Certificates . . . . . . . . . . . . 14
SECTION 12.10. 1996 Rebate Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 12.11. Use of Depository . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 12.12. Continuing Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 12.13. Amendments to Trust Agreement . . . . . . . . . . . . . . . . . 18
SECTION 12.14. Article and Section Headings, Gender and References . . . . . 18
SECTION 12.15. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . 18
Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SF2-54846.2 i
FIRST SUPPLEMENTAL TRUST AGREEMENT
This FIRST SUPPLEMENTAL TRUST AGREEMENT, made and entered
into as of 1, 1996, by and among U.S. TRUST COMPANY OF CALIFORNIA,
N.A. a national banking association duly organized and existing under and by virtue of the
laws of the United States of America (the "Trustee"), CONTRA COSTA COUNTY PUBLIC
FACILITIES CORPORATION, a nonprofit public benefit corporation duly organized and
existing under and by virtue of the laws of the State of California (the "Corporation"), and
the COUNTY OF CONTRA COSTA, a political subdivision of the State of California (the
"County"), being supplemental to the Trust Agreement, dated as of May 1, 1992, by and
among said parties;
WITNESSETH:
WHEREAS, the Corporation has been formed for the purpose of rendering
financial assistance to the County by financing and constructing public buildings and facilities
for the County;
WHEREAS, the County has leased certain real property to the Corporation by
a lease, dated as of May 1, 1992 and entitled "Site Lease (Merrithew Memorial Hospital
Replacement Project)" (herein called the "Site Lease"), upon the condition that the
Corporation construct thereon for sublease back to the County for the use of the County
during the term thereof a project consisting of the construction, acquisition and equipping of
an approximately 144 bed hospital, together with site development, landscaping, utilities,
fixtures, furnishings, equipment, improvements and appurtenant and related facilities (herein
called "Project Phase I");
WHEREAS, the Corporation has agreed to construct and complete Project
Phase I thereon and has leased said real property and Project Phase I to be constructed
thereon to the County by a lease, dated as of May 1, 1992 and entitled "Facility Lease
(Merrithew Memorial Hospital Replacement Project)" (herein called the "Facility Lease");
WHEREAS, the County and the Corporation have entered into a First
Amendment to Facility Lease (Merrithew Memorial Hospital Replacement Project), dated as
of 1, 1996 (herein called the "First Amendment to Facility Lease"), to amend
the Facility Lease in certain respects;
WHEREAS, the Corporation has not made, and does not intend to make, any
profit by reason of any business or venture in which it may engage or by reason of the
construction of Project Phase I and no part of the Corporation's net earnings, if any, will
ever inure to the benefit of any person except the County;
SF2-54846.2
WHEREAS, the Trustee, the Corporation and the County have heretofore
executed a Trust Agreement, dated as of May 1, 1992 (herein called the "Trust Agreement");
WHEREAS, pursuant to the Trust Agreement, the Trustee has heretofore
executed and delivered certificates of participation in the aggregate principal amount of
$125,584,011.80 entitled "Certificates of Participation (Merrithew Memorial Hospital
Replacement Project), Series of 1992" (herein called the "1992 Certificates");
WHEREAS, the Corporation and the County have heretofore determined that
it would be in the best interests of the Corporation, the County and the residents of the
County to defease the 1992 Certificates through the sale and delivery of Certificates of
Participation hereunder;
WHEREAS, under the Facility Lease, as amended, the County is obligated to
make base rental payments to the Corporation for the lease of Project Phase I;
WHEREAS, all rights to receive such base rental payments for Project Phase I
have been assigned without recourse by the Corporation to the Trustee pursuant to an
agreement, entitled "Assignment Agreement" and dated as of May 1, 1992, as amended by a
First Amendment to Assignment Agreement, dated as of 1, 1996 (the
"Assignment Agreement");
WHEREAS, in consideration of such assignment and the execution of this
First Supplemental Trust Agreement, the Trustee has agreed to execute and deliver
certificates of participation in an amount equal to the aggregate principal components of such
base rental payments, each evidencing and representing a fractional undivided interest in such
base rental payments; and
WHEREAS, all acts, conditions and things required by law to exist, to have
happened and to have been performed precedent to and in connection with the execution and
entering into of this First Supplemental Trust Agreement do exist, have happened and have
been performed in regular and due time, form and manner as required by law, and the
parties hereto are now duly authorized to execute and enter into this First Supplemental Trust
Agreement;
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND OF
THE MUTUAL AGREEMENTS AND COVENANTS CONTAINED HEREIN AND FOR
OTHER VALUABLE CONSIDERATION, THE PARTIES DO HEREBY AGREE AS
FOLLOWS:
SF2-54846.2 2
ARTICLE XII
SERIES OF 1996 CERTIFICATES
SECTION 12.01. Definitions. Unless the context otherwise requires, the
terms defined in this Section shall for all purposes hereof and of any amendment hereof or
supplement hereto and of the Certificates and of any certificate, opinion, request or other
document mentioned herein or therein have the meanings defined herein, the following
definitions to be equally applicable to both the singular and plural forms of any of the terms
defined herein. All terms defined in the Trust Agreement and used herein shall have the
meanings assigned to such terms in the Trust Agreement.
First Amendment to Assignment Agreement
The term "First Amendment to Assignment Agreement" means that certain
instrument, entitled "First Amendment to Assignment Agreement (Merrithew Memorial
Hospital Replacement Project)," by and between the Corporation and the Trustee, dated as of
1, 1996, which instrument or a memorandum thereof was recorded in the office
of the County Recorder of the County of Contra Costa on , 1996 under
Recorder's Serial No. , as originally executed and recorded or as it may from
time to time be supplemented, modified or amended pursuant to the provisions hereof and
thereof.
First Amendment to Facility Lease
The term "First Amendment to Facility Lease" means that certain lease and
instrument, entitled "First Amendment to Facility Lease_(Merrithew Memorial Hospital
Replacement Project)," by and between the Corporation and the County, dated as of
s 1, 1996, which instrument or a memorandum thereof was recorded in the office
of the County Recorder of the County of Contra Costa on , 1996 under
Recorder's Serial No. , as originally executed and recorded or as it may from
time to time be supplemented, modified or amended pursuant to the provisions hereof and
thereof.
First Supplemental Trust Agreement
The term "First Supplemental Trust Agreement" means this First Supplemental
Trust Agreement, dated as of 1, 1996, by and among the Trustee, the
Corporation and the County, executed and delivered in accordance with the Trust
Agreement, and which is supplemental to the Trust Agreement.
1992 Certificates
The term "1992 Certificates" means $125,584,011.80 original aggregate
principal amount of Certificates of Participation (Merrithew Memorial Hospital Replacement
Project), Series of 1992, executed and delivered by the Trustee pursuant to the Trust
Agreement.
SF2-54846.2 3
1992 Certificates Escrow Fund
The term "1992 Certificates Escrow Fund" means the fund by that name
referred to in Section 12.07.
1992 Certificates Letter of Instructions
The term "1992 Certificates Letter of Instructions" means the letter of
instructions, dated as of 1, 1996 and entitled "Letter of Instructions Regarding
1992 Certificates," from the County and the Corporation to the Trustee, relating to'the
defeasance of the 1992 Certificates.
1996 Certificates
The term "1996 Certificates" means the Certificates of Participation
(Merrithew Memorial Hospital Replacement Project), Refunding Series of 1996, executed
and delivered by the Trustee pursuant to the Trust Agreement and hereto and then
Outstanding, the proceeds of which are for the defeasance of the 1992 Certificates.
1996 Purchasers
The term "1996 Purchasers" means Smith Barney Inc., BA Securities, Inc. and
Bear, Stearns & Co., Inc. as underwriters and purchasers of the 1996 Certificates.
1996 Rebate Fund
The term "1996 Rebate Fund" means the fund by that name established in
Section 12.10.
1996 Tax Certificate
The term "1996 Tax Certificate" means the certificate relating to Section 103
of the Code, executed by the County on the date of delivery of the 1996 Certificates to the
1996 Purchaser, as originally delivered and as it may be amended from time to time.
SECTION 12.02. Original Execution of 1996 Certificates. 1996 Certificates
may be executed and delivered hereunder by the Trustee upon the Written Request of the
County in an aggregate amount equal to the principal components of Base Rental Payments'to
become due and payable pursuant to the Facility Lease as a result of the execution and
delivery of the First Amendment to Facility Lease. The Trustee is hereby authorized to
execute a second series of Certificates designated "County of Contra Costa Certificates of
Participation (Merrithew Memorial Replacement Project), Refunding Series of 1996" in the
aggregate principal amount of million hundred thousand
dollars ($ ), evidencing and representing the aggregate principal components of
SF2-54846.2 4
the Base Rental Payments resulting from the First Amendment to Facility Lease and each
evidencing and representing a fractional undivided interest in the Base Rental Payments.
The 1996 Certificates shall be initially registered in the name of "Cede &
Co.," as nominee of The Depository Trust Company, New York, New York, and shall be
evidenced by one 1996 Certificate for each Certificate Payment Date, to be in a
denomination corresponding to the total principal designated to be paid on such date.
Registered ownership of the 1996 Certificates, or any portion thereof, may not thereafter be
transferred except as'set forth in Section 12.11 herein.
SECTION 12.03. Denominations and Dating of 1996 Certificates. The 1996
Certificates shall be prepared in the form of fully registered Certificates in the denomination
of five thousand dollars ($5,000) each or any integral multiple thereof so long as no 1996
Certificate shall represent principal becoming payable on more than one Certificate Payment
Date.
The' 1996 Certificates shall be dated as of 1, 1996 and shall
evidence and represent interest from the Interest Payment Date next preceding the date of
execution thereof by the Trustee, unless such date of execution is a day during the period
from and including the 16th day of the month next preceding any Interest Payment Date to
and including such Interest Payment Date, in which case they shall evidence and represent
interest from such Interest Payment Date, or unless such date of execution is on or before
October 15, 1996, in which case they shall evidence and represent interest from
1, 1996.
SECTION 12.04. Payment Dates of 1996 Certificates; Medium, Method and
Place of Payment. The 1996 Certificates shall have Certificate Payment Dates of
November 1 in the years and shall evidence and represent principal components in the
amounts, with an interest component with respect thereto calculated on the basis of a 360-day
year composed of-twelve 30-day months at the rates, as follows:
1996
Certificate
Payment Date Principal Interest
(November 1) Amount Component
The interest evidenced and represented by the 1996 Certificates shall be
payable on the Interest Payment Dates (being May 1 and November 1 of each year),
beginning on November 1, 1996 and continuing to and including their Certificate Payment
SF2-54846.2 5
Dates or on prepayment prior thereto, and shall evidence and represent the sum of the
portions of the Base Rental Payments designated as interest components coming due on the
Interest Payment Dates in each year.
The principal evidenced and represented by the 1996 Certificates shall be
payable on November 1 of each year, beginning on November 1, and continuing to
and including November 1, . 1996 Certificates evidence and represent the principal
component of the Base Rental Payments coming due on their respective Certificate Payment
Dates.
The principal of and premium, if any, evidenced and represented by the
Certificates shall be payable by check in lawful money of the United States of America to
the Owner thereof, upon the surrender thereof at the principal corporate trust office of the
Trustee in Los Angeles, California. The interest represented by the Certificates shall be
payable in like lawful money to the person whose name appears on the Certificate
registration books of the Trustee as the Owner thereof as of the close of business on the
15th day of the month immediately preceding the Interest Payment Date, whether or not
such day is a Business Day, such interest to be paid by check mailed by first class mail on
the date such interest is due to such registered owner at his address as it appears on such
registration books. Upon the written request of a registered owner of $1,000,000 or more
in principal amount of Certificates, submitted to the Trustee on or before the fifteenth
(15th) day of the month preceding each Interest Payment Date, interest with respect to such
Certificates shall be paid by wire transfer in immediately available funds to the bank
account number of said owner on file with the Trustee.
SECTION 12.05. Form of 1996 Certificates. The 1996 Certificates and the
form of the assignment to appear thereon shall be in substantially the following forms,
respectively, with necessary or appropriate insertions, omissions and variations as permitted
or required hereby, including placement of a portion of the form of the Certificate on the
reverse side thereof (provided that on the face of each Certificate, at the place where the
portion on the reverse side appears in the form set forth below, there shall be inserted the
following sentence: "THE TERMS AND PROVISIONS OF THIS CERTIFICATE ARE
CONTINUED ON THE REVERSE SIDE HEREOF AND SUCH CONTINUED TERMS
AND PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS
THOUGH FULLY SET FORTH AT THIS PLACE."):
z
SF2-54846.2 6
�,442
[FORM OF 1996 CERTIFICATE
OF PARTICIPATION]
No. $
CERTIFICATE OF PARTICIPATION
(MERRITHEW MEMORIAL HOSPITAL REPLACEMENT PROJECT)
REFUNDING SERIES OF 1996
Evidencing and Representing A Fractional Undivided
Interest of the Owner Hereof
in Base Rental Payments to be Made
by the
COUNTY OF CONTRA COSTA
to the
CONTRA COSTA COUNTY PUBLIC
FACILITIES CORPORATION
Certificate
Interest Rate Payment Date Dated as of CUSIP No.
1, 1996
REGISTERED OWNER:
PRINCIPAL SUM:
THIS IS TO CERTIFY that the registered owner named above, as the
registered owner of this Certificate of Participation (the "Certificate"), is the owner of a
fractional undivided. interest in the rights to receive certain Base Rental Payments (as that
term is defined in the Trust Agreement hereinafter mentioned) under and pursuant to that
certain Facility Lease (Merrithew Memorial Hospital Replacement Project) dated as of
May 1, 1992, as amended by the First Amendment to Facility Lease (Merrithew Memorial
Hospital Replacement Project) dated as of 1, 1996 (together the "Facility
SF2-54846.2 7
Lease"), by and between the Contra Costa County Public Facilities Corporation (the
"Corporation"), a nonprofit corporation duly organized and existing under and by virtue of
the laws of the State.of California, and the County of Contra Costa (the "County"), a
political subdivision duly organized and existing under and by virtue of the laws of the State
of California, all of which rights to receive such Base Rental Payments having been
assigned without recourse by the Corporation to U.S. Trust Company of California, N.A.
as trustee (the "Trustee"), a national banking association duly organized and existing under
and by virtue of the laws of the United States of America and having a principal corporate
trust office in Los Angeles, California (the "Principal Corporate Trust Office").
The registered owner of this Certificate is entitled to receive, subject to the
terms of the Facility Lease and any right of prepayment prior thereto hereinafter provided
for, on the certificate payment date set forth above (the "Certificate Payment Date"), upon
surrender of this Certificate on the Certificate Payment Date or on the date of prepayment
prior thereto at the Principal Corporate Trust Office of the Trustee, the principal sum
specified above representing the registered owner's fractional undivided share of the Base
Rental Payments designated as principal components coming due on the Certificate Payment
Date, and on each May 1 and November 1 commencing November 1, 1996 (the "Interest
Payment Date"), the registered owner of this Certificate as shown in the registration books
maintained by the Trustee at the close of business on the fifteenth (15th) day of the month
preceding each Interest Payment Date, whether or not such day is a Business Day (as such
term is defined in the Trust Agreement), is entitled to receive such registered owner's
fractional undivided share of the Base Rental Payments constituting interest components
accruing from the Interest Payment Date next preceding the elate of execution hereof by the
Trustee (unless such date of execution is on or after the sixteenth (16th) day of the month
next preceding an Interest Payment Date and on or before such Interest Payment Date, in
which case from such Interest Payment Date, or unless such date of execution is prior to
October 16, 1996, in which case from 1, 1996) to such Certificate Payment
Date or the date of prepayment prior thereto, whichever is earlier. Such fractional
undivided share designated as interest components is the result of the multiplication of the
aforesaid portion of the Base Rental Payments designated as principal components by the
interest rate per annum stated above calculated on the basis of a 360-day year composed of
twelve 30-day months. The interest is payable to the person whose name appears on the
certificate registration books of the Trustee as the registered owner hereof as of the close of
business on the 15th day of the month immediately preceding an Interest Payment Date,
whether or not such day is a Business Day, such interest to be paid by check mailed by first
class mail on the date such interest is due to such registered owner at his address as it
appears on such registration books. Upon the written request of a registered owner of
$1,000,000 or more in principal amount of Certificates, submitted to the Trustee on or
before the fifteenth (15th) day of the month preceding each Interest Payment Date, interest
with respect to such Certificates shall be paid by wire transfer in immediately available
funds to the bank account number of said owner on file with the Trustee. All such
amounts are payable in lawful money of the United States of America.
This Certificate is one of the duly authorized certificates of participation
entitled "County of.Contra Costa Certificates of Participation (Merrithew Memorial
SF2-54846.2 8
Hospital Replacement Project)," of the series set forth above, which have been executed by
the Trustee pursuant to the terms of a Trust Agreement (together with any supplements or
amendments thereto, the "Trust Agreement") by and among the Trustee, the Corporation
and the County, dated as of May 1, 1992, as supplemented by the First Supplemental Trust
Agreement, dated as of 1, 1996. Copies of the Trust Agreement are on file at
the Principal Corporate Trust Office of the Trustee, and reference is hereby made to the
Trust Agreement and to any and all amendments thereof and supplements thereto for a
description of the agreements, conditions, covenants and terms securing the Certificates, for
the nature, extent and manner of enforcement of such agreements, conditions, covenants
and terms, for the rights and remedies of the registered owners of the Certificates with
respect thereto and for the other agreements, conditions, covenants and terms upon which
the Certificates are executed and delivered thereunder, to which agreements, conditions,
covenants and terms the owner hereof, by acceptance hereof, hereby consents.
Additional series of Certificates may be executed and delivered on the terms
and conditions set forth in the Trust Agreement.
To the extent and in the manner permitted by the terms of the Trust
Agreement and the Facility Lease, the provisions of the Trust Agreement may be amended
or supplemented by the parties thereto.
This Certificate is transferable by the registered owner hereof, in person or
by his attorney duly authorized in writing, at the Principal Corporate Trust Office of the
Trustee, but only in the manner, subject to the limitations and upon payment of the charges
provided in the Trust Agreement, and upon surrender of this Certificate for cancellation
accompanied by delivery of a duly executed written instrument of transfer in the form
appearing hereon. Upon such transfer, a new Certificate or Certificates of the same series
and Certificate Payment Date representing the same principal amount will be issued to the
transferee in exchange herefor. The Certificates are exchangeable at the Principal
Corporate Trust Office of the Trustee for a like aggregate principal amount of Certificates
of authorized denominations of the same series and Certificate Payment Date, in the
manner, subject to the limitations and upon payment of the charges provided in the Trust
Agreement.
The Trustee may treat the registered owner hereof as the absolute owner
hereof for all purposes, whether or not this Certificate shall be overdue, and the Trustee
shall not be affected by any knowledge or notice to the contrary; and payment of the
interest and principal represented by this Certificate shall be made only to such registered
owner, which payments shall be valid and effectual to satisfy and discharge liability
represented by this Certificate to the extent of the sum or sums so paid.
The Certificates are authorized to be executed and delivered in the form of
fully registered Certificates in denominations of five thousand dollars ($5,000) each or any
integral multiple thereof so long as no Certificate shall represent principal becoming
payable on more than one Certificate Payment Date.
SF2-54846.2 9
The Certificates are subject to prepayment on any date prior to their
respective Certificate Payment Dates, as a whole, or in part by lot within each Certificate
Payment Date selected as provided in the Trust Agreement, from prepaid Base Rental
Payments made by the County from funds received by the County due to a casualty loss or
governmental taking of the Demised Premises and the Project (as those terms are defined in
the Trust Agreement) or portion thereof, under the circumstances and upon the conditions
and terms prescribed in the Trust Agreement and in the Facility Lease, at the principal
amount represented thereby plus accrued interest represented thereby to the date fixed for
prepayment, without premium.
Series of 1996 Certificates payable on or before November 1, shall not
otherwise be subject to prepayment before their respective stated Certificate Payment Dates.
Series of.1996 Certificates payable on or after November 1, shall also
be subject to prepayment prior to their respective stated Certificate Payment Dates, at the
option of the County, as a whole, or in part of such Certificate Payment Dates as shall be
determined by the County and by lot within any such Certificate Payment Date if less than
all of the Series of 1996 Certificates of such Certificate Payment Date be prepaid, from any
source of available funds, on any date on or after November 1, , at the following
prepayment prices (expressed as a percentage of the principal amount) plus accrued interest
represented thereby to the date fixed for prepayment, as follows:
Prepayment Dates Prepayment
(dates inclusive) Price
As provided in the Trust Agreement, notice of prepayment hereof shall be
mailed, first class postage prepaid, not less than thirty (30) nor more than sixty (60) days
before the prepayment date, to the registered owner of this Certificate at its address as it
appears on the registration books maintained by the Trustee. If this Certificate is called for
prepayment and payment is duly provided herefor as specified in the Trust Agreement,
interest represented hereby shall cease to accrue from and after the date fixed for
prepayment.
The Certificates each evidence and represent a fractional undivided interest in
the Base Rental Payments in an amount equal to the aggregate principal amount of
Certificates originally executed and delivered.by the Trustee in series from time to time
pursuant to theTrust Agreement and enjoy the benefits of a security interest in the moneys
held in the funds established pursuant to the Trust Agreement, subject to the provisions of
the Trust Agreement permitting the disbursement thereof for or to the purposes and on the
conditions and terms set forth therein. The obligation of the County to make the Base
Rental Payments is a special obligation of the County, and does not constitute a debt of the
County or of the State of California or of any political subdivision thereof within the
meaning of any constitutional or statutory debt limitation or restriction. .
SF2-54846.2 10
The Trustee has no obligation or liability to the Certificate owners for the
payment of the interest or principal represented by the Certificates, but rather the Trustee's
sole obligations are to administer, for the benefit of the County and the Corporation and the
Certificate owners, the various funds established under the Trust Agreement and the
Facility Lease except from amounts on deposit therefor with the Trustee pursuant to the
Trust. Agreement. The Corporation has no obligation or liability whatsoever to the
Certificate owners.
The County has certified to the Trustee that all acts, conditions and things
required by the statutes of the State of California and the Trust Agreement to exist, to have
happened and to have been performed precedent to and in connection with the execution
and delivery of this Certificate do exist, have happened and have been performed in regular
and due time, form and manner as required by law, and that the Trustee is duly authorized
to execute and deliver this Certificate. The County has further certified that the amount of
this Certificate, together with all other Certificates executed and delivered under the Trust
Agreement, is not in excess of the amount of Certificates authorized to be executed and
delivered thereunder.
IN WITNESS WHEREOF, this Certificate has been dated as of the date set
forth above and has been executed by the manual signature of an authorized signatory of the
Trustee.
Date of Execution:
U.S. TRUST COMPANY OF CALIFORNIA,
N.A., as Trustee
By
Authorized Signatory
r
SF2-54846:2 1 1
[FORM OF ASSIGNMENT]
For value received, the undersigned do(es) hereby sell, assign and transfer
unto the within Certificate and do(es) hereby irrevocably constitute
and appoint attorney to transfer such Certificate on the
Certificate register of the Trustee, with full power of substitution in the premises.
Dated
Note: The signature(s) to this Assignment must
correspond with the name(s) as written on the
face of the within Certificate in every particular,
without alteration or enlargement or any change
whatsoever.
Signature Guarantee:
(Signature(s) must be guaranteed by
an eligible guarantor institution.)
SF2-54846.2 12
SECTION 12.06. Delivery of 1996 Certificates. The Trustee is hereby
authorized to execute and deliver the 1996 Certificates to the 1996 Purchasers upon receipt
of a Written Request of the County and upon receipt of the proceeds of sale thereof.
, SECTION 12.07. Deposit of Proceeds of 1996 Certificates and Application
of Amounts Held Pursuant to Trust Agreement. (a) The proceeds received by the Trustee
from the sale of the 1996 Certificates and $ received from the County shall be
transferred and applied, as directed by the Written Request of the County and the
Corporation, promptly upon such sale as follows:
(i) $ shall be deposited in the Lease Fund established
pursuant to Section 3.07(b) of the Facility Lease,
(ii) $ shall be deposited in the 1992 Certificates Escrow Fund
established by the Trustee (which fund the Trustee hereby agrees to establish and
maintain until all 1092 Certificates are paid), to be used pursuant to the 1992
Certificates Letter of Instructions to acquire escrow securities pursuant to section 2
of said Letter of Instructions; and
(iii) $ shall be deposited in the Refunding Expenses Fund to be
established pursuant to Section 12.08.
(b) Amounts held in the following funds and accounts shall be transferred
as follows:
(i) $ shall be transferred from the Certificate Reserve Fund
established pursuant to Section 3.07(c) of the Facility Lease to the Acquisition and
Construction Fund (following such transfer, $ , which shall at least equal
the Certificate Reserve Fund Requirement, shall remain on deposit in the Certificate
Reserve Fund); and
(ii) $ shall be transferred from the Lease Fund established
pursuant to Section 3.07(b) of the Facility Lease to the Acquisition and Construction
Fund.
SECTION 12.08. Use of Moneys in the Refunding_Expenses Fund. The
Refunding Expenses Fund, which fund the Trustee hereby agrees to establish and maintain,
shall be held by the Trustee in trust and applied by the Trustee to the payment of all costs
incidental to or connected with the issuance of the 1996 Certificates and the defeasance of
the 1992 Certificates (or for making reimbursements to the Corporation or the County or
any other person, firm or corporation for such costs theretofore paid by him or it).
Before any payment is made from the Refunding Expenses Fund by the
Trustee, the Corporation shall file with the Trustee a Written Request of the Corporation,
showing with respect to each payment to be made --
SF2-54846.2 13
(a) the name and address of the person to whom payment is due;
(b) the amount to be paid; and
(c) the purpose for which the obligation was incurred.
Each such Written Request of the Corporation shall state and shall be
sufficient evidence to the Trustee that obligations in the stated amounts have been incurred
and that each such obligation is a proper charge against the Refunding Expenses Fund.
When all expenses payable from the Refunding Expenses Fund have been
paid, the Corporation shall deliver a Certificate of the Corporation to the Trustee stating
such fact. Upon the receipt of such certificate, the Trustee shall transfer any remaining
balance in the Refunding Expenses Fund to the Acquisition and Construction Fund.
SECTION 12.09. Terms of Prepayment of 1996 Certificates. (a) The
Certificates, including the 1996 Certificates, are subject to prepayment on any date prior to
their respective Certificate Payment Dates, upon notice as hereinafter provided, as a whole,
or in part by lot within each Certificate Payment Date so that the aggregate annual amounts
of principal and interest represented by the Certificates which shall be payable after such
prepayment date, as determined by the County, shall correspond to the principal component
and interest component of the reduced Base Rental Payments resulting from a casualty loss
or governmental taking of the Demised Premises and the Project or portions thereof, from
prepaid Base Rental Payments made by the County from funds received by the County due
to such casualty loss or governmental taking, if such amounts are not used to repair or
replace the Demised Premises and the Project in accordance with the provisions of the
Facility Lease, under the circumstances and upon the conditions and terms prescribed
herein and in the Trust Agreement and in the Facility Lease, at the principal amount
represented thereby plus accrued interest represented thereby to the date fixed for
prepayment, without premium.
(b) The 1996 Certificates payable on or before November 1, shall
not otherwise be subject to prepayment before their respective stated Certificate Payment
Date.
(c) The 1996 Certificates payable on or after November 1, shall
also be subject to prepayment prior to their respective stated Certificate Payment Dates, at
the option of the County, as a whole, or in part of such Certificate Payment Dates as shall
be determined by the County, and by lot within any such Certificate Payment Date if less
than all of the 1996 Certificates of such Certificate Payment Date be prepaid, from any
source of available funds; on any date on or after November 1, , at the following
prepayment prices (expressed as a percentage of the principal amount) plus accrued interest
represented thereby to the date fixed for prepayment, as follows:
Prepayment Dates Prepayment Price
(dates inclusive)
SF2-54846.2 14
SECTION 12.10. 1996 Rebate Fund. (a) The Trustee shall establish and
maintain a fund separate from any other fund established and maintained under the Trust
Agreement designated as the "1996 Rebate Fund." The Trustee shall establish and maintain
separate subaccounts within the 1996 Rebate Fund to the extent requested by the County.
There shall be deposited in the 1996 Rebate Fund from lawfully available funds such
amounts as are required to be deposited therein pursuant to the instructions of the County
given pursuant to the 1996 Tax Certificate. All money at any time deposited in the 1996
Rebate Fund and any subaccount therein shall be held by the Trustee in trust, to the extent
required to satisfy the Rebate Requirement (as defined in the 1996 Tax Certificate), for
payment to the United States of America. All amounts required to be deposited into or on
deposit in the 1996 Rebate Fund shall be governed exclusively by this Section and by the
1996 Tax Certificate. The Trustee shall be deemed conclusively to have complied with
such provisions if it follows the directions of the County, and shall have no liability or
responsibility to enforce compliance by the County with the terms of the 1996 Tax
Certificate.
(b) Upon the Written Request of the County, the Trustee shill pay to the
United States of America out of amounts in the 1996 Rebate Fund, the amounts directed
and at the times directed by the County. The County shall make the calculations required
to provide such Written Request in accordance with the 1996 Tax Certificate. In the event
that prior to the time of any required payment out of the 1996 Rebate Fund, the amount in
the 1996 Rebate Fund is not sufficient to make such payment when such payment is due,
the County shall calculate and direct the Trustee to deposit moneys from such sources as
directed by the County (which sources shall be lawfully available sources) an amount equal
to such deficiency into the 1996 Rebate Fund prior to the time such payment is due. Each
payment required to be made pursuant to this subsection shall be made to the Internal
Revenue Service Center, Philadelphia, Pennsylvania 19255 on or before the date such
payment is due, and shall be accompanied by a statement summarizing the determination of
the amount required to be paid pursuant to this subsection and by a copy of the Internal
Revenue Service Form 8038-G prepared by the County filed with respect to the 1996
Certificates.
Notwithstanding anything to the contrary in this Trust Agreement, any
amount received with respect to any investment credited to the 1996 Rebate Fund shall be
credited to and retained in the 1996 Rebate Fund upon the receipt thereof.
In the event that the amount credited to the 1996 Rebate Fund exceeds the
Rebate Requirement as calculated from time to time by or on behalf of the County, the
Trustee, upon the Written Request of the County, shall withdraw the excess from the 1996
Rebate Fund and credit the excess to the Principal Fund.
For purposes of crediting amounts to the 1996 Rebate Fund or withdrawing
amounts from the 1996 Rebate Fund, Nonpurpose Investments shall be valued by or on
behalf of the County in the manner provided in the Tax Certificate.
SF2-54846.2 15
SECTION 12.11. Use of Depository. Notwithstanding any provision of the.
Trust Agreement or this First Supplemental Trust Agreement to the contrary:
(a) The 1996 Certificates shall be initially executed and delivered as
provided in Section 12.02. Registered ownership of the 1996 Certificates, or any portions
thereof, may not thereafter be transferred except:
(i) To any successor of The Depository Trust Company or its
nominee, or to any substitute depository designated pursuant to clause (ii) of this
subsection (a) ("substitute depository"); provided that any successor 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 Trustee, 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 County that The Depository Trust Company or its successor (or any substitute
depository 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 substitute depository or its successor)
from its functions as depository which is not objected to by the Trustee, or (2) a
determination by the County that it is in the best interests of the County to remove
The Depository Trust Company or its successor (or any substitute depository or its
successor) from its function as depository.
(b) In the case of any transfer pursuant to clause (i) or clause (ii) of
subsection 12.11(a) hereof, upon receipt of all Outstanding 1996 Certificates by the
Trustee, together with a Certificate of the County to the Trustee, a single new 1996
Certificate for each Certificate Payment Date shall be executed and delivered, registered in
the name of such successor or such substitute depository, or their nominees, as the case
may be, all as specified in such Certificate of the County. In the case of any transfer
pursuant to clause (iii) of subsection 12.11(a) hereof, upon receipt of all Outstanding 1996
Certificates by the Trustee together with a Certificate of the County to the Trustee, new
1996 Certificates shall be executed and delivered in such denominations and registered in
the names of such persons as are requested in such a Certificate of the County, subject to
the limitations of Section 12.02 hereof; provided the.Trustee shall not be required to deliver
such new 1996 Certificates within a period less than 60 days from the date of receipt of
such a Certificate of the County.
(c) The County and the Trustee shall be entitled to treat the person in
whose name any 1996 Certificate is registered as the Owner thereof for all purposes of this
First Supplemental Trust Agreement and any applicable laws, notwithstanding any notice to
the contrary received by the Trustee or the County; and the County and the Trustee shall
SF2-54846.2 16
c�z
have no responsibility for transmitting payments to, communication with, notifying, or
otherwise dealing with any beneficial owners of the 1996 Certificates. Neither the County
nor the Trustee will have any responsibility or obligations, legal or otherwise, to the
beneficial owners or to any other party including The Depository Trust Company or its
successor (or substitute depository or its successor), except for the owner of any 1996
Certificate.
(d) In the case of a partial redemption or an advance refunding of any
1996 Certificates evidencing a portion of the principal maturing in a particular year, The
Depository Trust Company or its successor (or any Substitute Depository or its successor)
shall.make an appropriate notation on such 1996 Certificates indicating the date and
amounts of such reduction in principal, in form acceptable to the Trustee, all in accordance
with the letter of representations referred to below. The Trustee shall not be liable for such
depository's failure to make such notations or errors in making such notations.
(e) Notwithstanding any other provision of this First Supplemental Trust
Agreement and so long as all Outstanding 1996 Certificates are registered in the name of
Cede & Co. or its registered assigns, the County and the Trustee shall cooperate with
Cede & Co., as sole registered Owner, and its registered assigns in effecting payment of
the principal of and redemption premium, if any, and interest on the 1996 Certificates 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 letter of
representations delivered by the County and the Trustee to The Depository Trust Company
with respect to the 1996 Certificates, the provisions of which the Trustee may rely upon to
implement the foregoing procedures notwithstanding any inconsistent provisions herein.
SECTION 12.12. Continuing Disclosure. The County and the Trustee
hereby covenant and agree that they will comply with and carry out all of the provisions of
the Continuing Disclosure Agreement. Notwithstanding any other provision of the Trust
Agreement, failure of the County or the Trustee to comply with the Continuing Disclosure
Agreement,shall not be considered an Event of Default; however, the Trustee may (and, at
the request of any Participating Underwriter (as defined in the Continuing Disclosure
Agreement) or the Owners of at least 25% aggregate principal amount of Outstanding 1996
Certificates, shall) or any Owner or Beneficial Owner may take such actions as may be
necessary and appropriate, including seeking mandate or specific performance by court
order, to cause the County or the Trustee, as the case may be, to comply with its
obligations under this Section. For purposes of this Section, "Beneficial Owner" means any
person which has the power, directly or indirectly, to vote or consent with respect to, or to
dispose of ownership of, any 1996 Certificates (including persons holding 1996 Certificates
through nominees, depositories or other intermediaries). "Continuing Disclosure
Agreement" shall mean that certain Continuing Disclosure Agreement between the County
and the Trustee dated the date of issuance and delivery of the 1996 Certificates, as
originally executed and as it may be amended from time to time in accordance with the
terms thereof.
SF2-54846.2 17
SECTION 12.13. Amendments to Trust Agreement. From and after the
effective date of this First Supplemental Trust Agreement, an additional paragraph shall be
added to Section 5.01, such paragraph to read in full as follows:
"Pursuant to Section 25350.55 of the California Government Code,
the County has elected to guarantee Base Rental Payments paid by the
County under the Facility Lease. On or before each Interest Payment Date,
if the County has insufficient funds to make the installment of Base Rental
Payment due on such Interest Payment Date, the County shall so notify the
Trustee. Upon receipt of such notification, the Trustee shall immediately
notify the State Controller and shall request from the State Controller the
amount by which the Base Rental Payment due on such Interest Payment
Date exceeds the amount on deposit in the Base Rental Payment Fund. The
Trustee is hereby instructed and hereby agrees to receive such moneys
transferred by the State Controller and to the extent moneys on deposit in the
Certificate Reserve Fund were used in lieu of such Base Rental Payments, to
replenish the Certificate Reserve Fund and otherwise to deposit the funds into
the Base Rental Payment Fund."
SECTION 12.14. Article and Section Headings, Gender and References.
The headings or titles of the several Articles and Sections hereof and the table of contents
appended hereto shall be solely for convenience of reference and shall not affect the
meaning, construction or effect hereof, and words of any gender shall be deemed and
construed to include all genders. All references herein to "Articles," "Sections" and other
subdivisions or clauses are to the corresponding Articles, Sections, subdivisions or clauses
hereof; and the words "hereby," "herein," "hereof," "hereto," "herewith, "hereunder" and
other words of similar import refer to this First Supplemental Trust Agreement and the
Trust Agreement as a whole and not to any particular Article, Section, subdivision or
clause thereof.
SECTION 12.15. Execution in Counterparts. This First Supplement Trust
Agreement may be executed in several counterparts, each of which shall be deemed an
original, and all of which shall constitute but one and the same instrument.
sF2-54846.2 18
IN WITNESS WHEREOF, the parties hereto have executed this First
Supplemental Trust Agreement by their officers thereunto duly authorized as of the day and
year first written above.
U.S. TRUST COMPANY OF'CALIFORNIA,
N.A., as Trustee
By
Authorized Officer
CONTRA COSTA COUNTY PUBLIC
FACILITIES CORPORATION
By
President
By
Secretary
COUNTY OF CONTRA COSTA
By
Chair of the Board of
Supervisors of the County of
Contra Costa, State of California
Attest: Philip J. Batchelor, Clerk of the
Board of Supervisors and County
Administrator
By:
Approved as to form:
County Counsel
sF2-54946.2 19
FIRST AMENDMENT TO FACILITY LEASE
(MERRITHEW MEMORIAL HOSPITAL REPLACEMENT PROJECT)
This First Amendment to Facility Lease (Merrithew Memorial Hospital
Replacement Project), dated as of 1, 1996, between the CONTRA COSTA
COUNTY PUBLIC FACILITIES CORPORATION (the "Corporation") a nonprofit
corporation duly organized and existing under and by virtue of the laws of the State of
California, as lessor, and the COUNTY OF CONTRA COSTA (the "County"), a body
corporate and politic and a political subdivision of the State of California, as lessee;
WITNESSETH:
WHEREAS, the County has leased certain real property to the Corporation by
a lease, entitled "Site Lease (Merrithew Memorial Hospital Replacement Project)" and dated
as of May 1, 1992; and
WHEREAS, this First Amendment to Facility Lease (Merrithew Memorial
Hospital Replacement Project) is entered into to amend in certain respects a lease between
the Corporation and the County entitled "Facility Lease (Merrithew Memorial Hospital
Replacement Project)", dated as of May 1, 1992 and recorded on May 13, 1992 in the office
of the County Recorder of Contra Costa County, State of California, under Recorder's Serial
No. 92-119065 (the "Facility Lease");
NOW, THEREFORE, the parties hereto,-for good consideration, the receipt of
which is hereby acknowledged, agree as follows:
SF2-55104.2
Section 1. This First Amendment to Facility Lease (Merrithew Memorial
Hospital Replacement Project) shall become effective on.the date of recordation of this
instrument in the office of the County Recorder of Contra Costa County, State of California,
or on 1, 1996, whichever is earlier, and such date of commencement shall be
hereinafter referred to as the "effective date."
Section 2. From and after the effective date of this instrument, new
definitions shall be added to Section 1.01 of the Facility Lease, to be in alphabetical order
and to read as follows:
"First Amendment to Facility Lease
The term "First Amendment to Facility Lease" means that First
Amendment to Facility Lease (Merrithew Memorial Hospital
Replacement Project) between the Corporation and the County, dated as
of 1, 1996."
"License Fee Revenues
The term "License Fee Revenues" means those amounts allocated to the
County by the State Controller pursuant to California Revenue and Taxation
Code Section 11001 et LN., excluding that portion deposited to.the Vehicle
License Fee Account of the Local Revenue Fund and allocated to the County
pursuant to Chapter 89 of the Statutes of 1991 (Welfare and Institutions Code
§ 17604), enacted by the California State Legislature."
"1996 Certificates
The term "1996 Certificates" means the certificates of
participation executed and delivered by the Trustee under and.pursuant
to the Trust Agreement and the First Supplemental Trust Agreement,
the proceeds of which are for the defeasance of the 1992 Certificates."
[If scope of the Project is changed, revised definitions of "Project Phase I" and
"Demised Premises" may be added]
SF2-55104.2 2
c.qz
Section 3. From and after the effective date of this instrument, the definition
of the term "Certificate Reserve Fund Requirement" contained in Section 1.01 of the Facility
Lease shall be amended to read as follows:
"Certificate Reserve Fund Requirement"
"The term Certificate Reserve Fund Requirement" means the lesser of
(i) the maximum amount of Base Rental Payments remaining to be made by
the County pursuant to this Lease, as supplemented from time to time, during
any twelve-month period ending on November 1 and attributable to all
Outstanding series of Certificates, or (ii) 125% of the average of all such
remaining annual Base Rental Payments; provided, that with respect to the
execution and delivery of Additional Certificates if the Certificate Reserve
Fund would have to be increased by an amount greater than 10% of the stated
principal amount of such Additional Certificates, then the Certificate Reserve
Fund Requirement shall be such lesser amount as is determined by a deposit of
10%; and provided, further, that all or a part of such Certificate Reserve Fund
Requirement may be provided by a policy of insurance issued by a municipal
bond insurance company obligations insured by which have a rating by
Moody's Investors Service and by Standard and Poor's Ratings Services which
is in one of the two highest ratings then issued by said rating agencies or by a
Letter of Credit issued by a Qualified Bank."
Section 4. From and after the effective date of this instrument, the first
paragraph of Section 3.01 of the Facility Lease shall be amended to read as follows:
"SECTION 3.01. Base Rental Payments. The County
agrees to pay to the Corporation, as Base Rental Payments for
the use and occupancy of the Project and the Demised Premises
(subject to the provisions of Sections 3.04, 3.06 and 7.01 of this
Lease) annual rental payments with principal and interest
components, the interest components being payable semi-
annually, in accordance with the Rental Payment Schedule
attached hereto as Exhibit B and made a part hereof. Base
Rental shall be calculated on an annual basis, for the twelve-
month periods commencing on April 1 and ending on March 31,
and each annual Base Rental shall be divided into two interest
components, payable on April 15 and October 15 of each rental
payment period, and one principal component, payable on
October 15 of each rental payment period (commencing on
October 15, _), except that the first Base Rental Payment
period shall commence on the date of recordation of this Lease
sF2-55104.2 3
or a memorandum thereof in the office of the County Recorder
of Contra Costa County and shall end on March 31, 1997 and
the first payment of Base Rental shall consist of one interest
component, payable on October 15, 1996. Each Base Rental
Payment installment shall be payable on the fifteenth (15th) day
of the month immediately preceding its due date and any interest
or other income with respect thereto accruing prior to such due
date shall belong to the County and shall be returned by the
Corporation to the County on May. 1 and November 1 of each
year. The interest components of the Base Rental Payments
shall be paid by the County as and constitute interest paid on the
principal components of the Base Rental Payments to be paid by
the County hereunder, computed on the basis of a 360-day year
composed of twelve 30-day months. Each annual payment of
Base Rental (to be payable in two installments as aforesaid) shall
be for the use of the Demised Premises and the Project
following completion of construction thereof for the twelve-
month period commencing on April 1 of the period in which
such installments are payable.
Section 5. From and after the effective date of this instrument, Section 3.05 of the
Facility Lease shall be entitled "Appropriations Covenant; License Fee Revenues" and shall
be amended to read as follows:
"The,County covenants to take such action as may be necessary to
include all such Base Rental Payments and Additional Payments due hereunder
in its annual budgets, to make necessary annual appropriations for all such
Base Rental Payments and Additional Payments as shall be required to provide
funds in such year for such Base Rental Payments and Additional Payments.
The County will deliver to the Corporation and the Trustee within sixty (60)
days of adoption of the County budget a Certificateof the County stating that
the budget as adopted appropriates all moneys necessary for the payment of
Base Rental Payments and Additional Payments hereunder. The covenants on
the part of the County herein contained shall be deemed to be and shall be
construed to be duties imposed by law and it shall be the duty of each and
every public official of the County to take such action and do such things as
are required by law in the performance of the official duty of such officials to
enable the County to carry out and perform the covenants and agreements in
this Lease agreed to be carried out and performed by the County.
The Corporation and the County understand and intend that the
obligation of the County to.pay Base Rental Payments and Additional
Payments hereunder shall constitute a current expense of the County and shall
SF2-55104.2 4
not in any way be construed to be a debt of the County in contravention of any
applicable constitutional or statutory limitation or requirement concerning the
creation of indebtedness by the County, nor shall anything contained herein
constitute a pledge of the.general tax revenues, funds or moneys of the
County, other than the pledge of Supplemental Reimbursements deposited in
the Supplemental Reimbursement Account pursuant to Section 3.07(d) and the
pledge of License Fee Revenues. Base Rental Payments and Additional
Payments due hereunder shall be payable only from current funds which are
budgeted and appropriated or on deposit in the Lease Fund or Certificate
Reserve Fund or otherwise legally available for the purpose of paying Base
Rental Payments and Additional Payments or other payments due hereunder as
consideration for use of the Project. This Lease shall not create an immediate
indebtedness for any aggregate payments which may become due hereunder in
the event that the term of the Lease is continued. The County has not pledged
the full faith and credit of the County, the State of California or any agency or
department thereof to the payment of the Base Rental Payments and.Additional
Payments or any other payments due hereunder.
The County hereby elects pursuant to Section 25350.55 of the
California Government Code to guarantee the Base Rental Payments payable
hereunder by an apportionment of License Fee Revenues as provided in said
Government Code Section and Section 5.01 of the Trust Agreement. To the
extent permitted by law, the County hereby pledges and grants a security
interest in the License Fee Revenues to secure the timely payment, when due,
of the Base Rental Payments. However, the County reserves the right to
guarantee other obligations of the County with the License Fee Revenues and
to grant to the holders of such obligations a pledge and security interest in the
License Fee Revenues on a parity basis with the pledge and security interest
granted herein."
Section 6. From and after the effective date of this instrument, the first
paragraph of Section 3.07 of the Facility Lease, being the paragraph entitled "(a) Use of
Proceeds," shall be amended to read as follows:
"(a) Use of Proceeds. The parties hereto agree that the
proceeds of the Certificates, except for the proceeds of the 1996
Certificates, will be used to finance the acquisition, design, construction
and financing of the Project, to establish the Lease Fund and the
Certificate Reserve Fund hereinafter referred to and the Trust
Administration Fund referred to in the Trust Agreement and to pay the
costs of issuing the Certificates and incidental and related expenses.
The parties further agree that the proceeds of the 1996 Certificates will
be used to finance the defeasance of the 1992 Certificates, pursuant to
the provisions of Section 12.07 of the First Supplemental Trust
SF2-55104.2 5
DRAFT C `�
2/26/96
Recording requested by
and return to:
COUNTY OF CONTRA COSTA
c/o Orrick, Herrington & Sutcliffe
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California 94111
Attention: Thomas R. Shearer, Jr.
FIRST AMENDMENT TO FACILITY LEASE
(Merrithew Memorial Hospital Replacement Project)
by and between
CONTRA COSTA COUNTY PUBLIC FACILITIES CORPORATION
and the
COUNTY OF CONTRA COSTA
Dated as of April 1, 1996
SF2-55104.2
x.42
Agreement, and to pay the costs of issuing the 1996 Certificates and
incidental and related expenses."
Section 7. From and after the effective date of this instrument, a new
paragraph shall be added following the existing first paragraph of Section 3.07(c) of the
Facility Lease, to read as follows:
"In further consideration for the agreements and covenants of
the County herein and in the First Amendment to Facility Lease, the
Corporation further agrees to cause to be paid to the County upon the
sale and delivery of the 1996 Certificates a sum which, if needed,
together with the balance on deposit in the Certificate Reserve Fund
shall equal the Certificate Reserve Fund Requirement, for deposit with
the Trustee in the Certificate Reserve Fund."
Section 8. From and after the effective date of this instrument, the existing
Section 8.07 of the Facility Lease shall be labeled subsection (a) and a new subsection shall
be added to Section 8.07 of the Facility Lease, to be entitled "(b) 1996 Certificates Tax
Covenants" and to read as follows:
"(b) 1996 Certificates Tax Covenants. The County and the
Corporation will not make any use of the proceeds of the obligations
provided in the First Amendment to Facility Lease or any other funds
of the County or the Corporation which will cause such obligations to
be 'arbitrage bonds' subject to federal income taxation by reason of
Section 148 of the Code. The County and the Corporation will not
make any use of the proceeds of the obligations provided in the First
Amendment to Facility Lease or any other funds of the.County of the
Corporation which will cause such obligations to be 'federally
guaranteed' and subject to inclusion in gross income for federal income
tax purposes by reason of Section 149(b) of the Code. To that end, so
long as any rental payments are unpaid, the County and the
Corporation, with respect to such proceeds and such other funds, will
comply with all requirements of such Sections 148 and 149(b) and all
regulations of the United States Department of the Treasury issued
thereunder to the extent that such requirements are, at the time,
applicable and in effect.
The County further covenants that it will not use or permit the
use of the Project by any person not an 'exempt person' within the
meaning of Section 141(a) of the Code or by an 'exempt person'
sF2-55104.2 6
(including the County) in an 'unrelated trade or business', in such
manner or to such extent as would result in the inclusion of interest
received hereunder in gross income for federal income tax purposes
under Section 103 of the Code.
If at any time the County is of the opinion that for purposes of
this subsection (b) it is necessary to restrict or limit the yield on or
change in any way the investment of any moneys held by the Trustee or
the County or the Corporation under this Lease or the Trust
Agreement, the County shall so instruct the Trustee or the appropriate
officials of the County in writing, and the Trustee or the appropriate
officials of the County, as the case may be, shall take such actions as
may be necessary in accordance with such instructions.
In furtherance of the covenants of the County set forth above,
the County will comply with the Tax Certificates and will cause the
Trustee to comply with the Tax Certificates. The Trustee and the
Corporation may conclusively rely on any such instructions, and the
County hereby agrees to hold harmless the Trustee and the Corporation
for any loss, claim, damage, liability or expense incurred by the
Corporation for any actions taken by the Corporation in accordance
with such instructions.
The County and the Corporation shall at all times do and
perform all acts and things permitted by law which are necessary or
desirable in order to assure that the interest component of the Base
Rental will be excluded from gross income for federal income tax
purposes and shall take no action that would result in such interest not
being excluded from gross income for federal income tax purposes."
Section 9. Except as in this First Amendment to Facility Lease(Merrithew
Memorial Hospital Replacement Project) expressly provided, the Facility Lease shall
continue in full force and effect in accordance with the terms and provisions thereof, as
amended hereby.
SF2-55104.2 7
c.�z
IN WITNESS WHEREOF, the Corporation and the County have caused this
First Amendment to Facility Lease (Merrithew Memorial Hospital Replacement Project) to
be executed by their respective officers thereunto duly authorized, all as of the day and year
first above written.
CONTRA COSTA COUNTY PUBLIC
FACILITIES CORPORATION, as Lessor
By
President
By'
Secretary
COUNTY OF CONTRA COSTA, as Lessee
By
Chair of the Board of
Supervisors of the County of
Contra Costa, State of California
Attest: Philip J. Batchelor, Clerk
of the Board of Supervisors
and County.Administrator
By:
Deputy
Approved as to form:
County Counsel
SF2-55104.2 8
EXHIBIT A
(Project Phase I)
All that certain real property situated in the County of Contra Costa, State of
California, described as follows:
sF2-55104.2 A-1
l j r�2
EXHIIBIT B
PROJECT PHASE I
RENTAL PAYMENT SCHEDULE
Amount
Base Rental Total Base Amount Attributable Attributable
Due DatesflIj Rental Payment to Interest to Principal
(1) Payment date is the fifteenth day of the preceding month.
SF2-55104.2 B-1
B&W DRAFT
2-27-96
CERTIFICATES OF PARTICIPATION
(Merrithew Memorial Hospital Project)
Refunding Series of 1996
Evidencing the Fractional Undivided Interests
of the Owners Thereof
in Base Rental Payments to be made by the
COUNTY OF CONTRA COSTA
to the
CONTRA COSTA COUNTY PUBLIC FACILITIES CORPORATION
CONTRACT OF PURCHASE
, 1996
Contra Costa County Public Facilities Corporation
651 Pine,Street, 11th Floor
Martinez, California 94553
County of Contra Costa
651 Pine Street, l lth Floor
Martinez, California 94553
Ladies and Gentlemen:
The undersigned, Smith Barney Inc., for itself and as representative of BA Securities, Inc.
and Bear, Stearns & Co., Inc. (the "Underwriters"), hereby offers to enter into this Contract of
Purchase with you,the Contra Costa County Public Facilities Corporation(the "Corporation") and
the County of Contra Costa(the "County"), for the purchase by the Underwriters and the delivery
to be caused by the County, the Corporation and U.S. Trust Company of California, N.A., Los
Angeles, California, as trustee (the "Trustee") under the Trust Agreement, dated as of May 1,
1992, among the County, the Corporation and the Trustee, as amended and supplemented by the
First Supplemental Trust Agreement, to be dated as of 1, 1996 (the "First
Supplement"), among the County, the Corporation and the Trustee (as amended, the "Trust
Agreement"),of the$ Certificates of Participation(Merrithew Memorial Hospital
Replacement Project), Refunding Series of 1996, described herein (the "Certificates"). The
17000\00219\43640.4 1
proceeds of the Certificates will be used to finance the advance refunding of the $125,584,011.80
Certificates of Participation (Merrithew Memorial Hospital Replacement Project), Series of 1992
(the "1992 Certificates"). The 1992 Certificates werre executed and delivered to finance the
design and construction of the replacement of the major county hospital located in the City of
Martinez, California known as the Merrithew Memorial Hospital (the "Project"). The Project,
including the real property on which the Project is being built (the "Leased Property"), has been
leased by the County to the Corporation and subleased by the Corporation to the County. This
offer is made subject to acceptance by the County and the Corporation and delivery to the
Underwriters prior to 11:59 p.m., San Francisco time, on the date hereof, and upon such
acceptance this Contract of Purchase and approval thereof by the County and the Corporation,
shall be in full force and effect in accordance with its terms and shall be binding upon the
Corporation, the County and the Underwriters. All terms not defined herein shall have the
meanings set forth in the Trust Agreement.
1. Upon the terms and conditions and upon the basis of the representations herein set
forth, the Underwriters hereby agree to purchase from the Corporation for offering to the public
and the Corporation hereby agrees to cause the Trustee to execute and deliver to the Underwriters
all (but not less than all) of the $ aggregate principal amount of the Certificates,
to be dated 1, 1996, evidencing fractional undivided interests of the owners thereof
in Base Rental Payments to be made by the County to the Corporation pursuant to the Facility
Lease (defined below).
The aggregate purchase price for the Certificates shall be$ (which equals
the par value of the Certificates less an original issue discount of $ 1 and less an
Underwriters' discount of$ ) plus accrued interest with respect to the Certificates
to the Closing Date.
The Underwriters agree to make a bona fide public offering of all the Certificates at the
initial public offering price or prices (or yields) set forth on the cover page of the Official
Statement plus accrued interest with respect to the Certificates to the Closing Date; provided,
however, the Underwriters reserve the right to change such initial public offering price as the
Underwriters deem necessary or desirable, in their sole discretion in connection with the
marketing of the Certificates, and to sell the Certificates to certain dealers (including dealers
depositing the Certificates into investment trusts) and others at prices lower than the initial
offering prices or higher than the yields set forth in the Official Statement. The Underwriters
also reserve the right (a) to overallot or effect transactions that stabilize or maintain the market
price of the Certificates at a level above that which might otherwise prevail in the open market
and (b) to discontinue such stabilizing, if commenced, at any time. A "bona fide public offering"
shall include an offering to institutional investors or registered investment companies, regardless
of the number of such investors*to which the Certificates are sold.
The Certificates evidence the fractional undivided interests of the owners thereof in Base
Rental Payments to be paid by the County pursuant to a Facility Lease, dated as of May 1, 1992,
between the County and the Corporation, as amended by a First Amendment to Facility Lease,
to be dated as of 1, 1996 (the "Facility Lease Amendment"), between the County
17000\00219\43640.4 2
and the Corporation (as amended, the "Facility Lease"). The Corporation's right to receive Base
Rental Payments and to exercise remedies upon an Event of Default has been assigned to the
Trustee, for the benefit of the Certificate Owners, pursuant to an Assignment Agreement, dated
as of May 1, 1992, between the Corporation and the Trustee, as amended by a First Amendment
to Assignment Agreement, to be dated as of 1, 1996 (the "Assignment Agreement
Amendment"), between the Corporation and the Trustee (as amended, the "Assignment
Agreement"). The Corporation's rights to use and occupy the Leased Property are described
under the Site Lease, dated as of May 1, 1992, between the Corporation and the County (the "Site
Lease"). Pursuant to the Facility Lease, the Corporation and the County have entered into that
certain Agency Agreement, dated as of May 1, 1992 (the "Agency Agreement").
The Certificates shall be as described in and shall be secured under and pursuant to the
Trust Agreement, substantially in the form previously submitted to the Underwriters with only
such changes therein as shall be mutually agreed upon by the Corporation, the County, the
Trustee, and the Underwriters.
The net proceeds from the sale of the Certificates will be deposited in an escrow pursuant
to a 1992 Certificates Letter of Instructions, dated as of , 1996 (the "Escrow Letter"),
from the Corporation and the County and accepted by the Trustee, and be used to advance refund
the outstanding 1992 Certificates.
The County will undertake, pursuant to the First Supplement and a Continuing Disclosure
Agreement to be entered into on the Closing Date (the "Continuing Disclosure Agreement"), to
provide certain annual financial information and notices of the occurrence of certain events, if
material. A form of the Continuing Disclosure Agreement is set forth in the Preliminary Official
Statement and will also be set forth in the Official Statement.
This Contract of Purchase, the Trust Agreement, the Assignment Agreement, the Site
Lease, the Agency Agreement, the Facility Lease, the First Supplement, the Assignment
Agreement Amendment, the Facility Lease Amendment, the Escrow Letter, and the Continuing
Disclosure Agreement are collectively referred to herein as the "Legal Documents." The Legal
Documents to which the County is a party are collectively referred to herein as the "County
Documents" and the Legal Documents to which the Corporation is a party are collectively
referred to herein as the "Corporation Documents."
2. The Corporation and the County have authorized the Underwriters to use and
distribute, in connection with the offer and sale of the Certificates, the Preliminary Official
Statement dated 1, 1996 relating to the Certificates, which, together with the cover
page and all appendices thereto, is herein called the "Preliminary Official Statement." The
Preliminary Official Statement was prepared in conjunction with the Underwriters, the
Underwriters' Counsel, Brown& Wood, the Co-Special Counsel, Orrick, Herrington & Sutcliffe
and Pamela S. Jue, Attorney at Law, and the County. Based upon the representations and
covenants of the County, the Corporation hereby certifies that it deems such Preliminary Official
Statement to be final as of its date for purposes of subsection (b)(1) of the Securities and
Exchange Commission Rule 15c2-12 adopted by the Securities and Exchange Commission on
17000\00219\43640.4 3
June 28, 1989 ("Rule 15c2-12"), with the exception of certain final pricing and related
information referred to in Rule 15c2-12. The Underwriters will distribute the Preliminary Official
Statement in accordance with Rule 15c2-12.
3. The Corporation and the County shall deliver or cause to be delivered to the
Underwriters within seven business days hereof copies of the Official Statement dated the date
hereof, relating to the Certificates approved for distribution by respective resolutions of the
County and Corporation (the Official Statement including the cover pages, the appendices thereto
and all information incorporated therein by reference are hereinafter referred collectively to as
the "Official Statement"). The Corporation and the County shall deliver copies of the Official
Statement in a quantity sufficient to comply with Rule 15c2-12 and the Rules of the Municipal
Securities Rulemaking Board. The Underwriters shall distribute a single copy to any potential
customer of the Underwriters requesting an Official Statement during the time period beginning
when the Official Statement becomes available and ending on a date referred to herein as the
"End Date," which date is the earlier of. (1) 90 days after the end of the underwriting period (as
defined in Rule 15c2-12); or (2) the time when the Official Statement becomes available from
a "national recognized municipal securities information repository" ("NRMSIR"), but in no event
less than 25 days after the underwriting period (as defined in Rule 15c2-12) ends. Unless
informed otherwise, the Corporation and the County shall be entitled to presume the end of the
underwriting period is the Closing Date. The Underwriters will file with NRMSIR promptly after
the Closing Date.
4. By its approval of the terms hereof, the County represents,warrants and covenants
to the Underwriters that:
(a) The County is a political subdivision of the State of California organized
and operating pursuant to the Constitution and laws of the State of California and has all
necessary power and authority to enter into and perform its duties under the County
Documents and,when executed and delivered by the respective parties thereto, the County
Documents will constitute the legal, valid and binding obligations of the County in
accordance with their respective terms.
(b) To the best of its knowledge, neither the execution and delivery of the
County Documents and compliance with the provisions on the County's part contained
therein, nor the consummation of any other of the transactions herein and therein
contemplated, nor the fulfillment of the terms hereof and thereof, nor the approval and
execution of the Official Statement, conflicts with or constitutes a breach of or default
under nor contravenes any law, administrative regulation, judgment, decree, loan
agreement, indenture, bond, note, resolution, agreement or other instrument to which the
County is a party or is otherwise subject, nor does any such execution, delivery, adoption
or compliance result in the security interest or encumbrance of any nature whatsoever
upon any of the properties or assets of the County under the terms of any such law,
administrative regulation, judgment, decree, loan agreement, indenture, bond, note,
resolution, agreement or other instrument, except as provided by the County Documents.
17000\00219\43640.4 4
(c) Except as may be required under blue sky or other securities laws of any
state, there is no consent, approval, authorization or other order of, or filing with, or
certification by, any regulatory authority having jurisdiction over the County required for
the execution and delivery of the Certificates by the Trustee or the consummation by the
County of the other transactions contemplated by the Official Statement and this Contract
of Purchase.
(d) To the best of its knowledge, there is, and on the Closing Date (as
hereinafter defined) there will be, no action, suit, proceeding or investigation at law or in
equity before or by any court or governmental agency or body pending or threatened
against the County to restrain or enjoin the delivery of any of the Certificates, or the
payments to be made pursuant to the Facility Lease, or in any way contesting or affecting
the validity of the County Documents or the authority of the County to approve this
Contract of Purchase, or enter into the County Documents or contesting the powers of the
County to enter into or perform its obligations under any of the foregoing or in any way
contesting the powers of the County in connection with any action contemplated by this
Contract of Purchase.
(e) The Preliminary Official Statement provided to the Underwriters has been
deemed final by the County, as required by Rule 15c2-12. As of the date thereof and at
all times subsequent thereto up to and including the End Date, the information relating
to the County contained in the Official Statement was and will be complete. The
information relating to the County contained in the Official Statement is true and correct
in all material respects and such information does not contain any untrue or misleading
statement of a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were made, not
misleading.
(f) The County agrees to cooperate with the Underwriters in endeavoring to
qualify the Certificates for offering and sale under the securities or blue sky laws of such
jurisdictions of the United States as the Underwriters may request;provided, however,that
the County will not be required to execute a special or general consent to service of
process in any jurisdiction in which it is not now so subject or to qualify to do business
as a foreign corporation in any jurisdiction where it is not so qualified.
(g) By official action of the County prior to or concurrently with the execution
hereof, the County has duly approved the distribution of the Official Statement, and has
duly authorized and approved the execution and delivery of, and the performance by the
County of the obligations on its part contained in, the County Documents and the
consummation by it of all other transactions contemplated by the Official Statement and
this Contract of Purchase.
(h) The County is not in breach of or default under any applicable law or
administrative regulation of the State of California or the United States or any applicable
judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement
17000\00219\43640.4 5
c=�z
or other instrument affecting the Certificates in any manner and to which the County is
a party or is otherwise subject, and no event has occurred and is continuing which, with
the passage of time or the giving of notice, or both, would constitute a default or an event
of default under any such instrument.
(i) The County is not in default, nor has been in default at any time, as to the
payment of principal or interest with respect to an obligation issued by the County or
successor of the County or with respect to an obligation guaranteed by the County as
guarantor or successor of a guarantor.
0) If between the date of this Contract of Purchase and the date of the Closing
an event occurs, of which the County has knowledge, which might or would cause the
information relating to the County, its functions, duties and responsibilities contained in
the Official Statement, as then supplemented or amended, to contain an untrue statement
of a material fact or to omit to state a material fact required to be stated therein or
necessary to make such information therein, in the light of the circumstances under which
it was presented, not misleading, the County will notify the Underwriters and the
Corporation, and if, in the opinion of the Underwriters, the County and the Corporation,
or their respective counsel, such event requires the preparation and publication of a
supplement or amendment to the Official Statement, the County will cooperate with the
Underwriters in the preparation of an amendment or supplement to the Official Statement
in a form and in a manner approved by the Underwriters, provided all expenses thereby
incurred will be paid for by the County.
(k) If the information relating to the County, its functions, duties and
responsibilities contained in the Official Statement is amended or supplemented pursuant
to the immediately preceding subparagraph, at the time of each supplement or amendment
thereto and (unless subsequently again supplemented or amended pursuant to such
subparagraph) at all times subsequent thereto up to and including the Closing Date, the
portions of the Official Statement so supplemented or amended (including any financial
and statistical data contained therein) will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary to make such
information therein, in the light of the circumstances under which it was presented, not
misleading.
(1) The County covenants that it will comply with all tax covenants relating
to it in the County Documents and in the Tax Certificate (as defined below).
(m) The written information supplied by the County to the Corporation and the
Underwriters with respect to the Project to be financed with the proceeds of the
Certificates, and with respect to Leased Property, is true, correct and complete in all
material respects for the purposes for which it was supplied.
(n) No consent, approval, authorization or other action by a governmental or
regulatory authority that has not been obtained is or will be required of the County for
17000\00219\43640.4 6
e4
the delivery and sale of the Certificates or the consummation of the other transactions
contemplated by this Contract of Purchase and the Official Statement, except for such
licenses, certificates, approvals, variances or permits which may be necessary for the
construction or operation of the Project or the Leased Property which the County has
applied for (or will apply for in the ordinary course of business) and expects to receive,
and except as may be required under the state securities or blue sky laws in connection
with the sale of the Certificates by the Underwriters.
(o) Substantially all the proceeds from the sale of the Certificates (after
deducting the expenses of issuance and sale of the Certificates and any interest during
construction paid for from such proceeds) will be used to advance refund the 1992
Certificates and the County will not take or omit to take any action which action or
omission will in any way cause the proceeds from the sale of the Certificates to be applied
in a manner contrary to that provided in the Trust Agreement and the Facility Lease, as
amended from time to time.
(p) The County will deliver all opinions, certificates, letters and other
instruments and documents reasonably required by the Underwriters and this Contract of
Purchase.
(q) Any certificate of the County delivered to the Underwriters shall be deemed
a representation and warranty by the County to the Underwriters as to the statements
made therein.
5. The Corporation represents, warrants and covenants to the Underwriters that:
(a) The Corporation is a nonprofit corporation duly organized and validly
existing pursuant to the laws of the State of California and has all necessary power and
authority to enter into and perform its duties under the Corporation Documents and, when
executed and delivered by the respective parties thereto, the Corporation Documents will
constitute the legal, valid and binding obligations of the Corporation in accordance with
their respective terms.
(b) The execution and delivery of the Corporation Documents, and compliance
with the provisions thereof, will not conflict with, or constitute a breach of or default
under any law, administrative regulation, court decree, resolution, charter,bylaws or other
agreement to which the Corporation is subject or by which it is bound.
(c) Except as may be required under blue sky or other securities laws of any
state and any applicable building codes, permits, zoning variances, if any, and similar
ministerial governmental approvals related to the development of the Project or the use
of the Leased Property, there is no consent, approval, authorization or other order of, or
filing with, or jurisdiction over the Corporation required for the consummation by the
Corporation of the transactions contemplated by the Official Statement and this Contract
of Purchase.
17000\00219\43640.4 7
(d) To the best of its knowledge, there is, and on the Closing Date (as
hereinafter defined) there will be, no action, suit, proceeding or investigation at law or in
equity before or by any court or governmental agency or body pending or threatened
against the Corporation to restrain or enjoin the delivery of any of the Certificates, or the
assignment of the payments to be made pursuant to the Facility Lease, or in any way
contesting or affecting the validity of the Corporation Documents or the authority of the
Corporation to enter into the Corporation Documents or contesting the powers of the
Corporation to enter into or perform its obligations under any of the foregoing or in any
way contesting the powers of the Corporation in connection with any action contemplated
by this Contract of Purchase.
(e) The information relating to the Corporation, its function, duties and
responsibilities contained in the Official Statement is true and correct in all material
respects and such information does not contain any untrue or misleading statement of a
material fact or omit to state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(f) By official action of the Corporation prior to or concurrently with the
execution hereof, the Corporation has duly approved the distribution of the Official
Statement, and has duly authorized and approved the execution and delivery of, and the
performance by the Corporation of the obligations on its part contained in the Corporation
Documents and the consummation by it of all other transactions contemplated by the
Official Statement and the Contract of Purchase.
(g) To the best of its knowledge, the Corporation is not in breach of or default
under any applicable law or administrative regulation of the State of California or the
United States or any applicable judgment or decree or any loan agreement, indenture,
bond, note, resolution, agreement or other instrument to which the Corporation is a party
or is otherwise subject which would have an adverse impact on the Corporation's ability
to perform its obligations under the Corporation Documents, and no event has occurred
and is continuing which, with the passage of time or the giving of notice, or both, would
constitute a default or an event of default under any such instrument.
(h) If between the date of this Contract of Purchase and the Closing Date an
event occurs, of which the Corporation has knowledge, which might or, would cause the
information relating to the Leased Property, the Project, the Corporation or its functions,
duties and responsibilities contained in the Official Statement, as then supplemented or
amended, to contain an untrue statement of a material fact or to omit to state a material
fact required to be stated therein or necessary to make such information therein, in the
light of the circumstances under which it was presented, not misleading, the Corporation
will notify the Underwriters and the County, and if in the opinion of the Underwriters,
the County, or the Corporation, or their respective counsel, such event requires the
preparation and publication of a supplement or amendment to such portions of the Official
Statement, the Corporation will cooperate with the Underwriters in the preparation of an
amendment or supplement to the Official Statement in a form and in a manner approved
17000\00219\43640.4 8
by the Underwriters, provided all expenses thereby incurred will be paid in accordance
with Section 11 hereof.
(i) If the information relating to the Corporation or its functions, duties and
responsibilities contained in the Official Statement is amended or supplemented pursuant
to the immediately preceding subparagraph, at the time of each supplement or amendment
thereto and (unless subsequently again supplemented or amended pursuant to such
subparagraph) at all times subsequent thereto up to and including the Closing Date, the
portions of the Official Statement so supplemented or amended (including any financial
and statistical data contained therein) will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary to make such
information therein, in the light of the circumstances under which it was presented, not
misleading.
0) The Corporation covenants that it will comply with all tax covenants
relating to it in the Corporation Documents and the Tax Certificate.
6. At 8:00 a.m., San Francisco Time, on , 1996, or at such other time or
on such earlier or later date as the Corporation, the County and the Underwriters mutually agree
upon (herein called the "Closing Date"), the Trustee will deliver or cause to be delivered, for the
account of the Underwriters,to the Depository Trust Company ("DTC") in New York,New York,
or to such other place as the Corporation, the County and the Underwriters mutually agree upon,
definitive Certificates in the form of a single Certificate for each maturity, duly executed by the
Trustee, and at the offices of Orrick, Herrington & Sutcliffe, San Francisco, the other documents
hereinafter mentioned. CUSIP identification numbers shall be printed on the Certificates, but the
failure to print such number on any of the Certificates or any error with respect thereto shall not
constitute cause for a failure or refusal by the Underwriters to accept delivery of, or pay for, the
Certificates in accordance with the terms of this Contract of Purchase. All expenses in relation
to the printing of CUSIP numbers on said Certificates and the CUSIP Service Bureau charge for
the assignment of said numbers shall be paid for by the County from Certificate proceeds. The
Underwriters will accept delivery of the Certificates and pay the purchase price thereof by wire
payable in federal funds to the order of the Trustee in an amount equal to the purchase price.
7. The Underwriters have entered into this Contract of Purchase in reliance upon the
representations, warranties and agreements of the County and the Corporation contained herein,
and the opinions of Co-Special Counsel, Counsel to the Trustee, Counsel to the Corporation,
County Counsel and Counsel to the Underwriters required hereby. The Underwriters' obligations
under this Contract of Purchase are and shall be subject to the following further conditions:
(a) At the time of Closing, the Legal Documents, all as described in the
Official Statement, shall be in full force and effect as valid and binding agreements
between or among the various parties thereto and the Legal Documents and the Official
Statement shall not have been amended, modified or supplemented except as may have
been agreed to in writing by the Underwriters, and there shall be in full force and effect
17000\00219\43640.4 9
c.�z.
such resolutions as, in the opinions of Co-Special Counsel, shall be necessary in
connection with the transactions contemplated hereby.
(b) At or prior to the Closing Date, the Underwriters shall receive the
following documents, in each case satisfactory in form and substance to them and their
counsel:
(1) The unqualified approving opinion of Co-Special Counsel,dated the
date of Closing, addressed to the Corporation, in the form attached to the Official
Statement as Appendix E, and a reliance letter addressed to the Underwriters.
(2) Supplementary opinions of Co-Special Counsel in form and
substance satisfactory to the Underwriters, dated the date of Closing and addressed
to the Underwriters, to the effect that:
(i) the statements and information in the Official Statement under
the captions "INTRODUCTION", "THE 1996 CERTIFICATES" (except
'Book-Entry Only System"), "SECURITY AND SOURCES OF
PAYMENT FOR THE CERTIFICATES (except "Source of Revenues for
Base Rental Payments" and "State Intercept Program"), "LEGAL
MATTERS," "TAX MATTERS," and "Appendix D - Summary of Certain
Provisions of Principal Documents" taken together are, to the extent they
purport to summarize certain provisions of the Facility Lease, the Site
Lease, the Assignment Agreement, the Agency Agreement, the Trust
Agreement, the Certificates and the opinions of such counsel, accurate in
all material respects for purposes of use in the Official Statement;
(ii) The Certificates are exempt from registration under the
Securities Act of 1933, as amended (the "1933 Act"), and the Trust
`Agreement is exempt from qualification as an indenture pursuant to the
Trust Indenture Act of 1939, as amended.
(3) An opinion of County Counsel of the County, dated the date of
Closing, in form and substance satisfactory to the Underwriters, addressed to the
Underwriters, the Corporation and the Trustee, to the effect that:
(i) the County is a political subdivision of the State of California
duly organized and validly existing under the Constitution and the laws of
the State of California;
(ii) the preparation and distribution of the Preliminary Official
Statement and the Official Statement and this Contract of Purchase have
been duly approved by the County;
17000\00219\43640.4 10
(iii) the resolutions of the County approving and authorizing the
execution and delivery of the County Documents have been duly adopted
at meetings of the governing body of the County which were called and
held pursuant to law and with all public notice required by law and at
which quorums were present and acting throughout;
(iv) to the best knowledge of such counsel, after reasonable
investigation, there is no action, suit, proceeding or investigation at law or
in equity before or by any court, public board or body, pending against or
affecting the County, which would materially adversely impact the
County's legal ability to complete the transactions described in and
contemplated by the Official Statement, to restrain or enjoin the payments
under the Facility Lease, or in any way contesting or affecting the validity
of the County Documents or the transactions relating to the Leased
Property as described and defined in the Official Statement wherein an
unfavorable decision, ruling or finding would materially adversely affect
the validity and enforceability of the County Documents;
(v) the execution and delivery of the County Documents and the
execution and approval of the Official Statement, and compliance with the
provisions thereof and hereof, under the circumstances contemplated
thereby, do not and will not in any material respect conflict with or
constitute on the part of the County a breach of or default under any
agreement or other`instrument to which the County is a party or by which
it is bound under any existing law, regulation, court order or consent
decree to which the County is subject;
(vi) the County Documents have been duly authorized, executed
and delivered by the County, and, assuming due authorization, execution
and delivery by the other parties thereto, constitute legal, valid and binding
agreements of the County enforceable in accordance with their respective
terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency or other laws affecting the enforcement of creditors' rights
generally and by the application of equitable principles if equitable
remedies are sought and by the limitations on legal remedies imposed on
actions against counties in the State of California; and
(vii) no authorization, approval, consent, or other order of the State
of California or any other governmental authority or agency within the
State of California that has not already been obtained is required for the
valid authorization, execution and delivery of the County Documents and
the execution and approval of the Official Statement.
17000\00219\43640.4 11
(4) An opinion of Counsel to the Corporation, dated the date of
Closing, in form and substance satisfactory to the Underwriters, addressed to the
County, the Underwriters and the Trustee, to the effect that:
(i) the Corporation is a nonprofit corporation duly organized,
existing and in good standing under the laws of the State of California;
(ii) the Corporation has corporate power to enter into the
Corporation Documents and to own its properties and to carry on its
business as then conducted;
(iii) the Corporation Documents have been duly authorized,
executed and delivered by and on behalf of the Corporation and assuming
due authorization, execution and delivery by the other parties thereto,
constitute legally valid, binding and enforceable agreements of the
Corporation, except as enforcement thereof may be limited by bankruptcy,
insolvency or other laws affecting enforcement of creditors, rights and by
the application of equitable principles if equitable remedies are sought;
(iv) the Corporation has duly approved the information relating to
the Corporation and its function, duties and responsibilities contained in the
Preliminary Official Statement and in the Official Statement and the
distribution of the Preliminary Official Statement and the Official
Statement;
(v) to the best knowledge of such counsel, except for the issuance
of building permits, zoning variances, if any, and similar ministerial
governmental approvals associated with the construction of the Project, and
except as otherwise disclosed in such opinion, no consent, approval,
authorization or order of any court or governmental body is required for
the consummation by the Corporation of the transactions contemplated
herein except such as have been obtained and except such as may be
required under the state securities or blue sky laws in connection with the
purchase and distribution of the Certificates by the Underwriters;
(vi) to the best knowledge of such counsel based solely on their
review of certificates of the Corporation and the representations of its
officers and governing body, there is no action, suit, proceeding or
investigation at law or in equity before or by any court, public board or
body,pending against or affecting the Corporation,which would materially
adversely impact the Corporation's ability to complete the transactions
described in and contemplated by the Official Statement or in any way
contesting or affecting the validity of the Corporation Documents, or the
transactions relating to the program as described and defined in the Official
Statement wherein an unfavorable decision, ruling or finding would
17000\00219\43640.4 12
materially adversely affect the validity and enforceability of the
Corporation Documents; and
(vii) to the best knowledge of such counsel, based solely on their
review of certificates of the Corporation and the representations of its
officers and governing body and except as limited in subsection (v) above,
the execution and delivery of the Corporation Documents by the
Corporation and performance by the Corporation of its obligations
thereunder will not conflict with or result in a breach of any of the terms,
conditions or provisions of any agreement or instrument to which the
Corporation is a party or constitute a default thereunder and all consents,
approvals, authorizations and orders of a governmental or regulatory
authority, if any, which are required to be obtained by the Corporation for
the consummation of the transactions contemplated thereby or as conditions
precedent to the issuance of the Certificates have been obtained (provided
no opinion need be expressed as to any action required under state
securities or blue sky laws in connection with the purchase or distribution
of the Certificates by the Underwriters).
(5) An opinion of counsel to the Trustee, dated the date of Closing,
addressed to the County, the Corporation, and Underwriters, to the effect that:
(i) the Trustee is a national banking association, duly created and
lawfully existing under the laws of the United States;
(ii) the Trustee has duly authorized the execution and delivery of
the Trust Agreement and the Assignment Agreement. Upon the execution
and delivery of the Trust Agreement and the Assignment Agreement by the
Trustee, the Trust Agreement and the Assignment Agreement will
constitute valid and binding obligations of the Trustee, enforceable against
the Trustee in accordance with their respective terms, except as such
enforcement may be limited by: (a) any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors, rights
generally; and (b) the application of general principles of equity (whether
enforceability is considered in a preceding in equity or at law);
(iii) the Trustee has duly authorized the execution and delivery of
the Certificates and the Trustee has all necessary trust power required to
execute and deliver the Certificates; and.
(iv) no consent, approval, authorization or other action by any
governmental or regulatory authority having jurisdiction over the Trustee
that has not been obtained is or will be obtained as required with respect
to the transactions contemplated by the Trust Agreement.
17000\00219\43640.4 13
(6) An opinion of Brown & Wood, San Francisco, California, counsel
for the Underwriters, dated the Closing Date, addressed to the Underwriters, to the
effect that:
(i) the Certificates are exempt from registration pursuant to the
Securities Act of 1933; as amended (the "1933 Act") and the Trust
Agreement is exempt from qualification as an indenture pursuant to the
Trust Indenture Act of 1939, as amended; and
(ii) without having undertaken to determine independently the
accuracy or completeness of the statements contained in the Official
Statement, nothing has come to their attention which would lead them to
believe that the Official Statement (other than statistical and financial
information included therein and incorporated therein by reference as to
which no opinion need be expressed) contains an untrue statement of a
material fact or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(7) A certificate, dated the Closing Date, signed by a duly authorized
official of the County satisfactory in form and substance to the Underwriters and
counsel to the Underwriters, (a) confirming as of such date the representations and
warranties of the County contained in this Contract of Purchase; (b) confirming
the County's approval of the negative declaration relating to the Project, if
applicable; and (c) to the effect that, to the best of his knowledge, the Official
Statement does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements therein, in light of the
circumstances under which they were made,not misleading(except such certificate
need not cover information obtained from the Trustee, the Underwriters, DTC or
the Corporation).
(8) A certificate, dated the Closing Date, signed by a duly authorized
official of the Corporation satisfactory in form and substance to the Underwriters
and counsel to the Underwriters, (a) confirming as of such date the representations
and warranties of the Corporation contained in this Contract of Purchase; (b) to
the effect that, to the best of his knowledge, no event affecting the Corporation
has occurred since the date of the Official Statement which has not been disclosed
therein or in any supplement of amendment thereto which event should be
disclosed in the Official Statement in order to make the statements therein, in light
of the circumstances under which they were made, not misleading (except such
certificate need not cover information obtained from the Trustee,the Underwriters,
DTC or the County).
(9) Two executed or certified copies of each of the Legal Documents.
17000\00219\43640.4 14
(10) Two executed copies of the Official Statement.
(11) Two certified copies of the general resolution of the Trustee
authorizing the execution and delivery of certain documents by certain officers of
the Trustee, which resolution authorizes the execution and delivery of documents
such as the Certificates, the Trust Agreement and the Assignment.
(12) Copies of the resolution adopted by the County and certified by the
Clerk of the County Board of Supervisors authorizing the execution and delivery
of the First Supplement, the Facility Lease Amendment, the Escrow Letter, the
Continuing Disclosure Agreement, and this Contract of Purchase.
(13) Copies of the resolution adopted by the Corporation and certified
by the Secretary or Assistant Secretary of the Corporation, authorizing the
execution and delivery of the Facility Lease Amendment, the First Supplement,
the Assignment Agreement Amendment, the Escrow Letter, the Continuing
Disclosure Agreement, and this Contract of Purchase.
(14) A certificate of the County regarding arbitrage and tax issues related
to the Certificates (the "Tax Certificate") in form and substance acceptable to Co-
Special Counsel.
(15) Evidence from (i) Moody's Investors Service that the Certificates
have been rated_and (ii) Standard & Poor's Services that the Certificates have
been rated
(16) A Certificate of the Trustee, dated the Closing Date, to the effect
that:
(i) the Trustee is duly organized and existing as a national banking
association under the laws of the United States having the full power and
authority to enter into and perform its duties under the Trust Agreement
and the Assignment Agreement and to execute and deliver the Certificates
to the Underwriters pursuant to the request of the Corporation to execute
and deliver Certificates;
(ii) the Trustee is duly authorized to enter into the Trust
Agreement and the Assignment Agreement, and when the Trust Agreement
and the Assignment Agreement are duly executed and delivered by the
respective parties thereto, to execute and deliver the Certificates to the
Underwriters pursuant to the Trust Agreement and this Contract of
Purchase;
(iii) the Trustee has duly executed and delivered the Certificates,
the Trust Agreement and the Assignment Agreement;
17000\00219\43640.4 15
(iv) to the best of the knowledge of the Trustee, without
independent inquiry, no consent, approval, authorization or other action by
any governmental or regulatory authority having jurisdiction over the
Trustee that has not been obtained is or will be required for the execution
and delivery of the Certificates or the performance by the Trustee of its
obligations under the Trust Agreement or the Assignment Agreement,
except as such may be required under the state securities or Blue Sky laws
in connection with the distribution of the Certificates by the Underwriters;
(v) to the best of the knowledge of the Trustee without
independent inquiry, the execution and delivery by the Trustee of the Trust
Agreement, the Certificates, the Assignment Agreement and compliance
with the terms thereof will not conflict with, or result in a violation or
breach of, or constitute a default under, any loan agreement, indenture,
bond, note, resolution or any other agreement or instrument to which the
Trustee is a party or by which it is bound, or any law or any rule,
regulation, order or decree of any court or governmental agency or body
having jurisdiction over the Trustee or any of its activities or properties
(except that no representation, warranty or agreement is made by the
Trustee with respect to any federal or state securities or Blue Sky laws or
regulations), or (except with respect to the lien of the Trust Agreement)
result in the creation or imposition of any lien, charge or other security
interest or encumbrance of any nature whatsoever upon any of the property
or assets of the Trustee;
(vi) to the best of the -knowledge of the Trustee, without
independent inquiry, there is no action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court or governmental
agency, public board or body pending or threatened against or affecting the
existence of the Trustee or seeking to prohibit, restrain or enjoin the
execution and delivery of the Certificates or the collection of Base Rental
Payments to pay the principal and interest which are represented by the
Certificates, or the pledge thereof, or in any way contesting or affecting the
validity or enforceability of the Certificates, the Trust Agreement, the
Assignment Agreement or contesting the powers of the Trustee or its
authority to enter into and perform its obligation under any of the
foregoing, wherein an unfavorable decision, ruling or finding would
adversely affect the obligations of the Trustee under the Trust Agreement
or the Assignment Agreement, or which, in any way, would adversely
affect the validity of the Certificates,the Trust Agreement, the Assignment
Agreement or any agreement or instrument to which the Trustee is a party;
and
17000\00219\43640.4 16
(vii) subject to the provisions of the Trust Agreement, the Trustee
will apply the proceeds from the Certificates to the purposes specified in
the Trust Agreement.
(17) The Verification Report of with respect to the
advance refunding of the 1992 Certificates;
(18) The opinions of Co-Special Counsel satisfactory to the Underwriters
to the effect that the 1992 Certificates have been defeased pursuant to the terms
of the Trust Agreement; and
(19) Such additional legal opinions,certificates,proceedings,instruments
and other documents as Co-Special Counsel and Counsel for the Underwriters may
reasonably request to evidence compliance by the Trustee with legal requirements,
the truth and accuracy, as of the time of Closing, of the representations contained
herein and in the Official Statement and the due performance or satisfaction by the
Trustee, the Corporation and the County at or prior to such time of all agreements
then to be performed and all conditions then to be satisfied.
(c) All matters relating to this Contract of Purchase, the Certificates and the
sale thereof, the Trust Agreement, the Site Lease, the Facility Lease, the Assignment.
Agreement, the Agency Agreement and the consummation of the transactions
contemplated by this Contract of Purchase shall have been approved by the Underwriters
and Counsel for the Underwriters, such approval not to be unreasonably withheld.
If the conditions to the Underwriters's obligations contained in this Contract of Purchase
are not satisfied or if the Underwriters's obligations shall be terminated for any reason permitted
by this Contract of Purchase, this Contract of Purchase shall terminate and neither the
Underwriters nor the Corporation shall have any further obligation hereunder.
8. The Underwriters shall have the right to cancel their obligations to purchase the
Certificates if, between the date hereof and the Closing Date:
(a) legislation shall have been enacted by the United States or the State of
California or shall have been reported out of committee or be pending in committee, or
a decision shall have been rendered by a court of the United States or the Tax Court of
the United States, or a ruling shall have been made or a regulation or a temporary
regulation shall have been proposed or made or any other release or announcement shall
have been made by the Treasury Department of the United States or the Internal Revenue
Service, with respect to Federal or California taxation upon revenues or other income or
payments of the general character to be derived by the Corporation from Base Rental
Payments or upon interest received on obligations of the general character of the
Certificates, which in the reasonable opinion of the Underwriters materially adversely
affects the market for the Certificates; or
17000\00219\43640.4 17
(b) there shall exist any event which in the reasonable opinion of the
Underwriters either (i) makes untrue or incorrect in any material respect any statement or
information contained in the Official Statement or (ii) is not reflected in the Official
Statement but should be reflected therein to make the statements and information
contained therein not misleading in any material respect; or
(c) there shall have occurred any outbreak of hostilities or other national or
international calamity or crisis, the effect of such outbreak, calamity or crisis on the
financial markets of the United States being such as would make it impracticable, in the
reasonable opinion of the Underwriters, for the Underwriters to sell the Certificates; or
(d) there shall be in force a general suspension of trading on the New York
Stock Exchange or other minimum or maximum prices for trading shall have been fixed
and be in force, or maximum ranges for prices for securities shall have been required and
be in force on the New York Stock Exchange or any other exchange, whether by virtue
of a determination by the Exchange or such other exchange or by orders of the Securities
and Exchange Commission or any other governmental authority; or
(e) a general banking moratorium shall have been declared by either Federal,
California or New York authorities having jurisdiction and be in force; or
(f) there shall be established any new restrictions on securities materially
affecting the free market for securities (including the imposition of any limitations on
interest rates) or the extension of credit by, or the charge to the net capital requirements
of, Underwriters established by the New York Stock Exchange, the Securities and
Exchange Commission, any other Federal or state agency or the Congress of the United
States, or by Executive Order; or
(g) an adverse event occurs in the affairs of the Trustee, the County or the
Corporation which materially impairs the investment quality of the Certificates; or
(h) the rating of the Certificates shall have been downgraded or withdrawn by
a national rating service,which, in the Underwriters's opinion,materially adversely affects
the market price of the Certificates.
9. After the Closing (a) the Corporation will not adopt any amendment of or
supplement to the Official Statement to which the Underwriters shall object in writing or which
shall be disapproved by counsel for the Underwriters, the County, the Corporation or their
respective counsel and(b) if any event relating to or affecting the County or the Corporation shall
occur as a result of which it is necessary, in the opinion of counsel for the Underwriters, to
amend or supplement the Official Statement in order to make the Official Statement not
misleading in the light of the circumstances existing at the time it is delivered to an initial
purchaser of the Certificates, the County and the Corporation will forthwith prepare and furnish
to the Underwriters a reasonable number of copies of an amendment of or supplement to the
Official Statement(in form and substance satisfactory to counsel for the Underwriters) which will
17000\00219\43640.4 18
amend or supplement the Official Statement so that it will not contain an untrue statement of a
material fact necessary in order to make the statements therein, in the light of the circumstances
existing at the time the Official Statement is delivered to an initial purchaser of the Certificates,
not misleading. The costs of preparing any necessary amendment or supplement to the Official
Statement to be utilized during the first 90 days after Closing shall be borne by the County, or
by the Corporation, but only from the proceeds of the Certificates or other amounts provided by
the County, and any costs incurred thereafter incident to amending or supplementing the Official
Statement shall be borne by the Underwriters. For the purposes of this section the County and
the Corporation will each furnish such information with respect to itself as the Underwriters may
from time to time reasonably request.
10. Performance by the Corporation of its obligations under this Contract of Purchase
is conditioned upon (i) performance by the Underwriters of their obligations hereunder and (ii)
receipt by the Underwriters of all opinions and certificates to be delivered at Closing by persons
and entities other than the Corporation.
11. In connection with the initial placement and underwriting, the Corporation shall
pay the following expenses but only from the proceeds of the Certificates or other amounts
provided by the County: (a) the cost of preparation, execution and delivery of the Certificates;
(b) the fees and costs of the Trustee and approved fees and expenses of the Trustee's counsel;
(c) any fees charged by any rating agency for rating the Certificates; (d) the cost of preparation,
distribution, delivery, amendment or supplementation of the Official Statement and this Contract
of Purchase; (e) expenses to qualify the Certificates for sale under any Blue Sky laws; (f)the fees
and disbursements of Co-Special Counsel, Counsel to the Corporation and any financial advisor
or independent certified public accountant; (g) administrative fees of the Corporation and (h) any
out-of-pocket disbursements of the Corporation to be paid from the proceeds of the Certificates.
All out-of-pocket expenses of the Underwriters shall be paid by the Underwriters.
12. Any notice or other communication to be given to the Underwriters may be given
by delivering the same to Smith Barney Inc., Public Finance Department, 350 California Street,
Suite 2080, San Francisco, California 94104. Any notice or other communication to be given
to the Corporation may be given by delivering the same to Contra Costa County Public Facilities
Corporation, 651 Pine Street, Martinez, California 94553 or the County at 651 Pine Street,
Martinez, California 94553. The approval of the Underwriters when required hereunder or the
determination of satisfaction as to any document referred to herein shall be in writing signed by
Smith Barney Inc. as representative of the Underwriters and delivered to you.
13. This Contract of Purchase is made solely for the benefit of the Corporation, the
County, and the Underwriters (including the successors or assigns thereof) and no other person
shall acquire or have any right hereunder or by virtue hereof.
14. This Contract of Purchase may be executed by the parties hereto in separate
counterparts, each of which such counterparts shall together constitute but one and the same
instrument.
17000\00219\43640.4 19
This Contract of Purchase shall be governed by the laws of the State of California.
SMITH BARNEY INC.
By:
[Name]
[Title]
Accepted:
CONTRA COSTA COUNTY PUBLIC FACILITIES
CORPORATION
By:
Authorized Officer
COUNTY OF CONTRA COSTA
By:
Philip J. Batchelor
County Administrator
17000\00219\43640.4 20