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2016-03-24 - Board of Directors Meeting Agenda Packet
AGENDA YORBA LINDA WATER DISTRICT BOARD OF DIRECTORS REGULAR MEETING Thursday, March 24, 2016, 8:30 AM 1717 E Miraloma Ave, Placentia CA 92870 1. CALL TO ORDER 2. PLEDGE OF ALLEGIANCE 3. ROLL CALL Ric Collett, President Michael J. Beverage, Vice President Phil Hawkins Robert R. Kiley Gary T. Melton 4. ADDITIONS/DELETIONS TO THE AGENDA 5. PUBLIC COMMENTS Any individual wishing to address the Board is requested to identify themselves and state the matter on which they wish to comment. If the matter is on the agenda, the Board will recognize the individual for their comment when the item is considered. No action will be taken on matters not listed on the agenda. Comments are limited to matters of public interest and matters within the jurisdiction of the Water District. Comments are limited to three minutes. 6. CONSENT CALENDAR All items listed on the consent calendar are considered to be routine matters, status reports, or documents covering previous Board instructions. The items listed on the consent calendar may be enacted by one motion. There will be no discussion on the items unless a member of the Board, staff, or public requests further consideration. 6.1. Payments of Bills, Refunds, and Wire Transfers Recommendation: That the Board of Directors ratify and authorize disbursements in the amount of $959,311.04. 6.2. Progress Payment No. 3 for Construction of Well No. 21 Well Head Equipping Project Recommendation: That the Board of Directors approve Progress Payment No. 3 in the net amount of $41,325.00 to Pascal & Ludwig Constructors for construction of the Well No. 21 Well Head Equipping Project, Job No. 2009-22. 6.3. ACWA/JPIA Property Program Renewal Billing Recommendation: That the Board of Directors authorize payment to ACWA/JPIA in the amount of $44,612 for renewal of the District's property insurance coverage for the period of April 1, 2016 to April 1, 2017. 6.4. Claim for Damages Filed by Janice Bell Heil Recommendation: That the Board of Directors reject and deny the claim filed by Janice Bell Heil. 7. ACTION CALENDAR This portion of the agenda is for items where staff presentations and Board discussions are needed prior to formal Board action. 7.1. Requested Input Regarding MWDOC's Water Rate Study Recommendation: That the Board of Directors consider providing input regarding MWDOC's Water Rate Study and provide direction to staff regarding formulation of a written response. 7.2. Ballots for Proposed Increased Assessments Affecting District Properties Located in Local Landscaping Zones L-1B, L-2E and L-2N of the City of Yorba Linda Street Lighting and Landscaping Maintenance District Recommendation: That the Board of Directors vote in favor of the increased assessments for these parcels and authorize the General Manager to complete and submit the ballots as required. 7.3. California Special District Association Call for Nominations (Seat B) Recommendation: That the Board of Directors consider nominating one Board member or the General Manager as a candidate for election to CSDA's Board of Directors. 7.4. Orange County LAFCO Call for Nominations (Regular Special District Member Seat) Recommendation: That the Board of Directors consider nominating one Board member as a candidate for election to OC LAFCO's Regular Special District Member Seat and designate two Directors to serve as the primary and alternate voting representatives in the associated election. 7.5. Professional Services Agreements for Refunding Revenue Bonds, Series 2016A Recommendation: That the Board of Directors: (1) approve a Professional Services Agreement with Fieldman, Rolapp & Asssociates to serve as the District's Financial Service Advisor for administering the refunding opportunity as identified in the Scope of Work and/or other services as deemed necessary or advisable in a manner consistent with the standards and practice of professional financial advisors at the time services are rendered to the District; and (2) approve a Professional Services Agreement with Straddling Yocca Carlson & Rauth to serve as the District's Bond Counsel. 7.6. Revenue Refunding Bonds, Series 2016A Recommendation: That the Board of Directors adopt Resolution No. 16-XX Authorizing the Issuance of Not to Exceed $38,000,000 Refunding Revenue Bonds, Series 2016A, and Approving the Execution and Delivery of Certain Documents (subject to approval as to form by General Counsel) in Connection Therewith and Certain Other Matters. 8. REPORTS, INFORMATION ITEMS, AND COMMENTS 8.1. President's Report 8.2. Directors' Reports 8.3. General Manager's Report 8.4. General Counsel's Report 8.5. Future Agenda Items and Staff Tasks 9. COMMITTEE REPORTS 9.1. Interagency Committee with MWDOC and OCWD (Collett/Melton) · Minutes of the meeting held March 22, 2016 at 4:00 p.m. (To be provided at the next regular Board meeting.) · Next meeting is scheduled to be held May 24, 2016 at 4:00 p.m. 9.2. Joint Agency Committee with City of Yorba Linda (Collett/Beverage) · Minutes of the meeting held March 21, 2016 at 9:00 a.m. (To be provided at the next regular Board meeting.) · Next meeting is yet to be scheduled. 9.3. Interagency Committee with City of Placentia and Golden State Water Company (Collett/Kiley) · Minutes of the meeting held March 8, 2016 at 2:00 p.m. · Next meeting is yet to be scheduled. 9.4. Citizens Advisory Committee (Melton) · Next meeting is scheduled to be held March 28, 2016 at 8:30 a.m. 10. INTERGOVERNMENTAL MEETINGS 10.1. YL City Council - March 15, 2016 (Collett) 10.2. MWDOC Board - March 16, 2016 (Melton) 10.3. OCWD Board - March 16, 2016 (Kiley) 10.4. LAFCO - March 18, 2016 (Beverage - As Needed) 10.5. OCSD Board - March 23, 2016 (Kiley/Beverage) 10.6. YL Planning Commission - March 23, 2016 (Hawkins) 11. BOARD OF DIRECTORS ACTIVITY CALENDAR 11.1. Meetings from March 25, 2016 - April 30, 2016 12. CONFERENCES, SEMINARS, AND SPECIAL EVENTS This section of the agenda is for the Board of Directors to authorize Director attendance at the listed events. 12.1. MWDOC Elected Officials' Forum - April 7, 2016 ACWA/JPIA Spring Conference - May 2-3, 2016 ACWA Spring Conference - May 3-6, 2016 OC Water Summit - May 20, 2016 Recommendation: That the Board of Directors approve Director attendance at these events if desired. 13. CLOSED SESSION The Board may hold a closed session on items related to personnel, labor relations and/or litigation. The public is excused during these discussions. 13.1. Conference with Legal Counsel - Pending Litigation Pursuant to Subdivision (a) of Section 54956.9 of the California Government Code Name of Case: Kent Ebinger and Yorba Linda Taxpayers Association vs. Yorba Linda Water District (OC Superior Court - Case No. 00829548) 14. ADJOURNMENT 14.1. The next Regular Board of Directors Meeting will be held Thursday, April 14, 2016 at 8:30 a.m. Items Distributed to the Board Less Than 72 Hours Prior to the Meeting Pursuant to Government Code section 54957.5, non-exempt public records that relate to open session agenda items and are distributed to a majority of the Board less than seventy-two (72) hours prior to the meeting will be available for public inspection in the lobby of the District’s business office located at 1717 E. Miraloma Avenue, Placentia, CA 92870, during regular business hours. When practical, these public records will also be made available on the District’s internet website accessible at http://www.ylwd.com/. Accommodations for the Disabled Any person may make a request for a disability-related modification or accommodation needed for that person to be able to participate in the public meeting by telephoning the Executive Secretary at 714-701-3020, or writing to Yorba Linda Water District, P.O. Box 309, Yorba Linda, CA 92885-0309. Requests must specify the nature of the disability and the type of accommodation requested. A telephone number or other contact information should be included so the District staff may discuss appropriate arrangements. Persons requesting a disability-related accommodation should make the request with adequate time before the meeting for the District to provide the requested accommodation. ITEM NO. 6.1 AGENDA REPORT Meeting Date: March 24, 2016 Budgeted:Yes To:Board of Directors Cost Estimate:$959,311.04 Funding Source:All Funds From:Marc Marcantonio, General Manager Presented By:Delia Lugo, Finance Manager Dept:Finance Reviewed by Legal:N/A Prepared By:Richard Cabadas, Accounting Assistant I CEQA Compliance:N/A Subject:Payments of Bills, Refunds, and Wire Transfers SUMMARY: Section 31302 of the California Water Code says the District shall pay demands made against it when they have been approved by the Board of Directors. Pursuant to law, staff is hereby submitting the list of disbursements for Board of Directors’ approval. STAFF RECOMMENDATION: That the Board of Directors ratify and authorize disbursements in the amount of $959,311.04. DISCUSSION: The major items on this disbursement list are as follows: A check of $107,944.13 to ACWA/JPIA for April 2016 medical and dental premium; a check of $44,612.00 to ACWA/JPIA for property insurance premium from April 2016 to April 2017; a check of $41,325.00 to Pascal & Ludwig Contractors for Well #21 progress payment no. 3; and a wire of $313,255.01 to MWDOC for January 2016 water purchases. The balance of $188,615.49 is routine invoices. The Accounts Payable check register total is $695,751.63; Payroll No. 05 total is $263,559.41; and the disbursements of this agenda report are $959,311.04. A summary of the checks is attached. PRIOR RELEVANT BOARD ACTION(S): The Board of Directors approves bills, refunds and wire transfers semi-monthly. ATTACHMENTS: Name:Description:Type: 16-CS_0324.pdf CAP SHEET Backup Material CkReg032416.pdf CHECK REGISTER Backup Material 16_CC_0324.pdf CREDIT CARD SUMMARY Backup Material . March 16, 2016 CHECK NUMBERS & WIRES: Computer Checks 67287—67368 $ 382,496.62 ___________ $ 382,496.62 WIRE W031516 MWDOC $ 313,255.01 ____________ $ 313,255.01 TOTAL OF CHECKS & WIRE $695,751.63 PAYROLL NO. 05: Direct Deposits $ 169,334.17 Third Party Checks 6364—6371 $ 46,893.28 Payroll Taxes $ 47,331.96 $ 263,559.41 TOTAL OF PAYROLL $263,559.41 ---------------------------------------------------------------------------------------------------------------------- DISBURSEMENT TOTAL: $959,311.04 ================================================================== APPROVED BY THE BOARD OF DIRECTORS MINUTE ORDER AT BOARD MEETING OF MARCH 24, 2016 ==================================================================. Check No.Date Vendor Name Amount Description 67307 03/24/2016 ACWA/JPIA 107,944.13 MEDICAL & DENTAL PREMIUM -APRIL 2016 67308 03/24/2016 ACWA/JPIA 44,612.00 JPIA PROPERTY INSURANCE PREMIUM - 4/16 - 4/17 67288 03/24/2016 ALLISON RICH 71.28 CUSTOMER REFUND 67309 03/24/2016 Apollo Technologies, Inc.430.00 WATER TREATMENT - CLOSED LOOPS 67310 03/24/2016 Aqua-Metric Sales Co.15,224.27 MXU & METER REPLACEMENTS 67311 03/24/2016 Aramark 516.63 UNIFORM SERVICE 67317 03/24/2016 ARC 606.85 J14-12 - DOC MGMT, DMF/SPECS 67312 03/24/2016 Autoscribe Corporation 932.75 PAYMENT VISION GATEWAY 67366 03/24/2016 CalCard US Bank 21,661.89 FEBRUARY & MARCH 2016 - CREDIT CARD TRANSACTIONS 67313 03/24/2016 CalPERS 1,287.12 REPLACEMENT BENEFIT FUND 67314 03/24/2016 CDW Government, Inc 1,860.00 SOFTWARE LICENSE RENEWAL 67294 03/24/2016 Chaohui Wang 184.70 CUSTOMER REFUND 67315 03/24/2016 Citizen's Business Bank 2,175.00 J09-22#21 - RETENTION PAY 03 67316 03/24/2016 City Of Placentia 3,145.73 SEWER FEES - FEBRUARY 2016 67306 03/24/2016 CITY VENTURES COMMUNITIES, LLC 18.27 CUSTOMER REFUND 67318 03/24/2016 Cynthia Botts 28.36 MILEAGE REIMBURSEMENT - AWWA CA/NV 67354 03/24/2016 De Nora Water Technologies Inc.558.15 CL2 PARTS 67322 03/24/2016 Dean Criske Trucking 747.76 MATERIAL - BASE 67319 03/24/2016 Dell Marketing L.P.11,561.53 IT COMPUTER & EQUIPMENT 67320 03/24/2016 Delta Wye Electric, Inc.1,763.75 SERVICE ON LAKEVIEW CHEM PUMP & RICHFIELD HYDRO SENSOR 67321 03/24/2016 Dick's Lock & Safe Inc.243.32 PADLOCKS AND KEYS 67323 03/24/2016 Economy Radiator Repair 375.00 RADIATOR REPLACEMENT - UNIT168 67324 03/24/2016 Eduardo Gutierrez 170.00 CERTIFICATE REIMBURSEMENT - D-3 67325 03/24/2016 Eisel Enterprises, Inc.276.48 J14-25 & J15-01 - MTR BOX, LID & COVER 67326 03/24/2016 Elite Equipment Inc 404.91 MAINTENANCE PARTS 67293 03/24/2016 ENERTECH 416.12 CUSTOMER REFUND 67328 03/24/2016 EyeMed 1,373.61 EYEMED PREMIUM - MARCH 2016 67327 03/24/2016 Ferguson Enterprise Inc 5,518.80 WAREHOUSE STOCK 67329 03/24/2016 Firemaster 1,893.94 WELDING SUPPLIES 67330 03/24/2016 Fleet Services, Inc 224.58 AUTO MAINTENACE - UNIT E162 67331 03/24/2016 Flex Advantage 108.00 FLEX ADV - FEBRUARY 2016 67332 03/24/2016 George Baltierra 60.00 CERTIFICATE REIMBURSEMENT - T2 67301 03/24/2016 GMU GEOTECHNICAL INC.885.90 CUSTOMER REFUND 67333 03/24/2016 Grainger 1,336.50 COATING GAGE 67334 03/24/2016 Harrington Industrial 1,166.50 WAREHOUSE PARTS 67335 03/24/2016 Infosend Inc.3,289.31 POSTAGE BILLING - MONTHLY FEE 67338 03/24/2016 J & S Construction 9,960.00 REMOVE & REPLACE CONCRETE - (2) LOCATIONS 67336 03/24/2016 Jackson's Auto Supply - Napa 516.39 MAINTENANCE PARTS - E162 & 168 67337 03/24/2016 John Bogosian 490.97 TOOLS & EQUIPMENT 67297 03/24/2016 JUNZHONG WU 277.21 CUSTOMER REFUND 67291 03/24/2016 Karmen Donnally 96.32 CUSTOMER REFUND 67295 03/24/2016 KENT KRAINING 27.54 CUSTOMER REFUND 67339 03/24/2016 Kidman Law 30,241.50 LEGAL SERVICES 67304 03/24/2016 Kirk Killinger 176.89 CUSTOMER REFUND 67340 03/24/2016 Managed Health Network 168.75 EAP - MARCH 2016 67341 03/24/2016 Marc Marcantonio 94.94 MILEAGE REIMBURSEMENT - FEBRUARY 16 67289 03/24/2016 MARK COLLINS 141.64 CUSTOMER REFUND 67342 03/24/2016 Mc Fadden-Dale Hardware 243.13 HARDWARE SUPPLIES 67343 03/24/2016 Mc Master-Carr Supply Co.155.53 HARDWARE SUPPLIES 67344 03/24/2016 MCR Technologies Inc.1,900.92 ELECTRIC FLOWMETER TRANSMITTER 67345 03/24/2016 Mobile Industrial Supply 8.00 WELDING SUPPLIES 67299 03/24/2016 MOOREFIELD CONST 905.00 CUSTOMER REFUND 67367 03/24/2016 Municipal Water District 34,442.00 WATER LOSS CONTROL TECH ASSIST & SMART TIMER REBATE PROGRAM W031516 03/15/2016 Municipal Water District 313,255.01 WATER PURCHASES - JANUARY 2016 67300 03/24/2016 NASER ABDAMLAT 82.34 CUSTOMER REFUND 67346 03/24/2016 NatPay Online Business Solutions 49.05 DOCULIVERY - JANUARY & FEBRUARY 2016 67290 03/24/2016 NEASE PROPERTY MGMT 392.22 CUSTOMER REFUND 67347 03/24/2016 Nickey Kard Lock Inc 6,965.91 FUEL - FEB. 16 - 29, 2016 Yorba Linda Water District Check Register For Checks Dated: 03/11/2015 thru 03/24/2016 67348 03/24/2016 Office Solutions 2,445.99 CHECK STOCK, OFFICE SUPPLIES & TONER 67349 03/24/2016 Orange Coast Petroleum Equip.104.77 FUEL FILL NOZZLE 67350 03/24/2016 Orange County - Tax Collector 575.66 ENCROACHMENT PERMIT#2016-00065 67352 03/24/2016 P.T.I. Sand & Gravel, Inc.1,428.66 MATERIAL - 3/14" CL2 BASE 67298 03/24/2016 PAN PACIFIC MGMT CO 329.93 CUSTOMER REFUND 67351 03/24/2016 Pascal & Ludwig Constructors, Inc 41,325.00 J09-22#21 - Well #21 - PROGRESS PAYMENT 03 67353 03/24/2016 Public Retirement Journal 250.00 SUBSCRIPTION RENEWAL 67356 03/24/2016 Rachel Padilla/Petty Cash 248.44 PETTY CASH 67302 03/24/2016 RANCHO DOMINGUEZ TOWNHOMES 427.44 CUSTOMER REFUND 67305 03/24/2016 RICHARD SANGERMANO 197.85 CUSTOMER REFUND 67287 03/24/2016 RUBEN GOODSELL 62.88 CUSTOMER REFUND 67292 03/24/2016 SAMIYA WAHEED 6.15 CUSTOMER REFUND 67355 03/24/2016 Spectorsoft Corp.1,872.00 LEASE - 1 YR SPECTOR SUPPORT 67357 03/24/2016 Stater Bros. Markets 80.43 MEETING SUPPLIES -ACP TRAINING 67359 03/24/2016 Step Saver Inc 795.48 EXTRA COARSE SALT 67358 03/24/2016 Steven Enterprises 422.05 PRINTER SUPPLIES - ENGINEERING 67303 03/24/2016 SUSAN RUPERT 184.70 CUSTOMER REFUND 67360 03/24/2016 TDI Refrigeration Air Conditioning Inc.343.75 BOILER - ONSITE SERVICE 67361 03/24/2016 Time Warner Cable 511.44 DEDICATED INTERNET ACCESS & INTER STATE CONNECTION 67362 03/24/2016 Townsend Public Affairs, Inc.5,000.00 CONSULTING SERVICE - MARCH 2016 67363 03/24/2016 United Industries 591.70 PPE EQUIPMENT 67364 03/24/2016 UNUM Life Insurance Co. of America 3,533.82 LIFE INS -04/2016- #95-001 2 & #96-001 9 67365 03/24/2016 Westside Building Material 1,218.16 WAREHOUSE PARTS 67296 03/24/2016 YIQI WANG 130.93 CUSTOMER REFUND 695,751.63 Date Vendor Name Amount Description 2/17/2016 USA Blue Book 409.78 Safety signs - Production facility 2/19/2016 Government Finance Officers Assoc.505.00 Application fee for GFOA - Cert of Achievement 2/22/2016 FTP Today 64.95 Monthly billing - ylwd.ftptoday.com 2/23/2016 ESRI 1,070.00 GIS Analyst training - Vargas,A 2/23/2016 EMV Online 149.25 Engineering VOIP support 2/24/2016 Duluth Trading Co.177.00 (6) YLWD uniform shirts 2/24/2016 AllCable 128.35 Cable for SCADA 2/24/2016 Aria 224.00 Travel Expense - IT/DEV Connection Conf - Vega,A 2/26/2016 Mars Company 559.44 (4) tapping bits - Mueller machine 3/1/2016 USA Blue Book 124.74 Warning signs for buildings 3/1/2016 Dan Copp Crushing 150.00 Dump fees 3/1/2016 Dell 300.33 IT equipment 3/1/2016 ServerSupply.com 210.04 IT equipment 3/2/2016 Costco 374.63 Office supplies 3/2/2016 NewEgg.com 25.67 IT hardware supplies 3/2/2016 Fry's Electronics 6.47 IT hardware supplies 3/3/2016 Staples 143.54 Toner supplies 3/4/2016 United Water Work 14,981.35 January 2016 invoice - Warehouse supplies 3/7/2016 McFadden Dale 34.45 Hardware supplies 3/8/2016 Public Retirement Journal 400.00 Registration - Public Retirement Seminar - Knight & Melton 3/8/2016 BART - Oakland Airport 40.80 Travel Expense - Liebert Cassidy Whitmore Conf - Knight & Melton 3/8/2016 Orchard Supply 63.96 Hardware supplies - Lakeview pump 3/8/2016 Yorba Linda Feed 513.00 Straw bales - flood control 3/9/2016 thebackschool.net 165.94 Office equipment 3/9/2016 Minuteman Press 338.03 Door hangers ''Water shutoff" 3/9/2016 Home Depot 39.17 Hardware supplies - Lakeview pump 3/9/2016 Swiss Cleaners 12.00 Traffic sign repair 3/9/2016 Dan Copp Crushing 300.00 Dump fees 3/10/2016 Grisworld Industries 150.00 Cla-Val training - Graff, K 21,661.89 Cal Card Credit Card U S Bank 2/17/16 - 3/10/16 ITEM NO. 6.2 AGENDA REPORT Meeting Date: March 24, 2016 Budgeted:Yes Total Budget:$2.3M To:Board of Directors Cost Estimate:$1,232,000 Funding Source:All Water Funds From:Marc Marcantonio, General Manager Account No:101-2700 Job No:2009-22 Presented By:Steve Conklin, Engineering Manager Dept:Engineering Reviewed by Legal:N/A Prepared By:Joe Polimino, Project Engineer CEQA Compliance:MND Subject:Progress Payment No. 3 for Construction of Well No. 21 Well Head Equipping Project SUMMARY: Work continues on construction of the Well No. 21 Well Head Equipping Project. It includes installation of a new well head, pump and electric motor, electrical controls and equipment, a concrete well pad, and approximately 700 lineal feet of 16-inch CML&C steel pipe. STAFF RECOMMENDATION: That the Board of Directors approve Progress Payment No. 3 in the net amount of $41,325.00 to Pascal & Ludwig Constructors for construction of the Well No. 21 Well Head Equipping Project, Job No. 2009-22. DISCUSSION: In accordance with the contract documents, Pascal & Ludwig Constructors submitted a request for Progress Payment No. 3, in the amount of $43,500.00 for completed work through February 29, 2016. During this period, the contractor excavated for the transformer vault and the underground conduit for the main electrical feed, MCC and PLC control panels. The conduit was installed and then a concrete encasement was poured for all of the electrical conduit. A pre-cast concrete vault for the new transformer was also set in place and backfilled. The status of the construction contract with Pascal & Ludwig Constructors is as follows: The current contract is $910,487.00 and 365 calendar days starting November 2, 2015. If approved, Progress Payment No. 3 is $43,500.00 (4.8% of the total contract amount), less 5% retention of $2,175.00 for a net payment of $41,325.00. If approved, total payments to date including retention will be $94,800.00 (10.4% of the total contract amount). As of February 29, 2016, 120 calendar days were used (32.9% of the contract time). Staff reviewed the contractor’s progress payment and recommend approval. A copy of Progress Payment No. 3 is attached for your reference. STRATEGIC PLAN: SR 3-A: Complete Implementation of Five Year Capital Improvement Plan from FY 2011-2015 with adopted amendments PRIOR RELEVANT BOARD ACTION(S): On August 13, 2015, The Board of Directors awarded a Construction Contract for the Well No. 21 Wellhead Equipping Project to Pascal & Ludwig Constructors, Inc. for $910,487.00. The Board of Directors has approved two progress payments to date, the last of which was approved on February 25, 2016. ATTACHMENTS: Name:Description:Type: P_L_Progress_Pay_Request_3.pdf Progress Payment No. 3 Well 21 Project Backup Material ITEM NO. 6.3 AGENDA REPORT Meeting Date: March 24, 2016 Budgeted:Yes Total Budget:$60,000 To:Board of Directors Cost Estimate:$44,612 Funding Source:All Funds From:Marc Marcantonio, General Manager Account No:1-7020-0690-30 Presented By:Gina Knight, HR/Risk Manager Dept:Human Resources/Risk Management Reviewed by Legal:N/A Prepared By:Amelia Cloonan, Human Resources Analyst Subject:ACWA/JPIA Property Program Renewal Billing SUMMARY: The District has received the ACWA/JPIA Property Program Renewal Billing for the period 4/1/2016 to 4/1/2017. STAFF RECOMMENDATION: That the Board of Directors authorize payment to ACWA/JPIA in the amount of $44,612 for renewal of the District's property insurance coverage for the period of April 1, 2016 to April 1, 2017. COMMITTEE RECOMMENDATION: DISCUSSION: The District obtains its property insurance through the ACWA-JPIA. In addition, the District also receives workers compensation and general liability insurance coverage through the ACWA-JPIA and receives a multiple program discount of 5%. This year's multiple program discount for the property insurance was $2,348. The District pays its Property Program Renewal Billing annually to ACWA/JPIA. After applying the discount the total premium for the period 4/1/2016 to 4/1/2017 is $44,612. An increase occurred in the Licensed Vehicle Comprehensive and Collision category in the amount of $1,801. For this billing period, the District added to the policy: 4 new vehicles (two 1/2 ton and one 3/4 ton pickup trucks and one Kenworth Sewer Vactor). Additionally, there was an increase in the premium for Basic Property in the Fixed Equipment Value and Personal Property Value categories in the amount of $691. This year's invoice is based on values and items listed on the property schedule from December 2015. ATTACHMENTS: Name:Description:Type: Property_Program_Renewal_03.09.16.pdf Property Program Renewal Backup Material ITEM NO. 6.4 AGENDA REPORT Meeting Date: March 24, 2016 To:Board of Directors From:Marc Marcantonio, General Manager Presented By:Gina Knight, HR/Risk Manager Dept:Human Resources/Risk Management Reviewed by Legal:No Prepared By:Amelia Cloonan, Human Resources Analyst Subject:Claim for Damages Filed by Janice Bell Heil SUMMARY: A claim was filed with the District on December 8, 2015 for plumbing services. STAFF RECOMMENDATION: That the Board of Directors reject and deny the claim filed by Janice Bell Heil. DISCUSSION: In the claim submitted to the District, claimant states that a water district crew fixed a water leak at the meter located at her property on November 24, 2015. The leak was dug up across the street. After the repairs were completed, claimant had little water pressure in her home and to the backyard sprinkler and hose. Claimant called a plumber who found "sand" in the lines to the sinks and hallway toilet, which he cleaned, billing claimant $175.00 for his services. An investigation was conducted by staff. John DeCriscio, Operations Manager, interviewed his staff who were present at this job. They indicated to him that they had followed all District procedures for returning a water line to service after completing repairs. During these procedures, staff flushes the water from the District lines through the customer's front hose bib. This clears any sediment that may have been stirred up in the District's main line during the opening and closing of valves and removes the air that is introduced during the shutdown process. Whenever a water line is shut down and the system is depressurized, sediment falls from the pipe walls both in the District lines and the customer's home plumbing system. Plumbing systems degrade with age. Rust and metal flakes fall off the pipe walls and are pushed to the point where the water is used. These points include aerator screens on faucets, screens on washing machines and sprinkler valves. The sediment (debris) came from the home's plumbing system. It most likely was not introduced into the system during the repair process. After a repair, it is the customer's responsibility to maintain and flush their own plumbing system. The best way to flush the home system is through the bathtubs, because bathtubs do not have screens that can become plugged up. The claim form and supporting documents are on file and available for review in the office of the General Manager. ITEM NO. 7.1 AGENDA REPORT Meeting Date: March 24, 2016 To:Board of Directors From:Marc Marcantonio, General Manager Presented By:Marc Marcantonio, General Manager Prepared By:Annie Alexander, Executive Secretary Subject:Requested Input Regarding MWDOC's Water Rate Study STAFF RECOMMENDATION: That the Board of Directors consider providing input regarding MWDOC's Water Rate Study and provide direction to staff regarding formulation of a written response. DISCUSSION: MWDOC's rate structure for its operating budget is currently defined by a Settlement Agreement which expires in June 2016. As such, MWDOC has contracted with Raftelis to conduct a rate study. The study is being performed to provide a legal basis for MWDOC's rates and not to implement any specific change in the current rate structure. Historically, MWDOC's rates were originally tax-based and consisted of combination of variable and fixed charges. The variable component was a fee based on the volume of water purchased by each member agency. The fixed component was based on the number of retail meters in each member agency's service area. The Settlement Agreement implemented a migration to a 100% fixed rate structure which was completed this fiscal year. MWDOC's Board of Directors has requested the Board's input on two areas within the rate study. The first consideration is related to equity. As a result of the rate structure contained in the Settlement Agreement, OCWD does not pay any fees as it is a regional groundwater agency and has no retail meters. MWDOC is currently reviewing legal issues related to Prop 26, however, it would like to hear the Board's opinion regarding the equity of this situation. If that condition is determined to be legal and the member agencies support it, the situation would be considered a non-issue. The second consideration is the actual rate structure. With the recent migration to a 100% fixed rate structure, MWDOC is interested in hearing the Board's opinion regarding this change. Additionally, there is a question as to the appropriate metric for allocating fees. While variable rates are based on the volume of water purchased, fixed rates can be based on several metrics, none of which are perfectly equitable. MWDOC is using the number of retail meters in a members agency's service area as its current metric. This tends to under-bill member agencies with higher proportions of customers on master meters (e.g. multi-family units, HOA's, and commercial properties). Other alternative metrics including water meter size, previous year's volume, or population will also be considered in the rate study. Should the Board desire to provide input regarding these particular areas of the rate study, a written response will need to be provided before the end of March. ATTACHMENTS: Name:Description:Type: MWDOC_Water_Rate_Study.pdf Backup Material Backup Material Presentation.pdf Backup Material Distributed Less Than 72 Hours Prior to the Meeting Presentation Backup Material Distributed Less Than 72 Hours Prior to the Meeting Backup Material Distributed Less Than 72 Hours Prior to the Meeting Backup Material Distributed Less Than 72 Hours Prior to the Meeting Backup Material Distributed Less Than 72 Hours Prior to the Meeting Backup Material Distributed Less Than 72 Hours Prior to the Meeting Backup Material Distributed Less Than 72 Hours Prior to the Meeting Backup Material Distributed Less Than 72 Hours Prior to the Meeting Backup Material Distributed Less Than 72 Hours Prior to the Meeting Backup Material Distributed Less Than 72 Hours Prior to the Meeting Backup Material Distributed Less Than 72 Hours Prior to the Meeting Backup Material Distributed Less Than 72 Hours Prior to the Meeting Backup Material Distributed Less Than 72 Hours Prior to the Meeting Backup Material Distributed Less Than 72 Hours Prior to the Meeting Backup Material Distributed Less Than 72 Hours Prior to the Meeting ITEM NO. 7.2 AGENDA REPORT Meeting Date: March 24, 2016 Total Budget:None To:Board of Directors Cost Estimate:$2130 From:Marc Marcantonio, General Manager Account No:1-9010-0985-05 Presented By:Delia Lugo, Finance Manager Prepared By:Annie Alexander, Executive Secretary Subject:Ballots for Proposed Increased Assessments Affecting District Properties Located in Local Landscaping Zones L-1B, L-2E and L-2N of the City of Yorba Linda Street Lighting and Landscaping Maintenance District STAFF RECOMMENDATION: That the Board of Directors vote in favor of the increased assessments for these parcels and authorize the General Manager to complete and submit the ballots as required. DISCUSSION: The District recently received ballots for a proposed increased assessment affecting seven properties owned by YLWD located in the above listed zones of the Yorba Linda Street Lighting and Landscaping Maintenance District (LMAD). The LMAD was first established in 1978 to maintain various landscaping and lighting improvements throughout the community. Unfortunately, some of the zones do not have sufficient assessment funds to adequately maintain local landscaping and by law all funds can only be used for services in each specified zone. While the City has been able to provide temporary funding to cover existing budget gaps, it cannot continue to do so. If these zones are no longer maintained by the LMAD, the responsibility will be transferred to the individual property owner. The City Council has voted to proceed with two mail balloting processes for proposed increased assessments before maintenance levels are affected. Each ballot is related to a specific zone's maintenance needs. Completed ballots must be received by the YL City Clerk no later than the Public Comment portion of the public hearing scheduled Tuesday, April 5, 2016 at 6:30 p.m. The next balloting process will cover zones L-2L, L-2P, L-4A, and L-5A and the associated public hearing has been tentatively scheduled for May 17, 2016. Staff is in the process of identifying District owned properties located in these zones, as well as the proposed new maximum assessment rate and the balloted assessment amount for each parcel for budgeting purposes for FY 2016/17. ATTACHMENTS: Name:Description:Type: LMAD_Ballots.pdf Backup Material Backup Material ITEM NO. 7.3 AGENDA REPORT Meeting Date: March 24, 2016 To:Board of Directors From:Marc Marcantonio, General Manager Presented By:Marc Marcantonio, General Manager Prepared By:Annie Alexander, Executive Secretary Subject:California Special District Association Call for Nominations (Seat B) STAFF RECOMMENDATION: That the Board of Directors consider nominating one Board member or the General Manager as a candidate for election to CSDA's Board of Directors. DISCUSSION: The California Special Districts Association (CSDA) Elections and Bylaws Committee is looking for Independent Special District Board Members or their General Managers who are interested in leading the direction of CSDA for the 2017-19 term. The leadership of CSDA is elected from six geographical networks. Each network has 3 seats on the Board with staggered 3-year terms. Board members are expected to attend all meetings, held every other month in Sacramento. Board Members are also expected to participate on at least one committee which meets 3-5 times a year also in Sacramento and attend both of the following events: Special Districts Legislative Days (held in the spring) and the annual conference (held in the fall). Additionally, Board members are required to complete all four modules of CSDA's Special District Leadership Academy within 2 years. (CSDA does not reimburse for expenses for conference attendance or academy classes even if a Board or committee meeting is held in conjunction with these events.) YLWD is eligible to nominate one person (Board member or General Manager) for election to the CSDA Board of Directors. The deadline for nominations is May 20, 2016. Ballots will be mailed on June 3, 2016 and then due on August 5, 2016. The successful candidates will be notified no later than August 8, 2016 and will be introduced at the annual conference in San Diego in October. The current incumbent in the expiring seat (Seat B) for the southern network is Bill Nelson from the Orange County Cemetery District who is running for re-election. Kathy Tiegs from the Cucamonga Valley Water District is also running for election. ATTACHMENTS: Name:Description:Type: CSDA_Nominations.pdf Backup Material Backup Material ITEM NO. 7.4 AGENDA REPORT Meeting Date: March 24, 2016 To:Board of Directors From:Marc Marcantonio, General Manager Presented By:Marc Marcantonio, General Manager Prepared By:Annie Alexander, Executive Secretary Subject:Orange County LAFCO Call for Nominations (Regular Special District Member Seat) STAFF RECOMMENDATION: That the Board of Directors consider nominating one Board member as a candidate for election to OC LAFCO's Regular Special District Member Seat and designate two Directors to serve as the primary and alternate voting representatives in the associated election. DISCUSSION: The term of office for the Orange County Local Agency Formation Commission (OC LAFCO) Regular Special District Member seat (currently held by Commission Charley Wilson, President of Santa Margarita Water District) will expire on June 30, 2016. The election process for special district seats is governed by Section 56332 of the CA Government Code and the bylaws of the Independent Special Districts Selection Committee. In 2011, the Special Districts Selection Committee approved a mail-in ballot election process for OC LAFCO Special District seats. As such, the Board is being requested to designate two Directors to serve as the primary and alternate voting representatives in the upcoming election. The attached declaration form must be returned no later than Monday, April 11, 2016 at 3:00 p.m. OC LAFCO will distribute election ballots and any supplemental candidate information to each special district electronically on April 19, 2016. Only the designated voting representatives may vote for a candidate and only one ballot for each agency will be accepted. Ballots will be due no later than May 27, 2016 at 3:00 p.m. Election results will be announced on or before June 6, 2016. Additionally, the Board has the option to nominate a Director to serve as a candidate for this seat in the upcoming election. Should the Board desire to do so, the attached nomination form must be completed and returned no later than Monday, April 11, 2016 at 3:00 p.m. Candidate resumes or other supplemental information may also be included and will be distributed with the election ballots. The District has not received any requests for nominations or support in the election from other local agencies to date. ATTACHMENTS: Name:Description:Type: LAFCO_Election.pdf Backup Material Backup Material 1 From:Cheryl Carter-Benjamin <ccarter-benjamin@oclafco.org> Sent:Monday, March 07, 2016 2:49 PM To:Ric Collett Cc:chair; Marc Marcantonio; Annie Alexander Subject:Nomination Period for Orange County LAFCO Special District Seats Election Attachments:COLLETT.pdf DATE: March 7, 2016 TO: Special District Presiding Officers and General Managers FROM: Carolyn Emery, Executive Officer SUBJECT: Orange County LAFCO Special District Seat Election The term of office for Orange County LAFCO Regular Special District Member expires on June 30, 2016. In 2011, the Special Districts Selection Committee approved a mail‐in ballot process that governs the election process for LAFCO Special District seats. In accordance with that process, attached you will find: (1)A “Declaration of Qualification to Vote Form” for designating the voting member (and alternative voting member) of your district, who is authorized to vote in the election. This form must be returned to LAFCO no later than 3 PM on Monday, April 11, 2016. Please note that if we do not receive the form by that date, your district will be ineligible to vote. (2)A “2016 Nomination Form” for submitting candidate names for the Special District seat election. If your district is nominating a candidate for the OC LAFCO Special District Member seat, this form must be filled out completely and returned to OC LAFCO no later than 3 PM on Monday, April 11, 2016. Candidate resumes or other supplemental information may also be included and will be distributed with the election ballots. Both forms may be returned to LAFCO by any of the following: (1)Email: cemery@oclafco.org (2)Mail: Orange County LAFCO 2677 North Main Street, Suite 1050 Santa Ana, CA 92705 Attn: Carolyn Emery, Executive Officer (3)FAX:(714)640‐5139, Attn: Carolyn Emery Next Steps: LAFCO will distribute election ballots and any supplemental candidate information to each special district electronically on April 19, 2016. Only designated voting members (as indicated on the “Declaration of Qualification to Vote Form”) may vote for a candidate and only one ballot for each agency will be accepted. Ballots will be due to LAFCO no later than 3 PM, May 27, 2016. Election results will be announced by LAFCO on or before June 6, 2016 Cheryl Carter-Benjamin Office Manager/Commission Clerk ORANGE COUNTY LAFCO ccarter‐benjamin@oclafco.org ITEM NO. 7.5 AGENDA REPORT Meeting Date: March 24, 2016 To:Board of Directors From:Marc Marcantonio, General Manager Presented By:Delia Lugo, Finance Manager Dept:Finance Prepared By:Delia Lugo, Finance Manager Subject:Professional Services Agreements for Refunding Revenue Bonds, Series 2016A STAFF RECOMMENDATION: That the Board of Directors: (1) approve a Professional Services Agreement with Fieldman, Rolapp & Asssociates to serve as the District's Financial Service Advisor for administering the refunding opportunity as identified in the Scope of Work and/or other services as deemed necessary or advisable in a manner consistent with the standards and practice of professional financial advisors at the time services are rendered to the District; and (2) approve a Professional Services Agreement with Straddling Yocca Carlson & Rauth to serve as the District's Bond Counsel. DISCUSSION: At the Special Board Meeting of January 21, 2016, Josh Lentz and Tom DeMars, of Fieldman, Rolapp & Associates, presented the Board of Directors details of an opportunity to refund the current debt pertaining to the District's Revenue Certificates of Participation, Series 2008, where current municipal bond market conditions could potentially provide the District significant annual cashflow savings. The amount of savings is dependent on the interest rates in effect at the time of the refunding. Upon completion of the presentation and further discussion, the Board approved for staff to pursue the presented refunding opportunity and to move on to the next step of the process which would be to engage bond counsel and to assemble the financing team. ATTACHMENTS: Name:Description:Type: 2016_YLWD_PSA_with_Rolapp.docx PSA - Fieldman Rolapp Backup Material 2016_YLWD_PSA_with_Stradling_et_al._(2).docx PSA - SYCA Backup Material SYCR_Engagement_Letter_Yorba_Linda_WD_2016A_ (2008_Refunding)_(2a).docx Engagement Letter - SYCA Backup Material YLWD Professional Services Agreement 1 of 17 PROFESSIONAL SERVICES AGREEMENT BETWEEN THE YORBA LINDA WATER DISTRICT AND FIELDMAN, ROLAPP & ASSOCIATES PROJECT: Professional Services Agreement for Financial Advisor THIS PROFESSIONAL SERVICES AGREEMENT (“Agreement”) is made and entered into on __, 2015, by and between the YORBA LINDA WATER DISTRICT, a local public agency, created and operating under authority of Division 12 of the California Water Code (“District”), and Fieldman, Rolapp & Associates (“Consultant”) (collectively referred to herein as the “Parties”). RECITALS WHEREAS, District is engaging in the Project described in the Scope of Work attached as Exhibit “A”; and WHEREAS, District requires a professional consultant with the requisite knowledge, skill, ability and expertise to provide the necessary services for District during all phases of the Project to which the specialized services of Consultant are appropriate; and WHEREAS, Consultant represents to District that it is fully qualified and available to perform the services for and as requested by District; and NOW, THEREFORE, in consideration of the mutual promises, covenants, and terms and conditions herein, the Parties agree as follows: AGREEMENT 1.0. SCOPE OF WORK. The services to be provided by Consultant (“Work”) are called out in the Scope of Work attached as Exhibit “A” and incorporated herein by reference. All Work shall be performed in accordance with the standards customarily provided by an experienced and competent professional rendering the same or similar services and in such a prompt and continuous fashion as not to impede or delay the overall completion of the Project. 1.1. Project Manager. Consultant acknowledges that continuous and effective communication between District, Consultant, and other consultants (as appropriate) is necessary to the successful completion of the Project. Consultant may also be required to furnish copies of its work product and communications to others as requested by District. Consultant’s primary contact with District shall be through District’s Finance Manager. District’s primary contact with Consultant shall be through the Consultant’s YLWD Professional Services Agreement 2 of 17 Representative, designated on Consultant’s Cost Proposal attached as Exhibit “A,” and incorporated herein by reference. When requested by District, Consultant’s Representative shall attend District meetings and will undertake, as a part of its professional responsibility under this Agreement, to coordinate its activities with all appropriate individuals and consultants. 1.2. Use of Documents, Analysis and Statistics. All work product of Consultant, whether created solely by Consultant or in cooperation with others, is prepared specifically and expressly for District and all right, title, and interest therein shall be owned by District. District shall make available to Consultant such information, documents, graphs, studies, etc., which District possesses or has access to, which are relevant to Consultant’s Work pursuant to this Agreement. 1.3. Review. Consultant shall furnish District with reasonable opportunities from time to time to ascertain whether the Work of Consultant is being performed in accordance with this Agreement. All Work done and materials furnished shall be subject to final review and approval by District. District’s interim review and approval of Consultant’s work product shall not relieve Consultant of its obligations to fully perform this Agreement. 1.4. Commencement of Work. The Project start date is called out on Exhibit “A.” 1.5. Time Is Of The Essence. Consultant shall perform all Work with due diligence as time is of the essence in the performance of this Agreement. Time limits applicable for the performance of Consultant’s Work are established in Exhibit “A.” 2.0 COMPENSATION. As compensation for performance of the Work specified under the Scope of Work (Exhibit “A”), as specified in Consultant’s Cost Proposal (Exhibit “A”). Payment will be made at the rates set forth in Consultant’s Cost Proposal, which is included in Exhibit “A” and incorporated herein by reference. Costs or expenses not designated or identified in the Cost Proposal shall not be reimbursable unless otherwise provided in this Agreement. 2.1. Invoicing. Consultant shall submit an invoice after the closing of the Debt Issuance. District shall pay approved invoice(s) within thirty (30) days of receipt. Consultant agrees to submit additional documentation to support the invoice if requested. If District does not approve an invoice, District shall send a notice to Consultant setting forth the reason(s) the invoice was not approved. Consultant may re-invoice District to cure the defects identified by District. The revised invoice will be treated as a new submittal. District’s determinations regarding verification of Consultant’s performance, accrued reimbursable expenses, if any, and percentage of completion shall be binding and conclusive. Consultant’s time records, invoices, receipts and other documentation supporting the invoices shall be available for review by District upon reasonable notice and shall be retained by Consultant for three (3) years after completion of the Project. 2.2. Extra Services. Before performing any services outside the scope of this Agreement (“Extra Services”), Consultant shall submit a written request for approval of such Extra Services and receive written approval from District. District shall have no YLWD Professional Services Agreement 3 of 17 responsibility to compensate Consultant for any Extra Services provided by Consultant without such prior written approval. 3.0 TERMINATION. District may terminate this Agreement at any time upon ten (10) days written notice to Consultant. Should District exercise the right to terminate this Agreement, District shall pay Consultant for any Work satisfactorily completed prior to the date of termination, based upon Consultant’s Cost Proposal. Consultant may terminate this Agreement upon ten (10) days written notice to District in the event of substantial failure by District to perform in accordance with the terms hereof through no fault of Consultant; or in the event District fails to pay Consultant in accordance with the terms in Section 2.0; or if Consultant’s Work hereunder is suspended for a period of time greater than ninety (90) days through no fault of Consultant. 3.1. Withholding Payment. In the event District has reasonable grounds to believe Consultant will be materially unable to perform the Work under this Agreement, or if District becomes aware of a potential claim against Consultant or District arising out of Consultant’s negligence, intentional act or breach of any provision of this Agreement, including a potential claim against Consultant by District, then District may, to the fullest extent allowed by law, withhold payment of any amount payable to Consultant that District determines is related to such inability to complete the Work, negligence, intentional act, or breach. 4.0. SAFETY. Consultant shall conduct and maintain the Work so as to avoid injury or damage to any person or property. Consultant shall at all times exercise all necessary safety precautions appropriate to the nature of the Work and the conditions under which the Work is to be performed, and be in compliance with all applicable federal, state and local statutory and regulatory requirements including State of California, Department of Industrial Relations (Cal/OSHA) regulations. Consultant is responsible for the safety of all Consultant personnel at all times during performance of its Work, including while on District property. 5.0 INDEMNIFICATION. 5.1. When the law establishes a professional standard of care for the Consultant’s services, to the fullest extent permitted by law, Consultant will defend, indemnify and hold harmless District, its directors, officers, employees, and authorized volunteers from and against all claims and demands of all persons that arise out of, pertain to, or relate to the Consultant’s negligence, recklessness, or willful misconduct in the performance (or actual or alleged non-performance) of the Work under this Agreement. Consultant shall defend itself against any and all liabilities, claims, losses, damages, and costs arising out of or alleged to arise out of Consultant’s performance or non-performance of the Work hereunder, and shall not tender such claims to District nor to its directors, officers, employees, or authorized volunteers, for defense or indemnity. 5.2. Other than in the performance of professional services, to the fullest extent permitted by law, Consultant will defend, indemnify and hold harmless District, its directors, officers, employees and authorized volunteers from and against all claims and demands of all persons arising out the performance (or actual or alleged non- YLWD Professional Services Agreement 4 of 17 performance) of the Work (including the furnishing of materials), including but not limited to claims by the Consultant, Consultant’s employees and any subconsultants for damages to persons or property, except for damages resulting from the willful misconduct, sole negligence or active negligence of District, its directors, officers, employees, or authorized volunteers. 5.3. Consultant shall defend, at Consultant's own cost, expense and risk, any and all such aforesaid suits, actions or other legal proceedings of every kind that may be brought or instituted against District or any of its directors, officers, employees, or authorized volunteers, with legal counsel reasonably acceptable to District. Consultant shall pay and satisfy any judgment, award or decree that may be rendered against District or any of its directors, officers, employees, or authorized volunteers, in any and all such aforesaid suits, actions, or other legal proceedings for which Consultant is obligated to defend, indemnify and hold harmless District, its directors, officers, employees and authorized volunteers under this Agreement. 5.4. Consultant shall reimburse District or its directors, officers, employees, and authorized volunteers, for any and all legal expenses and costs incurred by each of them in connection therewith or in enforcing the indemnity herein provided. Consultant’s obligation to indemnify shall not be restricted to insurance proceeds, if any, received by District or its directors, officers, employees, or authorized volunteers. 6.0 INSURANCE REQUIREMENTS. Prior to execution of this Agreement, and at any time thereafter on request, Consultant shall provide executed certificates of insurance in the form attached hereto as Exhibit “B” evidencing the required coverage and limits for each insurance policy. In addition, Consultant shall provide a new executed certificate of insurance in the form attached hereto as Exhibit “B” whenever an insurance policy required herein, expires, is renewed or is replaced. District may also, at any time, request submittal of policies and policy endorsements acceptable to District evidencing the required coverage and limits. Each insurance policy shall be primary insurance as respects District, its affiliated organizations and its and their respective officers, directors, trustees, employees, agents, consultants, attorneys, successors and assigns (collectively, the “Covered Parties”) for all liability arising out of the activities performed by or on behalf of Consultant. Any insurance, pool coverage, or self-insurance maintained by Covered Parties shall be excess of Consultant’s insurance and shall not contribute to it. Except for the Errors and Omissions policy (Section 6.4), all insurance coverage maintained or procured pursuant to this Agreement shall be endorsed to waive subrogation against the Covered Parties or shall specifically allow Consultant or others providing insurance evidence in compliance with these requirements to waive their right of recovery prior to loss. Consultant waives its right of recovery against the Covered Parties for damages covered by insurance required by this Agreement. Consultant shall require similar written express waivers and insurance clauses from each of its subcontractors. The insurer issuing the Workers’ Compensation insurance shall amend its policy to waive all rights of subrogation against the Covered Parties. Each insurance policy shall provide, or be endorsed to provide, that coverage shall not be cancelled except after thirty (30) days prior written notice by U.S. Mail (ten (10) days for non- payment of premium) has been given to District. Unless otherwise approved by District, each YLWD Professional Services Agreement 5 of 17 insurance provider shall be authorized to do business in California and have an A.M. Best rating (or equivalent) of not less than “A-:VII.” Consultant shall provide and maintain at all times during the performance of this Agreement the following insurance: (1) Commercial General Liability (“CGL”) insurance; (2) Automobile Liability insurance; (3) Workers’ Compensation and Employer’s Liability insurance; and (4) Errors and Omissions (“E&O”) liability insurance. 6.1. Commercial General Liability. Each CGL policy shall identify Covered Parties as additional insured, or be endorsed to identify Covered Parties as additional insured using a form acceptable to the District. Coverage for additional insured shall not be limited to vicarious liability. Defense costs must be paid in addition to limits. Each CGL policy shall have liability coverage limits of at least $1,000,000 per occurrence for bodily injury, personal injury and property damage, and $2,000,000 aggregate total bodily injury, personal injury and property damage. CGL insurance and endorsements shall be kept in force at all times during the performance of this Agreement and all coverage required herein shall be maintained after the term of this Agreement so long as such coverage is reasonably available. 6.2. Automobile Liability. Each Automobile Liability policy shall require coverage for “any auto” and shall have limits of at least $1,000,000 for bodily injury and property damage, each accident, and shall use ISO policy form “CA 00 01,” including owned, non-owned and hired autos, or the exact equivalent. If Consultant owns no vehicles, this requirement may be satisfied by a non-owned auto endorsement to the CGL policy described above. Automobile Liability insurance and endorsements shall be kept in force at all times during the performance of this Agreement and all coverage required herein shall be maintained after the term of this Agreement so long as such coverage is reasonably available. 6.3. Workers’ Compensation/Employer’s Liability. Consultant shall cover or insure the existence of coverage under the applicable laws relating to Workers’ Compensation insurance, all of their employees employed directly by them or through subconsultants at all times in carrying out the Work contemplated under this Agreement, in accordance with the “Workers’ Compensation and Insurance Act” of the California Labor Code and any amendatory Acts. Consultant shall provide Employer’s Liability insurance with limits of at least $1,000,000 each accident, $1,000,000 disease policy limit, and $1,000,000 disease each employee. By Consultant’s signature hereunder, Consultant certifies that it is aware of the provisions of Section 3700 of the California Labor Code, which requires every employer to be insured against liability for Workers’ Compensation or to undertake self-insurance in accordance with the provisions of that code, and that Consultant will comply with such provisions before commencing Work under this Agreement. Upon the request of District, subconsultants must provide certificates of insurance evidencing such coverage. 6.4. Errors and Omissions. Each E&O policy shall have limits of at least $1,000,000 per claim and $1,000,000 aggregate. E&O insurance and endorsements shall be kept in force at all times during the performance of this Agreement and all coverage required YLWD Professional Services Agreement 6 of 17 herein shall be maintained after the term of this Agreement so long as such coverage is reasonably available. 7.0. INDEPENDENT CONTRACTOR. The Parties agree that the relationship between District and Consultant is that of an independent contractor and Consultant shall not, in any way, be considered to be an employee or agent of District. Consultant shall not represent or otherwise hold out itself or any of its directors, officers, partners, employees, or agents to be an agent or employee of District. District will not be legally or financially responsible for any damage or loss that may be sustained by Consultant because of any act, error, or omission of Consultant or any other consultant, nor shall Consultant make any claim against District arising out of any such act, error, or omission. 7.1. Taxes and Benefits. Consultant shall be solely responsible for the payment of all federal, state and local income tax, social security tax, Workers’ Compensation insurance, state disability insurance, and any other taxes or insurance Consultant, as an independent contractor, is responsible for paying under federal, state or local law. Consultant is not eligible to receive Workers’ Compensation, medical, indemnity or retirement benefits through District, including but not limited to enrollment in CalPERS. Consultant is not eligible to receive overtime, vacation or sick pay. 7.2. Permits and Licenses. Consultant shall procure and maintain all permits, and licenses and other government-required certification necessary for the performance of its Work, all at the sole cost of Consultant. None of the items referenced in this section shall be reimbursable to Consultant under the Agreement. 7.3. Methods. Consultant shall have the sole and absolute discretion in determining the methods, details and means of performing the Work required by District. Consultant shall furnish, at its own expense, all labor, materials, equipment, tools and transportation necessary for the successful completion of the Work to be performed under this Agreement. District shall not have any right to direct the methods, details and means of the Work; however, Consultant must receive prior written approval from District before assigning or changing any assignment of Consultant’s project manager or key personnel and before using any subconsultants or subconsultant agreements for services or materials under this Agreement and any work authorizations. YLWD Professional Services Agreement 7 of 17 8.0. NOTICES. Any notice may be served upon either Party by delivering it in person, or by depositing it in a U.S. Mail Deposit Box with the postage thereon fully prepaid, and addressed to the Party at the address set forth below: District: Marc Marcantonio, General Manager Yorba Linda Water District P.O. Box 309 Yorba Linda, CA 92885-0309 Consultant: As designated in Exhibit “A.” Any notice given hereunder shall be deemed effective in the case of personal delivery, upon receipt thereof, or, in the case of mailing, at the moment of deposit in the course of transmission with the United States Postal Service. 9.0 ASSIGNMENT. Neither Consultant nor District may assign or transfer this Agreement, or any part thereof, without the prior written consent of the other Party, which shall not be unreasonably withheld. 10.0 ATTORNEY’S FEES. In the event of any action arising out of, or in connection with, this Agreement, or the Work to be performed hereunder, the prevailing Party shall be entitled to have and recover, in addition to damages, injunctive or other relief, its reasonable costs and expenses, including without limitation, its attorney’s fees. 11.0. BINDING ARBITRATION. Within thirty (30) days after service of a civil action on either Party arising out of, or in connection with, this Agreement, either Party may elect to submit the action to binding arbitration before the Judicial Arbitration and Mediation Service (“JAMS”), located in Orange County. The Parties agree that upon an election to arbitrate, any civil action filed will be stayed until arbitration proceedings have concluded. Upon submission of the matter to JAMS, the submitting Party shall obtain from JAMS a list of three (3) randomly selected arbitrators and serve said list upon the other Party. In the event that there are more than two parties to the action, the number of arbitrators randomly selected and included in the list shall be increased by two for each additional party involved. Upon service of the randomly selected list of arbitrators, each party shall have twenty (20) days to eliminate two arbitrators from the list and return it to JAMS, with the selected arbitrator being the remaining name on the list. Should more than one name remain on the list, JAMS will randomly select the arbitrator from the names remaining on the list. Arbitration shall be scheduled for hearing on the merits no later than six (6) months after the date the arbitrator is selected. All parties shall be permitted to conduct discovery as provided by the current rules of the California Code of Civil Procedure. All costs of JAMS or of the arbitrator for Work shall be divided equally among the Parties, unless otherwise ordered by the arbitrator. In an arbitration to resolve a dispute under this provision, the arbitrator’s award shall be supported by law and substantial evidence. YLWD Professional Services Agreement 8 of 17 12.0 FORCE MAJEURE. Upon written notice by the owing Party, the respective duties and obligations of the Parties hereunder (except District’s obligation to pay Consultant such sums as may become due from time to time for Work rendered by it) shall be suspended while and so long as performance thereof is prevented or impeded by strikes, disturbances, riots, fire, governmental action, war acts, acts of God, or any other cause similar or dissimilar to the foregoing which are beyond the reasonable control of the Party from whom the affected performance was due. 13.0 ENTIRE AGREEMENT. This Agreement, and the attached Exhibits, represent the entire and integrated agreement between District and Consultant and supersedes all prior negotiations, representations, or agreements, either written or oral. This Agreement may be amended only by written instrument signed by both District and Consultant. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be entered into as of the day and year written above. District: Consultant: Yorba Linda Water District Fieldman, Rolapp & Associates By: By: ________________________________ Marc Marcantonio, General Manager Robert A. Porr, Senior Vice President APPROVED AS TO FORM: Kidman Law LLP By: Arthur G. Kidman, General Counsel Attachments: Exhibit A: Scope of Work, Fee Schedule Exhibit B: Certificates of Insurance YLWD Professional Services Agreement 9 of 17 EXHIBIT A TO PROFESSIONAL SERVICES AGREEMENT FOR FINANCIAL ADVISOR BY AND BETWEEN YORBA LINDA WATER DISTRICT AND FIELDMAN, ROLAPP & ASSOCIATES Scope of Work A. General Services. The Consultant shall perform duties and services as set forth herein in connection with a proposed 2008 Certificate of Participation Refunding issue up to $35,000,000 and shall provide such other services as it deems necessary or advisable, or are reasonable and necessary to accomplish the intent of this Agreement in a manner consistent with the standards and practice of professional financial advisors prevailing at the time such services are rendered to the District. The District may, with the concurrence of Consultant, expand this Agreement to include any additional services not specifically identified within the terms of this Agreement. Any additional services may be described in an addendum to this Exhibit A and are subject to fees described in Exhibit B to this Agreement. B. Additional Services. Services performed for the District by Consultant that are not otherwise specifically identified shall be additional services. Additional services include, but are not limited to, the following: • Assisting the District in obtaining enabling legislation or conducting referendum elections. • Extraordinary services and extensive computer analysis in the structuring or planning of any debt issue or financing program. • The repeat of any element of a service to this Agreement which is made necessary through no fault of Consultant. • Financial management services, including development of financial policies, capital improvement plans, economic development planning, credit analysis or review and such other services that are not ordinarily considered within the scope of services described in this Agreement. • Services rendered in connection with any undertaking of the District relating to a continuing disclosure agreement entered into in order to comply with Securities and Exchange Commission Rule 15c2-12 or other similar rules. YLWD Professional Services Agreement 10 of 17 • Services rendered to the District in connection with calculations or determination of any arbitrage rebate liability to the United States of America arising from investment activities associated with debt issued to fund the Project. C. Debt Issuance Services. The Consultant shall assume primary responsibility for assisting the District in coordinating the planning and execution of each debt issue relating to the Project. Insofar as the Consultant is providing Services which are rendered only to the District, the overall coordination of the financing shall be such as to minimize the costs of the transaction coincident with maximizing the District's financing flexibility and capital market access. The Consultant's proposed debt issuance Services may include, but shall not be limited to, the following: • Establish the Financing Objectives • Develop the Financing Schedule • Monitor the Transaction Process • Review the Official Statement, both preliminary and final • Procure and Coordinate Additional Service Providers • Provide Financial Advice to the District Relating to Financing Documents • Compute Sizing and Design Structure of the Debt Issue • Plan and Schedule Rating Agency Presentation and Investor Briefings • Conduct Credit Enhancement Procurement and Evaluation • Conduct Market Analysis and Evaluate Timing of Market Entry • Recommend Award of Debt Issuance • Provide Pre-Closing and Closing Assistance Specifically, Consultant will: 1. Establish the Financing Objectives. At the onset of the financing transaction process for the Project, the Consultant shall review the District's financing needs and in conjunction with the District's management, outline the objectives of the financing transaction to be undertaken and its proposed form. Unless previously determined, Consultant shall recommend the method of sale of debt and outline the steps required to achieve efficient market access. 2. Develop the Financing Timetable. The Consultant shall take the lead role in preparing a schedule and detailed description of the interconnected responsibilities of each team member and update this schedule, with refinements, as necessary, as the work progresses. YLWD Professional Services Agreement 11 of 17 3. Monitor the Transaction Process. The Consultant shall have primary responsibility for the successful implementation of the financing strategy and timetable that is adopted for each debt issue relating to the Project. The Consultant shall coordinate (and assist, where appropriate) in the preparation of the legal and disclosure documents and shall monitor the progress of all activities leading to the sale of debt. The Consultant shall prepare the timetables and work schedules necessary to achieve this end in a timely, efficient and cost-effective manner and will coordinate and monitor the activities of all parties engaged in the financing transaction. 4. Review the Official Statement. a. Generally, SEC, MSRB, and GFOA guidelines encourage full disclosure so that potential investors have sufficient data to analyze each proposed financing. Upon direction of the District, the Consultant shall review the official statement for each debt issue relating to the Project to insure that the District's official statement is compiled in a manner consistent with industry standards, typically including the following matters: • Legal Authority for the Financing • Security for the Financing • Restrictions on Additional Financings • Purpose and Funds for which the Financing is Being Issued • Governmental System • Financial Management System • Revenue Sources: Historic, Current and Projected • Outstanding Financings • Planned Future Financings • Labor Relations and Retirement Systems • Economic Base • Annual Financial Statements • Legal Opinions Regarding Tax Exemption • Such Other Matters as the Context May Require. b. The Consultant shall maintain and update the official statement on its word processing system until such time as it is near final and suitable for transfer to the financial printer, in order to minimize the costs of revisions made by the printer. 5. Procure and Coordinate Additional Service Providers. Should the District desire, the Consultant may act as District’s representative in procuring the services of financial printers for the official statement and related documents, and for the printing of any securities. In addition, the Consultant may act as the District's representative in procuring the services of trustees, paying agents, fiscal agents, YLWD Professional Services Agreement 12 of 17 feasibility consultants, redevelopment consultants, or escrow verification agents or other professionals, if the District directs. 6. Provide Financial Advice to the District Relating to Financing Documents. Simultaneous with assisting in the preparation of official statements for each debt issue relating to the Project, the Consultant shall assist the managing underwriters, bond counsel and/or other legal advisors in the drafting of the respective financing resolutions, notices and other legal documents. In this regard, the Consultant shall monitor document preparation for a consistent and accurate presentation of the recommended business terms and financing structure of each debt issue relating to the Project, it being specifically understood however that the Consultant’s services shall in no manner be construed as the Consultant engaging in the practice of law. 7. Compute Sizing and Design Structure of Debt Issue. The Consultant shall work with the District's staff to design a financing structure for each debt issue relating to the Project that is consistent with the District's objectives, that coordinates each transaction with outstanding issues and that reflects current conditions in the capital markets. 8. Plan and Schedule Rating Agency Presentation and Investor Briefings. The Consultant shall develop a plan for presenting the financing program to the rating agencies and the investor community. The Consultant shall schedule rating agency visits, if appropriate, to assure the appropriate and most knowledgeable rating agency personnel are available for the presentation and will develop presentation materials and assist the District officials in preparing for the presentations. 9. Conduct Credit Enhancement Evaluation and Procurement. Upon the District’s direction, the Consultant will initiate discussions with bond insurers, letter of credit providers and vendors of other forms of credit enhancements to determine the availability of and cost benefit of securing financing credit support. 10. Conduct Market Analysis and Evaluate Timing of Market Entry. The Consultant shall provide regular summaries of current municipal market conditions, trends in the market and how these may favorably or unfavorably affect the District's proposed financing. a. Competitive Sales. For all types of competitive sale of debt, the Consultant shall undertake such activities as are generally required for sale of securities by competitive bid including, but not limited to the following: YLWD Professional Services Agreement 13 of 17 • Review and comment on terms of Notice of Sale Inviting Bids • Provide advice on debt sale scheduling • Provide advice on the use of electronic bidding systems • Coordinate bid opening with the District officials • Verify bids received and make recommendations for acceptance • Provide confirmation of issue sizing, based upon actual bids received, where appropriate • Coordinate closing arrangements with the successful bidder(s) b. Negotiated Sales. In the case of a negotiated sale of debt, the Consultant shall perform a thorough evaluation of market conditions preceding the negotiation of the terms of the sale of debt and will assist the District with the negotiation of final issue structure, interest rates, interest cost, reoffering terms and gross underwriting spread and provide a recommendation on acceptance or rejection of the offer to purchase the debt. This assistance and evaluation will focus on the following areas as determinants of interest cost: • Size of financing • Sources and uses of funds • Terms and maturities of the debt issue • Review of the rating in pricing of the debt issue • Investment of debt issue proceeds • Distribution mix among institutional and retail purchasers • Interest rate, reoffering terms and underwriting discount with comparable issues • Redemption provisions 11. Recommend Award of Debt Issuance. Based upon activities outlined in Task 10(a) and 10(b) above, the Consultant will recommend accepting or rejecting offers to purchase the debt issue. If the District elects to award the debt issue, the Consultant will instruct all parties and help facilitate the actions required to formally consummate the award. 12. Provide Pre-Closing and Closing Activities. The Consultant shall assist in arranging for the closing of each financing. The Consultant shall assist counsel in assuming responsibility for such arrangements as they are required, including arranging for or monitoring the progress of bond printing, qualification of issues for book-entry status, signing and final delivery of the securities and settlement of the costs of issuance. YLWD Professional Services Agreement 14 of 17 D. Special Financing Services. The Consultant shall assist the District, as needed, in identifying and procuring special financial related services that may be needed for any debt issue relating to the Project. Services that may be required include those listed below: • Feasibility consultants or other consultants required to deliver services relevant to any debt issue relating to the Project • Credit providers, such as bank, insurance companies and private lenders At each point where a special service is required, the Consultant shall research and develop a set of specifications for the desired service, develop a distribution list and supervise the circulation of the request for proposals. As part of the process of procuring bank credit facilities, such as letters and lines of credit and insurance to support the District's financing programs, the Consultant shall pay particular attention to the cost-effectiveness and to the relative levels of market acceptance of bond insurers and both domestic and international banks. The Consultant shall advise the District as to how the credit rating and investor perception of the potential credit enhancement provider offering such services will affect the market for the debt issue relating to the Project. In addition, the Consultant shall evaluate the roll-over or renewal provisions that each such provider is willing to offer in its agreement with the District to determine which one offers the maximum assurance of continued availability. YLWD Professional Services Agreement 15 of 17 Cost Proposal for Work/Fee Schedule Part 1: Fee for Services Financial Advisory Services performed pursuant to Section 1 of this Agreement for this negotiated sale or private placement of debt, and as more fully described in the Scope of Services set forth in Exhibit A, will be billed for at the amounts set forth below: Transaction Size / Each Issuance Fees $1 to $2,499,999 $23,500 $2,500,000 to $4,999,999 $32,500 $5,000,000 to $9,999,999 $36,500 $10,000,000 to $14,999,999 $39,500 $15,000,000 to $19,999,999 $42,500 $20,000,000 to $29,999,999 $48,500 $30,000,000 to $39,999,999 $54,500 $40,000,000 and above to be negotiated Payment of fees earned by Consultant pursuant to this Part 1 shall be contingent on, and payable at the closing of the debt issue(s) undertaken to finance the Project. Part 2: Other Services Unless agreed to otherwise, financial advisory services performed pursuant to Section 2 of this Agreement will be billed at the then current hourly rates. The table below reflects the rates in effect as of the date of execution of this Agreement. Personnel Hourly Rate Executive Officer $335 Principal $305 Principal/Senior Vice President $290 Vice President $240 Assistant Vice President $205 Senior Associate $160 Associate $135 Analyst $90 Administrative Assistant $70 Clerical $40 Expenses Expenses will be billed for separately and will cover, among other things, travel, lodging, subsistence, overnight courier, computer, and fax transmission charges. Advances made on behalf of the District for costs of preparing, printing or distributing disclosure materials or related matter whether by postal services or electronic means, may also be billed through to the District upon prior authorization. Additionally, a surcharge of 6% of the net fee amount is added YLWD Professional Services Agreement 16 of 17 to verifiable out-of-pocket costs for recovery of costs such as telephone, postage, document reproduction and the like. Limiting Terms and Conditions The above fee is based on completion of work orders within twenty-four months of the District's authorization to proceed, and assumes that the District will provide all necessary information in a timely manner. The fee shown above in Part 1 presumes attendance at meetings in the District's offices or such other location within a 25-mile radius of the District place of business as the District may designate. Abandonment If, once commenced, the services of the Consultant are terminated prior to completion of any series of debt, for any reason, we are to be reimbursed for professional services and direct expenses incurred up to the time we receive notification of such termination at the standard hourly rates shown in Part 2. YLWD Professional Services Agreement 17 of 17 EXHIBIT B TO PROFESSIONAL SERVICES AGREEMENT FOR FINANCIAL ADVISOR BY AND BETWEEN YORBA LINDA WATER DISTRICT AND FIELDMAN, ROLAPP & ASSOCIATES Insurance Certificates YLWD Professional Services Agreement 1 of 10 PROFESSIONAL SERVICES AGREEMENT BETWEEN THE YORBA LINDA WATER DISTRICT AND STRADLING YOCCA CARLSON & RAUTH PROJECT: Professional Services Agreement for Bond Counsel THIS PROFESSIONAL SERVICES AGREEMENT (“Agreement”) is made and entered into on March__, 2016, by and between the YORBA LINDA WATER DISTRICT, a local public agency, created and operating under authority of Division 12 of the California Water Code (“District”), and Stradling Yocca Carlson & Rauth (“Consultant”) (collectively referred to herein as the “Parties”). RECITALS WHEREAS, District is engaging in the Project described in the Scope of Work attached as Exhibit “A”; and WHEREAS, District requires a professional consultant with the requisite knowledge, skill, ability and expertise to provide the necessary services for District during all phases of the Project to which the specialized services of Consultant are appropriate; and WHEREAS, Consultant represents to District that it is fully qualified and available to perform the services for and as requested by District; and NOW, THEREFORE, in consideration of the mutual promises, covenants, and terms and conditions herein, the Parties agree as follows: AGREEMENT 1.0. SCOPE OF WORK. The services to be provided by Consultant (“Work”) are called out in the Scope of Work attached as Exhibit “A” and incorporated herein by reference. All Work shall be performed in accordance with the standards customarily provided by an experienced and competent professional rendering the same or similar services and in such a prompt and continuous fashion as not to impede or delay the overall completion of the Project. 1.1. Project Manager. Consultant acknowledges that continuous and effective communication between District, Consultant, and other consultants (as appropriate) is necessary to the successful completion of the Project. Consultant may also be required to furnish copies of its work product and communications to others as requested by District. Consultant’s primary contact with District shall be through District’s Finance Manager. District’s primary contact with Consultant shall be through the Consultant’s Representative, designated on Consultant’s Cost Proposal attached as Exhibit “A,” and YLWD Professional Services Agreement 2 of 10 incorporated herein by reference. When requested by District, Consultant’s Representative shall attend District meetings and will undertake, as a part of its professional responsibility under this Agreement, to coordinate its activities with all appropriate individuals and consultants. 1.2. Use of Documents, Analysis and Statistics. All work product of Consultant, whether created solely by Consultant or in cooperation with others, is prepared specifically and expressly for District and all right, title, and interest therein shall be owned by District. District shall make available to Consultant such information, documents, graphs, studies, etc., which District possesses or has access to, which are relevant to Consultant’s Work pursuant to this Agreement. 1.3. Review. Consultant shall furnish District with reasonable opportunities from time to time to ascertain whether the Work of Consultant is being performed in accordance with this Agreement. All Work done and materials furnished shall be subject to final review and approval by District. District’s interim review and approval of Consultant’s work product shall not relieve Consultant of its obligations to fully perform this Agreement. 1.4. Commencement of Work. The Project start date is called out on Exhibit “A.” 1.5. Time Is Of The Essence. Consultant shall perform all Work with due diligence as time is of the essence in the performance of this Agreement. Time limits applicable for the performance of Consultant’s Work are established in Exhibit “A.” 2.0 COMPENSATION. As compensation for performance of the Work specified under the Scope of Work (Exhibit “A”), District shall pay Consultant an amount not to exceed $75,000, as specified in Consultant’s Cost Proposal (Exhibit “A”). Payment will be made at the rates set forth in Consultant’s Cost Proposal, which is included in Exhibit “A” and incorporated herein by reference. Costs or expenses not designated or identified in the Cost Proposal shall not be reimbursable unless otherwise provided in this Agreement. 2.1. Invoicing. Consultant shall submit an invoice after the closing of the Debt Issuance. District shall pay approved invoice(s) within thirty (30) days of receipt. Consultant agrees to submit additional documentation to support the invoice if requested. If District does not approve an invoice, District shall send a notice to Consultant setting forth the reason(s) the invoice was not approved. Consultant may re-invoice District to cure the defects identified by District. The revised invoice will be treated as a new submittal. District’s determinations regarding verification of Consultant’s performance, accrued reimbursable expenses, if any, and percentage of completion shall be binding and conclusive. Consultant’s time records, invoices, receipts and other documentation supporting the invoices shall be available for review by District upon reasonable notice and shall be retained by Consultant for three (3) years after completion of the Project. 2.2. Extra Services. Before performing any services outside the scope of this Agreement (“Extra Services”), Consultant shall submit a written request for approval of such Extra Services and receive written approval from District. District shall have no YLWD Professional Services Agreement 3 of 10 responsibility to compensate Consultant for any Extra Services provided by Consultant without such prior written approval. 3.0 TERMINATION. District may terminate this Agreement at any time upon ten (10) days written notice to Consultant. Should District exercise the right to terminate this Agreement, District shall pay Consultant for any Work satisfactorily completed prior to the date of termination, based upon Consultant’s Cost Proposal. Consultant may terminate this Agreement upon ten (10) days written notice to District. 3.1. Withholding Payment. In the event District has reasonable grounds to believe Consultant will be materially unable to perform the Work under this Agreement, or if District becomes aware of a potential claim against Consultant or District arising out of Consultant’s negligence, intentional act or breach of any provision of this Agreement, including a potential claim against Consultant by District, then District may, to the fullest extent allowed by law, withhold payment of any amount payable to Consultant that District determines is related to such inability to complete the Work, negligence, intentional act, or breach. 4.0. SAFETY. Consultant shall conduct and maintain the Work so as to avoid injury or damage to any person or property. Consultant shall at all times exercise all necessary safety precautions appropriate to the nature of the Work and the conditions under which the Work is to be performed, and be in compliance with all applicable federal, state and local statutory and regulatory requirements including State of California, Department of Industrial Relations (Cal/OSHA) regulations. Consultant is responsible for the safety of all Consultant personnel at all times during performance of its Work, including while on District property. 5.0 INDEMNIFICATION. 5.1. When the law establishes a professional standard of care for the Consultant’s services, to the fullest extent permitted by law, Consultant will defend, indemnify and hold harmless District, its directors, officers, employees, and authorized volunteers from and against all claims and demands of all persons that arise out of, pertain to, or relate to the Consultant’s negligence, recklessness, or willful misconduct in the performance (or actual or alleged non-performance) of the Work under this Agreement. (Please see Paragraph No. 3 of Exhibit “A”.) Consultant shall defend itself against any and all liabilities, claims, losses, damages, and costs arising out of or alleged to arise out of Consultant’s performance or non-performance of the Work hereunder, and shall not tender such claims to District nor to its directors, officers, employees, or authorized volunteers, for defense or indemnity. 5.2. Other than in the performance of professional services, to the fullest extent permitted by law, Consultant will defend, indemnify and hold harmless District, its directors, officers, employees and authorized volunteers from and against all claims and demands of all persons arising out the performance (or actual or alleged non- performance) of the Work (including the furnishing of materials), including but not limited to claims by the Consultant, Consultant’s employees and any subconsultants for damages to persons or property, except for damages resulting from the willful YLWD Professional Services Agreement 4 of 10 misconduct, sole negligence or active negligence of District, its directors, officers, employees, or authorized volunteers. 5.3. Consultant shall defend, at Consultant's own cost, expense and risk, any and all such aforesaid suits, actions or other legal proceedings of every kind that may be brought or instituted against District or any of its directors, officers, employees, or authorized volunteers, with legal counsel reasonably acceptable to District. Consultant shall pay and satisfy any judgment, award or decree that may be rendered against District or any of its directors, officers, employees, or authorized volunteers, in any and all such aforesaid suits, actions, or other legal proceedings for which Consultant is obligated to defend, indemnify and hold harmless District, its directors, officers, employees and authorized volunteers under this Agreement. 5.4. Consultant shall reimburse District or its directors, officers, employees, and authorized volunteers, for any and all legal expenses and costs incurred by each of them in connection therewith or in enforcing the indemnity herein provided. Consultant’s obligation to indemnify shall not be restricted to insurance proceeds, if any, received by District or its directors, officers, employees, or authorized volunteers. 6.0 INSURANCE REQUIREMENTS. Prior to execution of this Agreement, and at any time thereafter on request, Consultant shall provide executed certificates of insurance in the form attached hereto as Exhibit “B” evidencing the required coverage and limits for each insurance policy. In addition, Consultant shall provide a new executed certificate of insurance in the form attached hereto as Exhibit “B” whenever an insurance policy required herein, expires, is renewed or is replaced. District may also, at any time, request submittal of policies and policy endorsements acceptable to District evidencing the required coverage and limits. Each insurance policy shall be primary insurance as respects District, its affiliated organizations and its and their respective officers, directors, trustees, employees, agents, consultants, attorneys, successors and assigns (collectively, the “Covered Parties”) for all liability arising out of the activities performed by or on behalf of Consultant. Any insurance, pool coverage, or self-insurance maintained by Covered Parties shall be excess of Consultant’s insurance and shall not contribute to it. Except for the Errors and Omissions policy (Section 6.4), all insurance coverage maintained or procured pursuant to this Agreement shall be endorsed to waive subrogation against the Covered Parties or shall specifically allow Consultant or others providing insurance evidence in compliance with these requirements to waive their right of recovery prior to loss. Consultant waives its right of recovery against the Covered Parties for damages covered by insurance required by this Agreement. Consultant shall require similar written express waivers and insurance clauses from each of its subcontractors. The insurer issuing the Workers’ Compensation insurance shall amend its policy to waive all rights of subrogation against the Covered Parties. Each insurance policy shall provide, or be endorsed to provide, that coverage shall not be cancelled except after thirty (30) days prior written notice by U.S. Mail (ten (10) days for non- payment of premium) has been given to District. Unless otherwise approved by District, each insurance provider shall be authorized to do business in California and have an A.M. Best rating (or equivalent) of not less than “A-:VII.” Consultant shall provide and maintain at all times during the performance of this Agreement the following insurance: (1) Commercial General YLWD Professional Services Agreement 5 of 10 Liability (“CGL”) insurance; (2) Automobile Liability insurance; (3) Workers’ Compensation and Employer’s Liability insurance; and (4) Errors and Omissions (“E&O”) liability insurance. 6.1. Commercial General Liability. Each CGL policy shall identify Covered Parties as additional insured, or be endorsed to identify Covered Parties as additional insured using a form acceptable to the District. Coverage for additional insured shall not be limited to vicarious liability. Defense costs must be paid in addition to limits. Each CGL policy shall have liability coverage limits of at least $1,000,000 per occurrence for bodily injury, personal injury and property damage, and $2,000,000 aggregate total bodily injury, personal injury and property damage. CGL insurance and endorsements shall be kept in force at all times during the performance of this Agreement and all coverage required herein shall be maintained after the term of this Agreement so long as such coverage is reasonably available. 6.2. Automobile Liability. Each Automobile Liability policy shall require coverage for “any auto” and shall have limits of at least $1,000,000 for bodily injury and property damage, each accident, and shall use ISO policy form “CA 00 01,” including owned, non-owned and hired autos, or the exact equivalent. If Consultant owns no vehicles, this requirement may be satisfied by a non-owned auto endorsement to the CGL policy described above. Automobile Liability insurance and endorsements shall be kept in force at all times during the performance of this Agreement and all coverage required herein shall be maintained after the term of this Agreement so long as such coverage is reasonably available. 6.3. Workers’ Compensation/Employer’s Liability. Consultant shall cover or insure the existence of coverage under the applicable laws relating to Workers’ Compensation insurance, all of their employees employed directly by them or through subconsultants at all times in carrying out the Work contemplated under this Agreement, in accordance with the “Workers’ Compensation and Insurance Act” of the California Labor Code and any amendatory Acts. Consultant shall provide Employer’s Liability insurance with limits of at least $1,000,000 each accident, $1,000,000 disease policy limit, and $1,000,000 disease each employee. By Consultant’s signature hereunder, Consultant certifies that it is aware of the provisions of Section 3700 of the California Labor Code, which requires every employer to be insured against liability for Workers’ Compensation or to undertake self-insurance in accordance with the provisions of that code, and that Consultant will comply with such provisions before commencing Work under this Agreement. Upon the request of District, subconsultants must provide certificates of insurance evidencing such coverage. 6.4. Errors and Omissions. Each E&O policy shall have limits of at least $1,000,000 per claim and $1,000,000 aggregate. E&O insurance and endorsements shall be kept in force at all times during the performance of this Agreement and all coverage required herein shall be maintained after the term of this Agreement so long as such coverage is reasonably available. YLWD Professional Services Agreement 6 of 10 7.0. INDEPENDENT CONTRACTOR. The Parties agree that the relationship between District and Consultant is that of an independent contractor and Consultant shall not, in any way, be considered to be an employee or agent of District. Consultant shall not represent or otherwise hold out itself or any of its directors, officers, partners, employees, or agents to be an agent or employee of District. District will not be legally or financially responsible for any damage or loss that may be sustained by Consultant because of any act, error, or omission of Consultant or any other consultant, nor shall Consultant make any claim against District arising out of any such act, error, or omission. 7.1. Taxes and Benefits. Consultant shall be solely responsible for the payment of all federal, state and local income tax, social security tax, Workers’ Compensation insurance, state disability insurance, and any other taxes or insurance Consultant, as an independent contractor, is responsible for paying under federal, state or local law. Consultant is not eligible to receive Workers’ Compensation, medical, indemnity or retirement benefits through District, including but not limited to enrollment in CalPERS. Consultant is not eligible to receive overtime, vacation or sick pay. 7.2. Permits and Licenses. Consultant shall procure and maintain all permits, and licenses and other government-required certification necessary for the performance of its Work, all at the sole cost of Consultant. None of the items referenced in this section shall be reimbursable to Consultant under the Agreement. 7.3. Methods. Consultant shall have the sole and absolute discretion in determining the methods, details and means of performing the Work required by District. Consultant shall furnish, at its own expense, all labor, materials, equipment, tools and transportation necessary for the successful completion of the Work to be performed under this Agreement. District shall not have any right to direct the methods, details and means of the Work; however, Consultant must receive prior written approval from District before assigning or changing any assignment of Consultant’s project manager or key personnel and before using any subconsultants or subconsultant agreements for services or materials under this Agreement and any work authorizations. YLWD Professional Services Agreement 7 of 10 8.0. NOTICES. Any notice may be served upon either Party by delivering it in person, or by depositing it in a U.S. Mail Deposit Box with the postage thereon fully prepaid, and addressed to the Party at the address set forth below: District: Marc Marcantonio, General Manager Yorba Linda Water District P.O. Box 309 Yorba Linda, CA 92885-0309 Consultant: As designated in Exhibit “A.” Any notice given hereunder shall be deemed effective in the case of personal delivery, upon receipt thereof, or, in the case of mailing, at the moment of deposit in the course of transmission with the United States Postal Service. 9.0 ASSIGNMENT. Neither Consultant nor District may assign or transfer this Agreement, or any part thereof, without the prior written consent of the other Party, which shall not be unreasonably withheld. 10.0 ATTORNEY’S FEES. In the event of any action arising out of, or in connection with, this Agreement, or the Work to be performed hereunder, the prevailing Party shall be entitled to have and recover, in addition to damages, injunctive or other relief, its reasonable costs and expenses, including without limitation, its attorney’s fees. 11.0. BINDING ARBITRATION. Within thirty (30) days after service of a civil action on either Party arising out of, or in connection with, this Agreement, either Party may elect to submit the action to binding arbitration before the Judicial Arbitration and Mediation Service (“JAMS”), located in Orange County. The Parties agree that upon an election to arbitrate, any civil action filed will be stayed until arbitration proceedings have concluded. Upon submission of the matter to JAMS, the submitting Party shall obtain from JAMS a list of three (3) randomly selected arbitrators and serve said list upon the other Party. In the event that there are more than two parties to the action, the number of arbitrators randomly selected and included in the list shall be increased by two for each additional party involved. Upon service of the randomly selected list of arbitrators, each party shall have twenty (20) days to eliminate two arbitrators from the list and return it to JAMS, with the selected arbitrator being the remaining name on the list. Should more than one name remain on the list, JAMS will randomly select the arbitrator from the names remaining on the list. Arbitration shall be scheduled for hearing on the merits no later than six (6) months after the date the arbitrator is selected. All parties shall be permitted to conduct discovery as provided by the current rules of the California Code of Civil Procedure. All costs of JAMS or of the arbitrator for Work shall be divided equally among the Parties, unless otherwise ordered by the arbitrator. In an arbitration to resolve a dispute under this provision, the arbitrator’s award shall be supported by law and substantial evidence. YLWD Professional Services Agreement 8 of 10 12.0 FORCE MAJEURE. Upon written notice by the owing Party, the respective duties and obligations of the Parties hereunder (except District’s obligation to pay Consultant such sums as may become due from time to time for Work rendered by it) shall be suspended while and so long as performance thereof is prevented or impeded by strikes, disturbances, riots, fire, governmental action, war acts, acts of God, or any other cause similar or dissimilar to the foregoing which are beyond the reasonable control of the Party from whom the affected performance was due. 13.0 ENTIRE AGREEMENT. This Agreement, and the attached Exhibits, represent the entire and integrated agreement between District and Consultant and supersedes all prior negotiations, representations, or agreements, either written or oral. This Agreement may be amended only by written instrument signed by both District and Consultant. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be entered into as of the day and year written above. District: Consultant: Yorba Linda Water District Stradling Yocca Carlson & Rauth By: By: ________________________________ Marc Marcantonio, General Manager E. Kurt Yeager, Shareholder APPROVED AS TO FORM: Kidman Law LLP By: Arthur G. Kidman, General Counsel Attachments: Exhibit A: Scope of Work, Fee Schedule Exhibit B: Certificates of Insurance YLWD Professional Services Agreement 9 of 10 EXHIBIT A TO PROFESSIONAL SERVICES AGREEMENT FOR BOND COUNSEL BY AND BETWEEN YORBA LINDA WATER DISTRICT AND STRADLING YOCCA CARLSON & RAUTH YLWD Professional Services Agreement 10 of 10 EXHIBIT B TO PROFESSIONAL SERVICES AGREEMENT FOR BOND COUNSEL BY AND BETWEEN YORBA LINDA WATER DISTRICT AND STRADLING YOCCA CARLSON & RAUTH Insurance Certificates S TRADLING Y OCCA C ARLSON & R AUTH A PROFESSIONAL CORPORATION ATTORNEYS AT LAW 660 NEWPORT CENTER DRIVE, SUITE 1600 NEWPORT BEACH, CA 92660-6422 TELEPHONE (949) 725-4000 FACSIMILE (949) 725-4100 CALIFORNIA NEWPORT BEACH SACRAMENTO SAN DIEGO SAN FRANCISCO SANTA BARBARA SANTA MONICA COLORADO DENVER NEVADA RENO WASHINGTON SEATTLE February 18, 2016 Yorba Linda Water District 1717 East Miraloma Avenue Placentia, California 92870 Re: Bond Counsel Engagement – Refunding of 2008 Certificates of Participation Stradling Yocca Carlson & Rauth Members of the Board of Directors: We appreciate for the opportunity to continue our representation of Yorba Linda Water District (the “District”) as bond counsel for the proposed debt refunding, including drafting the official statement. As is traditional for bond counsel matters, our fees will be contingent on the completion of the financing and will be payable from the proceeds of the financing. Unless otherwise confirmed in writing, the terms of this letter and the enclosed Terms of Retention will govern our bond counsel representation of you in connection with the matters identified above. If this letter, including the attached Terms of Retention, accurately reflects your understanding of our relationship, please acknowledge your approval and acceptance of these terms by signing and returning this letter to me. Copies of each are enclosed for your files. I would be pleased to answer any questions you might have. Very truly yours, STRADLING YOCCA CARLSON & RAUTH, P.C. Enclosure Yorba Linda Water District February 18, 2016 Page 2 The undersigned hereby agrees that the terms and conditions in this letter and the accompanying Terms of Retention shall apply to services rendered by Stradling Yocca Carlson & Rauth. YORBA LINDA WATER DISTRICT By: Authorized Signatory Yorba Linda Water District February 18, 2016 Page 3 TERMS OF RETENTION OF STRADLING YOCCA CARLSON & RAUTH Stradling Yocca Carlson & Rauth (the “Firm”) appreciates the opportunity to continue providing bond counsel related to legal services to Yorba Linda Water District (“you” or the “District”). This letter confirms the terms of our engagement. 1. Legal Services to be Provided. You are engaging us as bond counsel in connection with the refunding of certain outstanding debt obligations. Our representation is limited to the specific services that you request and that we have agreed to undertake. 2. Identity of Client. We represent only the District in this matter. We do not represent any other entity or person, including any other company, partnership, organization, director, officer, employee, member, shareholder, partner, agent or family member, in this matter. Any representation by us of such other entity or person will be established only in a separate written agreement. 3. Insurance and Indemnification. We hereby advise you that the Firm maintains professional errors and omissions insurance coverage applicable to the services to be rendered to you. The Firm agrees to hold harmless, indemnify, and defend the District from and against any and all claims, including all costs of defense and reasonable attorneys’ fees, relating to the negligence or willful misconduct of the Firm’s services rendered in connection with this Terms of Retention up to the limits of such professional errors and omission insurance coverage. 4. No Representation of Other Parties. The Firm has represented, and may represent in the future, underwriting firms from time to time in connection with other specific municipal finance offerings. In addition, the Firm has in the past, and may in the future, represent water agencies in Orange County as bond counsel on municipal finance offerings unrelated to the District’s financings or on employment law and related matters. The Firm confirms that it is not representing any other party in connection with the issuance of the bonds which is the subject of this engagement. 5. Client File and Retention. For each matter, we maintain a file in which we place certain documents and items, including original documents, that are reasonably necessary to our representation in the matter. We keep each file for seven years after a matter concludes. The file is your property and, subject to any protective order or non-disclosure agreement, you may request to take possession of it once the matter concludes. If you do not take possession of the file during that seven-year period, you agree that upon sixty days’ notice to you we may dispose of it unless you request to take possession of it at that time. We will promptly notify you should all or any portion of the file become the subject of a subpoena, discovery request or other disclosure obligation (a “Legal Process”) while in our possession, including after the matter concludes. You agree to pay our then-prevailing hourly rates and costs that we incur to comply with the Legal Process. Any Yorba Linda Water District February 18, 2016 Page 4 additional charges for fees and costs in connection with the Legal Process will be subject to your approval. 6. No Guarantee of Result or Charges. We do not guarantee any particular result or the maximum amount of fees or costs you will incur. You acknowledge and agree that any comments that we make about potential outcomes or charges in this matter, including any timetables, budgets or fee estimates, are expressions of opinion only, are neither promises nor guarantees and are not binding. If we represent you in a litigation matter, you may be required to pay the other side’s fees and costs. Any such payment is your sole responsibility. 7. Our Counsel. We have both internal counsel and outside counsel who advise our professionals about their ethical, professional and legal duties. From time to time, our professionals may consult such counsel about this matter. You acknowledge that such consultations are protected from disclosure to you by the attorney-client privilege between our counsel and us. You also agree that any such communications are not part of your client file, and that you waive any right to obtain discovery of those communications. 8. Client Communication. You hereby designate Delia Lugo, Finance Manager, to act on your behalf for this matter, and you authorize us to communicate with, and receive directions from, that person and any other person that you or Marc Marcantonio may designate in the future. 9. Authority to Sign. The person signing this letter on behalf of an entity represents that he or she has the full right and authority to do so, and to fully commit and bind that entity to this engagement letter. 10. Miscellaneous. This letter sets forth the entire agreement between you and us, and there are no other or additional understandings between you and us on these subjects. This agreement supersedes any prior agreements or representations, written or oral, between you and us on these subjects. Any modification or amendment to this agreement must be in a writing signed by you and us. This agreement shall be governed by California law without reference to its conflict of law principles. If any provision of this agreement is found to be invalid or unenforceable, that provision shall be deemed modified or removed so that it is valid and enforceable to the fullest extent of the law, and the other provisions of this agreement shall be unimpaired. 11. Effective Date. The effective date of this agreement is the date you sign this letter, but if signed, will apply back to the date we first provided legal services to you with regard to our fees. The date of this letter is for reference only. 12. Primary Attorney. The primary attorney with responsibility for this representation will be E. Kurt Yeager. The parties agree that the Firm is being retained based on the unique skill, experience, and expertise of Mr. Yeager and no change will be made in the primary attorney without the prior, written consent of the District. Yorba Linda Water District February 18, 2016 Page 5 If you agree with the above terms and conditions, please sign and return to me the enclosed copy of the signature page of this letter. If you have any questions about this letter, please feel free to ask me. In addition, you should feel free to consult independent counsel of your choice about the terms of this letter. Yorba Linda Water District February 18, 2016 Exhibit A EXHIBIT A SCOPE OF SERVICES As bond counsel, Stradling Yocca Carlson & Rauth (the “Firm”), will undertake the following Scope of Services on the proposed transaction: 1. Preparation of Legal Documents. Provide bond counsel services in connection with the proposed refunding of certain outstanding District debt, including but not limited to: • advising and consulting with the District staff, general counsel, District financial advisor, and the Board of Directors regarding the proposed refinancing, the revenues to be pledged, proposed financial covenants and the financing process; • preparing all legal proceedings in connection with the proposed financing; • drafting various resolutions, documents and agreements for consideration by the Board of Directors of the District; • preparing the escrow agreement with respect to the refunding bonds; • participating in meetings, hearings or negotiations with the District staff, Board committees, Board of Directors, financial advisor, and other financing team members as the circumstances require; • rendering a tax opinion that interest earned with respect to the District’s debt obligation is exempt from State and Federal taxes; and • rendering a defeasance opinion to the trustee with respect to the outstanding obligations being refunded; • preparing final closing documents to be executed by the District to effect delivery of any financing (including the tax certificate) and coordinate the adoption and execution of all documents and of the closing. 2. Drafting of Official Statement. • preparing disclosure policies and procedures, if requested. • providing disclosure training to District staff, if requested. • assisting the District in drafting the preliminary official statement and the final official statement. • rendering a “fair and accurate” summary opinion on certain sections of the official statement addressed to the underwriter in our customary form. Yorba Linda Water District February 18, 2016 Page 7 In accordance with our proposal, the not-to-exceed fee for the services described in 1 and 2 above will not exceed $75,000. This will confirm that in the event that our time actually spent on such services is less than such amount, our fee will be equal to such lesser amount. ITEM NO. 7.6 AGENDA REPORT Meeting Date: March 24, 2016 To:Board of Directors From:Marc Marcantonio, General Manager Presented By:Delia Lugo, Finance Manager Dept:Finance Prepared By:Delia Lugo, Finance Manager Subject:Revenue Refunding Bonds, Series 2016A SUMMARY: In 2008, the District sold $34,995,000 in Certificates of Participation ("2008 Certificates") to finance capital improvements for the Water System of the District. Based on preliminary financial assessments in January 2016, the 2008 Certificates present a potential refunding opportunity. On January 21, 2016, the Board of Directors approved moving forward with advance refunding the 2008 Certificates. In addition, the Board of Directors tasked staff to bring forward the overall effect of this advance refunding opportunity with the consideration including "payoff or pay down" options of the current principal balance drawn from the Wells Fargo Bank Line of Credit. STAFF RECOMMENDATION: That the Board of Directors adopt Resolution No. 16-XX Authorizing the Issuance of Not to Exceed $38,000,000 Refunding Revenue Bonds, Series 2016A, and Approving the Execution and Delivery of Certain Documents (subject to approval as to form by General Counsel) in Connection Therewith and Certain Other Matters. DISCUSSION: The current interest rate environment has improved since January 21, 2016 when the Board of Directors approved moving forward with the advance refunding of the 2008 Certificates. Though the District recently was affirmed with a AA+ rating from Standard & Poor's, as part of the advance refunding process the District has applied for credit ratings from Standard & Poor's and Fitch Ratings for the 2016 Bonds and these credit ratings are expected to be released by the April 14, 2016 Regular Board Meeting. The 2016 Bonds will be refunding revenue bonds issued by the District and the 2016 Bonds will be issued as fixed rate bonds with the same final maturity of October 1, 2038. The 2016 Bonds will be payable form and secured by Net Revenues of the Water System (Gross Revenues of the Water System less Operating Expenses and Non-Operating Expenses of the Water System). The 2016 Bonds will be sold through a negotiated sale with Citigroup Global Markets. Inc. ("Underwriter"). Fieldman, Rolapp & Associates, the District's financial advisor, will evaluate market conditions and terms of the sale to ensure competitive pricing is attained. There is a resolution to be adopted authorizing the issuance of the 2016 Bonds and approving the execution and delivery of certain documents and certain other matters: 1.Approve Indenture of Trust between the District and U.S. Bank National Association, as trustee. 2.Approve Escrow Agreement between the District and U.S. Bank National Association, as escrow bank. 3.Approve Purchase Contract between District and the Underwriter and authorizing the President of the Board and General Manager to execute and deliver the Purchase Contract. 4.Approve Continuing Disclosure Certificate. 5.Approve preparation and distribution of Preliminary Official Statement. 6.Authorize General Manager, Finance Manager, President, Vice President or Secretary to the Board to take action with any matter with respect to the refunding of the 2008 Certificates. There are numerous documents associated with a bond refunding and the following is a summary explaining each document: 1.Indenture of Trust - An agreement between the District and Trustee disclosing the rules and responsibilities of the District and the Trustee to which each party must adhere. 2.Escrow Agreement - In a refunding, the proceeds from the 2016 Bonds are used to purchase government securities for deposit in an escrow account. The escrow account is held by a trustee bank which will serve as the escrow bank. Under the terms of the Escrow Agreement, the government securities are irrevocably pledged to the payment of the outstanding 2008 Certificates to be refunded. The government securities are in principal amount such that the principal and interest are sufficient to retire the principal of and interest on the outstanding 2008 Certificates as they come due. The first redemption date is October 1, 2017. 3.Purchase Contract - A contract between the District and Underwriter in a negotiated sale that sets the terms of the sale, sale price and interest rates on the 2016 Bonds. 4.Continuing Disclosure Certificate - A certification of the District which the District agrees to provide bondholders annually the District's financial statements and certain updated information from the Official Statement and upon the occurrence of a significant event, provide notice regarding such event. 5.Preliminary Official Statement - A document that discloses material information on the bond issue, the District and the District's finances. A final Official Statement will prepared after pricing of the 2016 Bonds. PRIOR RELEVANT BOARD ACTION(S): On January 21, 2016, the Board of Directors approved moving forward with advance refunding the 2008 Certificates. ATTACHMENTS: Name:Description:Type: Resolution_No._16-XX_-_....docx Resolution No. 16-XX Backup Material DOCSOC_1738470v3_-_Indenture_Yorba_Linda_WD_2016A_(2008_Refunding).docx Indenture of Trust Backup Material DOCSOC_1738179v3_-_Escrow_Agreement_(2008_Certificates) _Yorba_Linda_WD_2016A.docx Escrow Agreement Backup Material Purchase_Contract_- _Yorba_Linda_Water_District_Revenue_Refunding_Bonds_Series_2016A_DMWEST_13961501 (1)_(2).docx Purchase Contract Backup Material DOCSOC_1738254v2_-_Continuing_Disclosure_Certificate_Yorba_Linda_WD_2016A_ (2008_Refunding).docx Continuing Disclosure Certificate Backup Material DOCSOC_1744160v5_-_Official_Statement_Yorba_Linda_WD_2016A_(2008_Refundi....docx Official Statement Backup Material Resolution No. 16-XX Authorizing the Issuance of Refunding Revenue Bonds Series 2016A 1 RESOLUTION NO. 16-XX RESOLUTION OF THE BOARD OF DIRECTORS OF THE YORBA LINDA WATER DISTRICT AUTHORIZING THE ISSUANCE OF NOT TO EXCEED $38,000,000 REFUNDING REVENUE BONDS, SERIES 2016A, AND APPROVING THE EXECUTION AND DELIVERY OF CERTAIN DOCUMENTS IN CONNECTION THEREWITH AND CERTAIN OTHER MATTERS WHEREAS, the Yorba Linda Water District (the “District”), a county water district duly organized and existing under and pursuant to Division 12 of the California Water Code (Section 30000 et seq.), desires to refinance the cost of constructing certain facilities within the District (the “2008 Project”); and WHEREAS, the District previously entered into a Credit Agreement and Line of Credit Note with Wells Fargo Bank, National Association (collectively, the “Wells Fargo Line of Credit”); and WHEREAS, the District desires to pay all or a portion of the outstanding amounts under the Wells Fargo Line of Credit; and WHEREAS, Article 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code, including but not limited to Section 53583, authorizes the District to issue refunding revenue bonds to refinance the 2008 Project and to pay outstanding amounts under the Wells Fargo Line of Credit; and WHEREAS, to facilitate the issuance of its Refunding Revenue Bonds, Series 2016A (the “Bonds”), the District and U.S. Bank National Association, as trustee, will enter into an Indenture of Trust (the “Indenture”) substantially in the form on file with the Secretary of the Board of Directors of the District (the “Board”); WHEREAS, to effect the refinancing of the 2008 Project, the District and U.S. Bank National Association, as escrow agent, will enter into an Escrow Agreement (2008 Certificates) (the “Escrow Agreement”) substantially in the form on file with the Secretary of the Board; and WHEREAS, to effect the sale of the Bonds, the District and Citigroup Global Markets Inc. (the “Underwriter”) will enter into a bond purchase contract (the “Purchase Contract”) substantially in the form on file with the Secretary of the Board; and WHEREAS, the District will enter into a Continuing Disclosure Certificate substantially in the form on file with the Secretary of the Board; and Resolution No. 16-XX Authorizing the Issuance of Refunding Revenue Bonds Series 2016A 2 WHEREAS, to facilitate the marketing of the Bonds, the District will authorize the Underwriter to disseminate a Preliminary Official Statement for the Bonds (the “Preliminary Official Statement”) substantially in the form on file with the Secretary of the Board; NOW, THEREFORE, the Board of Directors of the Yorba Linda Water District hereby finds, determines, declares and resolves as follows: Section 1. The Indenture is hereby approved substantially in the form on file with the Secretary of the Board. The President or Vice President of the Board or the General Manager or Finance Manager of the District (each, an “Authorized Officer”) or the designee thereof each is hereby authorized and directed to execute and deliver such Indenture with such changes, insertions and omissions as may be approved by the officer executing the same, said execution being conclusive evidence of such approval. Section 2. The Escrow Agreement is hereby approved substantially in the form on file with the Secretary of the Board. Each Authorized Officer or the designee thereof is hereby authorized and directed to execute and deliver such Escrow Agreement with such changes, insertions and omissions as may be approved by the officer executing the same, said execution being conclusive evidence of such approval. Section 3. The Purchase Contract is hereby approved substantially in the form on file with the Secretary of the Board. Each Authorized Officer or the designee thereof is hereby authorized and directed to execute and deliver such Purchase Contract with such changes, insertions and omissions as may be recommended by General Counsel or the law firm of Stradling Yocca Carlson & Rauth, a Professional Corporation (“Bond Counsel”) and approved by the officer executing the same, said execution being conclusive evidence of such approval; provided, however, that in no event shall the aggregate principal amount of the Bonds exceed $38,000,000, nor shall the underwriting discount exceed 0.40% of the aggregate principal amount of the Bonds, nor shall the all-in true interest cost of the Bonds exceed 4.00% per annum. Section 4. The Continuing Disclosure Certificate is hereby approved substantially in the form on file with the Secretary of the Board. Each Authorized Officer or the designee thereof is hereby authorized and directed to execute and deliver such Continuing Disclosure Certificate with such changes, insertions and omissions as may be approved by the officer executing the same, said execution being conclusive evidence of such approval. Section 5. The preparation and distribution of the Preliminary Official Statement in substantially the form on file with the Secretary of the Board is hereby approved. Each Authorized Officer or the designee thereof is hereby authorized to sign a certificate pursuant to Rule 15c2-12 promulgated Resolution No. 16-XX Authorizing the Issuance of Refunding Revenue Bonds Series 2016A 3 under the Securities Exchange Act of 1934 relating to the Preliminary Official Statement, and each Authorized Officer or the designee thereof is hereby authorized and directed to execute, approve and deliver the final Official Statement substantially in the form of the Preliminary Official Statement with such changes, insertions and omissions as the officer or officers executing said document may require or approve, subject to advice from General Counsel or Bond Counsel, such approval to be conclusively evidenced by the execution and delivery thereof. The Underwriter is directed to deliver copies of the final Official Statement to all actual initial purchasers of the Bonds. Section 6. The proceeds of the Bonds shall be deposited as provided in the Indenture and the Escrow Agreement to refinance the 2008 Project and to pay all or a portion of the outstanding amounts under the Wells Fargo Line of Credit. Section 7. U.S. Bank National Association is hereby appointed to act as trustee under the Indenture. Section 8. The Board hereby authorizes the General Manager or his designee: (i) to solicit bids on a municipal bond insurance policy and/or reserve surety; (ii) to negotiate the terms of such policy or policies; (iii) to finalize, if appropriate, the form of such policy or policies with a municipal bond insurer; and (iv) if it is determined that the policy or policies will result in net savings for the District, to pay the insurance premium of such policy or policies from the proceeds of the issuance and sale of the Bonds. Section 9. The Authorized Officers, the Secretary of the Board or any other proper officer of the District, acting singly, be and each of them hereby is authorized and directed to execute and deliver any and all documents and instruments and to do and cause to be done any and all acts and things necessary or proper for carrying out the transactions contemplated by the Indenture, the Escrow Agreement, the Purchase Contract, the Continuing Disclosure Certificate, bond insurance, a reserve surety and this resolution, including any reimbursement agreement or other agreement relative to bond insurance or a reserve surety. In the event that the President and Vice President of the Board are unavailable to sign any of the agreements described herein, any other member of the Board may sign such agreement. Section 10. Unless otherwise defined herein, all terms used herein and not otherwise defined shall have the meanings given such terms in the Indenture unless the context otherwise clearly requires. Section 11. This resolution shall take effect immediately. Resolution No. 16-XX Authorizing the Issuance of Refunding Revenue Bonds Series 2016A 4 PASSED AND ADOPTED this 24th day of March, 2016 by the following called vote: AYES: NOES: ABSTAIN: ABSENT: Ric Collett, President Yorba Linda Water District ATTEST: Marc Marcantonio, Board Secretary Yorba Linda Water District Reviewed as to form by General Counsel: Arthur G. Kidman, Esq. Kidman Law LLP Stradling Yocca Carlson & Rauth Draft of 3/14/16 INDENTURE OF TRUST Dated as of April 1, 2016 By and between U.S. BANK NATIONAL ASSOCIATION, as Trustee and YORBA LINDA WATER DISTRICT Relating to $_________ YORBA LINDA WATER DISTRICT REFUNDING REVENUE BONDS, SERIES 2016A TABLE OF CONTENTS Page i ARTICLE I DEFINITIONS; CONTENT OF CERTIFICATES AND OPINIONS Section 1.01. Definitions .............................................................................................................. 2 Section 1.02. Content of Certificates and Opinions.................................................................... 13 Section 1.03. Interpretation......................................................................................................... 14 ARTICLE II THE 2016A BONDS Section 2.01. Authorization of 2016A Bonds ............................................................................. 14 Section 2.02. Terms of the 2016A Bonds ................................................................................... 14 Section 2.03. Transfer of 2016A Bonds ..................................................................................... 15 Section 2.04. Exchange of 2016A Bonds ................................................................................... 16 Section 2.05. Registration Books ................................................................................................ 16 Section 2.06. Form and Execution of 2016A Bonds .................................................................. 16 Section 2.07. 2016A Bonds Mutilated, Lost, Destroyed or Stolen ............................................. 17 Section 2.08. Book Entry System ............................................................................................... 17 ARTICLE III ISSUANCE OF 2016A BONDS; APPLICATION OF PROCEEDS Section 3.01. Issuance of the 2016A Bonds ............................................................................... 20 Section 3.02. Application of Proceeds of the 2016A Bonds and Certain Other Moneys ........... 20 Section 3.03. Establishment and Application of Costs of Issuance Fund ................................... 20 Section 3.04. Validity of 2016A Bonds ...................................................................................... 20 ARTICLE IV REDEMPTION OF 2016A BONDS Section 4.01. Terms of Redemption ........................................................................................... 21 Section 4.02. Selection of 2016A Bonds for Redemption .......................................................... 21 Section 4.03. Notice of Redemption ........................................................................................... 21 Section 4.04. Partial Redemption of 2016A Bonds .................................................................... 22 Section 4.05. Effect of Redemption ............................................................................................ 22 ARTICLE V REVENUES, FUNDS AND ACCOUNTS; PAYMENT OF PRINCIPAL AND INTEREST Section 5.01. Pledge and Assignment; Revenue Fund ............................................................... 23 Section 5.02. Allocation of Revenues ......................................................................................... 24 Section 5.03. Application of Interest Account ............................................................................ 25 TABLE OF CONTENTS (continued) Page ii Section 5.04. Application of Principal Account ......................................................................... 25 Section 5.05. Application of Redemption Fund ......................................................................... 25 Section 5.06. Investments ........................................................................................................... 25 Section 5.07. Rebate Fund .......................................................................................................... 26 Section 5.08. Application of Funds and Accounts When No 2016A Bonds are Outstanding .... 28 ARTICLE VI PARTICULAR COVENANTS Section 6.01. Punctual Payment ................................................................................................. 28 Section 6.02. Extension of Payment of 2016A Bonds ................................................................ 28 Section 6.03. Against Encumbrances ......................................................................................... 28 Section 6.04. Power to Issue 2016A Bonds and Make Pledge and Assignment ........................ 28 Section 6.05. Accounting Records and Financial Statements .................................................... 29 Section 6.06. Tax Covenants ...................................................................................................... 29 Section 6.07. Waiver of Laws ..................................................................................................... 30 Section 6.08. Further Assurances ............................................................................................... 30 Section 6.09. Budgets ................................................................................................................. 30 Section 6.10. Observance of Laws and Regulations ................................................................... 30 Section 6.11. Compliance with Contracts ................................................................................... 30 Section 6.12. Prosecution and Defense of Suits ......................................................................... 31 Section 6.13. Continuing Disclosure .......................................................................................... 31 Section 6.14. Additional Contracts and Bonds ........................................................................... 31 Section 6.15. Against Sale or Other Disposition of Property ..................................................... 32 Section 6.16. Against Competitive Facilities ............................................................................. 33 Section 6.17. Maintenance and Operation of the Water System ................................................ 33 Section 6.18. Payment of Claims ................................................................................................ 33 Section 6.19. Insurance ............................................................................................................... 33 Section 6.20. Payment of Taxes and Compliance with Governmental Regulations .................. 34 Section 6.21. Amount of Rates and Charges .............................................................................. 34 Section 6.22. Collection of Rates and Charges ........................................................................... 34 Section 6.23. Eminent Domain Proceeds ................................................................................... 34 Section 6.24. Enforcement of Contracts ..................................................................................... 35 ARTICLE VII EVENTS OF DEFAULT AND REMEDIES OF 2016A BOND OWNERS Section 7.01. Events of Default .................................................................................................. 35 Section 7.02. Remedies Upon Event of Default ......................................................................... 36 Section 7.03. Application of Revenues and Other Funds After Default ..................................... 37 Section 7.04. Trustee to Represent 2016A Bond Owners .......................................................... 37 Section 7.05. 2016A Bond Owners’ Direction of Proceedings .................................................. 38 Section 7.06. Suit by Owners ..................................................................................................... 38 Section 7.07. Absolute Obligation of the District ....................................................................... 39 Section 7.08. Remedies Not Exclusive ....................................................................................... 39 Section 7.09. No Waiver of Default ........................................................................................... 39 TABLE OF CONTENTS (continued) Page iii ARTICLE VIII THE TRUSTEE Section 8.01. Duties, Immunities and Liabilities of Trustee ...................................................... 39 Section 8.02. Merger or Consolidation ....................................................................................... 40 Section 8.03. Liability of Trustee ............................................................................................... 41 Section 8.04. Right to Rely on Documents ................................................................................. 43 Section 8.05. Preservation and Inspection of Documents .......................................................... 43 Section 8.06. Compensation and Indemnification ...................................................................... 43 ARTICLE IX MODIFICATION OR AMENDMENT OF THE INDENTURE Section 9.01. Amendments Permitted ........................................................................................ 44 Section 9.02. Effect of Supplemental Indenture ......................................................................... 45 Section 9.03. Endorsement of 2016A Bonds; Preparation of New 2016A Bonds ..................... 45 Section 9.04. Amendment of Particular 2016A Bonds ............................................................... 45 ARTICLE X DEFEASANCE Section 10.01. Discharge of Indenture ......................................................................................... 46 Section 10.02. Discharge of Liability on 2016A Bonds ............................................................... 46 Section 10.03. Deposit of Money or Securities with Trustee ....................................................... 46 Section 10.04. Payment of 2016A Bonds After Discharge of Indenture ...................................... 47 ARTICLE XI MISCELLANEOUS Section 11.01. Liability of District Limited to Revenues ............................................................. 48 Section 11.02. Successor Is Deemed Included in All References to Predecessor ........................ 48 Section 11.03. Limitation of Rights to Parties and 2016A Bond Owners .................................... 48 Section 11.04. Waiver of Notice; Requirement of Mailed Notice ................................................ 48 Section 11.05. Destruction of 2016A Bonds ................................................................................ 48 Section 11.06. Severability of Invalid Provisions ........................................................................ 48 Section 11.07. Notices .................................................................................................................. 49 Section 11.08. Evidence of Rights of 2016A Bond Owners ........................................................ 49 Section 11.09. Disqualified 2016A Bonds ................................................................................... 49 Section 11.10. Money Held for Particular 2016A Bonds ............................................................. 50 Section 11.11. Funds and Accounts .............................................................................................. 50 Section 11.12. Waiver of Personal Liability ................................................................................. 50 Section 11.13. Execution in Several Counterparts ....................................................................... 50 Section 11.14. CUSIP Numbers ................................................................................................... 50 Section 11.15. Choice of Law....................................................................................................... 50 TABLE OF CONTENTS (continued) Page iv Signatures ............................................................................................................................ S-1 Exhibit A Form of 2016A Bond .......................................................................................... A-1 1 INDENTURE OF TRUST THIS INDENTURE OF TRUST (the “Indenture”) is made and entered into and dated as of April 1, 2016, by and between YORBA LINDA WATER DISTRICT, a county water district duly organized and existing under and by virtue of the laws of the State of California (the “District”), and U.S. BANK NATIONAL ASSOCIATION, a national banking association duly organized and existing under the laws of the United States of America, as trustee hereunder (the “Trustee”); RECITALS A. The District has determined that it is in the best interest of the public to refund the outstanding Yorba Linda Water District Revenue Certificates of Participation (2008 Capital Improvement Projects) Series 2008 (the “Series 2008 Certificates”) [and to prepay all outstanding amounts under the Wells Fargo Line of Credit]. B. The District is authorized by Article 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California, including but not limited to Section 53583, to issue bonds for the purpose of refunding any evidences of indebtedness of the District. C. In order to provide for the authentication and delivery of refunding revenue bonds (the “2016A Bonds”), to establish and declare the terms and conditions upon which such 2016A Bonds are to be issued and secured and to secure the payment of the principal thereof and interest and premium, if any, thereon, the District has authorized the execution and delivery of the Indenture. D. The District has determined that all acts and proceedings required by law necessary to make the 2016A Bonds, when executed by the District, authenticated and delivered by the Trustee, and duly issued, the valid, binding and legal special obligations of the District, and to constitute the Indenture a valid and binding agreement for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of the Indenture have been in all respects duly authorized. GRANTING CLAUSES The District, in consideration of the premises and the acceptance by the Trustee of the trusts hereby created, the mutual covenants herein contained and the purchase and acceptance of the 2016A Bonds by the owners thereof, and for other valuable considerations, the receipt of which is hereby acknowledged, in order to secure the payment of the principal of and the interest and premium (if any) on all 2016A Bonds at any time issued and Outstanding under the Indenture, according to their tenor, and to secure the performance and observance of all of the covenants and conditions therein and herein set forth, does hereby assign and pledge unto, and grant a security interest in, the following (the “Trust Estate”) to the Trustee, and its successors in trust and assigns forever, for the securing of the performance of the obligations of the District to the 2016A Bond Owners hereinafter set forth: GRANTING CLAUSE FIRST All right, title and interest of the District in and to the Revenues (as such term is defined herein), including, but without limiting the generality of the foregoing, the present and continuing right to make claim for, collect, receive and receipt for any Revenues payable to or receivable by the 2 District under the Constitution of the State, the Government Code of the State and the Indenture and any other applicable laws of the State or otherwise, to bring actions and proceedings thereunder for the enforcement thereof and to do any and all things which the District is or may become entitled to do thereunder, subject to the terms hereof. GRANTING CLAUSE SECOND All moneys and securities held in funds and accounts of the Indenture, except amounts held in the Rebate Fund, and all other rights of every name and nature from time to time herein or hereafter by delivery or by writing of any kind pledged, assigned or transferred as and for additional security hereunder to the Trustee by the District or by anyone on its behalf, or with its written consent, and to hold and apply the same, subject to the terms hereof. TO HAVE AND TO HOLD the Trust Estate, whether now owned or hereafter acquired, unto the Trustee and its respective successors in trust and assigns forever for the benefit of the Owners and such pledge shall constitute a lien on and security interest in such Trust Estate; IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth for the equal and proportionate benefit, security and protection of all present and future owners of the 2016A Bonds issued under and secured by the Indenture without privilege, priority or distinction as to the lien or otherwise of any of the 2016A Bonds over any of the other 2016A Bonds; PROVIDED, HOWEVER, that if the District, its successors or assigns shall well and truly pay, or cause to be paid, the principal of and interest and any redemption premium on the 2016A Bonds due or to become due thereon, at the times and in the manner provided in the 2016A Bonds according to the true intent and meaning thereof, and shall well and truly keep, perform and observe all of the covenants and conditions pursuant to the terms of the Indenture to be kept, performed and observed by it, and shall pay or cause to be paid to Trustee all sums of money due or to become due in accordance with the terms and provisions hereof, then upon such final payments or deposits as provided herein, the Indenture and the rights hereby granted shall cease, terminate and be void; otherwise the Indenture shall remain in full force and effect. It is expressly declared that all 2016A Bonds issued and secured hereunder are to be issued, authenticated and delivered, and all sold property, rights and interests, including, without limitation, the Revenues, hereby assigned and pledged, are to be dealt with and disposed of, under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes hereinafter expressed, and the District has agreed and covenanted and does hereby covenant and agree with the Trustee, for the benefit of the respective Owners from time to time of the 2016A Bonds, as follows: ARTICLE I DEFINITIONS; CONTENT OF CERTIFICATES AND OPINIONS Section 1.01. Definitions. Unless the context otherwise requires, the terms defined in this Section 1.01 shall, for all purposes of the Indenture and of any indenture supplemental hereto and of any certificate, opinion or other document herein mentioned, have the meanings herein specified, to be equally applicable to both the singular and plural forms of any of the terms herein defined. 3 Accountant’s Report. The term “Accountant’s Report” means a report signed by an Independent Certified Public Accountant. Ad Valorem Tax Revenues. The term “Ad Valorem Tax Revenues” means all amounts received from the District’s share of the 1% ad valorem property tax levied on property within the District pursuant to the provisions of Article XIIIA of the State Constitution. Authorized Representative. The term “Authorized Representative” means, with respect to the District, its President, Vice President, Secretary, General Manager, Finance Manager or any other person designated as an Authorized Representative of the District by a Certificate of the District signed by its President, Vice President, Secretary, General Manager or Finance Manager and filed with the Trustee. Bond Counsel. The term “Bond Counsel” means Stradling Yocca Carlson & Rauth, a Professional Corporation, or another firm of nationally recognized attorneys experienced in the issuance of obligations the interest on which is excludable from gross income under Section 103 of the Code. Bonds. The term “Bonds” means the 2016A Bonds, the 2012A Bonds and all other revenue bonds or notes of the District authorized, executed, issued and delivered by the District, the payments of which are payable from Net Revenues on a parity with the 2016A Bonds and which are secured by a pledge of and lien on Revenues as described in Section 5.01 hereof. Bond Year. The term “Bond Year” has the meaning given to such term in the Tax Certificate. Business Day. The term “Business Day” means: (i) a day which is not a Saturday, Sunday or legal holiday on which banking institutions in the State, or in any other state in which the Office of the Trustee is located, are closed; or (ii) a day on which the New York Stock Exchange is not closed. Certificate; Direction; Request; Requisition. The terms “Certificate,” “Direction,” “Request” and “Requisition” of the District mean a written certificate, direction, request or requisition signed in the name of the District by its Authorized Representative. Any such instrument and supporting opinions or representations, if any, may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument. If and to the extent required by Section 1.02, each such instrument shall include the statements provided for in Section 1.02. Closing Date. The term “Closing Date” means the date on which the 2016A Bonds are delivered to the original purchaser thereof. Code. The term “Code” means the Internal Revenue Code of 1986, as amended. Continuing Disclosure Certificate. The term “Continuing Disclosure Certificate” means the Continuing Disclosure Certificate, dated the Closing Date, by the District, as originally executed or as it may be from time to time amended or supplemented in accordance with its terms. Contracts. The term “Contracts” means all contracts of the District previously or hereafter authorized and executed by the District, the payments under which are payable from Net Revenues on a parity with the 2016A Bonds and which are secured by a pledge and lien on Revenues as 4 described in Section 5.01 hereof; and excluding contracts entered into for operation and maintenance of the Water System. Costs of Issuance. The term “Costs of Issuance” means all items of expense directly or indirectly payable by or reimbursable to the District and related to the authorization, issuance, sale and delivery of the 2016A Bonds, including but not limited to costs of preparation and reproduction of documents, printing expenses, filing and recording fees, initial fees and charges of the Trustee and counsel to the Trustee, legal fees and charges, fees and disbursements of consultants and professionals, rating agency fees, verification agent fees, title insurance premiums, letter of credit fees and bond insurance premiums (if any), fees and charges for preparation, execution and safekeeping of the 2016A Bonds and any other cost, charge or fee in connection with the original issuance of the 2016A Bonds. Costs of Issuance Fund. The term “Costs of Issuance Fund” means the fund by that name established pursuant to Section 3.03. Date of Operation. The term “Date of Operation” means, with respect to any uncompleted component of a Parity Project, the estimated date by which such uncompleted component of a Parity Project will have been completed and, in the opinion of an engineer, will be ready for operation by or on behalf of the District. Debt Service. The term “Debt Service” means, for any period of calculation, the sum of: (i) the interest accruing during such period on all outstanding Bonds, assuming that all outstanding serial Bonds are retired as scheduled and that all outstanding term Bonds are redeemed or paid from sinking fund payments as scheduled (except to the extent that such interest is capitalized or is reasonably anticipated to be reimbursed to the District by the United States of America pursuant to Section 54AA of the Code (Section 1531 of Title I of Division B of the American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5, 23 Stat. 115 (2009), enacted February 17, 2009)), or any future similar program); (ii) those portions of the principal amount of all outstanding serial Bonds maturing in such period; (iii) those portions of the principal amount of all outstanding term Bonds required to be prepaid or paid in such period; and (iv) those portions of the Contracts required to be made during such period, (except to the extent that the interest evidenced and represented thereby is capitalized or is reasonably anticipated to be reimbursed to the District by the United States of America pursuant to Section 54AA of the Code (Section 1531 of Title I of Division B of the American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5, 23 Stat. 115 (2009), enacted February 17, 2009)), or any future similar program); but less the earnings to be derived from the investment of moneys on deposit in debt service reserve funds established for Bonds or Contracts; provided that, as to any such Bonds or Contracts bearing or comprising interest at other than a fixed rate, the rate of interest used to calculate Debt Service shall, for all purposes, be assumed to be a 5 fixed rate equal to the higher of: (1) the then current variable interest rate borne by such Bonds or Contract plus 1%; and (2) the highest variable rate borne over the preceding 3 months by outstanding variable rate debt issued by the District or, if no such variable rate debt is at the time outstanding, by variable rate debt of which the interest rate is computed by reference to an index comparable to that to be utilized in determining the interest rate for the debt then proposed to be issued; provided further that if any series or issue of such Bonds or Contracts have twenty-five percent (25%) or more of the aggregate principal amount of such series or issue due in any one year, Debt Service shall be determined for the period of determination as if the principal of and interest on such series or issue of such Bonds or Contracts were being paid from the date of incurrence thereof in substantially equal annual amounts over a period of twenty-five (25) years from the date of calculation; and provided further that, as to any such Bonds or Contracts or portions thereof bearing no interest but which are sold at a discount and which discount accretes with respect to such Bonds or Contracts or portions thereof, such accreted discount shall be treated as interest in the calculation of Debt Service; and provided further that if the Bonds or Contracts constitute paired obligations, the interest rate on such Bonds or Contracts shall be the resulting linked rate or the effective fixed interest rate to be paid by the District with respect to such paired obligations; and provided further that the amount on deposit in a debt service reserve fund on any date of calculation of Debt Service shall be deducted from the amount of principal due at the final maturity of the Bonds and Contracts for which such debt service reserve fund was established and, to the extent that the amount in such debt service reserve fund is in excess of such amount of principal, such excess shall be applied to the full amount of principal due, in each preceding year, in descending order, until such amount is exhausted. Depository; DTC. The term “Depository” or “DTC” means The Depository Trust Company, New York, New York, a limited purpose trust company organized under the laws of the State of New York in its capacity as securities depository for the 2016A Bonds. District. The term “District” means Yorba Linda Water District, a county water district duly organized and existing under and by virtue of the laws of the State. Escrow Agent. The term “Escrow Agent” means U.S. Bank National Association, as escrow agent pursuant to the terms of the Escrow Agreement (2008 Certificates), or its successor thereunder. Escrow Agreement (2008 Certificates). The term “Escrow Agreement (2008 Certificates)” means the Escrow Agreement (2008 Certificates), dated as of April 1, 2016, by and between the District and the Escrow Agent, as originally executed or as it may from time to time be amended or supplemented in accordance with its terms. Event of Default. The term “Event of Default” means any of the events specified in Section 7.01. Federal Securities. The term “Federal Securities” means any direct, noncallable general obligations of the United States of America (including obligations issued or held in book entry form 6 on the books of the Department of the Treasury of the United States of America), or noncallable obligations the timely payment of principal of and interest on which are fully and unconditionally guaranteed by the United States of America. Fiscal Year. The term “Fiscal Year” means the twelve month period beginning on July 1 of each year and ending on the next succeeding June 30, both dates inclusive, or any other twelve month period hereafter selected and designated as the official fiscal year period of the District. Fitch. The term “Fitch” means Fitch Ratings, Inc., or any successor thereto. Indenture. The term “Indenture” means the Indenture of Trust, dated as of April 1, 2016, by and between the District and the Trustee, as originally executed or as it may from time to time be supplemented, modified or amended by any Supplemental Indenture. Independent Certified Public Accountant. The term “Independent Certified Public Accountant” means any firm of certified public accountants appointed by the District, each of whom is independent of the District pursuant to the Statement on Auditing Standards No. 1 of the American Institute of Certified Public Accountants. Independent Financial Consultant. The term “Independent Financial Consultant” means a financial consultant or firm of such consultants appointed by the District, which may be an interest rate swap adviser, and who, or each of whom: (i) is in fact independent and not under domination of the District; (ii) does not have any substantial interest, direct or indirect, in the District; and (iii) is not connected with the District as an officer or employee thereof, but who may be regularly retained to make reports thereto. Information Services. The term “Information Services” means the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System; or, in accordance with then-current guidelines of the Securities and Exchange Commission, such other services providing information with respect to called bonds as the District may specify in a certificate to the Trustee and as the Trustee may select. Interest Account. The term “Interest Account” means the account by that name in the Payment Fund established pursuant to Section 5.02. Interest Payment Date. The term “Interest Payment Date” means October 1, 2016 and each [April 1 and October 1] thereafter. Investment Agreement. The term “Investment Agreement” means an investment agreement by a provider, supported by appropriate opinions of counsel, provided that any such Investment Agreement shall: (i) be from a provider rated by S&P or Moody’s at “A-” or “A3”, respectively, or above; (ii) require the District to terminate such agreement and immediately reinvest the proceeds thereof in other Permitted Investments if the rating assigned to the provider by S&P or Moody’s falls to “BBB+” or “Baa1”, respectively, or below; and (iii) expressly permit the withdrawal, without penalty, of any amounts necessary at any time to fund any deficiencies on account of debt service requirements with respect to the 2016A Bonds, together with such amendments as may be approved by the District and the Trustee from time to time. 7 Letter of Representations. The term “Letter of Representations” means the letter of the District delivered to and accepted by the Depository on or prior to delivery of the 2016A Bonds as book entry bonds setting forth the basis on which the Depository serves as depository for such book entry bonds, as originally executed or as it may be supplemented or revised or replaced by a letter from the District delivered to and accepted by the Depository. Moody’s. The term “Moody’s” means Moody’s Investors Service, Inc., or any successor thereto. Net Proceeds. The term “Net Proceeds” means, when used with respect to any casualty insurance or condemnation award, the proceeds from such insurance or condemnation award remaining after payment of all expenses (including attorneys’ fees) incurred in the collection of such proceeds. Net Revenues. The term “Net Revenues” means, for any Fiscal Year, the Revenues for such Fiscal Year less the Operating and Maintenance Costs and Non-Operating and Maintenance Costs for such Fiscal Year. When held by the Trustee in any funds or accounts established hereunder, Net Revenues shall include all interest or gain derived from the investment of amounts in any of such funds or accounts. Nominee. The term “Nominee” means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Section 2.08 hereof. Non-Operating and Maintenance Costs. The term “Non-Operating and Maintenance Costs” means certain other expenses of the District not directly related to the operation and maintenance of the Water System, including but not limited to certain projects that were budgeted as capital improvements but accounted for as expenses. Office. The term “Office” means with respect to the Trustee, the principal corporate trust office of the Trustee in Los Angeles, California, or such other or additional offices as may be specified in writing by the Trustee to the District, except that with respect to presentation of 2016A Bonds for payment or for registration of transfer and exchange, such term means the office or agency of the Trustee at which, at any particular time, its corporate trust agency business shall be conducted. Operating and Maintenance Costs. The term “Operating and Maintenance Costs” means: (i) costs spent or incurred for maintenance and operation of the Water System calculated in accordance with generally accepted accounting principles, including (among other things) the reasonable expenses of management and repair and other expenses necessary to maintain and preserve the Water System in good repair and working order, and including administrative costs of the District that are charged directly or apportioned to the Water System, including but not limited to salaries and wages of employees, payments to the Public Employees Retirement System, overhead, insurance, taxes (if any), fees of auditors, accountants, attorneys or engineers and insurance premiums, and including all other reasonable and necessary costs of the District or charges (other than debt service payments) required to be paid by it to comply with the terms of the 2016A Bonds or of the Indenture or any Contract or of any resolution or indenture authorizing the issuance of any Bonds or of such Bonds; and (ii) costs spent or incurred in the purchase of water for the Water System; but excluding in all cases depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles or other bookkeeping entries of a similar nature and all capital charges. 8 Opinion of Counsel. The term “Opinion of Counsel” means a written opinion of counsel (including but not limited to counsel to the District) selected by the District. If and to the extent required by the provisions of Section 1.02, each Opinion of Counsel shall include the statements provided for in Section 1.02. Outstanding. The term “Outstanding,” when used as of any particular time with reference to 2016A Bonds, means (subject to the provisions of Section 11.09) all 2016A Bonds theretofore, or thereupon being, authenticated and delivered by the Trustee under the Indenture except: (i) 2016A Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (ii) 2016A Bonds with respect to which all liability of the District shall have been discharged in accordance with Section 10.02, including 2016A Bonds (or portions thereof) described in Section 11.09; and (iii) 2016A Bonds for the transfer or exchange of or in lieu of or in substitution for which other 2016A Bonds shall have been authenticated and delivered by the Trustee pursuant to the Indenture. Owner; 2016A Bond Owner. The term “Owner” or “2016A Bond Owner,” whenever used herein with respect to a 2016A Bond, means the person in whose name the ownership of such 2016A Bond is registered on the Registration Books. Parity Project. The term “Parity Project” means any additions, betterments, extensions or improvements to the District’s Water System designated by the Board of Directors of the District as a Parity Project, the acquisition and construction of which is to be paid for with the proceeds of any Contracts or Bonds. Participants. The term “Participants” means those broker-dealers, banks and other financial institutions from time to time for which the Depository holds book entry certificates as securities depository. Payment Fund. The term “Payment Fund” means the fund by that name established pursuant to Section 5.02. Permitted Investments. The term “Permitted Investments” means any of the following which at the time are legal investments under the laws of the State for moneys held hereunder and then proposed to be invested therein: (A) for all purposes, including defeasance investments in refunding escrow accounts: (1) cash (insured at all times by the Federal Deposit Insurance Corporation or otherwise collateralized with obligations described in clause (2) below); (2) direct obligations of (including obligations issued or held in book entry form on the books of) the Department of the Treasury of the United States of America; (3) U.S. Treasury Certificates, Notes and Bonds (including State and Local Government Series); (4) Resolution Funding Corp. strips (only the interest component of REFCORP strips which have been stripped by request to the Federal Reserve Bank of New York in book entry form are acceptable); (5) Pre-refunded municipal bonds rated “Aaa” by Moody’s and “AAA” by S&P. If however, the issue is only rated by S&P (i.e., there is no Moody’s rating), then the pre-refunded bonds must have been pre-refunded with cash, direct U.S. or U.S. guaranteed obligations, or “AAA” rated pre-refunded municipals to satisfy this condition; and (6) Obligations issued by the following agencies which are backed by the full faith and credit of the U.S.: a. U.S. Export-Import Bank (Eximbank): Direct obligations or fully guaranteed certificates of beneficial ownership; b. Farmers Home Administration Certificates of beneficial ownership; c. Federal Financing Bank; d. General Services Administration: Participation Certificates; e. U.S. Maritime Administration: Guaranteed 9 Title XI financing; and f. U.S. Department of Housing and Urban Development: Project Notes, Local Authority Bonds, New Communities Debentures - U.S. government guaranteed debentures, U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds; and (B) for all purposes other than defeasance investments in refunding escrow accounts: (1) direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury, and CATS and TIGRS) or obligations of the principal of and interest on which are unconditionally guaranteed by the United States of America; (2) obligations of any of the following federal agencies which obligations represent the full faith and credit of the United States of America: the Export-Import Bank; Farmers Home Administration; General Services Administration; United States Maritime Administration; Government National Mortgage Association; United States Department of Housing & Urban Development; Federal Financing Bank; and Federal Housing Administration Debentures; (3) obligations of any of the following federal agencies which obligations do not represent the full faith and credit of the United States of America, including the Federal Home Loan Bank System; Federal Home Loan Mortgage Corporation (FHLMC); Federal National Mortgage Association (FNMA); Student Loan Marketing Association; Resolution Funding Corp.; and Farm Credit System; (4) commercial paper which is rated at the time of purchase in the single highest classification, “A-1” by S&P and “P-1” by Moody’s; (5) investments in a money market fund rated “AAAm”, “AAAm-G” or “AA-m” or better by S&P, or “Aaa”, “Aa1” or “Aa2” or better by Moody’s, including any fund for which the Trustee or an affiliate acts as investment advisor or provides other services; (6) Certificates of deposit secured at all times by collateral described in (A) and/or (B)(1) above. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks, including the Trustee and its affiliates. The collateral must be held by a third party and the Trustee must have a perfected first security interest in the collateral; (7) Certificates of deposit (including those of the Trustee, its parent and its affiliates), savings accounts, deposit accounts or money market deposits; (8) Investment Agreements, including GICs, Forward Purchase Agreements and Reserve Fund Put Agreements; (9) Federal Funds or bankers acceptances with a maximum term of one year of any bank, including the Trustee and its affiliates, which has an unsecured, uninsured and unguaranteed obligation rating of “Prime-1” or “A3” or better by Moody’s and “A-1” or “A” or better by S&P; (10) Repurchase agreements provide for the transfer of securities from a dealer bank or securities firm (seller/borrower) to the Trustee or the District, as applicable, and the transfer of cash from the Trustee or the District, as applicable, to the dealer bank or securities firm with an 10 agreement that the dealer bank or securities firm will repay the cash plus a yield to the Trustee or the District, as applicable, in exchange for the securities at a specified date; 1. Repurchase Agreements must be between the municipal entity and a dealer bank or securities firm. a. Primary dealers on the Federal Reserve reporting dealer list which are rated A or better by Standard & Poor’s Corporation and Moody’s Investor Services; or b. Banks rated “A” or above by Standard & Poor’s Corporation and Moody’s Investor Services. 2. The written contract must include the following: a. Securities which are acceptable for transfer are: (1) Direct U.S. Governments, or (2) Federal agencies backed by the full faith and credit of the U.S. government (and FNMA & FHLMC); b. The term of the Repurchase Agreement may be up to 30 days; c. The collateral must be delivered to the Trustee or the District, as applicable, trustee (if trustee is not supplying the collateral) or third party acting as agent for the trustee (if the trustee is supplying the collateral) before/simultaneous with payment (perfection by possession of certificates securities). d. Valuation of Collateral. (1) The securities must be valued weekly, marked-to-market at current market price plus accrued interest. The value of collateral must be equal to 104% of the amount of cash transferred by the Trustee or the District, as applicable, to the dealer bank or security firm under the repo plus accrued interest. If the value of the securities held as collateral slips below the 104% of the value of the cash transferred by the Trustee or the District, as applicable, then additional cash and/or acceptable securities must be transferred. If, however, the securities used as collateral are FNMA or FHLMC, then the value of collateral must equal 105%. 3. Legal opinion which must be delivered to the Trustee and the District: the Repurchase Agreement meets guidelines under state law for legal investment of public funds; (11) The Local Agency Investment Fund of the State of California created pursuant to Section 16429.1 of the California Government Code; and (12) Unsecured certificates of deposit, time deposits, money market deposits, demand deposits and bankers’ acceptances of any bank (including those of Trustee, its parent and its affiliates) the short term obligations of which are rated on the date of purchase “A-1” or better by S&P, “P-1” or better by Moody’s or “F1” or better by Fitch. Principal Account. The term “Principal Account” means the account by that name in the Payment Fund established pursuant to Section 5.02. 11 Rating. The term “Rating” means any currently effective rating on the 2016A Bonds issued by a Rating Agency. Rating Agencies. The term “Rating Agencies” means S&P and Fitch. Rebate Fund. The term “Rebate Fund” means the fund by that name established pursuant to Section 5.07. Record Date. The term “Record Date” means, with respect to any Interest Payment Date, the fifteenth (15th) day of the calendar month preceding such Interest Payment Date, whether or not such day is a Business Day. Redemption Date. The term “Redemption Date” means the date fixed for an optional redemption prior to maturity of the 2016A Bonds. Redemption Fund. The term “Redemption Fund” means the fund by that name established pursuant to Section 5.05. Redemption Price. The term “Redemption Price” means, with respect to any 2016A Bond (or portion thereof), the principal amount of such 2016A Bond (or portion) plus the interest accrued to the applicable Redemption Date and the applicable premium, if any, payable upon redemption thereof pursuant to the provisions of such 2016A Bond and the Indenture. Registration Books. The term “Registration Books” means the records maintained by the Trustee for the registration of ownership and registration of transfer of the 2016A Bonds pursuant to Section 2.05. Responsible Officer of the Trustee. The term “Responsible Officer of the Trustee” means any officer within the corporate trust division (or any successor group or department of the Trustee) including any vice president, assistant vice president, assistant secretary or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, with responsibility for the administration of the Indenture. Revenue Fund. The term “Revenue Fund” means the fund by that name continued pursuant to Section 5.01(b). Revenues. [DISCUSS – EXCLUDE DROUGHT PENALTY REVENUES?] The term “Revenues” means all income, rents, rates, fees, charges and other moneys derived from the ownership or operation of the Water System, including, without limiting the generality of the foregoing: (i) the Ad Valorem Tax Revenues; (ii) all income, rents, rates, fees, charges or other moneys derived by the District from the sale, furnishing and supplying of the water or other services, facilities, and commodities sold, furnished or supplied through the facilities of or in the conduct or operation of the business of the Water System, and certain administrative and maintenance costs related thereto; 12 (iii) the proceeds of any stand-by or water availability charges, development fees and connection charges collected by the District; and (iv) the earnings on and income derived from the investment of amounts described in clauses (i), (ii) and (iii) above and from District reserves; but excluding: (x) customers’ deposits or any other deposits or advances subject to refund until such deposits or advances have become the property of the District; and (y) any proceeds of taxes or assessments restricted by law to be used by the District to pay bonds or other obligations heretofore or hereafter issued. S&P. The term “S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, or any successor thereto. Securities Depositories. The term “Securities Depositories” means The Depository Trust Company; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories as the District may designate in a Written Request of the District deliver to the Trustee. Series 2008 Certificates. The term “Series 2008 Certificates” means the Yorba Linda Water District Revenue Certificates of Participation (2008 Capital Improvement Projects) Series 2008. State. The term “State” means the State of California. Supplemental Indenture. The term “Supplemental Indenture” means any indenture hereafter duly authorized and entered into between the District and the Trustee, supplementing, modifying or amending the Indenture; but only if and to the extent that such Supplemental Indenture is specifically authorized hereunder. Tax Certificate. The term “Tax Certificate” means the Tax Certificate dated the Closing Date, concerning certain matters pertaining to the use and investment of proceeds of the 2016A Bonds issued by the District on the date of issuance of the 2016A Bonds, including any and all exhibits attached thereto. Trustee. The term “Trustee” means U.S. Bank National Association, a national banking association duly organized and existing under the laws of the United States of America, or its successor as Trustee hereunder as provided in Section 8.01. 2012A Bonds. The term “2012A Bonds” means the Yorba Linda Water District Refunding Revenue Bonds, Series 2012A authorized pursuant to the 2012A Indenture. 2012A Indenture. The term “2012A Indenture” means the Indenture of Trust, dated as of August 1, 2012, by and between the District and the Trustee. 2016A Bonds. The term “2016A Bonds” means the Yorba Linda Water District Refunding Revenue Bonds, Series 2016A authorized pursuant to the Indenture. 13 Water Service. The term “Water Service” means the water distribution service made available or provided by the Water System. Water System. The term “Water System” means the whole and each and every part of the water system of the District, including all real property and buildings, including the portion thereof existing on the date hereof, and including all additions, betterments, extensions and improvements to such water system or any part thereof hereafter acquired or constructed, and excluding any water system acquired through merger, consolidation or similar action, to the extent that the exclusion of such acquired water system is required pursuant to the term of such merger, consolidation or similar action, and further excluding the District’s sewer system. [Wells Fargo Line of Credit. The term “Wells Fargo Line of Credit” means, collectively, the Line of Credit Note dated September 24, 2012 payable to Wells Fargo Bank, National Association, and the Credit Agreement, dated September 24, 2012, by and between the District and Wells Fargo Bank, National Association.] Written Consent of the District; Written Order of the District; Written Request of the District; Written Requisition of the District. The terms “Written Consent of the District,” “Written Order of the District,” “Written Request of the District,” and “Written Requisition of the District” mean, respectively, a written consent, order, request or requisition signed by or on behalf of the District by the President, General Manager, Finance Manager or Secretary or by any two persons (whether or not members of the Board of Directors) who are specifically authorized by resolution of the District to sign or execute such a document on its behalf. Section 1.02. Content of Certificates and Opinions. Every certificate or opinion provided for in the Indenture except the certificate of destruction provided for in Section 11.05 hereof, with respect to compliance with any provision hereof shall include: (a) a statement that the person making or giving such certificate or opinion has read such provision and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the certificate or opinion is based; (c) a statement that, in the opinion of such person he or she has made or caused to be made such examination or investigation as is necessary to enable him or her to express an informed opinion with respect to the subject matter referred to in the instrument to which his signature is affixed; (c) a statement of the assumptions upon which such certificate or opinion is based, and that such assumptions are reasonable; and (5) a statement as to whether, in the opinion of such person, such provision has been complied with. Any such certificate or opinion made or given by an officer of the District may be based, insofar as it relates to legal or accounting matters, upon a certificate or opinion of or representation by counsel or an Independent Certified Public Accountant or Independent Financial Consultant, unless such officer knows, or in the exercise of reasonable care should have known, that the certificate, opinion or representation with respect to the matters upon which such certificate or statement may be based, as aforesaid, is erroneous. Any such certificate or opinion made or given by counsel or an Independent Certified Public Accountant or Independent Financial Consultant may be based, insofar as it relates to factual matters (with respect to which information is in the possession of the District) upon a certificate or opinion of or representation by an officer of the District, unless such counsel or Independent Certified Public Accountant or Independent Financial Consultant knows, or in the exercise of reasonable care should have known, that the certificate or opinion or representation with respect to the matters upon which such person’s certificate or opinion or representation may be based, as aforesaid, is erroneous. The same officer of the District, or the same 14 counsel or Independent Certified Public Accountant or Independent Financial Consultant, as the case may be, need not certify to all of the matters required to be certified under any provision of the Indenture, but different officers, counsel or Independent Certified Public Accountants or Independent Financial Consultants may certify to different matters, respectively. Section 1.03. Interpretation. (a) Unless the context otherwise indicates, words expressed in the singular shall include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for convenience only and shall be deemed to include the neuter, masculine or feminine gender, as appropriate. (b) Headings of articles and sections herein and the table of contents hereof are solely for convenience of reference, do not constitute a part hereof and shall not affect the meaning, construction or effect hereof. (c) All references herein to “Articles,” “Sections” and other subdivisions are to the corresponding Articles, Sections or subdivisions of the Indenture; the words “herein,” “hereof,” “hereby,” “hereunder” and other words of similar import refer to the Indenture as a whole and not to any particular Article, Section or subdivision hereof. ARTICLE II THE 2016A BONDS Section 2.01. Authorization of 2016A Bonds. The District hereby authorizes the issuance hereunder from time to time of the 2016A Bonds, which shall constitute special obligations of the District, for the purpose of refunding the Series 2008 Certificates [and prepaying all outstanding amounts under the Wells Fargo Line of Credit]. The 2016A Bonds are hereby designated the “Yorba Linda Water District Refunding Revenue Bonds, Series 2016A” in the aggregate principal amount of $_________. The Indenture constitutes a continuing agreement with the Owners from time to time of the 2016A Bonds to secure the full payment of the principal of and interest and premium (if any) on all the 2016A Bonds, subject to the covenants, provisions and conditions herein contained. The 2016A Bonds are special, limited obligations of the District payable solely from the sources described herein. Section 2.02. Terms of the 2016A Bonds. The 2016A Bonds shall be issued in fully registered form without coupons in denominations of $5,000 or any integral multiple thereof. The 2016A Bonds shall mature on October 1 in each of the years and in the amounts set forth below and shall bear interest on each Interest Payment Date at the rates set forth below: 15 Maturity Date (October 1) Principal Amount Interest Rate 20__ $ % Interest on the 2016A Bonds shall be payable on each Interest Payment Date to the person whose name appears on the Registration Books as the Owner thereof as of the Record Date immediately preceding each such Interest Payment Date, such interest to be paid by check of the Trustee sent by first class mail on the applicable Interest Payment Date to the Owner at the address of such Owner as it appears on the Registration Books (except that in the case of an Owner of one million dollars ($1,000,000) or more in principal amount, such payment may, at such Owner’s option, be made by wire transfer of immediately available funds to an account in the United States in accordance with written instructions provided to the Trustee by such Owner prior to the Record Date. Principal of and premium (if any) on any 2016A Bond shall be paid by check of the Trustee upon presentation and surrender thereof at maturity or upon the prior redemption thereof, at the Office of the Trustee. Both the principal of and interest and premium (if any) on the 2016A Bonds shall be payable in lawful money of the United States of America. Each 2016A Bond shall be dated the date of initial delivery, and shall bear interest from the Interest Payment Date next preceding the date of authentication thereof unless: (a) it is authenticated after a Record Date and on or before the following Interest Payment Date, in which event it shall bear interest from such Interest Payment Date; or (b) unless it is authenticated on or before September 15, 2016, in which event it shall bear interest from the date of initial delivery; provided, however, that if, as of the date of authentication of any 2016A Bond, interest thereon is in default, such 2016A Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. Interest on the 2016A Bonds shall be calculated on the basis of a 360 day year composed of twelve 30 day months. Section 2.03. Transfer of 2016A Bonds. Any 2016A Bond may, in accordance with its terms, be transferred on the Registration Books by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such 2016A Bond at the Office of 16 the Trustee for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form acceptable to the Trustee. The Trustee shall not be required to register the transfer of any 2016A Bond during the period in which the Trustee is selecting 2016A Bonds for redemption and any 2016A Bond that has been selected for redemption. Whenever any 2016A Bond or 2016A Bonds shall be surrendered for transfer, the District shall execute and the Trustee shall authenticate and shall deliver a new 2016A Bond or 2016A Bonds of authorized denomination or denominations for a like series and aggregate principal amount of the same maturity. The Trustee shall require the 2016A Bond Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer. Following any transfer of 2016A Bonds, the Trustee will cancel and destroy the 2016A Bonds it has received. Section 2.04. Exchange of 2016A Bonds. 2016A Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of other authorized denominations of the same series and maturity. The Trustee shall not be required to exchange any 2016A Bond during the period in which the Trustee is selecting 2016A Bonds for redemption or any 2016A Bond that has been selected for redemption. The Trustee shall require the 2016A Bond Owner requesting such exchange to pay any tax or other governmental charge required to be paid with respect to such exchange. Following any exchange of 2016A Bonds, the Trustee will cancel and destroy the 2016A Bonds that it has received. Section 2.05. Registration Books. The Trustee will keep or cause to be kept, at the Office of the Trustee, sufficient records for the registration and transfer of ownership of the 2016A Bonds, which shall upon reasonable notice and at reasonable times be open to inspection during regular business hours by the District and the Owners; and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on such records, the ownership of the 2016A Bonds as hereinbefore provided. The person in whose name any 2016A Bond shall be registered shall be deemed the Owner thereof for all purposes hereof, and payment of or on account of the interest on and principal and Redemption Price of by such 2016A Bonds shall be made only to or upon the order in writing of such registered Owner, which payments shall be valid and effectual to satisfy and discharge liability upon such 2016A Bond to the extent of the sum or sums so paid. Section 2.06. Form and Execution of 2016A Bonds. The 2016A Bonds shall be in substantially the form set forth in Exhibit A hereto. The 2016A Bonds shall be executed in the name and on behalf of the District with the manual or facsimile signature of its President. The 2016A Bonds may carry a seal, and such seal may be in the form of a facsimile of the District’s seal and may be reproduced, imprinted or impressed on the 2016A Bonds. The 2016A Bonds shall then be delivered to the Trustee for authentication by it. In case any of the officers who shall have signed or attested any of the 2016A Bonds shall cease to be such officer or officers of the District before the 2016A Bonds so signed or attested shall have been authenticated or delivered by the Trustee, or issued by the District, such 2016A Bonds may nevertheless be authenticated, delivered and issued and, upon such authentication, delivery and issue, shall be as binding upon the District as though those who signed and attested the same had continued to be such officers of the District. Also, any 2016A Bonds may be signed and attested on behalf of the District by such persons as at the actual date of execution of such 2016A Bonds shall be the proper officers of the District although at the nominal date of such 2016A Bonds any such person shall not have been such officer of the District. 17 Only those 2016A Bonds that bear thereon a certificate of authentication substantially in the form set forth in Exhibit A hereto, manually executed by the Trustee, shall be valid or obligatory for any purpose or entitled to the benefits of the Indenture, and such certificate of or on behalf of the Trustee shall be conclusive evidence that the 2016A Bonds so authenticated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of the Indenture. Section 2.07. 2016A Bonds Mutilated, Lost, Destroyed or Stolen. If any 2016A Bond shall become mutilated, the District, at the expense of the Owner of said 2016A Bond, shall execute, and the Trustee shall thereupon authenticate and deliver, a new 2016A Bond of like tenor, series and authorized denomination in exchange and substitution for the 2016A Bonds so mutilated, but only upon surrender to the Trustee of the 2016A Bond so mutilated. Every mutilated 2016A Bond so surrendered to the Trustee shall be canceled by it. If any 2016A Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence be satisfactory to the Trustee and indemnity satisfactory to the Trustee shall be given, the District, at the expense of the Owner, shall execute, and the Trustee shall thereupon authenticate and deliver, a new 2016A Bond of like tenor, series and authorized denomination in lieu of and in substitution for the 2016A Bond so lost, destroyed or stolen (or if any such 2016A Bond shall have matured or shall be about to mature, instead of issuing a substitute 2016A Bond, the Trustee may pay the same without surrender thereof). The District may require payment by the Owner of a sum not exceeding the actual cost of preparing each new 2016A Bond issued under this Section and of the expenses which may be incurred by the District and the Trustee in the premises. Any 2016A Bond issued under the provisions of this Section in lieu of any 2016A Bond alleged to be lost, destroyed or stolen shall constitute an original additional contractual obligation on the part of the District whether or not the 2016A Bond so alleged to be lost, destroyed, or stolen be at any time enforceable by anyone, and shall be entitled to the benefits of the Indenture with all other 2016A Bonds secured by the Indenture. Notwithstanding any other provision of this Section, in lieu of delivering a new 2016A Bond for a 2016A Bond which has been mutilated, lost, destroyed or stolen and which has matured or has been selected for redemption, the Trustee may make payment of such 2016A Bond upon receipt of indemnity satisfactory to the Trustee. Section 2.08. Book Entry System. (a) Election of Book Entry System. Prior to the issuance of the 2016A Bonds, the District may provide that such 2016A Bonds shall be initially issued as book entry bonds. If the District shall elect to deliver any 2016A Bonds in book entry form, then the District shall cause the delivery of a separate single fully registered bond (which may be typewritten) for each maturity date of such 2016A Bonds in an authorized denomination corresponding to that total principal amount of the 2016A Bonds designated to mature on such date. Upon initial issuance, the ownership of each such 2016A Bond shall be registered in the 2016A Bond Registration Books in the name of the Nominee, as nominee of the Depository, and ownership of the 2016A Bonds, or any portion thereof may not thereafter be transferred except as provided in Section 2.08(e). With respect to book entry 2016A Bonds, the District and the Trustee shall have no responsibility or obligation to any Participant or to any person on behalf of which such a Participant holds an interest in such book entry 2016A Bonds. Without limiting the immediately preceding sentence, the District and the Trustee shall have no responsibility or obligation with respect to: (i) the accuracy of the records of the Depository, the Nominee, or any Participant with respect to any ownership interest in book entry 2016A Bonds; (ii) the delivery to any Participant or any other person, other than an Owner as shown in the 2016A Bond Registration Books, of any notice with 18 respect to book entry 2016A Bonds, including any notice of redemption; (iii) the selection by the Depository and its Participants of the beneficial interests in book entry 2016A Bonds to be redeemed in the event that the District redeems the 2016A Bonds in part; or (iv) the payment by the Depository or any Participant or any other person of any amount of principal of, premium, if any, or interest on book entry 2016A Bonds. The District and the Trustee may treat and consider the person in whose name each book entry 2016A Bond is registered in the 2016A Bond Registration Books as the absolute Owner of such book entry 2016A Bond for the purpose of payment of principal of, premium and interest on such 2016A Bond, for the purpose of giving notices of redemption and other matters with respect to such 2016A Bond, for the purpose of registering transfers with respect to such 2016A Bond, and for all other purposes whatsoever. The Trustee shall pay all principal of, premium, if any, and interest on the 2016A Bonds only to or upon the order of the respective Owner, as shown in the 2016A Bond Registration Books, or such Owner’s respective attorney duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the District’s obligations with respect to payment of principal of, premium, if any, and interest on the 2016A Bonds to the extent of the sum or sums so paid. No person other than an Owner, as shown in the 2016A Bond Registration Books, shall receive a 2016A Bond evidencing the obligation to make payments of principal of, premium, if any, and interest on the 2016A Bonds. Upon delivery by the Depository to the District and the Trustee, of written notice to the effect that the Depository has determined to substitute a new nominee in place of the Nominee, and subject to the provisions herein with respect to Record Dates, the word Nominee in the Indenture shall refer to such nominee of the Depository. (b) Delivery of Letter of Representations. In order to qualify the book entry 2016A Bonds for the Depository’s book entry system, the District and the Trustee shall execute and deliver to the Depository a Letter of Representations. The execution and delivery of a Letter of Representations shall not in any way impose upon the District or the Trustee any obligation whatsoever with respect to persons having interests in such book entry 2016A Bonds other than the Owners, as shown on the 2016A Bond Registration Books. By executing a Letter of Representations, the Trustee shall agree to take all action necessary at all times so that the Trustee will be in compliance with all representations of the Trustee in such Letter of Representations. In addition to the execution and delivery of a Letter of Representations, the District and the Trustee shall take such other actions, not inconsistent with the Indenture, as are reasonably necessary to qualify book entry 2016A Bonds for the Depository’s book entry program. (c) Selection of Depository. In the event that: (i) the Depository determines not to continue to act as securities depository for book entry 2016A Bonds; or (ii) the District determines that continuation of the book entry system is not in the best interest of the beneficial owners of the 2016A Bonds or the District, then the District will discontinue the book entry system with the Depository. If the District determines to replace the Depository with another qualified securities depository, the District shall prepare or direct the preparation of a new single, separate, fully registered 2016A Bond for each of the maturity dates of such book entry 2016A Bonds, registered in the name of such successor or substitute qualified securities depository or its Nominee as provided in subsection (e) hereof. If the District fails to identify another qualified securities depository to replace the Depository, then the 2016A Bonds shall no longer be restricted to being registered in such 2016A Bond Registration Books in the name of the Nominee, but shall be registered in whatever name or names the Owners transferring or exchanging such 2016A Bonds shall designate, in accordance with the provisions of Sections 2.03 and 2.04 hereof. (d) Payments To Depository. Notwithstanding any other provision of the Indenture to the contrary, so long as all Outstanding 2016A Bonds are held in book entry form and 19 registered in the name of the Nominee, all payments of principal of, redemption premium, if any, and interest on such 2016A Bond and all notices with respect to such 2016A Bond shall be made and given, respectively to the Nominee, as provided in the Letter of Representations or as otherwise instructed by the Depository and agreed to by the Trustee, notwithstanding any inconsistent provisions herein. (e) Transfer of 2016A Bonds to Substitute Depository. (i) The 2016A Bonds shall be initially issued as provided in Section 2.01 hereof. Registered ownership of such 2016A Bonds, or any portions thereof, may not thereafter be transferred except: (A) to any successor of DTC or its nominee, or of any substitute depository designated pursuant to clause (B) of subsection (i) of this Section 2.08(e) (“Substitute Depository”); provided that any successor of DTC or Substitute Depository shall be qualified under any applicable laws to provide the service proposed to be provided by it; (B) to any Substitute Depository, upon: (1) the resignation of DTC or its successor (or any Substitute Depository or its successor) from its functions as depository; or (2) a determination by the District that DTC (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 (C) to any person as provided below, upon: (1) the resignation of DTC or its successor (or any Substitute Depository or its successor) from its functions as depository; or (2) a determination by the District that DTC or its successor (or Substitute Depository or its successor) is no longer able to carry out its functions as depository. (ii) In the case of any transfer pursuant to clause (A) or clause (B) of subsection (i) of this Section 2.08(e), upon receipt of all Outstanding 2016A Bonds by the Trustee, together with a Written Request of the District to the Trustee designating the Substitute Depository, a single new 2016A Bond, which the District shall prepare or cause to be prepared, shall be issued for each maturity of 2016A Bonds then Outstanding, registered in the name of such successor or such Substitute Depository or their Nominees, as the case may be, all as specified in such Written Request of the District. In the case of any transfer pursuant to clause (C) of subsection (i) of this Section 2.08(e), upon receipt of all Outstanding 2016A Bonds by the Trustee, together with a Written Request of the District to the Trustee, new 2016A Bonds, which the District shall prepare or cause to be prepared, shall be issued in such denominations and registered in the names of such persons as are requested in such Written Request of the District, subject to the limitations of Section 2.01 hereof, provided that the Trustee shall not be required to deliver such new 2016A Bonds within a period of less than sixty (60) days from the date of receipt of such Written Request from the District. (iii) In the case of a partial redemption or an advance refunding of any 2016A Bonds evidencing a portion of the principal maturing in a particular year, DTC or its successor (or any Substitute Depository or its successor) shall make an appropriate notation on such 2016A Bonds indicating the date and amounts of such reduction in principal, in form acceptable to the Trustee, all in accordance with the Letter of Representations. The Trustee shall not be liable for such Depository’s failure to make such notations or errors in making such notations and the records of the Trustee as to the Outstanding principal amount of such 2016A Bonds shall be controlling. 20 (iv) The District and the Trustee shall be entitled to treat the person in whose name any 2016A Bond is registered as the Owner thereof for all purposes of the Indenture and any applicable laws, notwithstanding any notice to the contrary received by the Trustee or the District; and the District and the Trustee shall not have responsibility for transmitting payments to, communicating with, notifying, or otherwise dealing with any beneficial owners of the 2016A Bonds. Neither the District nor the Trustee shall have any responsibility or obligation, legal or otherwise, to any such beneficial owners or to any other party, including DTC or its successor (or Substitute Depository or its successor), except to the Owner of any 2016A Bonds, and the Trustee may rely conclusively on its records as to the identity of the Owners of the 2016A Bonds. ARTICLE III ISSUANCE OF 2016A BONDS; APPLICATION OF PROCEEDS Section 3.01. Issuance of the 2016A Bonds. At any time after the execution of the Indenture, the District may execute and the Trustee shall authenticate and, upon Written Request of the District, deliver the 2016A Bonds in the aggregate principal amount of $_________. Section 3.02. Application of Proceeds of the 2016A Bonds and Certain Other Moneys. The proceeds received from the sale of the 2016A Bonds shall be deposited with the Trustee, who shall: (i) transfer to the Escrow Agent the amount of $_______ for deposit in the escrow fund created under the Escrow Agreement (2008 Certificates); (ii) [transfer to Wells Fargo Bank, National Association the amount of $_____ to prepay the Wells Fargo Line of Credit; and] (iii) deposit the amount of $______ in the Costs of Issuance Fund. The Trustee may establish temporary funds or accounts in its records to record and facilitate such deposit and transfer. Section 3.03. Establishment and Application of Costs of Issuance Fund. The Trustee shall establish, maintain and hold in trust a separate fund designated as the “Costs of Issuance Fund.” The moneys in the Costs of Issuance Fund shall be used and withdrawn by the Trustee to pay the Costs of Issuance upon submission of Requisitions of the District stating the person to whom payment is to be made, the amount to be paid, the purpose for which the obligation was incurred, that such payment is proper charge against said fund and that payment for such charge has not previously been made. On the six month anniversary of the issuance of the 2016A Bonds, or upon the earlier Written Request of the District, all amounts remaining in the Costs of Issuance Fund shall be transferred by the Trustee to the Interest Account and the Costs of Issuance Fund shall be closed. Investment earnings on amounts on deposit in the Costs of Issuance Fund shall be applied in accordance with Section 5.06 hereof. Section 3.04. Validity of 2016A Bonds. The validity of the authorization and issuance of the 2016A Bonds is not dependent on and shall not be affected in any way by any proceedings taken by the District or the Trustee with respect to any other agreement. The recital contained in the 2016A Bonds that the same are issued pursuant to the Constitution and laws of the State shall be conclusive evidence of the validity and of compliance with the provisions of law in their issuance. 21 ARTICLE IV REDEMPTION OF 2016A BONDS Section 4.01. Terms of Redemption. (a) The 2016A Bonds shall be subject to extraordinary redemption prior to their respective stated maturities, as a whole or in part on any date in the order of maturity and within maturities as directed by the District in a Written Request provided to the Trustee at least 35 days (or such lesser number of days acceptable to the Trustee in the sole discretion of the Trustee, such notice for the convenience of the Trustee) prior to such date and by lot within each maturity in integral multiples of $5,000 from Net Proceeds, upon the terms and conditions of, and as provided for in, Sections 6.19 and 6.23, at a Redemption Price equal to the principal amount thereof plus accrued interest thereon to the date fixed for redemption, without premium. (b) The 2016A Bonds maturing on or after October 1, 20__ shall be subject to redemption prior to their respective stated maturities, as a whole or in part on ___ 1, 20__ or any date thereafter in the order of maturity as directed by the District in a Written Request provided to the Trustee at least 35 days (or such lesser number of days acceptable to the Trustee in the sole discretion of the Trustee, such notice for the convenience of the Trustee) prior to such date and by lot within each maturity in integral multiples of $5,000, at a Redemption Price equal to the principal amount thereof plus accrued interest thereon to the date fixed for redemption, without premium. (c) The 2016A Bonds with stated maturities on October 1, 20__ are subject to mandatory sinking fund redemption in part (by lot) on each October 1 on and after October 1, 20__, in integral multiples of $5,000 at a Redemption Price of the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule: Redemption Date (October 1) Principal Amount 20__ $ 20__* * Final Maturity. Section 4.02. Selection of 2016A Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of less than all of the 2016A Bonds, the Trustee shall select the 2016A Bonds for redemption as a whole or in part on any date as directed by the District and by lot within each maturity in integral multiples of $5,000 in accordance with Section 4.01 hereof. The Trustee will promptly notify the District in writing of the numbers of the 2016A Bonds or portions thereof so selected for redemption. Section 4.03. Notice of Redemption. Notice of redemption shall be mailed by first class mail at least twenty (20) days but not more than sixty (60) days before any Redemption Date, to the respective Owners of any 2016A Bonds designated for redemption at their addresses appearing on the Registration Books, to the Securities Depositories and the Information Services. Each notice of redemption shall state the date of notice, the Redemption Date, the place or places of redemption and the Redemption Price, will designate the maturities, CUSIP numbers, if any, and, if less than all 22 2016A Bonds of any such maturity are to be redeemed, the serial numbers of the 2016A Bonds of such maturity to be redeemed by giving the individual number of each 2016A Bond or by stating that all 2016A Bonds between two stated numbers, both inclusive, have been called for redemption and, in the case of 2016A Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice shall also state that on the Redemption Date there will become due and payable on each of said 2016A Bonds or parts thereof designated for redemption the Redemption Price thereof or of said specified portion of the principal thereof in the case of a 2016A Bond to be redeemed in part only, together with interest accrued thereon to the Redemption Date, and that (provided that moneys for redemption have been deposited with the Trustee) from and after such Redemption Date interest thereon shall cease to accrue, and shall require that such 2016A Bonds be then surrendered to the Trustee. Neither the failure to receive such notice nor any defect in the notice or the mailing thereof will affect the validity of the redemption of any 2016A Bond. Notice of redemption of 2016A Bonds shall be given by the Trustee, at the expense of the District, for and on behalf of the District. With respect to any notice of optional redemption of 2016A Bonds, such notice shall state that such redemption shall be conditional upon the receipt by the Trustee on or prior to the date fixed for such redemption of moneys sufficient to pay the principal of, premium, if any, and interest on such 2016A Bonds to be redeemed and that, if such moneys shall not have been so received, said notice shall be of no force and effect and the Trustee shall not be required to redeem such 2016A Bonds. In the event that such notice of redemption contains such a condition and such moneys are not so received, the redemption shall not be made, and the Trustee shall within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such moneys were not so received. Section 4.04. Partial Redemption of 2016A Bonds. Upon surrender of any 2016A Bond redeemed in part only, the District shall execute and the Trustee shall authenticate and deliver to the Owner thereof, at the expense of the District, a new 2016A Bond or 2016A Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the 2016A Bonds surrendered and of the same series, interest rate and maturity. Section 4.05. Effect of Redemption. Notice of redemption having been duly given as aforesaid, and moneys for payment of the Redemption Price of, together with interest accrued to the date fixed for redemption on, the 2016A Bonds (or portions thereof) so called for redemption being held by the Trustee, on the Redemption Date designated in such notice, the 2016A Bonds (or portions thereof) so called for redemption shall become due and payable, interest on the 2016A Bonds so called for redemption shall cease to accrue, said 2016A Bonds (or portions thereof) shall cease to be entitled to any benefit or security under the Indenture, and the Owners of said 2016A Bonds shall have no rights in respect thereof except to receive payment of the Redemption Price thereof. The Trustee shall, upon surrender for payment of any of the 2016A Bonds to be redeemed on their Redemption Dates, pay such 2016A Bonds at the Redemption Price. All 2016A Bonds redeemed pursuant to the provisions of this Article shall be canceled upon surrender thereof. ARTICLE V REVENUES, FUNDS AND ACCOUNTS; PAYMENT OF PRINCIPAL AND INTEREST 23 Section 5.01. Pledge and Assignment; Revenue Fund. (a) Pursuant to the 2012A Indenture, all of the Revenues, all amounts held in the Revenue Fund described in subsection (b) below and any other amounts (including proceeds of the sale of the 2016A Bonds) held in any fund or account established pursuant to the Indenture (except the Rebate Fund) are hereby irrevocably pledged to secure the payment of the principal of and interest, and the premium, if any, on the 2012A Bonds and the 2016A Bonds in accordance with their terms and the provisions of the Indenture, and, except for the payment of the Operating and Maintenance Costs and Non-Operating and Maintenance Costs, the Revenues shall not be used for any other purpose while the 2016A Bonds remain Outstanding; provided that out of the Revenues there may be apportioned such sums for such purposes as are expressly permitted herein. Said pledge, together with the pledge created by all other Contracts and Bonds, shall constitute a first lien on and security interest on Revenues and, subject to the application of Revenues and all amounts on deposit therein as permitted herein, the Revenue Fund and other funds and accounts created hereunder for the payment of the principal of and interest, and the premium, if any, on the 2016A Bonds, 2012A Bonds and all Contracts and Debt Service on other Bonds in accordance with the terms hereof, and shall attach, be perfected and be valid and binding from and after the Closing Date, without any physical delivery thereof or further act and shall be valid and binding against all parties having claims of any kind in tort, contract or otherwise against the District, irrespective of whether such parties have notice hereof. The 2016A Bonds constitute Bonds for purposes of the 2012A Indenture and the District so finds, and represents that the conditions of Section 6.14 of the 2012A Indenture have been met in full. The Ad Valorem Tax Revenues are irrevocably pledged as the first source of repayment of the 2016A Bonds and the 2012A Bonds. The Ad Valorem Tax Revenues shall not be used for any other purposes while any of the 2016A Bonds remain unpaid, except as provided for herein and in the 2012A Indenture. In the event that the Ad Valorem Tax Revenues are not sufficient in amount to pay the payments of principal of and interest, and the premium, if any, on the 2016A Bonds and the 2012A Bonds when due, such amounts shall be paid from other Net Revenues. (b) In order to carry out and effectuate the pledge and lien contained herein, the District agrees and covenants that: (i) all Revenues shall be received by the District in trust hereunder and shall be deposited when and as received in a special fund designated as the “Revenue Fund,” which fund is hereby continued and which fund the District agrees and covenants to maintain and to hold separate and apart from other funds so long as the 2016A Bonds and any Contracts or Debt Service on Bonds remain unpaid; and (ii) all Ad Valorem Tax Revenues shall be deposited when and as received in an account within the Revenue Fund called the “Ad Valorem Taxes Account of the Revenue Fund,” which account is hereby continued and which account the District agrees and covenants to maintain and to hold separate and apart from other accounts so long as the 2016A Bonds and any Contracts or Debt Service on Bonds remain unpaid. Moneys in the Revenue Fund shall be used and applied by the District as provided herein. All moneys in the Revenue Fund shall be held in trust and shall be applied, used and withdrawn for the purposes set forth in this Section and the 2012A Indenture. The District shall, from the moneys in the Revenue Fund, pay all Operating and Maintenance Costs (including amounts reasonably required to be set aside in contingency reserves for Operating and Maintenance Costs, the payment of which is not then immediately required) and all Non-Operating and Maintenance Costs as such Operating and Maintenance Costs and Non-Operating and Maintenance Costs become due and payable. All remaining moneys in the Revenue Fund shall 24 be set aside by the District at the following times for the transfer to the following respective special funds in the following order of priority: (i) Interest and Principal Payments. Not later than the fifth Business Day prior to each Interest Payment Date, the District shall, first from moneys in the Ad Valorem Taxes Account and second from other remaining moneys in the Revenue Fund, transfer to the Trustee for deposit in the Payment Fund the payments of interest and principal on the 2016A Bonds due and payable on such Interest Payment Date. The District shall also, from the moneys in the Revenue Fund, transfer to the applicable trustee for deposit in the respective payment fund, without preference or priority, and in the event of any insufficiency of such moneys ratably without any discrimination or preference, any other Debt Service in accordance with the provisions of any Bond or Contract. (ii) Reserve Funds. On or before each Interest Payment Date, the District shall, first from moneys in the Ad Valorem Taxes Account and second from other remaining moneys in the Revenue Fund, thereafter, without preference or priority and in the event of any insufficiency of such moneys ratably without any discrimination or preference, transfer to the applicable trustees for reserve funds and/or accounts, if any, as may have been established in connection with Bonds or Contracts, that sum, if any, necessary to restore such funds or accounts to an amount equal to the reserve requirement with respect thereto. (iii) Surplus. Moneys on deposit in the Revenue Fund on any date when the District reasonably expects that such moneys will not be needed for the payment of Operating and Maintenance Costs or Non-Operating and Maintenance Costs or any of the purposes described in clauses (b)(i) or (b)(ii) may be expended by the District at any time for any purpose permitted by law. (iv) Investments. All moneys held by the District in the Revenue Fund shall be invested in Permitted Investments and the investment earnings thereon shall remain on deposit in such fund, except as otherwise provided herein. Section 5.02. Allocation of Revenues. There is hereby established with the Trustee the Payment Fund, which the Trustee covenants to maintain and hold in trust separate and apart from other funds held by it so long as any principal of and interest on the 2016A Bonds remain unpaid. Except as directed herein, all payments of interest and principal on the 2016A Bonds received by the Trustee pursuant to Section 5.01(b) shall be promptly deposited by the Trustee upon receipt thereof into the Payment Fund; except that all moneys received by the Trustee and required hereunder to be deposited in the Redemption Fund shall be promptly deposited therein. All payments of interest and principal on the 2016A Bonds deposited with the Trustee shall be held, disbursed, allocated and applied by the Trustee only as provided in the Indenture. The Trustee shall also establish and hold an Interest Account and a Principal Account within the Payment Fund. The Trustee shall transfer from the Payment Fund and deposit into the following respective accounts, the following amounts in the following order of priority and at the following times, the requirements of each such account (including the making up of any deficiencies in any such account resulting from lack of Revenues sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any transfer is made to any account subsequent in priority: (a) Not later than the Business Day preceding each Interest Payment Date, the Trustee shall deposit in the Interest Account that sum, if any, required to cause the aggregate amount on deposit in the Interest Account to be at least equal to the amount of interest becoming due and 25 payable on such date on all 2016A Bonds then Outstanding. No deposit need be made into the Interest Account so long as there shall be in such fund moneys sufficient to pay the interest becoming due and payable on such date on all 2016A Bonds then Outstanding. (b) Not later than the Business Day preceding each date on which the principal of the 2016A Bonds shall become due and payable hereunder, the Trustee shall deposit in the Principal Account that sum, if any, required to cause the aggregate amount on deposit in the Principal Account to equal the principal amount of the 2016A Bonds coming due and payable on such date or subject to mandatory sinking fund redemption on such date. No deposit need be made into the Principal Account so long as there shall be in such fund moneys sufficient to pay the principal becoming due and payable on such date on all 2016A Bonds then Outstanding. Section 5.03. Application of Interest Account. All amounts in the Interest Account shall be used and withdrawn by the Trustee solely for the purpose of paying interest on the 2016A Bonds as it shall become due and payable (including accrued interest on any 2016A Bonds purchased or accelerated prior to maturity pursuant to the Indenture). Section 5.04. Application of Principal Account. All amounts in the Principal Account shall be used and withdrawn by the Trustee solely to pay the principal amount of the 2016A Bonds at maturity, mandatory sinking fund redemption, purchase or acceleration; provided, however, that at any time prior to selection for redemption of any such 2016A Bonds, upon written direction of the District, the Trustee shall apply such amounts to the purchase of 2016A Bonds at public or private sale, as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account) as shall be directed pursuant to a Written Request of the District, except that the purchase price (exclusive of accrued interest) may not exceed the Redemption Price then applicable to the 2016A Bonds. Section 5.05. Application of Redemption Fund. There is hereby established with the Trustee a special fund designated as the “Redemption Fund.” All amounts in the Redemption Fund shall be used and withdrawn by the Trustee solely for the purpose of paying the Redemption Price of the 2016A Bonds to be redeemed on any Redemption Date pursuant to Section 4.01; provided, however, that at any time prior to selection for redemption of any such 2016A Bonds, upon written direction of the District, the Trustee shall apply such amounts to the purchase of 2016A Bonds at public or private sale, as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account) as shall be directed pursuant to a Written Request of the District, except that the purchase price (exclusive of accrued interest) may not exceed the Redemption Price then applicable to the 2016A Bonds. Section 5.06. Investments. All moneys in any of the funds or accounts established with the Trustee pursuant to the Indenture shall be invested by the Trustee solely in Permitted Investments. Such investments shall be directed by the District pursuant to a Written Request of the District filed with the Trustee at least two (2) Business Days in advance of the making of such investments. In the absence of any such directions from the District, the Trustee shall invest any such moneys in Permitted Investments described in clause (B)(5) of the definition thereof; provided, however, that any such investment shall be made by the Trustee only if, prior to the date on which such investment is to be made, the Trustee shall have received a written direction from the District specifying a specific money market fund and, if no such written direction from the District is so received, the Trustee shall hold such moneys uninvested. Obligations purchased as an investment of moneys in any fund shall be deemed to be part of such fund or account. 26 All interest or gain derived from the investment of amounts in any of the funds or accounts established hereunder shall be deposited in the Interest Account unless otherwise provided in the Indenture. For purposes of acquiring any investments hereunder, the Trustee may commingle funds (other than the Rebate Fund) held by it hereunder upon the Written Request of the District. The Trustee may act as principal or agent in the acquisition or disposition of any investment and may impose its customary charges therefor. The Trustee shall incur no liability for losses arising from any investments made pursuant to this Section. The District acknowledges that to the extent that regulations of the Comptroller of the Currency or other applicable regulatory entity grant the District the right to receive brokerage confirmations of security transactions as they occur, the District specifically waives receipt of such confirmations to the extent permitted by law. The Trustee will furnish the District with periodic cash transaction statements which include detail for all investment transactions made by the Trustee hereunder. The Trustee or any of its affiliates may act as sponsor, advisor or manager in connection with any investments made by the Trustee under the Indenture. The District shall invest, or cause to be invested, all moneys in any fund or accounts established with the Trustee as provided in the Tax Certificate. For investment purposes, the Trustee may commingle the funds and accounts established hereunder, but shall account for each separately. In making any valuations of investments hereunder, the Trustee may utilize and rely on computerized securities pricing services that may be available to the Trustee, including those available through the Trustee’s accounting system. Section 5.07. Rebate Fund. (a) Establishment. The Trustee shall establish a fund for the 2016A Bonds designated the “Rebate Fund.” Absent an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest on the 2016A Bonds will not be adversely affected, the District shall cause to be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to this Section and the Tax Certificate. All money at any time deposited in the Rebate Fund shall be held by the Trustee in trust for payment to the United States Treasury. All amounts on deposit in the Rebate Fund for the 2016A Bonds shall be governed by this Section and the Tax Certificate, unless and to the extent that the District delivers to the Trustee an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest on the 2016A Bonds will not be adversely affected if such requirements are not satisfied. Notwithstanding anything to the contrary contained herein or in the Tax Certificate, the Trustee: (i) shall be deemed conclusively to have complied with the provisions thereof if it follows all Requests of the District; and (ii) shall have no liability or responsibility to enforce compliance by the District with the terms of the Tax Certificate; and (iii) may rely conclusively on the District’s calculations and determinations and certifications relating to rebate matters; and (iv) shall have no responsibility to independently make any calculations or determinations or to review the District’s calculations or determinations thereunder. (i) Annual Computation. Within 55 days of the end of each Bond Year (as such term is defined in the Tax Certificate), the District shall calculate or cause to be calculated the amount of rebatable arbitrage, in accordance with Section 148(f)(2) of the Code and 27 Section 1.148-3 of the Treasury Regulations (taking into account any applicable exceptions with respect to the computation of the rebatable arbitrage, described, if applicable, in the Tax Certificate (e.g., the temporary investments exceptions of Section 148(f)(4)(B) and the construction expenditures exception of Section 148(f)(4)(C) of the Code), and taking into account whether the election pursuant to Section 148(f)(4)(C)(vii) of the Code (the “1½% Penalty”) has been made), for this purpose treating the last day of the applicable Bond Year as a computation date, within the meaning of Section 1.148-1(b) of the Treasury Regulations (the “Rebatable Arbitrage”). The District shall obtain expert advice as to the amount of the Rebatable Arbitrage to comply with this Section. (ii) Annual Transfer. Within 55 days of the end of each Bond Year, upon the Written Request of the District, an amount shall be deposited to the Rebate Fund by the Trustee from any Net Revenues legally available for such purpose (as specified by the District in the aforesaid Written Request), if and to the extent required so that the balance in the Rebate Fund shall equal the amount of Rebatable Arbitrage so calculated in accordance with clause (i) of this subsection (a). In the event that immediately following the transfer required by the previous sentence, the amount then on deposit to the credit of the Rebate Fund exceeds the amount required to be on deposit therein, upon Written Request of the District, the Trustee shall withdraw the excess from the Rebate Fund and then credit the excess to the Payment Fund. (iii) Payment to the Treasury. The Trustee shall pay, as directed by Written Request of the District, to the United States Treasury, out of amounts in the Rebate Account: (A) Not later than 60 days after the end of: (X) the fifth Bond Year; and (Y) each applicable fifth Bond Year thereafter, an amount equal to at least 90% of the Rebatable Arbitrage calculated as of the end of such Bond Year; and (B) Not later than 60 days after the payment of all the 2016A Bonds, an amount equal to 100% of the Rebatable Arbitrage calculated as of the end of such applicable Bond Year, and any income attributable to the Rebatable Arbitrage, computed in accordance with Section 148(f) of the Code and Section 1.148-3 of the Treasury Regulations. In the event that, prior to the time of any payment required to be made from the Rebate Fund, the amount in the Rebate Fund is not sufficient to make such payment when such payment is due, the District shall calculate or cause to be calculated the amount of such deficiency and deposit an amount received from any legally available source equal to such deficiency prior to the time such payment is due. Each payment required to be made pursuant to this subsection (a) shall be made to the Internal Revenue Service Center, Ogden, Utah 84201 on or before the date on which such payment is due, and shall be accompanied by Internal Revenue Service Form 8038-T (prepared by the District), or shall be made in such other manner as provided under the Code. (b) Disposition of Unexpended Funds. Any funds remaining in the Rebate Fund after redemption and payment of the 2016A Bonds and the payments described in subsection (a) above being made may be withdrawn by the District and utilized in any manner by the District. (c) Survival of Defeasance. Notwithstanding anything in this Section to the contrary, the obligation to comply with the requirements of this Section shall survive the defeasance or payment in full of the 2016A Bonds. 28 Section 5.08. Application of Funds and Accounts When No 2016A Bonds are Outstanding. On the date on which all 2016A Bonds shall be retired hereunder or provision made therefor pursuant to Article X and after payment of all amounts due the Trustee hereunder, all moneys then on deposit in any of the funds or accounts (other than the Rebate Fund) established with the Trustee pursuant to the Indenture shall be withdrawn by the Trustee and paid to the District for use by the District at any time for any purpose permitted by law. ARTICLE VI PARTICULAR COVENANTS Section 6.01. Punctual Payment. The District shall punctually pay or cause to be paid the principal and interest to become due in respect of all of the 2016A Bonds, in strict conformity with the terms of the 2016A Bonds and of the Indenture, according to the true intent and meaning thereof, but only out of Net Revenues and other assets pledged for such payment as provided in the Indenture. Section 6.02. Extension of Payment of 2016A Bonds. The District shall not directly or indirectly extend or assent to the extension of the maturity of any of the 2016A Bonds or the time of payment of any claims for interest by the purchase of such 2016A Bonds or by any other arrangement, and in case the maturity of any of the 2016A Bonds or the time of payment of any such claims for interest shall be extended, such 2016A Bonds or claims for interest shall not be entitled, in case of any default hereunder, to the benefits of the Indenture, except subject to the prior payment in full for the principal of all of the 2016A Bonds then Outstanding and of all claims for interest thereon which shall not have been so extended. Nothing in this Section shall be deemed to limit the right of the District to issue Bonds for the purpose of refunding any Outstanding 2016A Bonds, and such issuance shall not be deemed to constitute an extension of maturity of 2016A Bonds. Section 6.03. Against Encumbrances. The District will not make any pledge of or place any lien on Revenues or the moneys in the Revenue Fund except as provided herein and in the 2012A Indenture. The District may at any time, or from time to time, execute Contracts or issue Bonds as permitted herein. The District may also at any time, or from time to time, incur evidences of indebtedness or incur other obligations for any lawful purpose which are payable from and secured by a pledge of lien on Revenues on any moneys in the Revenue Fund as may from time to time be deposited therein, provided that such pledge and lien shall be subordinate in all respects to the pledge of and lien thereon provided herein. Section 6.04. Power to Issue 2016A Bonds and Make Pledge and Assignment. The District is duly authorized pursuant to law to issue the 2016A Bonds, to enter into the Indenture and to pledge and assign the Revenues and other assets purported to be pledged and assigned under the Indenture in the manner and to the extent provided in the Indenture. The 2016A Bonds and the provisions of the Indenture are and will be the legal, valid and binding special obligations of the District in accordance with their terms, and the District and the Trustee shall at all times, subject to the provisions of Article VIII and to the extent permitted by law, defend, preserve and protect said pledge and assignment of Revenues and other assets and all the rights of the 2016A Bond Owners under the Indenture against all claims and demands of all persons whomsoever. 29 Section 6.05. Accounting Records and Financial Statements. (a) The Trustee shall at all times keep, or cause to be kept, proper books of record and account, prepared in accordance with corporate trust industry standards, in which complete and accurate entries shall be made of all transactions made by it relating to the proceeds of 2016A Bonds and all funds and accounts established by it pursuant to the Indenture. Such books of record and account shall be available for inspection by the District upon reasonable prior notice during business hours and under reasonable circumstances. (b) The District will keep appropriate accounting records in which complete and correct entries shall be made of all transactions relating to the Water System, which records shall be available for inspection by the Trustee (which shall have no duty to inspect such records) at reasonable hours and under reasonable conditions. (c) The District will prepare and file with the Trustee annually within two hundred seventy (270) days after the end of each Fiscal Year (commencing with the Fiscal Year ending June 30, 2016) financial statements of the District for the preceding Fiscal Year prepared in accordance with generally accepted accounting principles, together with an Accountant’s Report thereon. The Trustee shall have no duty to review such financial statements. Section 6.06. Tax Covenants. Notwithstanding any other provision of the Indenture, absent an opinion of Bond Counsel that the exclusion from gross income of the portion of interest on the 2016A Bonds will not be adversely affected for federal income tax purposes, the District covenants to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income with respect to the 2016A Bonds and specifically covenants, without limiting the generality of the foregoing, as follows: (a) Private Activity. The District will take no action or refrain from taking any action or make any use of the proceeds of the 2016A Bonds or of any other moneys or property which would cause the 2016A Bonds to be “private activity bonds” within the meaning of Section 141 of the Code; (b) Arbitrage. The District will make no use of the proceeds of the 2016A Bonds or of any other amounts or property, regardless of the source, or take any action or refrain from taking any action which will cause the 2016A Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Code; (c) Federal Guarantee. The District will make no use of the proceeds of the 2016A Bonds or take or omit to take any action that would cause the 2016A Bonds to be “federally guaranteed” within the meaning of Section 149(b) of the Code; (d) Information Reporting. The District will take or cause to be taken all necessary action to comply with the informational reporting requirement of Section 149(e) of the Code necessary to preserve the exclusion of interest on the 2016A Bonds pursuant to Section 103(a) of the Code; (e) Hedge Bonds. The District will make no use of the proceeds of the 2016A Bonds or any other amounts or property, regardless of the source, or take any action or refrain from taking any action that would cause the 2016A Bonds to be considered “hedge bonds” within the 30 meaning of Section 149(g) of the Code unless the District takes all necessary action to assure compliance with the requirements of Section 149(g) of the Code to maintain the exclusion from gross income of interest on the 2016A Bonds for federal income tax purposes; and (f) Miscellaneous. The District will take no action or refrain from taking any action inconsistent with its expectations stated in the Tax Certificate executed by the District in connection with the issuance of the 2016A Bonds and will comply with the covenants and requirements stated therein and incorporated by reference herein. This Section and the covenants set forth herein shall not be applicable to, and nothing contained herein shall be deemed to prevent the District from causing the Trustee to issue revenue bonds or to execute and deliver contracts payable on a parity with the 2016A Bonds, the interest with respect to which has been determined by Bond Counsel to be subject to federal income taxation. Section 6.07. Waiver of Laws. The District shall not at any time insist upon or plead in any manner whatsoever, or claim or take the benefit or advantage of, any stay or extension law now or at any time hereafter in force that may affect the covenants and agreements contained in the Indenture or in the 2016A Bonds, and all benefit or advantage of any such law or laws is hereby expressly waived by the District to the extent permitted by law. Section 6.08. Further Assurances. The District will make, execute and deliver any and all such further indentures, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of the Indenture and for the better assuring and confirming unto the Owners of the 2016A Bonds of the rights and benefits provided in the Indenture. Section 6.09. Budgets. On or prior to the thirtieth day of each Fiscal Year, the District shall certify to the Trustee that the amounts budgeted for payment of the principal of and interest on the 2016A Bonds are fully adequate for the payment of all such payments for such Fiscal Year. If the amounts so budgeted are not adequate for the payment of the principal of and interest on the 2016A Bonds due under the Indenture, the District will take such action as may be necessary to cause such annual budget to be amended, corrected or augmented so as to include therein the amounts required to be raised by the District in the then ensuing Fiscal Year for the payment of the principal of and interest on the 2016A Bonds due under the Indenture and will notify the Trustee of the proceedings then taken or proposed to be taken by the District. Section 6.10. Observance of Laws and Regulations. To the extent necessary to assure its performance hereunder, the District will well and truly keep, observe and perform all valid and lawful obligations or regulations now or hereafter imposed on the District by contract, or prescribed by any law of the United States of America, or of the State, or by any officer, board or commission having jurisdiction or control, as a condition of the continued enjoyment of any and every right, privilege or franchise now owned or hereafter acquired by the District, respectively, including its right to exist and carry on its business, to the end that such contracts, rights and franchises shall be maintained and preserved, and shall not become abandoned, forfeited or in any manner impaired. Section 6.11. Compliance with Contracts. The District will neither take nor omit to take any action under any contract if the effect of such act or failure to act would in any manner impair or adversely affect the ability of the District to pay principal of or interest on the 2016A Bonds; and the District will comply with, keep, observe and perform all agreements, conditions, covenants and 31 terms, express or implied, required to be performed by it contained in all other contracts affecting or involving the Water System, to the extent that the District is a party thereto. Section 6.12. Prosecution and Defense of Suits. The District shall promptly, upon request of the Trustee or any 2016A Bond Owner, from time to time take such action as may be necessary or proper to remedy or cure any defect in or cloud upon the title to the Water System or any part thereof, whether now existing or hereafter developing, shall prosecute all such suits, actions and other proceedings as may be appropriate for such purpose and shall indemnify and save the Trustee (including all of its employees, officers and directors), and every 2016A Bond Owner harmless from all loss, cost, damage and expense, including attorneys’ fees, which they or any of them may incur by reason of any such defect, cloud, suit, action or proceeding. The District shall defend against every suit, action or proceeding at any time brought against the Trustee (including all of its employees, officers and directors) or any 2016A Bond Owner upon any claim arising out of the receipt, application or disbursement of any of the payments of principal of or interest on the 2016A Bonds or involving the rights of the Trustee or any 2016A Bond Owner under the Indenture; provided that the Trustee or any 2016A Bond Owner at such party’s election may appear in and defend any such suit, action or proceeding. The District shall indemnify and hold harmless the Trustee and the 2016A Bond Owners from and against any and all liability claimed or asserted by any person, arising out of such receipt, application or disbursement, and shall indemnify and hold harmless the 2016A Bond Owners against any attorneys’ fees or other expenses which any of them may incur in connection with any litigation (including pre-litigation activities) to which any of them may become a party by reason of ownership of 2016A Bonds. The District shall promptly reimburse the Trustee and any 2016A Bond Owner in the full amount of any attorneys’ fees or other expenses which such party may incur in litigation or otherwise in order to enforce such party’s rights under the Indenture or the 2016A Bonds, provided that such litigation shall be concluded favorably to such party’s contentions therein. Section 6.13. Continuing Disclosure. The District hereby covenants and agrees that it will comply with and carry out all of its obligations under the Continuing Disclosure Certificate to be executed and delivered by the District in connection with the issuance of the 2016A Bonds. Notwithstanding any other provision of the Indenture, failure of the District to comply with the Continuing Disclosure Certificate shall not be considered an Event of Default; however, 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 District to comply with its obligations under this Section. For purposes of this Section, “Beneficial Owner” means any person which has or shares the power, directly or indirectly, to make investment decisions concerning ownership of any 2016A Bonds (including persons holding 2016A Bonds through nominees, depositories or other intermediaries). Section 6.14. Additional Contracts and Bonds. The District may at any time execute any Contract or issue any Bonds, as the case may be, in accordance herewith; provided: (a) The Net Revenues for any consecutive twelve calendar month period during the eighteen calendar month period preceding the date of adoption by the Board of Directors of the District of the resolution authorizing the issuance of such Bonds or the date of the execution of such Contract, as the case may be, as evidenced by a special report prepared by an Independent Certified Public Accountant or Independent Financial Consultant on file with the District, shall 32 have produced a sum equal to at least one hundred ten percent (110%) of the Debt Service for such twelve month period; and (b) The Net Revenues for any consecutive twelve calendar month period during the eighteen calendar month period preceding the date of the execution of such Contract or the date of adoption by the Board of Directors of the District of the resolution authorizing the issuance of such Bonds, as the case may be, including adjustments to give effect as of the first day of such twelve month period to increases or decreases in rates and charges for the Water Service approved and in effect as of the date of calculation, as evidenced by a special report prepared by an Independent Certified Public Accountant or Independent Financial Consultant on file with the District, shall have produced a sum equal to at least one hundred ten percent (110%) of the Debt Service for such twelve month period plus the Debt Service which would have accrued on any Contracts executed or Bonds issued since the end of such twelve month period assuming such Contracts had been executed or Bonds had been issued at the beginning of such twelve month period; and (c) The estimated Net Revenues for the then current Fiscal Year and for each Fiscal Year thereafter to and including the first complete Fiscal Year after the latest Date of Operation of any uncompleted Parity Project to be financed from proceeds of such Contracts or Bonds, as evidenced by a certificate of the General Manager of the District on file with the District, including (after giving effect to the completion of all such uncompleted Parity Projects) an allowance for estimated Net Revenues for each of such Fiscal Years arising from any increase in the income, rents, fees, rates and charges estimated to be fixed, prescribed or received for Water Service and which are economically feasible and reasonably considered necessary based on projected operations for such period, as evidenced by a certificate of the Manager on file with the District, shall produce a sum equal to at least one hundred ten percent (110%) of the estimated Debt Service for each of such Fiscal Years, after giving effect to the execution of all Contracts and the issuance of all Bonds estimated to be required to be executed or issued to pay the costs of completing all uncompleted Parity Projects within such Fiscal Years, assuming that all such Contracts and Bonds have maturities, interest rates and proportionate principal repayment provisions similar to the Contract last executed or then being executed or the Bonds last issued or then being issued for the purpose of acquiring and constructing any of such uncompleted Parity Projects. Notwithstanding the foregoing, Bonds issued or Contracts executed to refund Bonds or prepay Contracts may be delivered without satisfying the conditions set forth above if Debt Service in each Fiscal Year after the Fiscal Year in which such Bonds are issued or Contracts executed is not greater than Debt Service would have been in each such Fiscal Year prior to the issuance of such Bonds or execution of such Contracts. Section 6.15. Against Sale or Other Disposition of Property. The District will not enter into any agreement or lease which impairs the operation of the Water System or any part thereof necessary to secure adequate Revenues for the payment of the principal of and interest on the 2016A Bonds, or which would otherwise impair the operation of the Water System. Any real or personal property which has become nonoperative or which is not needed for the efficient and proper operation of the Water System, or any material or equipment which has become worn out, may be sold if such sale will not impair the ability of the District to pay the principal of and interest on the 2016A Bonds and if the proceeds of such sale are deposited in the Revenue Fund. 33 Nothing herein shall restrict the ability of the District to sell any portion of the Water System if such portion is immediately repurchased by the District and if such arrangement cannot by its terms result in the purchaser of such portion of the Water System exercising any remedy which would deprive the District of or otherwise interfere with its right to own and operate such portion of the Water System. Section 6.16. Against Competitive Facilities. To the extent that it can so legally obligate itself, the District covenants that it will not acquire, construct, maintain or operate and will not, to the extent permitted by law and within the scope of its powers, permit any other public or private agency, corporation, district or political subdivision or any person whomsoever to acquire, construct, maintain or operate within the District any water system competitive with the Water System. Section 6.17. Maintenance and Operation of the Water System. The District will maintain and preserve the Water System in good repair and working order at all times, operate the Water System in an efficient and economical manner and pay all Operating and Maintenance Costs as they become due and payable. Section 6.18. Payment of Claims. The District will pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien on the Revenues or the funds or accounts created hereunder or on any funds in the hands of the District pledged to pay the principal of or interest on the 2016A Bonds or to the Owners prior or superior to the lien under the Indenture. Section 6.19. Insurance. (a) The District will procure and maintain or cause to be procured and maintained insurance on the Water System with responsible insurers in such amounts and against such risks (including damage to or destruction of the Water System) as are usually covered in connection with facilities similar to the Water System so long as such insurance is available from reputable insurance companies. In the event of any damage to or destruction of the Water System caused by the perils covered by such insurance, the Net Proceeds thereof shall be applied to the reconstruction, repair or replacement of the damaged or destroyed portion of the Water System. The District shall begin such reconstruction, repair or replacement promptly after such damage or destruction shall occur, and shall continue and properly complete such reconstruction, repair or replacement as expeditiously as possible, and shall pay out of such Net Proceeds all costs and expenses in connection with such reconstruction, repair or replacement so that the same shall be completed and the Water System shall be free and clear of all claims and liens. If such Net Proceeds exceed the costs of such reconstruction, repair or replacement portion of the Water System, and/or the cost of the construction of additions, betterments, extensions or improvements to the Water System, then the excess Net Proceeds shall be applied in part to the redemption of 2016A Bonds as provided in Section 4.01(a) and in part to such other fund or account as may be appropriate and used for the retirement of Bonds and Contracts in the same proportion which the aggregate unpaid principal balance of 2016A Bonds then bears to the aggregate unpaid principal amount of such Bonds and Contracts. If such Net Proceeds are sufficient to enable the District to retire the entire obligation evidenced hereby prior to the final due date of the 2016A Bonds as well as the entire obligations evidenced by Bonds and Contracts then remaining unpaid prior to 34 their final respective due dates, the District may elect not to reconstruct, repair or replace the damaged or destroyed portion of the Water System, and/or not to construct other additions, betterments, extensions or improvements to the Water System; and thereupon such Net Proceeds shall be applied to the redemption of 2016A Bonds as provided in Section 4.01(a) and to the retirement of such Bonds and Contracts. (b) The District will procure and maintain such other insurance as it shall deem advisable or necessary to protect its interests and the interests of the 2016A Bond Owners, which insurance shall afford protection in such amounts and against such risks as are usually covered in connection with municipal water systems similar to the Water System. (c) Any insurance required to be maintained by paragraph (a) above and, if the District determines to procure and maintain insurance pursuant to paragraph (b) above, such insurance, may be maintained under a self-insurance program so long as such self-insurance is maintained in the amounts and manner usually maintained in connection with water systems similar to the Water System and is, in the opinion of an accredited actuary, actuarially sound. Section 6.20. Payment of Taxes and Compliance with Governmental Regulations. The District will pay and discharge all taxes, assessments and other governmental charges which may hereafter be lawfully imposed upon the Water System, or any part thereof or upon the Revenues when the same shall become due. The District will duly observe and conform with all valid regulations and requirements of any governmental authority relative to the operation of the Water System, or any part thereof, but the District shall not be required to comply with any regulations or requirements so long as the validity or application thereof shall be contested in good faith. Section 6.21. Amount of Rates and Charges. To the fullest extent permitted by law, the District shall fix and prescribe, at the commencement of each Fiscal Year, rates and charges for the Water Service which are reasonably expected, at the commencement of each Fiscal Year, to be at least sufficient to yield during each Fiscal Year Net Revenues equal to one hundred ten percent (110%) of the Debt Service for such Fiscal Year. The District may make adjustments from time to time in such rates and charges and may make such classification thereof as it deems necessary, but shall not reduce the rates and charges then in effect unless the Net Revenues from such reduced rates and charges will at all times be sufficient to meet the requirements of this Section. Section 6.22. Collection of Rates and Charges. The District will have in effect at all times by-laws, rules and regulations requiring each customer to pay the rates and charges applicable to the Water Service and providing for the billing thereof and for a due date and a delinquency date for each bill. In each case where such bill remains unpaid in whole or in part after it becomes delinquent, the District may discontinue such service from the Water System, and such service shall not thereafter be recommenced except in accordance with District by-laws or rules, regulations and State law governing such situations of delinquency Section 6.23. Eminent Domain Proceeds. If all or any part of the Water System shall be taken by eminent domain proceedings, the Net Proceeds thereof shall be applied as follows: (a) If: (1) the District files with the Trustee a certificate showing: (i) the estimated loss of annual Net Revenues, if any, suffered or to be suffered by the District by reason of such eminent domain proceedings; (ii) a general description of the additions, betterments, extensions or improvements to the Water System proposed to be acquired and constructed by the District from 35 such Net Proceeds; and (iii) an estimate of the additional annual Net Revenues to be derived from such additions, betterments, extensions or improvements; and (2) the District, on the basis of such certificate filed with the Trustee, determines that the estimated additional annual Net Revenues will sufficiently offset the estimated loss of annual Net Revenues resulting from such eminent domain proceedings so that the ability of the District to meet its obligations hereunder will not be substantially impaired (which determination shall be final and conclusive), then the District shall promptly proceed with the acquisition and construction of such additions, betterments, extensions or improvements substantially in accordance with such certificate and such Net Proceeds shall be applied to the payment of the costs of such acquisition and construction, and any balance of such Net Proceeds not required by the District for such purpose shall be deposited in the Revenue Fund. (b) If the foregoing conditions are not met, then such Net Proceeds shall be applied by the District in part to the redemption of 2016A Bonds as provided in Section 4.01(a) and in part to such other fund or account as may be appropriate and used for the retirement of Bonds and Contracts in the same proportion which the aggregate unpaid principal balance of 2016A Bonds then bears to the aggregate unpaid principal amount of such Bonds and Contracts. Section 6.24. Enforcement of Contracts. So long as any of the 2016A Bonds are outstanding, the District will not voluntarily consent to or permit any rescission of, nor will it consent to any amendment to or otherwise take any action under or in connection with any contracts previously or hereafter entered into which contracts provide for water to be supplied to the District which consent, revision, amendment or other action will reduce the supply of water thereunder (except as provided therein), unless the Board of Directors of the District determines by resolution that such rescission or amendment would not materially adversely affect the ability of the District to pay principal of and interest on the 2016A Bonds. ARTICLE VII EVENTS OF DEFAULT AND REMEDIES OF 2016A BOND OWNERS Section 7.01. Events of Default. The following events shall be Events of Default hereunder: (a) Default by the District in the due and punctual payment of the principal of any 2016A Bonds, the principal of any Bonds or the principal with respect to any Contract, when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption, by acceleration, or otherwise. (b) Default by the District in the due and punctual payment of any installment of interest on any 2016A Bonds, any installment of interest on any Bond or any installment of interest with respect to any Contract, when and as the same shall become due and payable. (c) Default by the District in the observance of any of the other covenants, agreements or conditions on its part in the Indenture or in the 2016A Bonds, or required by any Bond or indenture relating thereto or by any Contract, if such default shall have continued for a period of sixty (60) days after written notice thereof, specifying such default and requiring the same to be remedied, shall have been given to the District by the Trustee or by the Owners of not less than a majority in aggregate principal amount of 2016A Bonds Outstanding, a majority in principal amount of such Bond outstanding, or a majority in principal amount outstanding with 36 respect to such Contract, as applicable; provided, however, that if in the reasonable opinion of the District the default stated in the notice can be corrected, but not within such sixty (60) day period and corrective action is instituted by the District within such sixty (60) day period and diligently pursued in good faith until the default is corrected, such default shall not be an Event of Default hereunder. (d) The District shall file a petition or answer seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if a court of competent jurisdiction shall approve a petition filed with or without the consent of the District seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if under the provisions of any other law for the relief or aid of debtors any court of competent jurisdiction shall assume custody or control of the District or of the whole or any substantial part of its property. (e) Payment of the principal of any Bond or with respect to any Contract is accelerated in accordance with its terms. Section 7.02. Remedies Upon Event of Default. If any Event of Default specified in Section 7.01(d) or (e) shall occur and be continuing, the Trustee shall, and for any other Event of Default, the Trustee may, and, at the written direction of the Owners of not less than a majority in aggregate principal amount of the 2016A Bonds at the time Outstanding, shall, in each case, upon notice in writing to the District, declare the principal of all of the 2016A Bonds then Outstanding, and the interest accrued thereon, to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in the Indenture or in the 2016A Bonds contained to the contrary notwithstanding. Nothing contained herein shall permit or require the Trustee to accelerate payments due under the Indenture if the District is not in default of its obligation hereunder. Any such declaration is subject to the condition that if, at any time after such declaration and before any judgment or decree for the payment of the moneys due shall have been obtained or entered, the District shall deposit with the Trustee a sum sufficient to pay all of the principal of and installments of interest on the 2016A Bonds payment of which is overdue, with interest on such overdue principal at the rate borne by the respective 2016A Bonds to the extent permitted by law, and the reasonable charges and expenses of the Trustee, or shall deposit with the applicable trustee with respect to any Contract a sum sufficient to pay all of the principal and installments of interest with respect to such Contract payment of which is overdue, with interest on such overdue principal at the rate borne by such Contract to the extent permitted by law, and the reasonable charges and expenses of the applicable trustee with respect to such Contract, or shall deposit with the applicable trustee with respect to any Bond a sum sufficient to pay all of the principal of and installments of interest on such Bond payment of which is overdue, with interest on such overdue principal at the rate borne by such Bonds to the extent permitted by law, and the reasonable charges and expenses of the applicable trustee with respect to such Bonds, and any and all other Events of Default known to the Trustee or the applicable trustee with respect to such Contract or Bonds (other than in the payment of principal of and interest on the 2016A Bonds, payment of principal and interest with respect to such Contract or payment of principal and interest on such Bond, as applicable, due and payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the Trustee, or provision deemed by the Trustee to be adequate shall have been made therefor, 37 then, and in every such case the Trustee shall on behalf of the Owners of all of the 2016A Bonds, rescind and annul such declaration and its consequences and waive such Event of Default; but no such rescission and annulment shall extend to or shall affect any subsequent Event of Default, or shall impair or exhaust any right or power consequent thereon. Section 7.03. Application of Revenues and Other Funds After Default. If an Event of Default shall occur and be continuing, all Revenues held or thereafter received by the Trustee and any other funds then held or thereafter received by the Trustee under any of the provisions of the Indenture (other than amounts held in the Rebate Fund) shall be applied in the following order: (i) To the payment of any expenses necessary in the opinion of the Trustee to protect the interests of the Owners of the 2016A Bonds, Contract or Bonds and payment of reasonable fees and expenses of the Trustee (including reasonable fees and disbursements of its counsel) incurred in and about the performance of its powers and duties under the Indenture; (ii) To the payment of Operating and Maintenance Costs and Non-Operating and Maintenance Costs; (iii) To the payment of the principal of and interest then due on the 2016A Bonds (upon presentation of the 2016A Bonds to be paid, and stamping or otherwise noting thereon of the payment if only partially paid, or surrender thereof if fully paid), in accordance with the provisions of the Indenture, the payment of the principal and interest then due with respect to such Contract in accordance with the provisions thereof and the payment of the principal of and interest then due on such Bonds in accordance with the provisions thereof and of any indenture related thereto, in the following order of priority: First: To the payment to the persons entitled thereto of all installments of interest then due on the 2016A Bonds, with respect to such Contract or on such Bonds, as applicable, in the order of the maturity of such installments, and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto, without any discrimination or preference; and Second: To the payment to the persons entitled thereto of the unpaid principal of any 2016A Bonds, principal with respect to such Contract or principal of any Bonds, as applicable, which shall have become due, whether at maturity or by acceleration or redemption, with interest on the overdue principal at the rate of eight percent (8%) per annum, and, if the amount available shall not be sufficient to pay in full all of the 2016A Bonds, all amounts due under such Contract or all the Bonds, as applicable, together with such interest, then to the payment thereof ratably, according to the amounts of principal due on such date to the persons entitled thereto, without any discrimination or preference; and Third: If there shall exist any remainder after the foregoing payments, such remainder shall be paid to the District. Section 7.04. Trustee to Represent 2016A Bond Owners. The Trustee is hereby irrevocably appointed (and the successive respective Owners of the 2016A Bonds, by taking and holding the same, shall be conclusively deemed to have so appointed the Trustee) as trustee and true and lawful attorney in fact of the Owners of the 2016A Bonds for the purpose of exercising and prosecuting on 38 their behalf such rights and remedies as may be available to such Owners under the provisions of the 2016A Bonds or the Indenture and applicable provisions of law. Upon the occurrence and continuance of an Event of Default or other occasion giving rise to a right in the Trustee to represent the 2016A Bond Owners, the Trustee in its discretion may, and upon the written request of the Owners of a majority in aggregate principal amount of the 2016A Bonds then Outstanding, and upon being indemnified to its satisfaction therefor, shall proceed to protect or enforce its rights or the rights of such Owners by such appropriate action, suit, mandamus or other proceedings as it shall deem most effectual to protect and enforce any such right, at law or in equity, either for the specific performance of any covenant or agreement contained herein, or in aid of the execution of any power herein granted, or for the enforcement of any other appropriate legal or equitable right or remedy vested in the Trustee or in such Owners under the 2016A Bonds or the Indenture or any law; and upon instituting such proceeding, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver for the Revenues and other assets pledged under the Indenture, pending such proceedings. All rights of action under the Indenture or the 2016A Bonds or otherwise may be prosecuted and enforced by the Trustee without the possession of any of the 2016A Bonds or the production thereof in any proceeding relating thereto, and any such suit, action or proceeding instituted by the Trustee shall be brought in the name of the Trustee for the benefit and protection of all of the Owners of such 2016A Bonds, subject to the provisions of the Indenture. Section 7.05. 2016A Bond Owners’ Direction of Proceedings. Anything in the Indenture to the contrary notwithstanding, the Owners of a majority in aggregate principal amount of the 2016A Bonds then Outstanding shall have the right, by an instrument or concurrent instruments in writing executed and delivered to the Trustee, and upon indemnification of the Trustee to its reasonable satisfaction to direct the method of conduct in all remedial proceedings taken by the Trustee hereunder, provided that such direction shall not be otherwise than in accordance with law and the provisions of the Indenture, and that the Trustee shall have the right to decline to follow any such direction which in the opinion of the Trustee would be unjustly prejudicial to 2016A Bond Owners not parties to such direction. Section 7.06. Suit by Owners. No Owner of any 2016A Bonds shall have the right to institute any suit, action or proceeding at law or in equity, for the protection or enforcement of any right or remedy under the Indenture with respect to such 2016A Bonds, unless: (a) such Owners shall have given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of not less than fifty percent (50%) in aggregate principal amount of the 2016A Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such suit, action or proceeding in its own name; (c) such Owner or Owners shall have tendered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee shall have failed to comply with such request for a period of sixty (60) days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee; and (e) no direction inconsistent with such written request shall have been given to the Trustee during such sixty (60) day period by the Owners of a majority in aggregate principal amount of the 2016A Bonds then Outstanding. Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of 2016A Bonds of any remedy hereunder or under law; it being understood and intended that no one or more Owners of 2016A Bonds shall have any right in any manner whatever by their action to affect, disturb or prejudice the security of the Indenture or the rights of any other Owners of 2016A Bonds, or to enforce any right under the 2016A Bonds, the Indenture, or applicable law with respect to the 2016A 39 Bonds, except in the manner herein provided, and that all proceedings at law or in equity to enforce any such right shall be instituted, had and maintained in the manner herein provided and for the benefit and protection of all Owners of the Outstanding 2016A Bonds, subject to the provisions of the Indenture. Section 7.07. Absolute Obligation of the District. Nothing in this Section 7.07 or in any other provision of the Indenture or in the 2016A Bonds shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the principal of and interest on the 2016A Bonds to the respective Owners of the 2016A Bonds at their respective dates of maturity, or upon call for redemption, as herein provided, but only out of the Revenues and other assets herein pledged therefor, or affect or impair the right of such Owners, which is also absolute and unconditional, to enforce such payment by virtue of the contract embodied in the 2016A Bonds. Section 7.08. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee or to the Owners of the 2016A Bonds is intended to be exclusive of any other remedy or remedies, and each and every such remedy, to the extent permitted by law, shall be cumulative and in addition to any other remedy given hereunder or now or hereafter existing at law or in equity or otherwise. Section 7.09. No Waiver of Default. No delay or omission of the Trustee or of any Owner of the 2016A Bonds to exercise any right or power arising upon the occurrence of any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein. ARTICLE VIII THE TRUSTEE Section 8.01. Duties, Immunities and Liabilities of Trustee. (a) The Trustee shall, prior to an Event of Default, and after the curing or waiving of all Events of Default which may have occurred, perform such duties and only such duties as are expressly and specifically set forth in the Indenture and no implied covenants or duties shall be read into the Indenture against the Trustee. The Trustee shall, during the existence of any Event of Default (which has not been cured or waived), exercise such of the rights and powers vested in it by the Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs. (b) The District may remove the Trustee at any time, unless an Event of Default shall have occurred and then be continuing, and shall remove the Trustee if at any time requested to do so by an instrument or concurrent instruments in writing signed by the Owners of not less than a majority in aggregate principal amount of the 2016A Bonds then Outstanding (or their attorneys duly authorized in writing) or if at any time the Trustee shall cease to be eligible in accordance with subsection (e) of this Section, or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or its property shall be appointed, or any public officer shall take control or charge of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, in each case by giving written notice of such removal to the Trustee and thereupon shall promptly appoint a successor Trustee by an instrument in writing. 40 (c) The Trustee may at any time resign by giving written notice of such resignation to the District and by giving the 2016A Bond Owners notice of such resignation by mail at the addresses shown on the Registration Books. Upon receiving such notice of resignation, the District shall promptly appoint a successor Trustee by an instrument in writing. (d) Any removal or resignation of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of appointment by the successor Trustee. If no successor Trustee shall have been appointed and have accepted appointment within forty five (45) days of giving notice of removal or notice of resignation as aforesaid, the resigning Trustee or any 2016A Bond Owner (on behalf of himself and all other 2016A Bond Owners) may petition any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. Any successor Trustee appointed under the Indenture shall signify its acceptance of such appointment by executing and delivering to the District and to its predecessor Trustee a written acceptance thereof, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become vested with all the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named Trustee herein; but, nevertheless at the Written Request of the District or the request of the successor Trustee, such predecessor Trustee shall execute and deliver any and all instruments of conveyance or further assurance and do such other things as may reasonably be required for more fully and certainly vesting in and confirming to such successor Trustee all the right, title and interest of such predecessor Trustee in and to any property held by it under the Indenture and shall pay over, transfer, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions herein set forth. Upon request of the successor Trustee, the District shall execute and deliver any and all instruments as may be reasonably required for more fully and certainly vesting in and confirming to such successor Trustee all such moneys, estates, properties, rights, powers, trusts, duties and obligations. Upon acceptance of appointment by a successor Trustee as provided in this subsection, the District shall mail or cause the successor trustee to mail a notice of the succession of such Trustee to the trusts hereunder to each rating agency which is then rating the 2016A Bonds and to the 2016A Bond Owners at the addresses shown on the Registration Books. If the District fails to mail such notice within fifteen (15) days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the District. (e) Any Trustee appointed under the provisions of this Section in succession to the Trustee shall be a trust company, banking association or bank having the powers of a trust company, having a combined capital and surplus of at least Seventy Five Million Dollars ($75,000,000), and subject to supervision or examination for federal or state authority. If such bank, banking association or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purpose of this subsection the combined capital and surplus of such trust company, banking association or bank shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this subsection (e), the Trustee shall resign immediately in the manner and with the effect specified in this Section. Section 8.02. Merger or Consolidation. Any trust company, banking association or bank into which the Trustee may be merged or converted or with which it may be consolidated or any trust company, banking association or bank resulting from any merger, conversion or consolidation to which it shall be a party or any trust company, banking association or bank to which the Trustee may 41 sell or transfer all or substantially all of its corporate trust business, provided such trust company, banking association or bank shall be eligible under subsection (e) of Section 8.01, shall be the successor to such Trustee, without the execution or filing of any paper or any further act, anything herein to the contrary notwithstanding. Section 8.03. Liability of Trustee. (a) The recitals of facts herein and in the 2016A Bonds shall be taken as statements of the District, and the Trustee shall not assume responsibility for the correctness of the same, or make any representations as to the validity or sufficiency of the Indenture or the 2016A Bonds, nor shall the Trustee incur any responsibility in respect thereof, other than as expressly stated herein in connection with the respective duties or obligations herein or in the 2016A Bonds assigned to or imposed upon it. The Trustee shall, however, be responsible for its representations contained in its certificate of authentication on the 2016A Bonds. The Trustee shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful misconduct. The Trustee may become the Owner of 2016A Bonds with the same rights it would have if it were not Trustee, and, to the extent permitted by law, may act as depository for and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of 2016A Bond Owners, whether or not such committee shall represent the Owners of a majority in principal amount of the 2016A Bonds then Outstanding. (b) The Trustee shall not be liable for any error of judgment made in good faith by a responsible officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts. (c) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Owners of not less than a majority (or such other percentage provided for herein) in aggregate principal amount of the 2016A Bonds at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under the Indenture. (d) The Trustee shall not be liable for any action taken by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by the Indenture. (e) The Trustee shall not be deemed to have knowledge of any default or Event of Default hereunder or any other event which, with the passage of time, the giving of notice, or both, would constitute an Event of Default hereunder unless and until a Responsible Officer of the Trustee shall have actual knowledge of such event or the Trustee shall have been notified in writing, in accordance with Section 11.07, of such event by the District or the Owners of not less than fifty percent (50%) of the 2016A Bonds then Outstanding. Except as otherwise expressly provided herein, the Trustee shall not be bound to ascertain or inquire as to the performance or observance by the District of any of the terms, conditions, covenants or agreements herein of any of the documents executed in connection with the 2016A Bonds, or as to the existence of an Event of Default thereunder or an event which would, with the giving of notice, the passage of time, or both, constitute an Event of Default thereunder. The Trustee shall not be responsible for the validity, effectiveness or priority of any collateral given to or held by it. 42 (f) No provision of the Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties hereunder, or in the exercise of any of its rights or powers. (g) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by the Indenture at the request or direction of Owners pursuant to the Indenture, unless such Owners shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. No permissive power, right or remedy conferred upon the Trustee hereunder shall be construed to impose a duty to exercise such power, right or remedy. (h) Whether or not herein expressly so provided, every provision of the Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Article VIII. (i) The Trustee shall have no responsibility with respect to any information, statement, or recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the 2016A Bonds. (j) The immunities extended to the Trustee also extend to its directors, officers, employees and agents. (k) The Trustee may execute any of the trusts or powers of the Indenture and perform any of its duties through attorneys, agents and receivers and shall not be answerable for the conduct of the same if appointed by it with reasonable care. (l) The Trustee shall not be considered in breach of or in default in its obligations hereunder or progress in respect thereto in the event of enforced delay (“unavoidable delay”) in the performance of such obligations due to unforeseeable causes beyond its control and without its fault or negligence, including, but not limited to, Acts of God or of the public enemy or terrorists, acts of a government, acts of the other party, fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes, earthquakes, explosion, mob violence, riot, inability to procure or general sabotage or rationing of labor, equipment, facilities, sources of energy, material or supplies in the open market, litigation or arbitration involving a party or others relating to zoning or other governmental action or inaction pertaining to the Water System, malicious mischief, condemnation, and unusually severe weather or delays of suppliers or subcontractors due to such causes or any similar event and/or occurrences beyond the control of the Trustee. (m) The Trustee agrees to accept and act upon instructions or directions pursuant to the Indenture sent by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods, provided, however, that the Trustee shall have received an incumbency certificate listing persons designated to give such instructions or directions and containing specimen signatures of such designated persons, which such incumbency certificate shall be amended and replaced whenever a person is to be added or deleted from the listing. If the District elects to give the Trustee e-mail or facsimile instructions (or instructions by a similar electronic method) and the Trustee in its discretion elects to act upon such instructions, the Trustee’s understanding of such instructions shall be deemed controlling. The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee’s reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written 43 instruction. The District agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized instructions, and the risk of interception and misuse by third parties. (n) The Trustee shall not be concerned with or accountable to anyone for the subsequent use or application of any moneys which shall be released or withdrawn in accordance with the provisions hereof. Section 8.04. Right to Rely on Documents. The Trustee shall be protected in acting upon any notice, resolution, requisition, request, consent, order, certificate, report, opinion, notes, direction, facsimile transmission, electronic mail or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Trustee may consult with counsel, who may be counsel of or to the District, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. The Trustee may treat the Owners of the 2016A Bonds appearing in the Trustee’s Registration Books as the absolute owners of the 2016A Bonds for all purposes and the Trustee shall not be affected by any notice to the contrary. Whenever in the administration of the trusts imposed upon it by the Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof is specifically prescribed herein) may be deemed to be conclusively proved and established by a Certificate, Request or Requisition of the District, and such Certificate, Request or Requisition shall be full warrant to the Trustee for any action taken or suffered in good faith under the provisions of the Indenture in reliance upon such Certificate, Request or Requisition, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as it may deem reasonable. Section 8.05. Preservation and Inspection of Documents. All documents received by the Trustee under the provisions of the Indenture shall be retained in its possession and shall be subject at all reasonable times to the inspection of the District and any 2016A Bond Owner, and their agents and representatives duly authorized in writing, at reasonable hours and under reasonable conditions. Section 8.06. Compensation and Indemnification. The District shall pay to the Trustee from time to time all reasonable compensation for all services rendered under the Indenture, and also all reasonable expenses, charges, legal and consulting fees and other disbursements and those of its attorneys, agents and employees, incurred in and about the performance of their powers and duties under the Indenture. The District shall indemnify, defend and hold harmless the Trustee, its officers, employees, directors and agents from and against any loss, costs, claims, liability or expense (including fees and expenses of its attorneys and advisors) incurred without negligence or bad faith on its part, arising out of or in connection with the execution of the Indenture, acceptance or administration of this trust, including costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers hereunder. The rights of the Trustee and the obligations of the District under this Section 8.06 shall survive removal or resignation of the Trustee hereunder or the discharge of the 2016A Bonds and the Indenture. 44 ARTICLE IX MODIFICATION OR AMENDMENT OF THE INDENTURE Section 9.01. Amendments Permitted. (a) The Indenture and the rights and obligations of the District and of the Owners of the 2016A Bonds and of the Trustee may be modified or amended from time to time and at any time by an indenture or indentures supplemental thereto, which the District and the Trustee may enter into when the written consent of the Owners of a majority in aggregate principal amount of all 2016A Bonds then Outstanding, exclusive of 2016A Bonds disqualified as provided in Section 11.09 hereof, shall have been filed with the Trustee. No such modification or amendment shall: (1) extend the fixed maturity of any 2016A Bonds, or reduce the amount of principal thereof or premium (if any) thereon, or extend the time of payment, or change the rate of interest or the method of computing the rate of interest thereon, or extend the time of payment of interest thereon, without the consent of the Owner of each 2016A Bond so affected; or (2) reduce the aforesaid percentage of 2016A Bonds the consent of the Owners of which is required to affect any such modification or amendment, or permit the creation of any lien on the Revenues and other assets pledged under the Indenture prior to or on a parity with the lien created by the Indenture except as permitted herein, or deprive the Owners of the 2016A Bonds of the lien created by the Indenture on such Revenues and other assets except as permitted herein, without the consent of the Owners of all of the 2016A Bonds then Outstanding. It shall not be necessary for the consent of the 2016A Bond Owners to approve the particular form of any Supplemental Indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the District and the Trustee of any Supplemental Indenture pursuant to this subsection (a), the Trustee shall mail a notice, setting forth in general terms the substance of such Supplemental Indenture, to each Rating Agency and the Owners of the 2016A Bonds at the respective addresses shown on the Registration Books. Any failure to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such Supplemental Indenture. (b) The Indenture and the rights and obligations of the District, the Trustee and the Owners of the 2016A Bonds may also be modified or amended from time to time and at any time by a Supplemental Indenture, which the District and the Trustee may enter into without the consent of any 2016A Bond Owners, if the Trustee shall receive an opinion of Bond Counsel to the effect that the provisions of such Supplemental Indenture shall not materially adversely affect the interests of the Owners of the Outstanding 2016A Bonds, including, without limitation, for any one or more of the following purposes: (1) to add to the covenants and agreements of the District contained in the Indenture other covenants and agreements thereafter to be observed, to pledge or assign additional security for the 2016A Bonds (or any portion thereof), or to surrender any right or power herein reserved to or conferred upon the District; (2) to make such provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defective provision, contained in the Indenture, or in regard to matters or questions arising under the Indenture, as the District may deem necessary or desirable; 45 (3) to modify, amend or supplement the Indenture in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute in effect, and to add such other terms conditions and provisions as may be permitted by said act or similar federal statute; and (4) to modify, amend or supplement the Indenture in such manner as to cause interest on the 2016A Bonds to remain excludable from gross income under the Code. (c) The Trustee may in its discretion, but shall not be obligated to, enter into any such Supplemental Indenture authorized by subsections (a) or (b) of this Section which materially adversely affects the Trustee’s own rights, duties or immunities under the Indenture or otherwise. (d) Prior to the Trustee entering into any Supplemental Indenture hereunder, there shall be delivered to the Trustee an opinion of Bond Counsel stating, in substance, that such Supplemental Indenture has been adopted in compliance with the requirements of the Indenture and that the adoption of such Supplemental Indenture will not, in and of itself, adversely affect the exclusion of interest on the 2016A Bonds from federal income taxation and from state income taxation. Section 9.02. Effect of Supplemental Indenture. Upon the execution of any Supplemental Indenture pursuant to this Article, the Indenture shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under the Indenture of the District, the Trustee and all Owners of 2016A Bonds Outstanding shall thereafter be determined, exercised and enforced thereunder subject in all respects to such modification and amendment, and all the terms and conditions of any such Supplemental Indenture shall be deemed to be part of the terms and conditions of the Indenture for any and all purposes. Section 9.03. Endorsement of 2016A Bonds; Preparation of New 2016A Bonds. 2016A Bonds delivered after the execution of any Supplemental Indenture pursuant to this Article may, and if the Trustee so determines shall, bear a notation by endorsement or otherwise in form approved by the District and the Trustee as to any modification or amendment provided for in such Supplemental Indenture, and, in that case, upon demand on the Owner of any 2016A Bonds Outstanding at the time of such execution and presentation of his or her 2016A Bonds for the purpose at the Office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, a suitable notation shall be made on such 2016A Bonds. If the Supplemental Indenture shall so provide, new 2016A Bonds so modified as to conform, in the opinion of the District and the Trustee, to any modification or amendment contained in such Supplemental Indenture, shall be prepared and executed by the District and authenticated by the Trustee, and upon demand on the Owners of any 2016A Bonds then Outstanding shall be exchanged at the Office of the Trustee, without cost to any 2016A Bond Owner, for 2016A Bonds then Outstanding, upon surrender for cancellation of such 2016A Bonds, in equal aggregate principal amount of the same maturity. Section 9.04. Amendment of Particular 2016A Bonds. The provisions of this Article shall not prevent any 2016A Bond Owner from accepting any amendment as to the particular 2016A Bonds held by him. 46 ARTICLE X DEFEASANCE Section 10.01. Discharge of Indenture. The 2016A Bonds may be paid by the District in any of the following ways, provided that the District also pays or causes to be paid any other sums payable hereunder by the District: (a) by paying or causing to be paid the principal of and interest and redemption premiums (if any) on the 2016A Bonds, as and when the same become due and payable; (b) by depositing with the Trustee, in trust, at or before maturity, money or securities in the necessary amount (as provided in Section 10.03) to pay or redeem all 2016A Bonds then Outstanding; or (c) by delivering to the Trustee, for cancellation by it, all of the 2016A Bonds then Outstanding. If the District shall also pay or cause to be paid all other sums payable hereunder by the District, then and in that case, at the election of the District (as evidenced by a Certificate of the District, filed with the Trustee, signifying the intention of the District to discharge all such indebtedness and the Indenture), and notwithstanding that any 2016A Bonds shall not have been surrendered for payment, the Indenture and the pledge of Revenues and other assets made under the Indenture and all covenants, agreements and other obligations of the District under the Indenture shall cease, terminate, become void and be completely discharged and satisfied. In such event, upon the Written Request of the District, the Trustee shall execute and deliver to the District all such instruments as may be necessary or desirable to evidence such discharge and satisfaction, and the Trustee shall pay over, transfer, assign or deliver all moneys or securities or other property held by it pursuant to the Indenture which are not required for the payment or redemption of 2016A Bonds not theretofore surrendered for such payment or redemption to the District. Section 10.02. Discharge of Liability on 2016A Bonds. Upon the deposit with the Trustee, in trust, at or before maturity, of money or securities in the necessary amount (as provided in Section 10.03) to pay or redeem any Outstanding 2016A Bonds (whether upon or prior to the maturity or the Redemption Date of such 2016A Bonds), provided that, if such Outstanding 2016A Bonds are to be redeemed prior to maturity, notice of such redemption shall have been given as provided in Article IV or provisions satisfactory to the Trustee shall have been made for the giving of such notice, then all liability of the District in respect of such 2016A Bonds shall cease, terminate and be completely discharged, and the Owners thereof shall thereafter be entitled only to payment out of such money or securities deposited with the Trustee as aforesaid for their payment, subject however, to the provisions of Section 10.04. The District may at any time surrender to the Trustee for cancellation by it any 2016A Bonds previously issued and delivered, which the District may have acquired in any manner whatsoever, and such 2016A Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired. Section 10.03. Deposit of Money or Securities with Trustee. Whenever in the Indenture it is provided or permitted that there be deposited with or held in trust by the Trustee money or securities in the necessary amount to pay or redeem any 2016A Bonds, the money or securities so to be 47 deposited or held may include money or securities held by the Trustee in the funds and accounts established pursuant to the Indenture and shall be: (a) lawful money of the United States of America in an amount equal to the principal amount of such 2016A Bonds and all unpaid interest thereon to maturity, except that, in the case of 2016A Bonds which are to be redeemed prior to maturity and in respect of which notice of such redemption shall have been given as provided in Article IV or provisions satisfactory to the Trustee shall have been made for the giving of such notice, the amount to be deposited or held shall be the principal amount of such 2016A Bonds and all unpaid interest and premium, if any, thereon to the Redemption Date; or (b) Federal Securities the principal of and interest on which when due will, in the written opinion of an Independent Certified Public Accountant or Independent Financial Consultant filed with the District and the Trustee, provide money sufficient to pay the principal of and all unpaid interest to maturity, or to the Redemption Date (with premium, if any), as the case may be, on the 2016A Bonds to be paid or redeemed, as such principal, interest and premium, if any, become due, provided that in the case of 2016A Bonds which are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in Article IV or provision satisfactory to the Trustee shall have been made for the giving of such notice; provided, in each case, that: (i) the Trustee shall have been irrevocably instructed (by the terms of the Indenture or by Written Request of the District) to apply such money to the payment of such principal, interest and premium, if any, with respect to such 2016A Bonds; and (ii) the District shall have delivered to the Trustee an opinion of Bond Counsel addressed to the District and the Trustee to the effect that such 2016A Bonds have been discharged in accordance with the Indenture (which opinion may rely upon and assume the accuracy of the Independent Certified Public Accountant’s or Independent Financial Consultant’s opinion referred to above). Section 10.04. Payment of 2016A Bonds After Discharge of Indenture. Notwithstanding any provisions of the Indenture, any moneys held by the Trustee in trust for the payment of the principal of, or interest on, any 2016A Bonds and remaining unclaimed for two (2) years after the principal of all of the 2016A Bonds has become due and payable (whether at maturity or upon call for redemption or by acceleration as provided in the Indenture), if such moneys were so held at such date, or two (2) years after the date of deposit of such moneys if deposited after said date when all of the 2016A Bonds became due and payable, shall be repaid to the District free from the trusts created by the Indenture upon receipt of an indemnification agreement acceptable to the District and the Trustee indemnifying the Trustee with respect to claims of Owners of 2016A Bonds which have not yet been paid, and all liability of the Trustee with respect to such moneys shall thereupon cease; provided, however, that before the repayment of such moneys to the District as aforesaid, the Trustee shall at the written direction of the District (at the cost of the District) first mail to the Owners of 2016A Bonds which have not yet been paid, at the addresses shown on the Registration Books, a notice, in such form as may be deemed appropriate by the Trustee with respect to the 2016A Bonds so payable and not presented and with respect to the provisions relating to the repayment to the District of the moneys held for the payment thereof. 48 ARTICLE XI MISCELLANEOUS Section 11.01. Liability of District Limited to Revenues. Notwithstanding anything in the Indenture or the 2016A Bonds, but subject to the priority of payment with respect to Operating and Maintenance Costs and Non-Operating and Maintenance Costs, the District shall not be required to advance any moneys derived from any source other than the Revenues, the Revenue Fund and other moneys pledged under the Indenture for any of the purposes in the Indenture mentioned, whether for the payment of the principal of or interest on the 2016A Bonds or for any other purpose of the Indenture. Nevertheless, the District may, but shall not be required to, advance for any of the purposes hereof any funds of the District which may be made available to it for such purposes. The obligation of the District to make pay interest and principal on the 2016A Bonds is a special obligation of the District payable solely from the Net Revenues as provided herein, and does not constitute a debt of the District or of the State of California or of any political subdivision thereof (other than the District) in contravention of any constitutional or statutory debt limitation or restriction. Section 11.02. Successor Is Deemed Included in All References to Predecessor. Whenever in the Indenture either the District or the Trustee is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all of the covenants and agreements contained in the Indenture by or on behalf of the District or the Trustee shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not. Section 11.03. Limitation of Rights to Parties and 2016A Bond Owners. Nothing in the Indenture or in the 2016A Bonds expressed or implied is intended or shall be construed to give to any person other than the District, the Trustee and the Owners of the 2016A Bonds any legal or equitable right, remedy or claim under or in respect of the Indenture or any covenant, condition or provision therein or herein contained; and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the District, the Trustee and the Owners of the 2016A Bonds. Section 11.04. Waiver of Notice; Requirement of Mailed Notice. Whenever in the Indenture the giving of notice by mail or otherwise is required, the giving of such notice may be waived in writing by the person entitled to receive such notice and in any such case the giving or receipt of such notice shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Whenever in the Indenture any notice shall be required to be given by mail, such requirement shall be satisfied by the deposit of such notice in the United States mail, postage prepaid, by first class mail. Section 11.05. Destruction of 2016A Bonds. Whenever in the Indenture provision is made for the cancellation by the Trustee and the delivery to the District of any 2016A Bonds, the Trustee shall destroy such 2016A Bonds as may be allowed by law, and deliver a certificate of such destruction to the District. Section 11.06. Severability of Invalid Provisions. If any one or more of the provisions contained in the Indenture or in the 2016A Bonds shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in the Indenture and such invalidity, illegality or unenforceability 49 shall not affect any other provision of the Indenture, and the Indenture shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. The District hereby declares that it would have entered into the Indenture and each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the issuance of the 2016A Bonds pursuant thereto irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses or phrases of the Indenture may be held illegal, invalid or unenforceable. Section 11.07. Notices. Any notice to or demand upon the District or the Trustee shall be deemed to have been sufficiently given or served for all purposes by being sent by facsimile or email or by being deposited, first class mail, postage prepaid, in a post office letter box, addressed, as the case may be, to the District at Yorba Linda Water District, 1717 East Miraloma Avenue, Placentia, California 92870, Attention: General Manager (or such other address as may have been filed in writing by the District with the Trustee), or to the Trustee at U.S. Bank National Association, 633 West Fifth Street, 24th Floor, Los Angeles, California 90071, Attention: Global Corporate Trust Services, Reference: Yorba Linda Water District, Series 2016A. Notwithstanding the foregoing provisions of this Section 11.07, the Trustee shall not be deemed to have received, and shall not be liable for failing to act upon the contents of, any notice unless and until the Trustee actually receives such notice. Section 11.08. Evidence of Rights of 2016A Bond Owners. Any request, consent or other instrument required or permitted by the Indenture to be signed and executed by 2016A Bond Owners may be in any number of concurrent instruments of substantially similar tenor and shall be signed or executed by such 2016A Bond Owners in person or by an agent or agents duly appointed in writing. Proof of the execution of any such request, consent or other instrument or of a writing appointing any such agent, or of the holding by any person of 2016A Bonds transferable by delivery, shall be sufficient for any purpose of the Indenture and shall be conclusive in favor of the Trustee and the District if made in the manner provided in this Section. The fact and date of the execution by any person of any such request, consent or other instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying that the person signing such request, consent or other instrument acknowledged to him the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer. The Ownership of 2016A Bonds shall be proved by the Registration Books. Any request, consent, or other instrument or writing of the Owner of any 2016A Bond shall bind every future Owner of the same 2016A Bond and the Owner of every 2016A Bond issued in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the District in accordance therewith or reliance thereon. Section 11.09. Disqualified 2016A Bonds. In determining whether the Owners of the requisite aggregate principal amount of 2016A Bonds have concurred in any demand, request, direction, consent or waiver under the Indenture, 2016A Bonds which are known by the Trustee to be owned or held by or for the account of the District, or by any other obligor on the 2016A Bonds, or by any person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the District or any other obligor on the 2016A Bonds, shall be disregarded and deemed not to be Outstanding for the purpose of any such determination. 2016A Bonds so owned which 50 have been pledged in good faith may be regarded as Outstanding for the purposes of this Section if the pledgee shall establish to the satisfaction of the Trustee the pledgee’s right to vote such 2016A Bonds and that the pledgee is not a person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the District or any other obligor on the 2016A Bonds. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. Upon request, the District shall certify to the Trustee those 2016A Bonds that are disqualified pursuant to this Section 11.09 and the Trustee may conclusively rely on such certificate. Section 11.10. Money Held for Particular 2016A Bonds. The money held by the Trustee for the payment of the interest, principal or premium due on any date with respect to particular 2016A Bonds (or portions of 2016A Bonds in the case of registered 2016A Bonds redeemed in part only) shall, on and after such date and pending such payment, be set aside on its books and held in trust by it for the Owners of the 2016A Bonds entitled thereto, subject, however, to the provisions of Section 10.04 hereof but without any liability for interest thereon. Section 11.11. Funds and Accounts. Any fund or account required by the Indenture to be established and maintained by the Trustee may be established and maintained in the accounting records of the Trustee, either as a fund or an account, and may, for the purposes of such records, any audits thereof and any reports or statements with respect thereto, be treated either as a fund or as an account; but all such records with respect to all such funds and accounts shall at all times be maintained in accordance with corporate trust industry standards to the extent practicable, and with due regard for the requirements of Section 6.05(a) and for the protection of the security of the 2016A Bonds and the rights of every Owner thereof. Section 11.12. Waiver of Personal Liability. No member, officer, agent, employee, consultant or attorney of the District shall be individually or personally liable for the payment of the principal of or premium or interest on the 2016A Bonds or be subject to any personal liability or accountability by reason of the issuance thereof; but nothing herein contained shall relieve any such member, officer, agent, employee, consultant or attorney from the performance of any official duty provided by law or by the Indenture. Section 11.13. Execution in Several Counterparts. The Indenture may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original; and all such counterparts, or as many of them as the District and the Trustee shall preserve undestroyed, shall together constitute but one and the same instrument. Section 11.14. CUSIP Numbers. Neither the Trustee nor the District shall be liable for any defect or inaccuracy in the CUSIP number that appears on any 2016A Bond or in any redemption notice. The Trustee may, in its discretion, include in any redemption notice a statement to the effect that the CUSIP numbers on the 2016A Bonds have been assigned by an independent service and are included in such notice solely for the convenience of the 2016A Bondholders and that neither the District nor the Trustee shall be liable for any inaccuracies in such numbers. Section 11.15. Choice of Law. THE INDENTURE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA. S-1 IN WITNESS WHEREOF, the District has caused the Indenture to be signed in its name by its President, and the Trustee, in token of its acceptance of the trusts created hereunder, has caused the Indenture to be signed in its corporate name by its officer thereunto duly authorized, all as of the day and year first above written. YORBA LINDA WATER DISTRICT By: President ATTEST: Secretary U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Authorized Officer A-1 EXHIBIT A FORM OF 2016A BOND UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AS DEFINED IN THE INDENTURE) TO THE TRUSTEE FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. No. ____ $__________ UNITED STATES OF AMERICA STATE OF CALIFORNIA YORBA LINDA WATER DISTRICT REFUNDING REVENUE BOND, SERIES 2016A INTEREST RATE MATURITY DATE ORIGINAL ISSUE DATE CUSIP ____% October 1, 20__ April __, 2016 _____ ___ REGISTERED OWNER CEDE & CO. PRINCIPAL AMOUNT: _________________________________________ DOLLARS The YORBA LINDA WATER DISTRICT, a county water district duly organized and existing under and by virtue of the laws of the State of California (the “District”), for value received, hereby promises to pay to the Registered Owner specified above or registered assigns (the “Registered Owner”), on the Maturity Date specified above (subject to any right of prior redemption hereinafter provided for), the Principal Amount specified above, in lawful money of the United States of America, and to pay interest thereon in like lawful money from the interest payment date next preceding the date of authentication of this Bond (unless: (i) this Bond is authenticated after the fifteenth day of the calendar month preceding an interest payment date, whether or not such day is a business day, and on or before the following interest payment date, in which event it shall bear interest from such interest payment date; or (ii) this Bond is authenticated on or before September 15, 2016, in which event it shall bear interest from the Original Issue Date identified above; provided, however, that if as of the date of authentication of this Bond, interest is in default on this Bond, this Bond shall bear interest from the interest payment date to which interest has previously been paid or made available for payment on this Bond), at the Interest Rate per annum specified above, payable on October 1, 2016 and each April 1 and October 1 thereafter, calculated on the basis of a 360-day year composed of twelve 30-day months. Principal hereof and premium, if any, upon early redemption hereof are payable by check of the Trustee upon presentation and surrender hereof at the Office (as defined in the hereinafter described Indenture) of U.S. Bank National Association, as A-2 trustee (the “Trustee”). Interest hereon is payable by check of the Trustee sent by first class mail on the applicable interest payment date to the Registered Owner hereof at the Registered Owner’s address as it appears on the registration books of the Trustee as of the close of business on the fifteenth day of the month preceding each interest payment date (except that in the case of a Registered Owner of one million dollars ($1,000,000) or more in principal amount, such payment may, at such Registered Owner’s option, be made by wire transfer of immediately available funds to an account in the United States in accordance with written instructions provided to the Trustee by such Registered Owner prior to the fifteenth (15th) day of the month preceding such interest payment date). This Bond is not a debt of the State of California, or any of its political subdivisions (other than the District), and neither the State, nor any of its political subdivisions (other than the District), is liable hereon, nor in any event shall this Bond be payable out of any funds or properties of the District other than the Net Revenues (as such term is defined in the Indenture of Trust, dated as of April 1, 2016 (the “Indenture”), by and between the District and the Trustee) and other moneys pledged therefor under the Indenture. The obligation of the District to make payments in accordance with the Indenture is a limited obligation of the District as set forth in the Indenture and the District shall have no liability or obligation in connection herewith except with respect to such payments to be made pursuant to the Indenture. This Bond does not constitute an indebtedness of the District in contravention of any constitutional or statutory debt limitation or restriction. This Bond is one of a duly authorized issue of bonds of the District designated as the “Yorba Linda Water District Refunding Revenue Bonds, Series 2016A” (the “2016A Bonds”), of an aggregate principal amount of _____ Million _____ Hundred _____ Thousand Dollars ($_________), all of like tenor and date (except for such variation, if any, as may be required to designate varying series, numbers or interest rates) and all issued pursuant to the provisions of Article 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California, including but not limited to Section 53583, and pursuant to the Indenture and the resolution authorizing the issuance of the 2016A Bonds. Reference is hereby made to the Indenture (copies of which are on file at the office of the District) and all supplements thereto for a description of the terms on which the 2016A Bonds are issued, the provisions with regard to the nature and extent of the Net Revenues, and the rights thereunder of the Owners of the 2016A Bonds and the rights, duties and immunities of the Trustee and the rights and obligations of the District hereunder, to all of the provisions of which the Registered Owner of this Bond, by acceptance hereof, assents and agrees. The 2016A Bonds have been issued in fully registered form without coupons in denominations of $5,000 or any integral multiple thereof. The 2016A Bonds have been issued by the District to refund certain obligations of the District, as more fully described in the Indenture. This Bond and the interest, premium, if any, hereon and all other 2016A Bonds and the interest and premium, if any, thereon (to the extent set forth in the Indenture) are special obligations of the District, secured by a pledge and lien on the Revenues and any other amounts on deposit in certain funds and accounts created under the Indenture, and payable first from amounts on deposit in the Ad Valorem Taxes Account of the Revenue Fund in accordance with the Indenture and, in the event that such amounts are not sufficient for such purpose, next from other from Net Revenues (as such terms are defined in the Indenture). As and to the extent set forth in the Indenture, all of the Revenues are exclusively and irrevocably pledged in accordance with the terms hereof and the A-3 provisions of the Indenture, to the payment of the principal of and interest and premium (if any) on this Bond. The Indenture and the rights and obligations of the District and the Owners of the 2016A Bonds and the Trustee may be modified or amended from time to time and at any time with the written consent of the Owners of a majority in aggregate principal amount of all 2016A Bonds then Outstanding, exclusive of Bonds disqualified as set forth in the Indenture, in the manner, to the extent and upon the terms provided in the Indenture, but no such modification or amendment shall: (i) extend the fixed maturity of any 2016A Bonds, or reduce the amount of principal thereof or premium (if any) thereon, or extend the time of payment, or change the method of computing the rate of interest thereon, or extend the time of payment of interest thereon, without the consent of the owner of each 2016A Bond so affected; or (ii) reduce the aforesaid percentage of 2016A Bonds the consent of the Owners of which is required to affect any such modification or amendment, or permit the creation of any lien on the Revenues and other assets pledged under the Indenture prior to or on a parity with the lien created by the Indenture except as permitted in the Indenture, or deprive the Owners of the 2016A Bonds of the lien created by the Indenture on such Revenues and other assets, except as expressly provided in the Indenture, without the consent of the Owners of all of the 2016A Bonds then Outstanding. The Indenture and the rights and obligations of the District, of the Trustee and the Owners of the 2016A Bonds may also be modified or amended for certain purposes described more fully in the Indenture at any time in the manner, to the extent and upon the terms provided in the Indenture by a supplemental indenture, which the District and the Trustee may enter into without the consent of any 2016A Bond Owners, if the Trustee shall receive an opinion of Bond Counsel to the effect that the provisions of such supplemental indenture will not materially adversely affect the interests of the Owners of the Outstanding 2016A Bonds. The 2016A Bonds are subject to extraordinary redemption prior to their respective stated maturities, as a whole or in part on any date in the order of maturity and within maturities as directed by the District in a Written Request provided to the Trustee at least 35 days (or such lesser number of days acceptable to the Trustee in the sole discretion of the Trustee, such notice for the convenience of the Trustee) prior to such date and by lot within each maturity in integral multiples of $5,000 from Net Proceeds of insurance or condemnation, upon the terms and conditions of, and as provided for in, the Indenture at a redemption price equal to the principal amount thereof plus accrued interest thereon to the date fixed for redemption, without premium. The 2016A Bonds maturing on or after October 1, 20__ are subject to redemption prior to their respective stated maturities, as a whole or in part on ____ 1, 20__ or any date thereafter as in the order of maturity as directed by the District in a Written Request provided to the Trustee at least 35 days (or such lesser number of days acceptable to the Trustee in the sole discretion of the Trustee, such notice for the convenience of the Trustee) prior to such date and by lot within each maturity in integral multiples of $5,000, at a redemption price equal to the principal amount thereof plus accrued interest thereon to the date fixed for redemption, without premium. The 2016A Bonds with stated maturities on October 1, 20__ are subject to mandatory sinking fund redemption in part (by lot) on each October 1 on and after October 1, 20__, in integral multiples of $5,000 at a redemption price of the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule: A-4 Prepayment Date (October 1) Principal Amount 20__ $ 20__* * Final Maturity. As provided in the Indenture, notice of redemption shall be mailed by the Trustee by first class mail at least 20 days but not more than 60 days prior to the date fixed for redemption to the respective Owners of any 2016A Bonds designated for redemption at their addresses appearing on the registration books of the Trustee, but neither the failure to receive such notice nor any defect in the notice or the mailing thereof shall affect the validity of the redemption. If this Bond is called for redemption and payment is duly provided therefor as specified in the Indenture, interest shall cease to accrue hereon from and after the date fixed for redemption. If an Event of Default (as defined in the Indenture) shall occur, the principal of all of the 2016A Bonds and the interest accrued thereon may be declared due and payable upon the conditions, in the manner and with the effect provided in the Indenture, but such declaration and its consequences may be rescinded and annulled as further provided in the Indenture. This Bond is transferable by the Registered Owner hereof, in person or by his or her duly authorized attorney in writing, at the office of the Trustee but only in the manner, subject to the limitations and upon payment of the taxes and charges provided in the Indenture and upon surrender and cancellation of this Bond. Upon registration of such transfer, a new 2016A Bond or 2016A Bonds of the same series, of authorized denomination or denominations, for the same aggregate principal amount of the same maturity will be issued to the transferee in exchange therefor. This Bond may be exchanged at said office of the Trustee for a like aggregate principal amount of Bonds of other authorized denominations of the same series and same maturity, but only in the manner, subject to the limitations and upon payment of the taxes and charges provided in the Indenture. The Trustee shall not be required to register the transfer or exchange of this Bond during the period in which the Trustee is selecting 2016A Bonds for redemption or if this Bond has been selected for redemption. The District and the Trustee may treat the Registered Owner hereof as the absolute owner hereof for all purposes, and the District and the Trustee shall not be affected by any notice to the contrary. It is hereby certified that all of the things, conditions and acts required to exist, to have happened or to have been performed precedent to and in the issuance of this Bond do exist, have happened or have been performed in due and regular time, form and manner as required by the Indenture and the laws of the State of California and that the amount of this Bond, together with all other indebtedness of the District, does not exceed any limit under any laws of the State of California, and is not in excess of the amount of 2016A Bonds permitted to be issued under the Indenture. A-5 This Bond shall not be entitled to any benefit under the Indenture or become valid or obligatory for any purpose until the certificate of authentication hereon endorsed shall have been manually signed by the Trustee. IN WITNESS WHEREOF, the District has caused this Bond to be executed in its name and on its behalf with the manual or facsimile signature of its President of the Board of Directors and attested to by its Assistant Secretary of the Board of Directors as of the Original Issue Date stated above. YORBA LINDA WATER DISTRICT By: President of the Board of Directors ATTEST: Secretary of the Board of Directors [FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION TO APPEAR ON BONDS] This is one of the Bonds described in the within-mentioned Indenture. Dated: April __, 2016 U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Its: Authorized Signatory A-6 [FORM OF ASSIGNMENT] For value received the undersigned hereby sells, assigns and transfers unto (Name, Address and Tax Identification or Social Security Number of Assignee) the within registered Bond and hereby irrevocably constitute(s) and appoint(s) __________________ _________________________ attorney, to transfer the same on the registration books of the Trustee with full power of substitution in the premises. Dated: Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within Bond in every particular without alteration or enlargement or any change whatsoever. Signature Guaranteed: Note: Signature guarantee shall be made by a guarantor institution participating in the Securities Transfer Agents Medallion Program or in such other guarantee program acceptable to the Trustee. Stradling Yocca Carlson & Rauth Draft of 3/14/16 ESCROW AGREEMENT (2008 CERTIFICATES) THIS ESCROW AGREEMENT (2008 CERTIFICATES), dated as of April 1, 2016 (the “Agreement”), by and between the Yorba Linda Water District (the “District”) and U.S. Bank National Association, as escrow agent (the “Escrow Agent”) and as 2008 Trustee (as such term is defined herein), is entered into in accordance with Resolution No. 16-__ of the District adopted on March 24, 2016 and a Trust Agreement, dated as of February 1, 2008 (the “2008 Trust Agreement”), by and among the Yorba Linda Water District Public Financing Corporation (the “Corporation”), U.S. Bank National Association (the “2008 Trustee”), and the District to refund the outstanding Yorba Linda Water District Revenue Certificates of Participation (2008 Capital Improvement Projects) Series 2008 (the “2008 Certificates”). RECITALS A. Pursuant to the 2008 Trust Agreement, the District has previously caused the 2008 Certificates to be executed and delivered in the aggregate principal amount of $34,995,000, of which $29,865,000 is currently outstanding. B. The District has determined that a portion of the proceeds of the $_____ aggregate principal amount of the Yorba Linda Water District Refunding Revenue Bonds, Series 2016A (the “Bonds”) issued pursuant to an Indenture of Trust, dated as of April 1, 2016, by and between the District and U.S. Bank National Association, as trustee (the “Trustee”), will be used to provide a portion of the funds to pay all regularly scheduled payments of principal and interest with respect to the 2008 Certificates on and prior to October 1, 2017, and to pay on October 1, 2017 the principal with respect to the 2008 Certificates maturing after October 1, 2017, plus interest with respect thereto accrued to such date, without premium (the “Prepayment Price”). C. The District will irrevocably deposit moneys with the Escrow Agent (as permitted by, in the manner prescribed by and all in accordance with the 2008 Trust Agreement), which moneys will be used to purchase the securities that are described on Schedule A (the “Federal Securities”). Such Federal Securities satisfy the criteria set forth in Article X of the 2008 Trust Agreement, and the principal of and interest on such Federal Securities when paid will provide money which, together with the moneys deposited with the Escrow Agent at the same time pursuant to this Agreement, will be fully sufficient to pay and discharge the 2008 Certificates. AGREEMENT SECTION 1. Deposit of Moneys. The District hereby instructs the Escrow Agent to deposit $_____ received from the Trustee from the net proceeds of the Bonds in the Escrow Fund established hereunder. The District hereby further instructs the 2008 Trustee to transfer to the Escrow Agent $_____, constituting certain amounts on deposit in the funds and accounts established under the 2008 Trust Agreement, which amount the District instructs the Escrow Agent to deposit in the Escrow Fund. The Escrow Agent shall hold all such amounts in irrevocable escrow separate and apart from other funds of the District and the Escrow Agent in a fund hereby created and established to be known as the “Escrow Fund” and to be applied solely as provided in this Agreement. The District 2 represents that the moneys set forth above are at least equal to an amount sufficient to purchase the Federal Securities listed on Schedule A, and to hold $_____ uninvested as cash. SECTION 2. Investment of Moneys. The Escrow Agent acknowledges receipt of the moneys described in Section 1 and agrees immediately to invest such moneys in the Federal Securities listed on Schedule A and to deposit such Federal Securities in the Escrow Fund. The Escrow Agent shall be entitled to rely upon the conclusion of Grant Thornton LLP, Minneapolis, Minnesota (the “Verification Agent”), that the Federal Securities listed on Schedule A mature and bear interest payable in such amounts and at such times as, together with cash on deposit in the Escrow Fund, will be sufficient to pay when due all regularly scheduled payments of principal and interest with respect to the 2008 Certificates on and prior to October 1, 2017, and to pay on October 1, 2017 the Prepayment Price (as such term is defined in the 2008 Trust Agreement) of the 2008 Certificates maturing after October 1, 2017. SECTION 3. Investment of Any Remaining Moneys. At the written direction of the District, the Escrow Agent shall reinvest any other amount of principal and interest, or any portion thereof, received from the Federal Securities prior to the date on which such payment is required for the purposes set forth herein, in noncallable Federal Securities maturing not later than the date on which such payment or portion thereof is required for the purposes set forth in Section 5, at the written direction of the District, as verified in a report prepared by an independent certified public accountant or firm of certified public accountants of favorable national reputation experienced in the refunding of obligations of political subdivisions to the effect that the reinvestment described in said report will not adversely affect the sufficiency of the amounts of securities, investments and money in the Escrow Fund to pay when due all regularly scheduled payments of principal and interest with respect to the 2008 Certificates on and prior to October 1, 2017, and to pay on October 1, 2017 the Prepayment Price of the 2008 Certificates maturing after October 1, 2017, and provided that the District has obtained and delivered to the Escrow Agent an unqualified opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, that such reinvestment will not adversely affect the exclusion from gross income for federal income tax purposes of the interest portion of the Installment Payments (as such term is defined in the 2008 Trust Agreement) or interest on the Bonds. Any interest income resulting from investment or reinvestment of moneys pursuant to this Section 3 which are not required for the purposes set forth in Section 5, as verified in the letter of the Verification Agent originally obtained by the District with respect to the refunding of the 2008 Certificates or in any other report prepared by an independent certified public accountant or firm of certified public accountants of favorable national reputation experienced in the refunding of tax-exempt obligations of political subdivisions, shall be paid to the District promptly upon the receipt of such interest income by the Escrow Agent. The determination of the District as to whether an accountant qualifies under this Escrow Agreement shall be conclusive. SECTION 4. Substitution of Securities. Upon the written request of the District, and subject to the conditions and limitations herein set forth and applicable governmental rules and regulations, the Escrow Agent shall sell, redeem or otherwise dispose of the Federal Securities, provided that there are substituted therefor from the proceeds of the Federal Securities other Federal Securities, but only after the District has obtained and delivered to the Escrow Agent: (i) an unqualified opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, to the effect that the substitution of securities is permitted under the legal documents in effect with respect to the 2008 Certificates and that such reinvestment will not adversely affect the exclusion from gross income for federal income tax purposes of the interest portion of the Installment Payments or interest with respect to the Bonds; and (ii) a report by a firm of independent certified public accountants to 3 the effect that the reinvestment described in said report will not adversely affect the sufficiency of the amounts of securities, investments and money in the Escrow Fund to pay when due all regularly scheduled payments of principal and interest with respect to the 2008 Certificates on and prior to October 1, 2017, and to pay on October 1, 2017 the Prepayment Price of the 2008 Certificates maturing after October 1, 2017. The Escrow Agent shall not be liable or responsible for any loss resulting from any reinvestment made pursuant to this Agreement and in full compliance with the provisions hereof. SECTION 5. Payment of 2008 Certificates. (a) Payment. From the maturing principal of the Federal Securities and the investment income and other earnings thereon and other moneys on deposit in the Escrow Fund, the Escrow Agent shall on October 1, 2016 and each April 1 and October 1 thereafter through and including October 1, 2017, apply the amounts on deposit in the Escrow Fund to pay when due all regularly scheduled payments of principal and interest with respect to the 2008 Certificates on and prior to October 1, 2017, and to pay on October 1, 2017 the Prepayment Price of the 2008 Certificates maturing after October 1, 2017. (b) Irrevocable Instructions to Provide Notice. The forms of the notices required to be mailed pursuant to Sections 4.03 and 10.01 of the 2008 Trust Agreement are substantially in the forms attached hereto as Exhibits A and B. The District hereby irrevocably instructs the Escrow Agent to mail a notice of prepayment and a notice of defeasance of the 2008 Certificates in accordance with Sections 4.03 and 10.01, respectively, of the 2008 Trust Agreement, as required to provide for the prepayment of the 2008 Certificates in accordance with this Section 5. (c) Unclaimed Moneys. Any moneys in the Escrow Fund which remain unclaimed for two years after October 1, 2017 shall be repaid by the Escrow Agent to the District. (d) Priority of Payments. The owners of the 2008 Certificates shall have a first and exclusive lien on all moneys and securities in the Escrow Fund until such moneys and such securities are used and applied as provided in this Agreement. (e) Termination of Obligation. As provided in the 2008 Trust Agreement, upon the deposit of moneys with the Escrow Agent in the Escrow Fund as set forth in Section 1 and the purchase of the various Federal Securities as provided in Section 2, all obligations of the District under the 2008 Trust Agreement with respect to the 2008 Certificates shall cease, terminate and become void except as set forth in the 2008 Trust Agreement. As provided in Section 9.01 of the Installment Purchase Agreement, dated as of February 1, 2008 (the “2008 Installment Purchase Agreement”), by and between the District and the Corporation, the obligations of the District under the 2008 Installment Purchase Agreement shall cease, terminate, become void and be completely discharged and satisfied (except for the rights of the 2008 Trustee and the obligation of the District to have the Federal Securities and moneys on deposit in the Escrow Fund applied to Series 2008 Installment Payments (as such term is defined in the 2008 Installment Purchase Agreement)). SECTION 6. Application of Certain Terms of the 2008 Trust Agreement. All of the terms of the 2008 Trust Agreement relating to the making of payments of principal and interest with respect to the 2008 Certificates and relating to the exchange or transfer of the 2008 Certificates are incorporated in this Agreement as if set forth in full herein. The procedures set forth in Sections 8.03 and 8.06 of the 2008 Trust Agreement relating to the resignation and removal and merger of the 2008 4 Trustee under the 2008 Trust Agreement are also incorporated in this Agreement as if set forth in full herein and shall be the procedures to be followed with respect to any resignation or removal of the Escrow Agent hereunder. SECTION 7. Performance of Duties. The Escrow Agent agrees to perform only the duties set forth herein and shall have no responsibility to take any action or omit to take any action not set forth herein. SECTION 8. Escrow Agent’s Authority to Make Investments. Except as provided in Section 2 hereof, the Escrow Agent shall have no power or duty to invest any funds held under this Agreement or to sell, transfer or otherwise dispose of the moneys or Federal Securities held hereunder. SECTION 9. Indemnity. The District hereby assumes liability for, and hereby agrees (whether or not any of the transactions contemplated hereby are consummated) to indemnify, protect, save and keep harmless the Escrow Agent and its respective successors, assigns, agents, employees and servants, from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including reasonable legal fees and disbursements) of whatsoever kind and nature which may be imposed on, incurred by or asserted against the Escrow Agent at any time (whether or not also indemnified against the same by the District or any other person under any other agreement or instrument, but without double indemnity) in any way relating to or arising out of the execution, delivery and performance of this Agreement, the establishment hereunder of the Escrow Fund, the acceptance of the funds and securities deposited therein, the retention of the proceeds thereof and any payment, transfer or other application of moneys or securities by the Escrow Agent in accordance with the provisions of this Agreement; provided, however, that the District shall not be required to indemnify the Escrow Agent against the Escrow Agent’s own negligence or willful misconduct, the negligence or willful misconduct of the Escrow Agent’s respective employees or the willful breach by the Escrow Agent of the terms of this Agreement. In no event shall the District or the Escrow Agent be liable to any person by reason of the transactions contemplated hereby other than to each other as set forth in this Section. The indemnities contained in this Section shall survive the termination of this Agreement. SECTION 10. Responsibilities of Escrow Agent. The Escrow Agent and its agents and servants shall not be held to any personal liability whatsoever, in tort, contract, or otherwise, in connection with the execution and delivery of this Agreement, the establishment of the Escrow Fund, the acceptance of the moneys or securities deposited therein, the retention of the Federal Securities or the proceeds thereof, the sufficiency of the Federal Securities to pay the 2008 Certificates or any payment, transfer or other application of moneys or obligations by the Escrow Agent in accordance with the provisions of this Agreement or by reason of any non-negligent act, non-negligent omission or non-negligent error of the Escrow Agent made in good faith in the conduct of its duties. The recitals of fact contained in the “Whereas” clauses herein shall be taken as the statements of the District, and the Escrow Agent assumes no responsibility for the correctness thereof. The Escrow Agent makes no representation as to the sufficiency of the proceeds to accomplish the refunding of the 2008 Certificates or to the validity of this Agreement as to the District and, except as otherwise provided herein, the Escrow Agent shall incur no liability in respect thereof. The Escrow Agent shall not be liable in connection with the performance of its duties under this Agreement except for its own negligence, willful misconduct or default, and the duties and obligations of the Escrow Agent shall be determined by the express provisions of this Agreement. The Escrow Agent may consult with counsel, who may or may not be counsel to the District, and in reliance upon the written opinion of 5 such counsel shall have full and complete authorization and protection in respect of any action taken, suffered or omitted by it in good faith in accordance therewith. Whenever the Escrow Agent shall deem it necessary or desirable that a matter be proved or established prior to taking, suffering, or omitting any action under this Agreement, such matter may be deemed to be conclusively established by a certificate signed by an officer of the District. The District acknowledges that to the extent that regulations of the Comptroller of the Currency or other applicable regulatory entity grant the District the right to receive brokerage confirmations of security transactions as they occur, the District specifically waives receipt of such confirmations to the extent permitted by law. The Escrow Agent will furnish the District with periodic transaction statements which include detail for all investment transactions made by the Escrow Agent hereunder; provided that the Escrow Agent is not obligated to provide an accounting for any fund or account that: (a) has a balance of $0.00; and (b) has not had any activity since the last reporting date. SECTION 11. Amendments. This Agreement is made for the benefit of the District and the owners from time to time of the 2008 Certificates and it shall not be repealed, revoked, altered or amended without the written consent of all such owners, the Escrow Agent and the District; provided, however, that the District and the Escrow Agent may, without the consent of, or notice to, such owners, amend this Agreement or enter into such agreements supplemental to this Agreement as shall not adversely affect the rights of such owners and as shall not be inconsistent with the terms and provisions of this Agreement, Division 12 of the Water Code of the State of California, or the 2008 Trust Agreement, for any one or more of the following purposes: (i) to cure any ambiguity or formal defect or omission in this Agreement; (ii) to grant to, or confer upon, the Escrow Agent for the benefit of the owners of the 2008 Certificates any additional rights, remedies, powers or authority that may lawfully be granted to, or conferred upon, such owners or the Escrow Agent; and (iii) to include under this Agreement additional funds. The Escrow Agent shall be entitled to rely conclusively upon an unqualified opinion of Stradling Yocca Carlson & Rauth, A Professional Corporation, with respect to compliance with this Section, including the extent, if any, to which any change, modification, addition or elimination affects the rights of the owners of the various 2008 Certificates or that any instrument executed hereunder complies with the conditions and provisions of this Section. SECTION 12. Notice to Rating Agencies. In the event that this agreement or any provision thereof is severed, amended or revoked, the Escrow Agent shall provide written notice of such severance, amendment or revocation to the rating agencies then rating the 2008 Certificates. SECTION 13. Term. This Agreement shall commence upon its execution and delivery and shall terminate on the later to occur of either: (i) the date upon which the 2008 Certificates have been paid in accordance with this Agreement; or (ii) the date upon which no unclaimed moneys remain on deposit with the Escrow Agent pursuant to Section 5(c) of this Agreement. SECTION 14. Compensation. The Escrow Agent shall receive its reasonable fees and expenses as previously agreed to by the Escrow Agent and the District and any other reasonable fees and expenses of the Escrow Agent approved by the District; provided, however, that under no circumstances shall the Escrow Agent be entitled to any lien or assert any lien whatsoever on any moneys or obligations in the Escrow Fund for the payment of fees and expenses for services rendered or expenses incurred by the Escrow Agent under this Agreement. 6 SECTION 15. Severability. If any one or more of the covenants or agreements provided in this Agreement on the part of the District or the Escrow Agent to be performed should be determined by a court of competent jurisdiction to be contrary to law, such covenants or agreements shall be null and void and shall be deemed separate from the remaining covenants and agreements contained herein and shall in no way affect the validity of the remaining provisions of this Agreement. SECTION 16. Counterparts. This Agreement may be executed in several counterparts, all or any of which shall be regarded for all purposes as an original but all of which shall constitute and be but one and the same instrument. SECTION 17. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED UNDER THE LAWS OF THE STATE OF CALIFORNIA. SECTION 18. Insufficient Funds. If at any time the Escrow Agent has actual knowledge that the moneys and investments in the Escrow Fund, including the anticipated proceeds thereof and earnings thereon, will not be sufficient to make all payments required by this Agreement, the Escrow Agent shall notify the District in writing, of the amount thereof and the reason therefor to the extent known to it. The Escrow Agent shall have no responsibility regarding any such deficiency. SECTION 19. Notice to District and Escrow Agent. Any notice to or demand upon the Escrow Agent may be served or presented, and such demand may be made, at the principal corporate trust office of the Escrow Agent at 633 West Fifth Street, 24th Floor, Los Angeles, California 90071, Attention: Global Corporate Trust Services, Reference: Yorba Linda Water District, Series 2008. Any notice to or demand upon the District shall be deemed to have been sufficiently given or served for all purposes by being mailed by registered or certified mail, and deposited, postage prepaid, in a post office letter box, addressed to the District at 1717 East Miraloma Avenue, Placentia, California 92870, Attention: General Manager (or such other address as may have been filed in writing by the District with the Escrow Agent). [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] S-1 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the date first above written. YORBA LINDA WATER DISTRICT By: President ATTEST: Secretary U.S. BANK NATIONAL ASSOCIATION, as Escrow Agent and as 2008 Trustee By: Authorized Officer Schedule A-1 SCHEDULE A FEDERAL SECURITIES Security Maturity Principal Amount Interest Rate $ % Exhibit A-1 EXHIBIT A NOTICE OF PREPAYMENT YORBA LINDA WATER DISTRICT REVENUE CERTIFICATES OF PARTICIPATION (2008 CAPITAL IMPROVEMENT PROJECTS) SERIES 2008 BASE CUSIP NO. 98618M NOTICE IS HEREBY GIVEN to the owners of the above-captioned certificates of participation (the “Certificates”) of the Yorba Linda Water District (the “District”) pursuant to the Trust Agreement, dated as of February 1, 2008 (the “2008 Trust Agreement”), by and among the District, the Yorba Linda Water District Public Financing Corporation and U.S. Bank National Association, as trustee (the “2008 Trustee”), that the Certificates in the amount of $28,245,000 have been called for prepayment on October 1, 2017 (the “Prepayment Date”). CUSIP Maturity (October 1) Rate Amount Price BJ7 2018 4.000% $ 860,000 100% BK4 2019 4.000 895,000 100 BL2 2020 4.000 930,000 100 BM0 2021 4.000 970,000 100 BN8 2022 4.000 1,005,000 100 BP3 2023 4.000 1,045,000 100 BQ1 2024 4.125 1,090,000 100 BR9 2025 4.250 1,135,000 100 BS7 2026 4.300 1,180,000 100 BT5 2027 4.375 1,230,000 100 BU2 2028 4.375 1,285,000 100 BV0 2029 4.500 1,340,000 100 BW8 2030 4.500 1,400,000 100 BX6 2031 4.500 1,465,000 100 BY4 2032 4.500 1,530,000 100 BZ1 2038 5.000 10,885,000 100 The Certificates will be payable on the Prepayment Date at a prepayment price of 100% of the principal amount plus accrued interest to such date (the “Prepayment Price”). The Prepayment Price of the Certificates will become due and payable on the Prepayment Date. Interest with respect to the Certificates to be prepaid will cease to accrue from and after the Prepayment Date, and such Certificates will be surrendered to the 2008 Trustee. All Certificates are required to be surrendered to the corporate trust office of the 2008 Trustee, on the Prepayment Date at the following location. If the Certificates are mailed, the use of registered, insured mail is recommended: Exhibit A-2 If By Mail: If By Hand or Overnight Mail: U.S. Bank National Association Global Corporate Trust Services P.O. Box 64111 St. Paul, Minnesota 55164-0111 U.S. Bank National Association Global Corporate Trust Services 60 Livingston Avenue 1st Floor, Bond Drop Window St. Paul, Minnesota 55107 If the Owner of any Certificate subject to optional prepayment fails to deliver such Certificate to the 2008 Trustee on the Prepayment Date, such Certificate shall nevertheless be deemed prepaid on the Prepayment Date and the Owner of such Certificate shall have no rights in respect thereof except to receive payment of the Prepayment Price from funds held by the 2008 Trustee for such payment. A form W-9 must be submitted with the Bonds. Failure to provide a completed form W-9 will result in 31% backup withholding pursuant to the Interest and Dividend Tax Compliance Act of 1983. Under the Jobs and Growth Tax Relief Reconciliation Act of 2003, 28% will be withheld if the tax identification number is not properly certified. Note: The District and the Trustee shall not be responsible for the selection or use of the CUSIP numbers selected, nor is any representation made as to their correctness in the notice or as printed on any Bond. They are included solely for the convenience of the holders. U.S. BANK NATIONAL ASSOCIATION, as Trustee DATED this 31st day of August, 2017. Exhibit B-1 EXHIBIT B NOTICE OF DEFEASANCE YORBA LINDA WATER DISTRICT REVENUE CERTIFICATES OF PARTICIPATION (2008 CAPITAL IMPROVEMENT PROJECTS) SERIES 2008 BASE CUSIP NO. 98618M NOTICE IS HEREBY GIVEN to the owners of the above-captioned certificates of participation (as further defined below, the “2008 Certificates”), of the Yorba Linda Water District (the “District”), that the District has deposited with U.S. Bank National Association, as trustee (the “2008 Trustee”) under the Trust Agreement, dated as of February 1, 2008 (the “2008 Trust Agreement”), by and among the District, the Yorba Linda Water District Public Financing Corporation (the “Corporation”) and the 2008 Trustee, cash and federal securities, the principal of and interest on which when paid will provide moneys sufficient to pay the regularly scheduled payments of principal and interest with respect to the 2008 Certificates on and prior to October 1, 2017, and to pay on October 1, 2017, the principal with respect to the 2008 Certificates of the 2008 Certificates maturing after October 1, 2017, plus accrued interest with respect thereto to such date. The 2008 Certificates to be defeased are as follows: CUSIP Maturity (October 1) Rate Amount Price BG3 2016 4.000% $ 795,000 100% BH1 2017 4.000 825,000 100 BJ7 2018 4.000 860,000 100 BK4 2019 4.000 895,000 100 BL2 2020 4.000 930,000 100 BM0 2021 4.000 970,000 100 BN8 2022 4.000 1,005,000 100 BP3 2023 4.000 1,045,000 100 BQ1 2024 4.125 1,090,000 100 BR9 2025 4.250 1,135,000 100 BS7 2026 4.300 1,180,000 100 BT5 2027 4.375 1,230,000 100 BU2 2028 4.375 1,285,000 100 BV0 2029 4.500 1,340,000 100 BW8 2030 4.500 1,400,000 100 BX6 2031 4.500 1,465,000 100 BY4 2032 4.500 1,530,000 100 BZ1 2038 5.000 10,885,000 100 In accordance with the 2008 Trust Agreement: (i) the 2008 Certificates are deemed to have been paid in accordance with Section 10.01 thereof; (ii) the obligations of the District and the Corporation under the 2008 Trust Agreement with respect to the 2008 Certificates have ceased, terminated and become void and have been released, discharged and satisfied, except as set forth in the 2008 Trust Agreement; (iii) the right, title and interest of the Corporation in the Installment Purchase Agreement, dated as of February 1, 2008 (the “2008 Installment Purchase Agreement”), by Exhibit B-2 and between the District and the Corporation, have ceased, terminated, become void and been completely discharged and satisfied, except as set forth in the 2008 Installment Purchase Agreement; and (iv) the obligations of the District under the 2008 Installment Purchase Agreement have ceased, terminated, become void and been completely discharged and satisfied, except as set forth in the 2008 Installment Purchase Agreement. No representation is made as to the correctness of the CUSIP number either as printed on any 2008 Certificate or as contained herein and any error in the CUSIP number shall not affect the validity of the proceedings for prepayment of the 2008 Certificates. U.S. BANK NATIONAL ASSOCIATION, as Trustee DATED this [20th day of April], 2016. Ballard Spahr draft 3/15/2016 DMWEST #13961501 v1 PURCHASE CONTRACT YORBA LINDA WATER DISTRICT $____________ Refunding Revenue Bonds, Series 2016A __________, 2016 Yorba Linda Water District 1717 East Miraloma Avenue Placentia, California 92870 Ladies and Gentlemen: The undersigned (hereinafter referred to as the “Underwriter”), acting on behalf of itself and not as an agent or representative of you, offers to enter into this purchase contract (the “Purchase Contract”) with the Yorba Linda Water District (the “District”), which will be binding upon the District and the Underwriter upon the acceptance hereof by the District. This offer is made subject to its acceptance by the District by execution of this Purchase Contract and its delivery to the Underwriter on or before 11:00 p.m., California time, on the date hereof. All terms used herein and not otherwise defined shall have the meanings given to such terms in the Indenture (as hereafter defined). 1. Purchase and Sale. Upon the terms and conditions and upon the basis of the representations, warranties and agreements hereinafter set forth, the Underwriter hereby agrees to purchase, and the District hereby agrees to cause to be delivered to the Underwriter, all (but not less than all) of the $____________ aggregate principal amount of Yorba Linda Water District Refunding Revenue Bonds, Series 2016A (the “Bonds”). The Underwriter will purchase the Bonds at a purchase price of $____________ (representing the par amount of the Bonds [plus/less] $___________ of original issue [premium/discount] and $____________ of Underwriter’s discount). 2. Description and Purpose of the Bonds. The Bonds will be issued pursuant to an Indenture of Trust, dated as of April 1, 2016 (the “Indenture”), by and between the District and U.S. Bank National Association, as trustee (the “Trustee”). The Bonds shall be as described in the Indenture and the Official Statement dated __________, 2016 relating to the Bonds (which, together with all exhibits and appendices included therein or attached thereto and such amendments or supplements thereto which shall be approved by the Underwriter, is hereinafter called the “Official Statement”). Proceeds from the sale of the Bonds will be used (i) to advance refund all of the outstanding Yorba Linda Water District Revenue Certificates of Participation (2008 Capital Improvement Projects) Series 2008 (the “Refunded Certificates”); [(ii) to pay all outstanding amounts under a line of credit with Wells Fargo Bank, National Association]; and (iii) to pay costs of issuance of the Bonds. DMWEST #13961501 v1 2 In order to effect the refunding of the Refunded Certificates, the District will enter into the Escrow Agreement (2008 Certificates), dated as of April 1, 2016 (the “Escrow Agreement”), by and between the District and U.S. Bank National Association, as escrow agent. 3. Public Offering. The Underwriter agrees to make an initial public offering of all the Bonds at the public offering prices (or yields) set forth in the Official Statement. Subsequent to the initial public offering, the Underwriter reserves the right to change the public offering prices (or yields) as it deems necessary in connection with the marketing of the Bonds, provided that the Underwriter shall not change the interest rates set forth on Appendix A attached hereto. The Bonds may be offered and sold to certain dealers at prices lower than such initial public offering price or prices set forth in the Official Statement. The Underwriter also reserves the right (i) to engage in transactions that stabilize, maintain or otherwise affect the market price of the Bonds at a level above that which might otherwise prevail in the open market and (ii) to discontinue such transactions, if commenced, at any time. 4. Delivery of Official Statement. Pursuant to the authorization of the District, the Underwriter has distributed copies of the Preliminary Official Statement dated _________, 2016, relating to the Bonds, which, together with the cover page and appendices thereto, is herein called the “Preliminary Official Statement.” By its acceptance of this proposal, the District hereby approves and ratifies the distribution use by the Underwriter of the Preliminary Official Statement. The District agrees to execute and deliver a final Official Statement in substantially the same form as the Preliminary Official Statement with such changes as may be made thereto, with the consent of the District and the Underwriter, and to provide copies thereof to the Underwriter as set forth in Section 6(a)(v) hereof. The District hereby authorizes the Underwriter to use and distribute, in connection with the offer and sale of the Bonds: the Preliminary Official Statement, the Official Statement, the Indenture, the Escrow Agreement and the Continuing Disclosure Certificate (as hereinafter defined) and other documents or contracts to which the District is a party in connection with the transactions contemplated by this Purchase Contract, including this Purchase Contract and all information contained herein, and all other documents, Bonds and statements furnished by the District to the Underwriter in connection with the transactions contemplated by this Purchase Contract. 5. The Closing. At [8:00 a.m.], California time, on __________, 2016 or at such other time or on such earlier or later business day as shall have been mutually agreed upon by the District and the Underwriter, the District will cause to be executed and delivered (i) the Bonds in book-entry form through the facilities of The Depository Trust Company (“DTC”) or its agent on behalf of the Underwriter, and (ii) the closing documents hereinafter mentioned at the offices of Stradling Yocca Carlson & Rauth, a Professional Corporation (“Bond Counsel”), [Santa Barbara], California, or another place to be mutually agreed upon by the District and the Underwriter. The Underwriter will accept such delivery and pay the purchase price of the Bonds as set forth in Section 1 hereof in immediately available funds to the order of the District. This payment and delivery, together with the delivery of the aforementioned documents, is herein called the “Closing.” DMWEST #13961501 v1 3 6. District Representations, Warranties and Covenants. (a) The District represents, warrants and covenants to the Underwriter that: (i) Due Organization, Existence and Authority. The District is a county water district duly organized and existing under and pursuant to Division 12 of the California Water Code (Section 30000 et seq.), and the constitution and laws of the State of California (the “State”), with full right, power and authority to execute, deliver and perform its obligations under this Purchase Contract, the Indenture, the Escrow Agreement and the Continuing Disclosure Certificate (collectively, the “District Documents”) and to carry out and consummate the transactions contemplated by the District Documents and the Official Statement. (ii) Due Authorization and Approval. By all necessary official action of the District, the District has duly authorized and approved the execution and delivery of, and the performance by the District of the obligations contained or described in, the Preliminary Official Statement, the Official Statement and the District Documents and as of the date hereof, such authorizations and approvals are in full force and effect and have not been amended, modified or rescinded. When executed and delivered, each District Document will constitute the legally valid and binding obligation of the District enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws or equitable principles relating to or affecting creditors’ rights generally or by the exercise of judicial discretion in appropriate cases or by limitations on legal remedies against public agencies in the State. (iii) Official Statement Accurate and Complete. The Preliminary Official Statement was as of its date, and the Official Statement is, and at all times subsequent to the date of the Official Statement up to and including the Closing will be, true and correct in all material respects, and the Preliminary Official Statement and the Official Statement contain and up to and including the Closing will contain no misstatement of any material fact and do not, and up to and including the Closing will not, omit any statement necessary to make the statements contained therein, in the light of the circumstances in which such statements were made, not misleading (except no representation is made with respect to information relating to DTC, DTC’s book-entry system). (iv) Underwriter’s Consent to Amendments and Supplements to Official Statement. The District will advise the Underwriter promptly of any proposal to amend or supplement the Official Statement and will not effect or consent to any such amendment or supplement without the consent of the Underwriter, which consent will not be unreasonably DMWEST #13961501 v1 4 withheld. The District will advise the Underwriter promptly of the institution of any proceedings known to it by any governmental agency prohibiting or otherwise affecting the use of the Official Statement in connection with the offering, sale or distribution of the Bonds. (v) District Agreement to Amend or Supplement Official Statement. If after the date of this Purchase Contract and until 25 days after the end of the “underwriting period” (as defined in Section 240 15c2- 12 in Chapter II of Title 17 of the Code of Federal Regulations (“Rule 15c2-12”)), any event occurs as a result of which the Official Statement as then amended or supplemented would include an untrue statement of a material fact, or omit to state any material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not misleading, and, in the reasonable opinion of the Underwriter, an amended or supplemented Official Statement should be delivered in connection with the offers or sales of the Bonds to reflect such event, the District promptly will prepare at its expense an amendment or supplement which will correct such statement or omission and the District shall promptly furnish to the Underwriter a reasonable number of copies of such amendment or supplement. The Underwriter hereby agrees to deposit the Official Statement with the Municipal Securities Rulemaking Board. The Underwriter acknowledges that the end of the “underwriting period” will be the date of Closing. (vi) No Material Change in Finances. At the time of the Closing, and except as otherwise described in the Official Statement, there shall not have been any material adverse changes in the financial condition of the District since June 30, 2015. (vii) No Breach or Default. As of the time of acceptance hereof and as of the time of the Closing, (i) the District is not in default, nor has it been in default, as to principal or interest with respect to an obligation issued by the District, and (ii) the District is not and will not, in any manner which would materially adversely affect the transactions contemplated by the District Documents, be in breach of or in default under any applicable constitutional provision, law or administrative rule or regulation of the State or the United States, or any applicable judgment or decree or any trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the District 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, in any manner which would materially adversely affect the transactions contemplated by the District Documents, a default or event of default under any such instrument; and, as of such times, the authorization, execution and delivery of the District Documents and compliance with the provisions of each of such agreements or instruments do not and will not, in any manner which would materially adversely affect the transactions DMWEST #13961501 v1 5 contemplated by the District Documents, conflict with or constitute a breach of or default under any applicable constitutional provision, law or administrative rule or regulation of the State or the United States, or any applicable judgment, decree, license, permit, trust agreement, loan agreement, bond, note, resolution, ordinance, agreement or other instrument to which the District (or any of its officers in their respective capacities as such) is subject, or by which it or any of its properties is bound, nor will any such authorization, execution, delivery or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of its assets or properties or under the terms of any such law, regulation or instrument, except as may be provided by the District Documents. (viii) No Litigation. As of the time of acceptance hereof and as of the date of Closing, no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body, is pending or, to the best knowledge of the District after due investigation, threatened (i) in any way questioning the corporate existence of the District or the titles of the officers of the District to their respective offices; (ii) affecting, contesting or seeking to prohibit, restrain or enjoin the execution or delivery of any of the Bonds, or in any way contesting or affecting the validity of the Bonds or the District Documents or the consummation of the transactions contemplated thereby, or contesting the exclusion of the interest on the Bonds from gross income for federal income tax purposes or contesting the powers of the District to enter into the District Documents; (iii) which may result in any material adverse change to the financial condition of the District or to its ability to pay the debt service on the Bonds when due; or (iv) contesting the completeness or accuracy of the Preliminary Official Statement or the Official Statement or any supplement or amendment thereto or asserting that the Preliminary Official Statement or the Official Statement contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and there is no basis for any action, suit, proceeding, inquiry or investigation of the nature described in clauses (i) through (iv) of this sentence. (ix) No Prior Liens on Net Revenues. Except for the Yorba Linda Water District Refunding Revenue Bonds, Series 2012A (the “2012A Bonds”), which obligations have a lien on the Net Revenues that is on a parity with the lien of the Bonds, as of the date of the Closing, the District will not have outstanding any indebtedness which indebtedness is secured by a lien on the Net Revenues superior to or on a parity with the lien of the Bonds on the Net Revenues. DMWEST #13961501 v1 6 (x) Further Cooperation: Blue Sky. The District will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order (i) to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate and (ii) to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions, and will use its best efforts to continue such qualifications in effect so long as required for the distribution of the Bonds; provided, however, that the District shall not be required to execute a general or special consent to service of process or qualify to do business in connection with any such qualification or determination in any jurisdiction. (xi) Consents and Approvals. All authorizations, approvals, licenses, permits, consents and orders of or filings with any governmental authority, legislative body, board, agency or commission having jurisdiction in the matters which are required for the due authorization of, which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by the District of its obligations in connection with, the District Documents or the refunding of the Refunded Certificates have been duly obtained or made, except as may be required under the Blue Sky or securities laws of any state in connection with the offering and sale of the Bonds. (xii) No Other Obligations. Between the date of this Purchase Contract and the date of Closing, the District will not, without the prior written consent of the Underwriter, offer or issue any bonds, notes or other obligations for borrowed money, or incur any material liabilities, directly or contingently payable from the Net Revenues. (xiii) Certificates. Any certificate signed by any official of the District and delivered to the Underwriter shall be deemed to be a representation and warranty by the District to the Underwriter as to the statements made therein. (xiv) Compliance with Rule 15c2-12. The Preliminary Official Statement heretofore delivered to the Underwriter is hereby deemed final by the District as of its date and as of the date hereof, except for the omission of such information as is permitted to be omitted in accordance with paragraph (b)(i) of Rule 15c2-12. The District hereby covenants and agrees that, within seven business days from the date hereof, the District shall cause a final printed form of the Official Statement to be delivered to the Underwriter in sufficient quantity to comply with paragraph (b)(4) of Rule 15c2-12 and Rules of the Municipal Securities Rulemaking Board. DMWEST #13961501 v1 7 (xv) Continuing Disclosure. The District will undertake, pursuant to a Continuing Disclosure Certificate (the “Continuing Disclosure Certificate”), to provide annual reports and notices of certain events in accordance with the requirements of Rule 15c2-12. A form of the Continuing Disclosure Certificate is set forth as Appendix E to the Official Statement. The District hereby represents that, except as otherwise disclosed in the Official Statement, it is in compliance with each continuing disclosure undertaking it has entered into pursuant to Rule 15c2-12. 7. Closing Conditions. The Underwriter has entered into this Purchase Contract in reliance upon the representations, warranties and covenants herein and the performance by the District of its obligations hereunder, both as of the date hereof and as of the date of the Closing. The Underwriter’s obligations under this Purchase Contract are and shall be subject to the following additional conditions: (a) Bring-Down Representation. The representations, warranties and covenants of the District contained herein shall be true, complete and correct at the date hereof and at the time of the Closing, as if made on the date of the Closing. (b) Executed Agreements and Performance Thereunder. At the time of the Closing (i) the District Documents shall be in full force and effect, and shall not have been amended, modified or supplemented except with the written consent of the Underwriter, (ii) there shall be in full force and effect such resolutions (the “Resolutions”) as, in the opinion of Bond Counsel, shall be necessary in connection with the transactions contemplated by the Official Statement, the District Documents, (iii) the District shall perform or have performed its obligations required or specified in the District Documents to be performed at or prior to Closing, and (iv) the Official Statement shall not have been supplemented or amended, except pursuant to Paragraphs 6(a)(iv) and 6(a)(v) hereof or as otherwise may have been agreed to in writing by the Underwriter. (c) No Default. At the time of the Closing, no default shall have occurred or be existing under the Resolutions, the District Documents, or any other agreement or document pursuant to which any of the District’s financial obligations was issued and the District shall not be in default in the payment of principal or interest on any of its financial obligations which default would adversely impact the ability of the District to pay debt service on the Bonds. (d) Termination Events. The Underwriter shall have the right to terminate this Purchase Contract, without liability therefor, by written notification to the District if at any time at or prior to the Closing: (i) an event shall occur which makes untrue or incorrect in any material respect, as of the time of such event, any DMWEST #13961501 v1 8 statement or information contained in the Official Statement or which is not reflected in the Official Statement but should be reflected therein in order to make the statements contained therein in the light of the circumstances under which they were made not misleading in any material respect and, in either such event, (a) the District refuses to permit the Official Statement to be supplemented to supply such statement or information in a manner satisfactory to the Underwriter or (b) the effect of the Official Statement as so supplemented is, in the judgment of the Underwriter, to materially adversely affect the market price or marketability of the Bonds or the ability of the Underwriter to enforce contracts for the sale, at the contemplated offering prices (or yields), of the Bonds; or (ii) legislation shall be introduced in, enacted by, reported out of committee, or recommended for passage by the State of California, either House of the Congress, or recommended to the Congress or otherwise endorsed for passage (by press release, other form of notice or otherwise) by the President of the United States, the Treasury Department of the United States, the Internal Revenue Service or the Chairman or ranking minority member of the Committee on Finance of the United States Senate or the Committee on Ways and Means of the United States House of Representatives, or legislation is proposed for consideration by either such committee by any member thereof or presented as an option for consideration by either such committee by the staff or such committee or by the staff of the Joint Committee on Taxation of the Congress of the United States, or a bill to amend the Code (which, if enacted, would be effective as of a date prior to the Closing) shall be filed in either House, or a decision by a court of competent jurisdiction shall be rendered, or a regulation or filing shall be issued or proposed by or on behalf of the Department of the Treasury or the Internal Revenue Service of the United States, or other agency of the federal government, or a release or official statement shall be issued by the President, the Department of the Treasury or the Internal Revenue Service of the United States, in any such case with respect to or affecting (directly or indirectly) the federal or state taxation of interest received on obligations of the general character of the Bonds which, in the judgment of the Underwriter, materially adversely affects the market price or marketability of the Bonds or the ability of the Underwriter to enforce contracts for the sale, at the contemplated offering prices (or yields), of the Bonds; or (iii) a stop order, ruling, regulation, proposed regulation or statement by or on behalf of the Securities and Exchange Commission or any other governmental agency having jurisdiction DMWEST #13961501 v1 9 of the subject matter shall be issued or made to the effect that the issuance, offering, sale or distribution of obligations of the general character of the Bonds (including any related underlying obligations) is in violation or would be in violation of any provisions of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended or the Trust Indenture Act of 1939, as amended; or (iv) legislation introduced in or enacted (or resolution passed) by the Congress or an order, decree, or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary, or proposed), press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds, including any or all underlying arrangements, are not exempt from registration under or other requirements of the Securities Act of 1933, as amended (the “Securities Act”), or that the Indenture is not exempt from qualification under or other requirements of the Trust Indenture Act of 1939, as amended, or that the issuance, offering, or sale of obligations of the general character of the Bonds, including any or all underlying arrangements, as contemplated hereby or by the Official Statement or otherwise, is or would be in violation of the federal securities law as amended and then in effect; (v) there shall have occurred (1) any outbreak or escalation of hostilities, declaration by the United States of a national or international emergency or war; or (2) any other calamity or crisis in the financial markets of the United States or elsewhere; or (3) a downgrade of the sovereign debt rating of the United States by any major credit rating agency or payment default on United States Treasury obligations; or (4) a default with respect to the debt obligations of, or the institution of proceedings under any federal bankruptcy laws by or against any state of the United States or any city, county or other political subdivision located in the United States having a population of over 1,000,000, which, in the judgment of the Underwriter, materially adversely affects the market price or marketability of the Bonds or the ability of the Underwriter to enforce contracts for the sale, at the contemplated offering prices (or yields), of the Bonds; or (vi) there shall have occurred a general suspension of trading, minimum or maximum prices for trading shall have been fixed and be in force or maximum ranges or prices for securities shall have been required on the New York Stock Exchange or other national stock exchange whether by virtue of a determination DMWEST #13961501 v1 10 by that Exchange or by order of the Securities and Exchange Commission or any other governmental agency having jurisdiction or any national securities exchange shall have: (i) imposed additional material restrictions not in force as of the date hereof with respect to trading in securities generally, or to the Bonds or similar obligations; or (ii) materially increased restrictions now in force with respect to the extension of credit by or the charge to the net capital requirements of underwriters or broker-dealers which, in the judgment of the Underwriter, materially adversely affects the market price or marketability of the Bonds or the ability of the Underwriter to enforce contracts for the sale, at the contemplated offering prices (or yields), of the Bonds; or (vii) a general banking moratorium shall have been declared by federal or New York or State of California state authorities or a major financial crisis or a material disruption in commercial banking or securities settlement or clearances services shall have occurred which, in the judgment of the Underwriter, materially adversely affects the market price or the marketability for the Bonds or the ability of the Underwriter to enforce contracts for the sale, at the contemplated offering prices (or yields), of the Bonds; or (viii) a downgrading or suspension of any rating (without regard to credit enhancement) by Moody’s Investors Service, Inc. (“Moody’s”), Standard & Poor’s (“S&P”), or Fitch Ratings (“Fitch”) of any debt securities issued by the District, or (ii) there shall have been any official statement as to a possible downgrading (such as being placed on “credit watch” or “negative outlook” or any similar qualification) of any rating by Moody’s, S&P or Fitch of any debt securities issued by the District, including the Bonds. (e) Closing Documents. At or prior to the Closing, the Underwriter shall receive with respect to the Bonds the following documents: (i) Bond Counsel Opinion. An approving opinion of Bond Counsel dated the date of the Closing and substantially in the form included as Appendix C to the Official Statement, together with a letter from such counsel, dated the date of the Closing and addressed to the Underwriter, to the effect that the foregoing opinion addressed to the District may be relied upon by the Underwriter to the same extent as if such opinion were addressed to it. (ii) Supplemental Opinion. A supplemental opinion or opinions of Bond Counsel addressed to the Underwriter, in form and substance acceptable to the Underwriter, and dated the date of the Closing substantially to the following effect: DMWEST #13961501 v1 11 (A) The Purchase Contract has been duly authorized, executed and delivered by the District and is a valid and binding agreement of the District enforceable in accordance with its terms, except that the rights and obligations under the Purchase Contract are subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors’ rights, to the application of equitable principles if equitable remedies are sought, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public agencies in the State; and (B) The statements contained in the Official Statement on the cover page and under the captions “INTRODUCTION,” “THE 2016A BONDS,” “SECURITY FOR THE 2016A BONDS,” “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES,” and “TAX MATTERS” and in Appendix B thereto, insofar as such statements purport to summarize certain provisions of the Bonds, the Indenture, State law and Bond Counsel’s opinions concerning certain federal tax matters relating to the Bonds, are accurate as of the date of the Official Statement and as of the date of Closing. (iii) District Counsel Opinion. An opinion of Kidman Law LLP, Irvine, California, counsel to the District, dated the date of the Closing and addressed to the Underwriter, in form and substance acceptable to the Underwriter substantially to the following effect: (A) The District is a county water district organized and validly existing under the constitution and the laws of the State; (B) The District Documents have been duly authorized, executed and delivered by the District and constitute the valid, legal and binding agreements of the District enforceable against the District in accordance with their respective terms, and the District has full right, power and authority to carry out and consummate all transactions contemplated by the District Documents as of the date of the Official Statement and as of the date of Closing; (C) To the best of such counsel’s knowledge based upon information provided by the District and except for the 2012A Bonds, as of the date of the Closing, the District does not and will not have outstanding any indebtedness which indebtedness is secured by a lien on the Net Revenues superior to or on a parity with the lien of the Bonds on the Net Revenues; DMWEST #13961501 v1 12 (D) The resolution of the District approving and authorizing the execution and delivery of the District Documents, and approving the Official Statement, has been duly adopted at a meeting of the governing body of the District, which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout and the resolution is in full force and effect and has not been modified, amended or rescinded; (E) To the best of such counsel’s knowledge based upon information provided by the District, the execution and delivery of the District Documents and compliance with the provisions thereof, under the circumstances contemplated thereby, do not and will not, in any respect which will have a material adverse impact on the transactions contemplated by the District Documents, conflict with, or constitute on the part of the District a breach of or default under, any material agreement or other instrument to which the District is a party or by which it is bound (as determined by reference to a certificate of the District identifying material agreements and instruments) or any existing law, regulation, court order or consent decree to which the District is subject (excluding, however, any opinion as to compliance with any applicable federal or state securities laws); (F) To the best of such counsel’s knowledge based upon information provided by the District, the execution and delivery of the District Documents and compliance with the provisions thereof, under the circumstances contemplated thereby, do not and will not, in any respect which will have a material adverse impact on the transactions contemplated by the District Documents, conflict with or constitute a breach of or default under any term or provision of the Constitution of the State or any statute, administrative rule or regulation, judgment, decree, order, license, permit, agreement or instrument to which the District is subject or by which the District or any of its property is bound (excluding, however, any opinion as to compliance with any applicable federal or state securities laws); (G) Based on the information made available to such counsel in his role as general counsel to the District, and without having undertaken to determine independently or assume any responsibility for the accuracy, completeness or fairness of the statements contained therein, the information in the Official Statement under the captions “REFUNDING PLAN,” “YORBA LINDA WATER DISTRICT,” and “LITIGATION,” is true and accurate to the best of such counsel’s knowledge at and as of the date of the Official Statement and at and as of the date of Closing; DMWEST #13961501 v1 13 (H) To the best of such counsel’s knowledge based upon information provided by the District, no additional authorization, approval, consent, waiver or any other action by any person, board or body, public or private, not previously obtained is required as of the date of the Closing for the District to enter into the District Documents or to perform its obligations thereunder (excluding, however, any opinion as to compliance with any applicable federal or state securities laws); (I) Based on information made available to such counsel in his role as general counsel to the District, he knows of no litigation, proceeding, action, suit, or investigation (or any basis therefor) at law or in equity before or by any court, governmental agency or body, pending or, to his best knowledge, threatened, against the District challenging the creation, organization or existence of the District, or the validity of the District Documents or seeking to restrain or enjoin the payments of debt service on the Bonds or in any way contesting or affecting the validity of the District Documents or any of the transactions referred to therein or contemplated thereby or contesting the authority of the District to enter into or perform its obligations under any of the District Documents, or under which a determination adverse to the District would have a material adverse effect upon the financial condition or the revenues of the District, or which, in any manner, questions or affects the right or ability of the District to enter into the District Documents or affects in any manner the right or ability of the District to pay debt service on the Bonds; and (J) Based on the information made available to counsel to the District in their role as general counsel to the District, and without having undertaken to determine independently or assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Official Statement, nothing has come to his attention which would lead him to believe that the Official Statement as of its date and as of the date of Closing (excluding therefrom the financial and statistical data and forecasts included therein, as to which no opinion is expressed) contained or contains any untrue statement of a material fact or omitted 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. (iv) Opinion of Counsel to Trustee. The opinion of counsel to U.S. Bank National Association (“Trustee”), dated the date of the Closing, addressed to the Underwriter, to the effect that: DMWEST #13961501 v1 14 (A) Trustee is a national banking association, duly organized and validly existing under the laws of the United States of America, having full corporate power to undertake the trust created under the Indenture and to enter into the Escrow Agreement (collectively with the Indenture, the “Trustee Documents”); (B) The Trustee Documents have been duly authorized, executed and delivered by Trustee and, assuming due authorization, execution and delivery by the other parties thereto, the Trustee Documents constitute the valid and binding obligations of Trustee enforceable in accordance with their respective terms, except as 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; (C) Trustee has duly authenticated the Bonds upon the order of the District; (D) Trustee’s actions in executing and delivering the Trustee Documents are in full compliance with, and do not conflict with any applicable law or governmental regulation and, to the best of such counsel’s knowledge, after reasonable inquiry with respect thereto, do not conflict with or violate any contract to which Trustee is a party or any administrative or judicial decision by which Trustee is bound; and (E) No consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the banking or trust powers of Trustee that has not been obtained is or will be required for the authentication and delivery of the Bonds or the consummation by Trustee of its obligations under the Trustee Documents. (v) Underwriter’s Counsel Opinion. An opinion of Ballard Spahr LLP, Salt Lake City, Utah counsel to the Underwriter (“Underwriter’s Counsel”), dated the date of Closing and addressed to the Underwriter to the effect that: (A) Such counsel is of the opinion that the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Indenture is exempt from qualification under the Trust Indenture Act of 1939, as amended; (B) While such counsel has not verified and is not passing upon and does not assume responsibility for, the accuracy, DMWEST #13961501 v1 15 completeness or fairness of the statements contained in the Official Statement, such counsel has participated in conferences with representatives of and counsel for the District and Bond Counsel and representatives of the Underwriter at which the contents of the Official Statement were discussed and revised. Based on such counsel’s representation of the Underwriter in connection with the issuance of the Bonds, no facts came to the attention of the attorneys in such firm rendering legal services in connection with such representation which caused such counsel to believe that the Official Statement contained as of its date or as of the date of Closing contains any untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading in any material respect (except that no opinion or belief is expressed as to (i) the expressions of opinion, the assumptions, the projections, the financial statements, or other financial, numerical, economic, demographic or statistical data contained in the Official Statement, (ii) the information with respect to DTC and its book-entry system and (iii) the information contained in Appendix A, Appendix C, Appendix D or Appendix E to the Official Statement); and (C) The provisions of the Continuing Disclosure Certificate comply with the provisions of Rule 15c2-12 under the Securities Exchange Act of 1934, as amended. (vi) District Certificate. A certificate of the District, dated the date of the Closing, signed on behalf of the District by the General Manager or other duly authorized officer of the District to the effect that: (A) The representations, warranties and covenants of the District contained in the Purchase Contract are true and correct in all material respects on and as of the date of the Closing as if made on the date of the Closing and the District has complied with all of the terms and conditions of the Purchase Contract required to be complied with by the District at or prior to the date of the Closing; (B) No event affecting the District has occurred since the date of the Official Statement which has not been disclosed therein or in any supplement or amendment thereto which event should be disclosed in the Official Statement in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and DMWEST #13961501 v1 16 (C) No event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute an event of default under the District Documents. (vii) Trustee’s Certificate. A certificate, dated the date of Closing, signed by a duly authorized official of Trustee satisfactory in form and substance to the Underwriter, to the effect that: (A) Trustee is duly organized and existing as a national banking association under the laws of the United States of America, having the full corporate power and authority to enter into and perform its duties under the Trustee Documents; (B) Trustee is duly authorized to enter into the Trustee Documents and has duly executed and delivered the Trustee Documents, and assuming due authorization and execution by the other parties thereto, the Trustee Documents are legal, valid and binding upon Trustee, and enforceable against Trustee in accordance with their terms; (C) Trustee has duly authenticated the Bonds under the Indenture and delivered the Bonds to or upon the order of the Underwriter; and (D) No consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the banking or trust powers of Trustee that has not been obtained is or will be required for the authentication and delivery of the Bonds or the consummation by Trustee of its obligations under the Trustee Documents. (viii) Transcripts. Two transcripts of all proceedings relating to the authorization, execution and delivery of the Bonds. (ix) Official Statement. The Official Statement and each supplement or amendment, if any, thereto, executed on behalf of the District by duly authorized officers of the District. (x) Documents. An original executed copy of each of the District Documents. (xi) District Resolution. Two certified copies of the District Resolution, certified by the District Clerk. (xii) Trustee Resolution. Two certified copies of the general resolution of Trustee authorizing the execution and delivery of certain documents by certain officers and employees of Trustee, which resolution authorizes the execution and delivery of the Trustee Documents. DMWEST #13961501 v1 17 (xiii) 8038-G. Evidence that the federal tax information form 8038-G relating to the Bonds has been prepared for filing. (xiv) 15c2-12 Certificate of the District. A certificate of the District “deeming final” the Preliminary Official Statement for purposes of Rule 15c2-12. (xv) Tax Certificate. A tax certificate in form satisfactory to Bond Counsel. (xvi) CDIAC Statements. A copy of the Notices of Sale required to be delivered to the California Debt Investment and Advisory Commission pursuant to Sections 8855(g) and 53583 of the California Government Code. (xvii) Rating. Evidence S&P that the Bonds have been assigned a rating of “____” and from Fitch that the Bonds have been assigned a rating of “____.” (xviii) Continuing Disclosure Certificate. An executed copy of the Continuing Disclosure Certificate. (xix) Verification Report. A verification report from Grant Thornton LLP, Minneapolis, Minnesota (the “Verification Agent”) together with a letter, dated the date of Closing, from an authorized officer of said firm consenting to the inclusion in the Official Statement of references to the Verification Agent and the verification report. (xx) DTC Letter of Representation. One copy of the executed Letter of Representation to The Depository Trust Company from the District. (xxi) Additional Documents. Such additional certificates, instruments and other documents as the Underwriter may reasonably deem necessary. If the District shall be unable to satisfy the conditions contained in this Purchase Contract, or if the obligations of the Underwriter shall be terminated for any reason permitted by this Purchase Contract, this Purchase Contract shall terminate and neither the Underwriter nor the District shall be under further obligation hereunder, except as further set forth in Section 8 hereof. (a) Whether or not the Underwriter accepts delivery of and pays for the Bonds as set forth herein, it shall be under no obligation to pay, and the District shall pay or cause to be paid (out of the proceeds of the Bonds or any other legally available funds of the District) all expenses incident to the performance of the District’s obligations hereunder, including but not limited to the cost of printing, engraving and delivering DMWEST #13961501 v1 18 the Bonds to the Underwriter; the cost of printing, distribution and delivery of all the agreements and documents contemplated hereby (including but not limited to the Preliminary Official Statement and the Official Statement) and drafts of any thereof in reasonable quantities as requested by the Underwriter; the fees and disbursements of the Trustee, Bond Counsel, accountants, appraisers, economic consultants and any other experts or consultants retained by the District in connection with the Bonds; CUSIP Service Bureau fees and charges; expenses (included in the expense component of the Underwriter’s spread) incurred on behalf of the District’s officers or employees which are directly related to the offering of the Bonds, including, but not limited to, meals, transportation, and lodging of those officers or employees; and any other expenses not specifically enumerated in paragraph (b) of this section incurred in connection with the execution of the Bonds. The Underwriter is required to pay fees to the California Debt and Investment Advisor Commission in connection with the offering of the Bonds. Notwithstanding that such fees are solely the legal obligation of the Underwriter, the District agrees to reimburse the Underwriter for such fees. (b) Whether or not the Bonds are delivered to the Underwriter as set forth herein, the District shall be under no obligation to pay, and the Underwriter shall pay, all expenses paid or incurred to qualify the Bonds for sale under any blue sky laws; and all other expenses paid or incurred by the Underwriter in connection with its public offering and distribution of the Bonds not specifically enumerated in paragraph (a) of this section, including the fees and disbursements of its counsel and the fees of Digital Assurance Certification, L.L.C. for a continuing disclosure undertaking compliance review (included in the expense component of the Underwriter’s spread) and fees customarily paid by the underwriters of municipal securities, such as the fees payable to the Municipal Securities Rulemaking Board. 8. Notice. Any notice or other communication to be given to the District under this Purchase Contract may be given by delivering the same in writing to Yorba Linda Water District, 1717 East Miraloma Avenue, Placentia, California 92870, Attention: General Manager. Any notice or other communication to be given to the Underwriter under this Purchase Contract may be given by delivering the same in writing to Citigroup Global Markets Inc., One Sansome Street, 26th Floor, San Francisco, California 94104, Attention: David G. Houston, Managing Director. 9. Entire Agreement. This Purchase Contract, when accepted by the District, shall constitute the entire agreement between the District and the Underwriter and is made solely for the benefit of the District and the Underwriter (including the successors DMWEST #13961501 v1 19 of the Underwriter). No other person shall acquire or have any right hereunder by virtue hereof, except as provided herein. All of the District’s representations, warranties and agreements in this Purchase Contract shall remain operative and in full force and effect except as otherwise provided herein, regardless of any investigations made by or on behalf of the Underwriter and shall survive the delivery of and payment for the Bonds. 10. Counterparts. This Purchase Contract may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. 11. Severability. In case any one or more of the provisions contained herein shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions hereof. 12. STATE LAW GOVERNS. THE VALIDITY, INTERPRETATION AND PERFORMANCE OF THIS PURCHASE CONTRACT SHALL BE GOVERNED BY THE LAWS OF THE STATE. 13. No Assignment. The rights and obligations created by this Purchase Contract shall not be subject to assignment by the Underwriter or the District without the prior written consent of the other party hereto. 14. No Advisory or Fiduciary Role. The District acknowledges and agrees that (i) the purchase and sale of the Bonds pursuant to this Purchase Contract is an arm’s- length commercial transaction between the District and the Underwriter, (ii) in connection therewith and with the discussions, undertakings and procedures leading up to the consummation of such transaction, the Underwriter is and has been acting solely as a principal and is not acting as the agent or fiduciary of the District, (iii) the Underwriter has not assumed an advisory or fiduciary responsibility in favor of the District with respect to the offering contemplated hereby or the discussions, undertakings and procedures leading thereto (irrespective of whether the Underwriter has provided other services or is currently providing other services to the District on other matters) and the Underwriter has no obligation to the District with respect to the offering contemplated hereby except the obligations expressly set forth in this Purchase Contract and (iv) the District has consulted its own legal, financial and other advisors to the extent it has deemed appropriate. S-1 CITIGROUP GLOBAL MARKETS INC. By: Managing Director Accepted as of the date first stated above: YORBA LINDA WATER DISTRICT By: General Manager DMWEST #13961501 v1 A-1 APPENDIX A $____________ Yorba Linda Water District Refunding Revenue Bonds, Series 2016A Maturity (October 1) Principal Amount Interest Rate $ % Stradling Yocca Carlson & Rauth Draft of 2/5/16 CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by the Yorba Linda Water District (the “District”) in connection with the execution and delivery of $_____ Refunding Revenue Bonds, Series 2016A (the “Bonds”). The Bonds are being issued pursuant to an Indenture of Trust, dated as of April 1, 2016 (the “Indenture of Trust”), by and between the District and U.S. Bank National Association, as trustee (the “Trustee”). The District covenants and agrees as follows: 1. Purpose of this Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the District for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule. 2. Definitions. In addition to the definitions set forth in the Indenture of Trust, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: Annual Report. The term “Annual Report” means any Annual Report provided by the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. Beneficial Owner. The term “Beneficial Owner” means any person which: (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries); or (b) is treated as the owner of any Bonds for federal income tax purposes. EMMA. The term “EMMA” means the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System for municipal securities disclosures, maintained on the Internet at http://emma.msrb.org/. Fiscal Year. The term “Fiscal Year” means the one-year period ending on the last day of June of each year, or any other period selected as the District’s fiscal year. In the event of a change in the District’s Fiscal Year, the District shall give notice of such change in the same manner as for a Listed Event under Section 5(a). Holder. The term “Holder” means a registered owner of the Bonds. Listed Events. The term “Listed Events” means any of the events listed in Sections 5(a) and (b) of this Disclosure Certificate. Official Statement. The term “Official Statement” means the Official Statement of the District dated April __, 2016 delivered in connection with the issuance of the Bonds. Participating Underwriter. The term “Participating Underwriter” means the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. Rule. The term “Rule” means Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. 3. Provision of Annual Reports. 2 (a) The District shall provide to EMMA not later than each April 1 following the end of its Fiscal Year (commencing April 1, 2017) an Annual Report relating to the immediately preceding Fiscal Year which is consistent with the requirements of Section 4 of this Disclosure Certificate, which Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate. (b) If the District is unable to provide to EMMA an Annual Report by the date required in subsection (a), the District shall send to EMMA a notice in substantially the manner prescribed by the Municipal Securities Rulemaking Board. 4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference the following: (a) The audited financial statements of the District 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 District’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Principal amount of the Bonds outstanding. (c) An update of the information in the following tables in the Official Statement: 1. Table 2 “PROPERTY TAX LEVIES AND COLLECTIONS;” 2. Table 3 “HISTORIC WATER SUPPLY IN ACRE FEET PER YEAR;” 3. Table 6 “HISTORIC WATER CONNECTIONS;” 4. Table 7 “HISTORIC WATER DELIVERIES IN ACRE FEET PER YEAR;” 5. Table 8 “HISTORIC WATER SALES REVENUES;” 6. Table 9 “TEN LARGEST WATER SYSTEM CUSTOMERS;” and 7. Table 15 “HISTORIC OPERATING RESULTS.” 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 District or related public entities, which have been submitted to EMMA or the Securities and Exchange Commission; provided that if any document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board; and provided further that the District shall clearly identify each such document so included by reference. 5. Reporting of Significant Events. 3 (a) Pursuant to the provisions of this Section 5, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds in a timely manner not more than ten (10) Business Days after the event: 1. principal and interest payment delinquencies; 2. unscheduled draws on debt service reserves reflecting financial difficulties; 3. unscheduled draws on credit enhancements reflecting financial difficulties; 4. substitution of credit or liquidity providers, or their failure to perform; 5. issuance by the Internal Revenue Service of proposed or final determination of taxability or of a Notice of Proposed Issue (IRS Form 5701-TEB); 6. tender offers; 7. defeasances; 8. ratings changes; and 9. bankruptcy, insolvency, receivership or similar proceedings. Note: For the purposes of the event identified in subparagraph (9), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. (b) Pursuant to the provisions of this Section 5, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: 1. unless described in Section 5(a)(5), other notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other events affecting the tax status of the Bonds; 2. modifications to the rights of Bondholders; 3. optional, unscheduled or contingent Bond calls; 4. release, substitution or sale of property securing repayment of the Bonds; 5. non-payment related defaults; 4 6. the consummation of a merger, consolidation, or acquisition involving the District or the sale of all or substantially all of the assets of the District, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms; and 7. appointment of a successor or additional trustee or the change of the name of a trustee. (c) If the District determines that knowledge of the occurrence of a Listed Event under Section 5(b) would be material under applicable federal securities laws, the District shall file a notice of such occurrence with EMMA in a timely manner not more than ten (10) Business Days after the event. 6. Customarily Prepared and Public Information. Upon request, the District shall provide to any person financial information and operating data regarding the District which is customarily prepared by the District and is publicly available. 7. Termination of Obligation. The District’s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5(a). 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that, in the opinion of nationally recognized bond counsel, such amendment or waiver is permitted by the Rule. 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall not thereby have any obligation under this Disclosure Certificate to update such information or include it in any future notice of occurrence of a Listed Event. 10. Default. In the event of a failure of the District to comply with any provision of this Disclosure Certificate, any Holders or Beneficial Owners of at least 50% aggregate principal amount of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture of Trust, and the sole remedy under this Disclosure Certificate in the event of any failure of the District to comply with this Disclosure Certificate shall be an action to compel performance. No Holder or Beneficial Owner of the Bonds may institute such action, suit or proceeding to compel performance unless they shall have first delivered to the District satisfactory written evidence of their status as such, and a written notice of and request to cure such failure, and the District shall have refused to comply therewith within a reasonable time. 5 11. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Participating Underwriter and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. 12. Filings with the MSRB. All financial information, operating data, financial statements, notices, and other documents provided to the Municipal Securities Rulemaking Board in accordance with this Disclosure Certificate shall be provided in an electronic format prescribed by the Municipal Securities Rulemaking Board and shall be accompanied by identifying information as prescribed by the Municipal Securities Rulemaking Board. Dated: April __, 2016 YORBA LINDA WATER DISTRICT By: President Stradling Yocca Carlson & Rauth Draft of 3/16/16 Th i s P r e l i m i n a r y O f f i c i a l S t a t e m e n t a n d t h e i n f o r m a ti o n c o n t a i n e d h e r e i n a r e s u b j e c t t o c o m p l e t i o n o r am e n d m e n t . T h e s e s e c u r it i e s m a y n o t b e s o l d , n o r m a y o f f e r s t o b u y t h e m b e a c c e p t e d , p r i o r t o th e t i m e t h e O f f i c i a l S t a t e m e n t i s d e l i v e r e d i n f i n al f o r m . U n d e r n o c i r c u m s t a n c e s s h a l l t h i s P r e l i m i n a r y O f fi c i a l S t a t e m e n t c o n s t i t u t e a n o f f e r t o s e l l o r t h e s o l i c i t a t i o n o f a n o f f e r t o b u y , n o r s h a l l t h e r e be a n y s a l e o f , t h e s e s e c u r i t i e s i n a n y j u r i s d i c t i o n i n w h i c h s u c h o f f e r , s o l i c i t a t i o n o r s a l e w o u l d b e u n l a w f u l . PRELIMINARY OFFICIAL STATEMENT DATED MARCH __, 2016 NEW ISSUE – BOOK-ENTRY ONLY RATINGS: See the caption “RATINGS” $___________* YORBA LINDA WATER DISTRICT REFUNDING REVENUE BONDS, SERIES 2016A Dated: Date of Issuance Due: October 1, as set forth on the inside cover The 2016A Bonds are being issued in fully registered form and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York. Purchasers of the 2016A Bonds will not receive securities representing their beneficial ownership in the 2016A Bonds purchased. Interest on the 2016A Bonds is payable on October 1, 2016 and each April 1 and October 1 thereafter until the maturity thereof. The principal of and interest on the 2016A Bonds are payable by the Trustee to Cede & Co., and such interest and principal payments are to be disbursed to the beneficial owners of the 2016A Bonds through their nominees. The 2016A Bonds are subject to optional, mandatory sinking fund and extraordinary redemption as more fully described herein. The 2016A Bonds are being issued to provide funds: (i) to advance refund all of the currently outstanding Yorba Linda Water District Revenue Certificates of Participation (2008 Capital Improvement Projects) Series 2008; [(ii) to pay all outstanding amounts under a line of credit with Wells Fargo Bank, National Association]; and (iii) to pay costs of issuance of the 2016A Bonds, all as more fully described herein. The 2016A Bonds are being issued pursuant to the Indenture of Trust, dated as of April 1, 2016, by and between the Yorba Linda Water District and U.S. Bank National Association, as trustee. The 2016A Bonds are limited obligations of the District payable solely first, from amounts on deposit in the Ad Valorem Taxes Account of the Revenue Fund remaining after payment of Operating and Maintenance Costs and Non-Operating and Maintenance Costs, and second, from other Net Revenues of the District’s Water System, and from amounts on deposit in certain funds and accounts created under the Indenture. The obligation of the District to pay principal of and interest on the 2016A Bonds is payable on a parity with approximately $7,515,000 aggregate principal amount of the Yorba Linda Water District Refunding Revenue Bonds, Series 2012A. The District may incur additional obligations payable from Net Revenues on a parity with the obligation to pay principal of and interest on the 2016A Bonds, subject to the terms and conditions of the Indenture, as more fully described herein. THE OBLIGATION OF THE DISTRICT TO PAY PRINCIPAL OF AND INTEREST ON THE 2016A BONDS PURSUANT TO THE INDENTURE DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH IT HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE DISTRICT TO PAY PRINCIPAL OF AND INTEREST ON THE 2016A BONDS IS A SPECIAL OBLIGATION OF THE DISTRICT PAYABLE SOLELY FROM SOURCES DESCRIBED HEREIN, AND DOES NOT CONSTITUTE A DEBT OF THE DISTRICT OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS ISSUE. INVESTORS ARE ADVISED TO READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the 2016A Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest (and original issue discount) on the 2016A Bonds is exempt from State of California personal income tax. See the caption “TAX MATTERS.” ____________________________________ MATURITY SCHEDULE – See Inside Cover Page ____________________________________ The 2016A Bonds are offered when, as and if issued and received by the Underwriter, subject to the approval of the valid, legal and binding nature of the 2016A Bonds by Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, and certain other conditions. Certain matters will be passed upon for the District by Kidman Law LLP, Irvine, California, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, as Disclosure Counsel, the Underwriter by its counsel, Ballard Spahr LLP, and for the Trustee by its counsel. It is anticipated that the 2016A Bonds will be available for delivery through the facilities of The Depository Trust Company on or about April 20, 2016. CITIGROUP Dated: April __, 2016 * Preliminary; subject to change. $___________* YORBA LINDA WATER DISTRICT REFUNDING REVENUE BONDS, SERIES 2016A MATURITY SCHEDULE BASE CUSIP®† _____ Maturity Date (October 1) Principal Amount Interest Rate Yield Price CUSIP®† Suffix $ % % $_____ ___% Term 2016A Bond due October 1, 20__, Price _____%, CUSIP®† Suffix ___ * Preliminary; subject to change. † CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by S&P Capital IQ. Copyright© 2016 CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. Neither the District nor the Underwriter takes any responsibility for the accuracy of such numbers. No dealer, broker, salesperson or other person has been authorized by the District or the Underwriter to give any information or to make any representations other than those contained in this Official Statement in connection with the offering made hereby and, if given or made, such other information or representations must not be relied upon as having been authorized by the District or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the 2016A Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers of the 2016A Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as a representation of facts. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. The information set forth herein has been obtained from official sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the Underwriter. The information and expression of opinions herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District since the date hereof. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 2016A BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE 2016A BONDS TO CERTAIN DEALERS, DEALER BANKS, BANKS ACTING AS AGENT AND OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE COVER PAGE HEREOF, AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. CERTAIN STATEMENTS CONTAINED IN THIS OFFICIAL STATEMENT REFLECT NOT HISTORICAL FACTS BUT FORECASTS AND “FORWARD-LOOKING STATEMENTS.” NO ASSURANCE CAN BE GIVEN THAT THE FUTURE RESULTS DISCUSSED HEREIN WILL BE ACHIEVED, AND ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE FORECASTS DESCRIBED HEREIN. IN THIS RESPECT, THE WORDS “ESTIMATE,” “PROJECT,” “ANTICIPATE,” “EXPECT,” “INTEND,” “BELIEVE” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. ALL PROJECTIONS, FORECASTS, ASSUMPTIONS, EXPRESSIONS OF OPINIONS, ESTIMATES AND OTHER FORWARD-LOOKING STATEMENTS ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. THE 2016A BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE 2016A BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. THE INDENTURE HAS NOT BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT The District maintains a website. However, the information presented there is not part of this Official Statement and should not be relied upon in making an investment decision with respect to the 2016A Bonds. YORBA LINDA WATER DISTRICT BOARD OF DIRECTORS Ric Collett, President Michael J. Beverage, Vice President Phil Hawkins, Director Bob Kiley, Director Gary Melton, Director STAFF Marc Marcantonio, General Manager Delia Lugo, Finance Manager SPECIAL SERVICES General Counsel Kidman Law LLP Irvine, California Bond Counsel and Disclosure Counsel Stradling Yocca Carlson & Rauth, a Professional Corporation Newport Beach, California Trustee U.S. Bank National Association Los Angeles, California Financial Advisor Fieldman, Rolapp & Associates Irvine, California Verification Agent Grant Thornton LLP Minneapolis, Minnesota TABLE OF CONTENTS Page i SUMMARY STATEMENT .................................................................................................................................. i INTRODUCTION ................................................................................................................................................ 1 REFUNDING PLAN ............................................................................................................................................ 2 General ........................................................................................................................................................... 2 Verification .................................................................................................................................................... 2 THE 2016A BONDS ............................................................................................................................................ 3 General Provisions ......................................................................................................................................... 3 Transfers and Exchanges Upon Termination of Book-Entry Only System ................................................... 3 Redemption of the 2016A Bonds ................................................................................................................... 4 Notice of Redemption .................................................................................................................................... 4 Book-Entry Only System ............................................................................................................................... 5 DEBT SERVICE PAYMENT SCHEDULE ........................................................................................................ 6 SECURITY FOR THE 2016A BONDS ............................................................................................................... 6 Limited Obligations Payable From Net Revenues ......................................................................................... 6 Rate Covenant ................................................................................................................................................ 7 Additional Indebtedness ................................................................................................................................. 7 No Reserve Fund ............................................................................................................................................ 8 ESTIMATED SOURCES AND USES OF FUNDS ............................................................................................ 8 YORBA LINDA WATER DISTRICT ................................................................................................................. 8 General ........................................................................................................................................................... 8 Land and Land Use ........................................................................................................................................ 9 Governance and Management ........................................................................................................................ 9 Employees and Employee Benefits .............................................................................................................. 10 Budget Process ............................................................................................................................................. 16 District Insurance ......................................................................................................................................... 16 Outstanding Obligations .............................................................................................................................. 17 Ad Valorem Tax Revenues .......................................................................................................................... 17 WATER SUPPLY .............................................................................................................................................. 20 General ......................................................................................................................................................... 20 Historic and Projected Water Supply ........................................................................................................... 22 THE WATER SYSTEM ..................................................................................................................................... 26 General ......................................................................................................................................................... 26 Historic Water Connections ......................................................................................................................... 27 Historic Water Deliveries ............................................................................................................................. 28 Historic Water Sales Revenues .................................................................................................................... 28 Largest Customers ....................................................................................................................................... 29 Water System Rates and Charges ................................................................................................................ 29 Collection Procedures .................................................................................................................................. 31 Projected Water Connections ....................................................................................................................... 31 Projected Water Deliveries .......................................................................................................................... 32 Projected Water Sales Revenues .................................................................................................................. 32 Future Water System Improvements ............................................................................................................ 33 TABLE OF CONTENTS (continued) Page ii WATER SYSTEM FINANCIAL INFORMATION .......................................................................................... 33 Financial Statements .................................................................................................................................... 33 Recovery of Wildfire Settlement Payment................................................................................................... 33 Investment of District Funds ........................................................................................................................ 34 Historic Operating Results and Debt Service Coverage .............................................................................. 35 Projected Operating Results and Debt Service Coverage ............................................................................ 36 CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES ......................................... 37 Article XIIIB ................................................................................................................................................ 37 Proposition 218 ............................................................................................................................................ 38 Future Initiatives .......................................................................................................................................... 39 APPROVAL OF LEGAL PROCEEDINGS ....................................................................................................... 39 LITIGATION ..................................................................................................................................................... 40 General ......................................................................................................................................................... 40 Challenge to Rate Increase ........................................................................................................................... 40 TAX MATTERS................................................................................................................................................. 41 FINANCIAL ADVISOR .................................................................................................................................... 42 RATINGS ........................................................................................................................................................... 42 UNDERWRITING ............................................................................................................................................. 43 CONTINUING DISCLOSURE UNDERTAKING ............................................................................................ 43 MISCELLANEOUS ........................................................................................................................................... 44 APPENDIX A YORBA LINDA WATER DISTRICT FINANCIAL STATEMENTS ........................................................................................... A-1 APPENDIX B DEFINITIONS AND SUMMARY OF THE INDENTURE ............................................. B-1 APPENDIX C FORM OF OPINION OF BOND COUNSEL ................................................................... C-1 APPENDIX D INFORMATION CONCERNING DTC ............................................................................ D-1 APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE ............................................ E-1 i SUMMARY STATEMENT This Summary Statement is subject in all respects to the more complete information contained in this Official Statement, and the offering of the 2016A Bonds to potential investors is made only by means of the entire Official Statement. Capitalized terms used and not otherwise defined in this Summary Statement have the meanings ascribed to them in this Official Statement. Purpose. The 2016A Bonds are being issued to provide funds: (i) to advance refund all of the currently outstanding Yorba Linda Water District Revenue Certificates of Participation (2008 Capital Improvement Projects) Series 2008; [(ii) to pay all outstanding amounts under a line of credit with Wells Fargo Bank, National Association]; and (iii) to pay costs of issuance of the 2016A Bonds. See the captions “REFUNDING PLAN” and “ESTIMATED SOURCES AND USES OF FUNDS.” Security for the 2016A Bonds. The 2016A Bonds are limited obligations of the District payable solely from Revenues of the District’s Water System remaining after payment of Operating and Maintenance Costs and Non-Operating and Maintenance Costs, and from amounts on deposit in certain funds and accounts created under the Indenture. The obligation of the District to pay principal of and interest on the 2016A Bonds is payable first, from Ad Valorem Tax Revenues remaining after payment of Operating and Maintenance Costs and Non-Operating and Maintenance Costs, if any, and, to the extent that such amounts are insufficient, next from other Net Revenues of the District’s Water System. The obligation of the District to pay principal of and interest on the 2016A Bonds is payable on a parity with payments with respect to approximately $7,515,000 aggregate principal amount of the Yorba Linda Water District Refunding Revenue Bonds, Series 2012A. The District may incur additional obligations payable on a parity with the obligation to pay principal of and interest on the 2016A Bonds in the future as described herein. The obligation of the District to pay principal of and interest on the 2016A Bonds pursuant to the Indenture does not constitute an obligation for which the District is obligated to levy or pledge any form of taxation or for which the District has levied or pledged any form of taxation. The obligation of the District to pay principal of and interest on the 2016A Bonds is a special obligation of the District payable solely from the sources described herein, and does not constitute a debt of the District or of the State of California or any political subdivision thereof in contravention of any constitutional or statutory debt limitation or restriction. See the caption “SECURITY FOR THE 2016A BONDS.” The Refunding Plan. A portion of the proceeds of the 2016A Bonds will be transferred to U.S. Bank National Association, as trustee with respect to the Series 2008 Certificates. Such moneys, together with moneys held in certain funds and accounts established in connection with the Series 2008 Certificates, will be applied to refund all outstanding Series 2008 Certificates in the aggregate principal amount of $29,865,000. [In addition, a portion of the proceeds of the 2016A Bonds will be delivered to Wells Fargo Bank, National Association and applied to pay all outstanding amounts under the District’s line of credit with Wells Fargo Bank, National Association]. See the caption “REFUNDING PLAN.” Rate Covenant. The Indenture requires the District, to the fullest extent permitted by law, to fix and prescribe, at the commencement of each Fiscal Year, rates and charges for the Water Service which are reasonably expected, at the commencement of each Fiscal Year, to be at least sufficient to yield during each Fiscal Year Net Revenues equal to 110% of the Debt Service for such Fiscal Year. The District may make adjustments from time to time in such rates and charges and may make such classification thereof as it deems necessary, but will not reduce the rates and charges then in effect unless the Net Revenues from such reduced ii rates and charges will at all times be sufficient to meet the foregoing requirements. See the caption “SECURITY FOR THE 2016A BONDS—Rate Covenant.” Additional Contracts and Bonds Test. The Indenture permits the District to execute any Contracts or issue any Bonds on a parity with the obligation to pay principal of and interest on the 2016A Bonds, provided that certain conditions are satisfied as described herein. See the caption “SECURITY FOR THE 2016A BONDS—Additional Indebtedness.” Redemption. The 2016A Bonds are subject to optional redemption, mandatory sinking fund redemption and extraordinary redemption from Net Proceeds of insurance or condemnation as described herein. See the caption “THE 2016A BONDS—Redemption of the 2016A Bonds.” The District. The District was established in 1959 as a county water district under the County Water District Law, Division 12 of the Water Code of the State of California, as the successor to a private water company that was incorporated in or about 1909, for purposes of supplying water for domestic, irrigation, sanitation, industrial, commercial, recreation and fire suppression use. The District is located in the northeastern portion of Orange County approximately 35 miles southeast of downtown Los Angeles and 11 miles north of Santa Ana, the county seat of the County. The District includes approximately 14,475 acres of land comprising 23.7 square miles. The District serves a population of approximately 74,000 and currently provides water services to approximately 24,653 residential, commercial, irrigation and other connections. In addition, the District provides wastewater service to a portion of the District. However, no revenues from the District’s wastewater system are pledged to the payment of the principal of, premium, if any, or interest on the 2016A Bonds. Approximately 95% of the operating revenues of the District for Fiscal Year 2011 are attributable to the Water System. The District service area lies within most of the City of Yorba Linda and portions of the cities of Anaheim, Brea and Placentia, including certain unincorporated areas of the County. The service area of the District is bounded by the City of Placentia on the west, the City of Brea on the northwest, the City of Anaheim on the south, the County/San Bernardino County line on the east and the Chino Hills State Park on the north. See the caption “YORBA LINDA WATER DISTRICT.” The District currently has two primary sources of water: (i) groundwater pumped from local wells; and (ii) imported water purchased from the Municipal Water District of Orange County delivered from The Metropolitan Water District of Southern California. See the caption “WATER SUPPLY.” 1 $___________* YORBA LINDA WATER DISTRICT REFUNDING REVENUE BONDS, SERIES 2016A INTRODUCTION This Official Statement, including the front cover page, the inside front cover page and the appendices, provides certain information concerning the sale and delivery of the Yorba Linda Water District Refunding Revenue Bonds, Series 2016A (the “2016A Bonds”). The 2016A Bonds are being issued pursuant to an Indenture of Trust, dated as of April 1, 2016 (the “Indenture”), by and between the Yorba Linda Water District (the “District”) and U.S. Bank National Association, Los Angeles, California, as trustee (the “Trustee”). Descriptions and summaries of various documents set forth in this Official Statement do not purport to be comprehensive or definitive, and reference is made to each document for complete details of all terms and conditions. All statements herein are qualified in their entirety by reference to each document. Capitalized terms used and not otherwise defined herein have the meanings ascribed to them in Appendix B. The 2016A Bonds are being issued to provide funds: (i) to advance refund all of the currently outstanding Yorba Linda Water District Revenue Certificates of Participation (2008 Capital Improvement Projects) Series 2008 (the “Series 2008 Certificates”); [(ii) to pay all outstanding amounts under a line of credit with Wells Fargo Bank, National Association (the “Wells Fargo Line of Credit”)]; and (iii) to pay costs of issuance of the 2016A Bonds. See the captions “REFUNDING PLAN” and “ESTIMATED SOURCES AND USES OF FUNDS.” The 2016A Bonds are limited obligations of the District payable solely from Net Revenues, which consist of Revenues of the District’s Water System remaining after payment of Operating and Maintenance Costs and Non-Operating and Maintenance Costs (as such terms are defined in Appendix B), and from amounts on deposit in certain funds and accounts created under the Indenture. The obligation of the District to pay principal of and interest on the 2016A Bonds is payable first from Ad Valorem Tax Revenues remaining after payment of Operating and Maintenance Costs and Non-Operating and Maintenance Costs, if any, and, to the extent that such amounts are insufficient, next from other Net Revenues of the District’s Water System. The obligation of the District to pay principal of and interest on the 2016A Bonds is payable on a parity with approximately $7,515,000 aggregate principal amount of the Yorba Linda Water District Refunding Revenue Bonds, Series 2012A (the “2012A Bonds”). See the caption “YORBA LINDA WATER DISTRICT— Outstanding Obligations.” The District may incur additional obligations payable on a parity with the obligation to pay principal of and interest on the 2016A Bonds in the future as described herein. See the caption “SECURITY FOR THE 2016A BONDS—Additional District Indebtedness.” Copies of the Indenture and all documents, statutes, reports and other instruments referred to herein are available for inspection at the offices of the District in Placentia, California and will be available from the Trustee upon request and payment of duplication cost. Unless otherwise indicated, all financial and statistical information herein has been provided by the District. The District regularly prepares a variety of reports, including audits, budgets and related documents. Any registered owner of the 2016A Bonds (each, an “Owner”) may obtain a copy of such report, as available, from the District. Additional information regarding the Official Statement may be obtained by contacting Yorba Linda Water District, 1717 East Miraloma Avenue, Placentia, California 92870, Attention: General Manager. * Preliminary; subject to change. 2 REFUNDING PLAN General The District caused the execution and delivery of the Series 2008 Certificates, which are currently outstanding in the aggregate principal amount of $29,865,000, pursuant to a Trust Agreement, dated as of February 1, 2008 (the “2008 Trust Agreement”), by and among the District, Yorba Linda Water District Public Financing Corporation (the “Corporation”) and U.S. Bank National Association, as trustee (the “2008 Trustee”). The Series 2008 Certificates are payable from installment payments made under the Installment Purchase Agreement, dated as of February 1, 2008 (the “2008 Installment Purchase Agreement”), by and between the District and the Corporation. The District plans to apply a portion of the proceeds of the 2016A Bonds to effect an advance refunding of the Series 2008 Certificates. Under an Escrow Agreement (2008 Certificates), dated as of April 1, 2016 (the “2008 Escrow Agreement”), by and between the District and the 2008 Trustee, the District will deliver a portion of the proceeds of the 2016A Bonds to the 2008 Trustee for deposit in the escrow fund established under the 2008 Escrow Agreement (the “2008 Escrow Fund”). The 2008 Trustee will invest a portion of the amounts deposited in the 2008 Escrow Fund in Federal Securities as set forth in the 2008 Escrow Agreement. From the maturing principal of the Federal Securities and related investment income and other moneys on deposit in the 2008 Escrow Fund, the 2008 Trustee will pay when due all regularly scheduled payments of interest and principal with respect to the Series 2008 Certificates on and prior to October 1, 2017, and pay on October 1, 2017 the principal of the Series 2008 Certificates maturing after October 1, 2017, plus interest accrued to such date, without premium. Sufficiency of the deposits in the 2008 Escrow Fund for such purposes will be verified by Grant Thornton LLP, Minneapolis, Minnesota (the “Verification Agent”). Assuming the accuracy of such computations, as a result of the deposit and application of funds as provided in the 2008 Escrow Agreement, the Series 2008 Certificates will be defeased pursuant to the provisions of the 2008 Installment Purchase Agreement and the 2008 Trust Agreement under which the Series 2008 Certificates were delivered, as of the date of issuance of the 2016A Bonds. The amounts held and invested by the 2008 Trustee in the 2008 Escrow Fund are pledged solely to the payment of the Series 2008 Certificates. Neither the funds deposited in the 2008 Escrow Fund nor the interest on the invested funds will be available for the payments of principal of and interest on the 2016A Bonds. [REFUNDING OF LINE OF CREDIT] Verification Upon issuance of the 2016A Bonds, the Verification Agent will deliver a report on the mathematical accuracy of certain computations based upon certain information and assertions provided to them by the Underwriter relating to: (a) the adequacy of the maturing principal of and interest on the Federal Securities to pay when due all interest with respect to the Series 2008 Certificates on and prior to the prepayment thereof and to pay the prepayment price of the Series 2008 Certificates on October 1, 2017; and (b) the computations of yield of the 2016A Bonds and the Federal Securities which support Bond Counsel’s opinion that the interest on the 2016A Bonds is excluded from gross income for federal income tax purposes. 3 THE 2016A BONDS General Provisions The 2016A Bonds will be issued in the aggregate principal amount of $___________.* The 2016A Bonds will be dated as of the date of initial issuance thereof (the “Issuance Date”), will bear interest from such date at the rates per annum set forth on the inside cover page hereof, payable on October 1, 2016 and each April 1 and October 1 thereafter (each, an “Interest Payment Date”), and will mature on the dates set forth on the inside cover page hereof. Interest on the 2016A Bonds will be computed on the basis of a 360-day year of twelve thirty-day months. The 2016A Bonds will be issued only in fully registered form and, when issued, 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 for the 2016A Bonds. Ownership interests in the 2016A Bonds may be purchased in book-entry form, in denominations of $5,000 or any integral multiple thereof. See the caption “—Book-Entry Only System” and Appendix D. In the event that the book-entry only system described herein is discontinued, the principal of and redemption premium (if any) on the 2016A Bonds are payable by check or draft of the Trustee upon presentation and surrender thereof at maturity or upon prior redemption at the office of the Trustee in Los Angeles, California (the “Office of the Trustee”). Interest on the 2016A Bonds is payable on each Interest Payment Date to the person whose name appears on the registration books maintained by the Trustee (the “Registration Books”) as the Owner thereof as of the close of business on the fifteenth day of the calendar month preceding the Interest Payment Date (the “Record Date”), such interest to be paid by check of the Trustee, sent by first class mail on the applicable Interest Payment Date to the Owner at such Owner’s address as it appears on the Registration Books. An Owner of $1,000,000 or more in principal amount of 2016A Bonds may, at such Owner’s option, be paid interest by wire transfer of immediately available funds to an account in the United States in accordance with written instructions provided to the Trustee by such Owner prior to the applicable Record Date. The principal of and interest and premium, if any, on the 2016A Bonds will be payable in lawful money of the United States of America. Interest on any 2016A Bond will be payable from the Interest Payment Date preceding the date of issuance thereof, unless such date is after a Record Date and on or before the succeeding Interest Payment Date, in which case interest thereon will be payable from such Interest Payment Date, or unless such date is on or before September 15, 2016, in which case interest thereon will be payable from the Issuance Date. Transfers and Exchanges Upon Termination of Book-Entry Only System In the event that the book-entry system described herein is abandoned, the 2016A Bonds will be printed and delivered as provided in the Indenture. Thereafter, any 2016A Bond may, in accordance with its terms, be transferred on the Registration Books by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such 2016A Bond at the Office of the Trustee for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form acceptable to the Trustee. The Trustee is not required to register the transfer of any 2016A Bond during the period in which the Trustee is selecting 2016A Bonds for redemption and any 2016A Bond that has been selected for redemption. Whenever any 2016A Bond or 2016A Bonds is surrendered for transfer, the District will execute and the Trustee will authenticate and deliver a new 2016A Bond or 2016A Bonds of authorized denomination or denominations for a like series and aggregate principal amount of the same maturity. The Trustee will require the 2016A Bond Owner requesting such transfer to pay any tax or other governmental charge required to be * Preliminary; subject to change. 4 paid with respect to such transfer. Following any transfer of 2016A Bonds, the Trustee will cancel and destroy the 2016A Bonds it has received. 2016A Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of other authorized denominations of the same series and maturity. The Trustee is not required to exchange any 2016A Bond during the period in which the Trustee is selecting 2016A Bonds for redemption or any 2016A Bond that has been selected for redemption. The Trustee will require the 2016A Bond Owner requesting such exchange to pay any tax or other governmental charge required to be paid with respect to such exchange. Following any exchange of 2016A Bonds, the Trustee will cancel and destroy the 2016A Bonds that it has received. Redemption of the 2016A Bonds Optional Redemption. The 2016A Bonds maturing on or after October 1, 20__ are subject to redemption prior to their respective stated maturities, as a whole or in part on ___ 1, 20__ or any date thereafter in the order of maturity as directed by the District in a Written Request provided to the Trustee at least 35 days (or such lesser number of days acceptable to the Trustee in the sole discretion of the Trustee, such notice for the convenience of the Trustee) prior to such date and by lot within each maturity in integral multiples of $5,000, at a Redemption Price equal to the principal amount thereof plus accrued interest thereon to the date fixed for redemption, without premium. Mandatory Sinking Fund Redemption. The 2016A Bonds with stated maturities on October 1, 20__ are subject to mandatory sinking fund redemption in part (by lot) on each October 1 on and after October 1, 20__, in integral multiples of $5,000 at a Redemption Price of the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule: Redemption Date (October 1) Principal Amount 20__ $ 20__* * Final Maturity. Extraordinary Redemption. The 2016A Bonds are subject to extraordinary redemption prior to their respective stated maturities, as a whole or in part on any date in the order of maturity and within maturities as directed by the District in a Written Request provided to the Trustee at least 35 days (or such lesser number of days acceptable to the Trustee in the sole discretion of the Trustee, such notice for the convenience of the Trustee) prior to such date and by lot within each maturity in integral multiples of $5,000 from Net Proceeds, upon the terms and conditions of, and as provided for in, the Indenture, at a Redemption Price equal to the principal amount thereof plus accrued interest thereon to the date fixed for redemption, without premium. See Appendix B under the captions “PARTICULAR COVENANTS—Insurance” and “PARTICULAR COVENANTS—Eminent Domain Proceeds,” respectively, for a description of the circumstances under which the 2016A Bonds could be subject to extraordinary redemption from Net Proceeds of insurance or condemnation. Notice of Redemption When redemption is authorized or required, the Trustee will give notice to the Owners of the 2016A Bonds designated for redemption. Notice of redemption will be mailed by first class mail at least 20 days but not more than 60 days before any Redemption Date, to the respective Owners of any 2016A Bonds designated for redemption at their addresses appearing on the Registration Books, to the Securities Depositories and the Information Services. Each notice of redemption will state the date of notice, the Redemption Date, the place 5 or places of redemption and the Redemption Price, will designate the maturities, CUSIP numbers, if any, and, if less than all 2016A Bonds of any such maturity are to be redeemed, the serial numbers of the 2016A Bonds of such maturity to be redeemed by giving the individual number of each 2016A Bond or by stating that all 2016A Bonds between two stated numbers, both inclusive, have been called for redemption and, in the case of 2016A Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice will also state that on the Redemption Date there will become due and payable on each of said 2016A Bonds or parts thereof designated for redemption the Redemption Price thereof or of said specified portion of the principal thereof in the case of a 2016A Bond to be redeemed in part only, together with interest accrued thereon to the Redemption Date, and that (provided that moneys for redemption have been deposited with the Trustee) from and after such Redemption Date interest thereon ceases to accrue, and will require that such 2016A Bonds be then surrendered to the Trustee. Neither the failure to receive such notice nor any defect in the notice or the mailing thereof will affect the validity of the redemption of any 2016A Bond. Notice of redemption of 2016A Bonds will be given by the Trustee, at the expense of the District, for and on behalf of the District. With respect to any notice of optional redemption of 2016A Bonds, such notice will state that such redemption will be conditional upon the receipt by the Trustee on or prior to the date fixed for such redemption of moneys sufficient to pay the principal of, premium, if any, and interest on such 2016A Bonds to be redeemed and that, if such moneys have not been so received, said notice will be of no force and effect and the Trustee will not be required to redeem such 2016A Bonds. In the event that such notice of redemption contains such a condition and such moneys are not so received, the redemption will not be made, and the Trustee will within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such moneys were not so received. Book-Entry Only System One fully-registered 2016A Bond of each maturity will be issued in the principal amount of the 2016A Bonds of such maturity. Such 2016A Bond will be registered in the name of Cede & Co. and will be deposited with DTC. The District may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, the 2016A Bonds will be printed and delivered and will be governed by the provisions of the Indenture with respect to payment of principal and interest and rights of exchange and transfer. The District cannot and does not give any assurances that DTC participants or others will distribute payments of principal of and interest on the 2016A Bonds received by DTC or its nominee as the registered Owner, or any redemption or other notices, to the Beneficial Owners, that they will do so on a timely basis or that DTC will service and act in the manner described in this Official Statement. See Appendix D for additional information concerning DTC. 6 DEBT SERVICE PAYMENT SCHEDULE Set forth below is a schedule of principal of and interest on the 2016A Bonds and the 2012A Bonds for the period ending June 30 in each of the years indicated: 2016A Bonds June 30 2016A Bonds Principal 2016A Bonds Interest 2016A Bonds Total 2012A Bonds(1) Total 2016 $ 591,962.50 2017 588,487.50 2018 588,312.50 2019 591,212.50 2020 583,712.50 2021 590,712.50 2022 586,250.00 2023 585,387.50 2024 582,912.50 2025 583,662.50 2026 583,412.50 2027 587,037.50 2028 584,537.50 2029 581,037.50 2030 583,937.50 2031 585,962.50 2032 584,987.50 2033 587,787.50 2034 584,343.75 2035 - 2036 - 2037 - 2038 - TOTAL $ 11,135,656.25 (1) See the caption “YORBA LINDA WATER DISTRICT—Outstanding Obligations.” Source: Fieldman, Rolapp & Associates. SECURITY FOR THE 2016A BONDS Limited Obligations Payable From Net Revenues The District is obligated to make payments of principal of and interest on the 2016A Bonds solely from Net Revenues of the District’s Water System. The term “Net Revenues” means, for any fiscal year of the District ending June 30 (each, a “Fiscal Year”), the Revenues for such Fiscal Year less Operating and Maintenance Costs and Non-Operating and Maintenance Costs for such Fiscal Year. The obligation of the District to pay principal of and interest on the 2016A Bonds is payable first from Ad Valorem Tax Revenues remaining after payment of Operating and Maintenance Costs and Non-Operating and Maintenance Costs, if any, and, to the extent that such amounts are insufficient, next from other Net Revenues of the District’s Water System. The obligation to make payments of principal of and interest on the 2016A Bonds is payable from Net Revenues on a parity with the obligation of the District to make payments on the 2012A Bonds, which are currently outstanding in the aggregate principal amount of approximately $7,515,000. See Appendix B for the definitions of Revenues, Operating and Maintenance Costs and Non-Operating and Maintenance Costs. See the caption “YORBA LINDA WATER DISTRICT—Outstanding Obligations” for a discussion of the 2012A Bonds. THE OBLIGATION OF THE DISTRICT TO PAY PRINCIPAL OF AND INTEREST ON THE 2016A BONDS PURSUANT TO THE INDENTURE DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR 7 WHICH IT HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE DISTRICT TO PAY PRINCIPAL OF AND INTEREST ON THE 2016A BONDS IS A SPECIAL OBLIGATION OF THE DISTRICT PAYABLE SOLELY FROM SOURCES DESCRIBED HEREIN, AND DOES NOT CONSTITUTE A DEBT OF THE DISTRICT OR OF THE STATE OF CALIFORNIA (the “State”) OR OF ANY POLITICAL SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. Rate Covenant The Indenture requires the District, to the fullest extent permitted by law, to fix and prescribe, at the commencement of each Fiscal Year, rates and charges for the Water Service which are reasonably expected, at the commencement of each Fiscal Year, to be at least sufficient to yield during each Fiscal Year Net Revenues equal to 110% of the Debt Service for such Fiscal Year. The District may make adjustments from time to time in such rates and charges and may make such classification thereof as it deems necessary, but will not reduce the rates and charges then in effect unless the Net Revenues from such reduced rates and charges will at all times be sufficient to meet the foregoing requirements. Additional Indebtedness The District may at any time execute any Contract or issue any Bonds, as the case may be, payable from Net Revenues on a parity with the 2016A Bonds and secured by a pledge of and lien on Revenues as described in the Indenture; provided that: (a) The Net Revenues for any consecutive twelve calendar month period during the eighteen calendar month period preceding the date of adoption by the Board of Directors of the District (the “Board”) of the resolution authorizing the issuance of such Bonds or the date of the execution of such Contract, as the case may be, as evidenced by a special report prepared by an Independent Certified Public Accountant or Independent Financial Consultant on file with the District, produces a sum equal to at least 110% of the Debt Service for such twelve month period; and (b) The Net Revenues for any consecutive twelve calendar month period during the eighteen calendar month period preceding the date of the execution of such Contract or the date of adoption by the Board of the resolution authorizing the issuance of such Bonds, as the case may be, including adjustments to give effect as of the first day of such twelve month period to increases or decreases in rates and charges for the Water Service approved and in effect as of the date of calculation, as evidenced by a special report prepared by an Independent Certified Public Accountant or Independent Financial Consultant on file with the District, produces a sum equal to at least 110% of the Debt Service for such twelve month period plus the Debt Service which would have accrued on any Contracts executed or Bonds issued since the end of such twelve month period assuming such Contracts had been executed or Bonds had been issued at the beginning of such twelve month period; and (c) The estimated Net Revenues for the then current Fiscal Year and for each Fiscal Year thereafter to and including the first complete Fiscal Year after the latest Date of Operation of any uncompleted Parity Project to be financed from proceeds of such Contracts or Bonds, as evidenced by a certificate of the General Manager of the District on file with the District, including (after giving effect to the completion of all such uncompleted Parity Projects) an allowance for estimated Net Revenues for each of such Fiscal Years arising from any increase in the income, rents, fees, rates and charges estimated to be fixed, prescribed or received for Water Service and which are economically feasible and reasonably considered necessary based on projected operations for such period, as evidenced by a certificate of the Manager on file with the District, will produce a sum equal to at least 110% of the estimated Debt Service for each of such Fiscal Years, after giving effect to the execution of all Contracts and the issuance of all Bonds estimated to be required to be executed or issued to pay the costs of completing all uncompleted Parity Projects within such Fiscal Years, assuming that all such Contracts and Bonds have maturities, interest rates and proportionate principal repayment provisions 8 similar to the Contract last executed or then being executed or the Bonds last issued or then being issued for the purpose of acquiring and constructing any of such uncompleted Parity Projects. Notwithstanding the foregoing, Bonds issued or Contracts executed to refund Bonds or prepay Contracts may be delivered without satisfying the conditions set forth above if Debt Service in each Fiscal Year after the Fiscal Year in which such Bonds are issued or Contracts executed is not greater than Debt Service would have been in each such Fiscal Year prior to the issuance of such Bonds or execution of such Contracts. The 2016A Bonds are being issued on a parity with the 2012A Bonds under provisions of the indenture pursuant to which the 2012A Bonds were issued that are substantially similar to those set forth above. No Reserve Fund No reserve fund has been established in connection with the issuance of the 2016A Bonds. ESTIMATED SOURCES AND USES OF FUNDS The following table sets forth the estimated sources and uses of funds for the 2016A Bonds: Sources(1): Principal Amount $ Plus/Less Net Original Issue Premium/Discount Transferred Moneys(2) Total Sources $ Uses(1): 2008 Escrow Fund $ Costs of Issuance(3) Total Uses $ (1) Rounded to the nearest dollar. Totals may not add due to rounding. (2) Reflects moneys transferred from funds and accounts established in connection with the Series 2008 Certificates. (3) Includes Underwriter’s discount, fees of the Verification Agent, Trustee and Financial Advisor and certain legal, financing and printing costs. YORBA LINDA WATER DISTRICT General The District was established in 1959 as a county water district under the County Water District Law, Division 12 of the Water Code of the State of California, as the successor to a private water company that was incorporated in or about 1909, for purposes of supplying water for domestic, irrigation, sanitation, industrial, commercial, recreation and fire suppression use. The District is located in the northeastern portion of Orange County (the “County”) approximately 35 miles southeast of downtown Los Angeles and 11 miles north of Santa Ana, the county seat of the County. The District includes approximately 14,475 acres of land comprising 23.7 square miles. The District serves a population of approximately 74,000 and currently provides water services to approximately 24,653 residential, commercial, irrigation and other connections. In addition, the District provides wastewater service to a portion of the District. However, no revenues from the District’s wastewater system are pledged to the payment of the principal of, premium, if any, or interest on the 2016A Bonds. Approximately 95% of the operating revenues of the District for Fiscal Year 2015 are attributable to the Water System. 9 The District service area lies within most of the City of Yorba Linda and portions of the cities of Anaheim, Brea and Placentia, including certain unincorporated areas of the County. The service area of the District is bounded by the City of Placentia on the west, the City of Brea on the northwest, the City of Anaheim on the south, the County/San Bernardino County line on the east and the Chino Hills State Park on the north. The District currently has two primary sources of water: (i) groundwater pumped from local wells; and (ii) imported water purchased from the Municipal Water District of Orange County (“MWDOC”) and delivered by The Metropolitan Water District of Southern California (“MWD”). See the caption “WATER SUPPLY.” Prior to May 2014, approximately 26% of the District’s service area was outside of the boundaries of the Orange County Water District (“OCWD”), the agency responsible for managing the Orange County Groundwater Basin. See the caption “WATER SUPPLY—General—Groundwater.” In May 2014, the District’s application to annex such portions of the District’s service area into OCWD was approved. It is anticipated that the annexation will ultimately allow the District to pump a higher percentage of its water supply from the Orange County Groundwater Basin at a lower cost than purchasing the same amount of water from MWDOC, thereby reducing the District’s dependence on drought-sensitive imported water from northern California and the Colorado River. The District expects to be able to take full advantage of the annexation of its entire service area into OCWD by approximately 2019. Currently, the District’s ability to pump water up to the basin production percentage set by OCWD (as described under the caption “WATER SUPPLY—General—Groundwater”) is limited by infrastructure limitations (as discussed in the following paragraph) and by MWD’s Conjunctive Use Program Agreement (the “CUP”), which requires the District to withdraw water in excess of the basin production percentage and to pay for such water at current imported water rates after subtracting power and operations and maintenance charges. The CUP authorizes MWD to compel the District to extract water from the Orange County Groundwater Basin in times of drought when MWD’s traditional sources (including the Colorado River and northern California supplies) are less plentiful. As described under the caption “THE WATER SYSTEM—Future Water System Improvements,” the District’s capital improvement program includes the construction of pumping, pipeline and well facilities over the next three years that will make it possible for the District to access its full allotment of groundwater. Land and Land Use The District currently includes approximately 14,475 acres of land. Land use within the District consists primarily of residential and small commercial uses. Currently, there are no heavy industrial or manufacturing uses within the District’s boundaries. There are several light industrial and commercial centers located mainly in the northwestern, southern and southeastern portions of the District. Governance and Management The District is governed by a 5-member Board of the Directors (the “Board”), the members of which are elected at large by the registered voters in the District to staggered 4-year terms. The current Board members, the expiration dates of their terms and their occupations are set forth below. 10 Board of Directors Member Expiration of Term Occupation Ric Collett, President November 2016 Retired Waste Management Industry Manager Michael J. Beverage, Vice President November 2016 Advertising and Marketing Consultant Phil Hawkins, Director November 2018 Real Estate Broker Bob Kiley, Director November 2018 Small Business Owner Gary Melton, Director November 2018 Restaurant Owner Day-to-day management of the District is delegated to the General Manager, Marc Marcantonio. Mr. Marcantonio has served as the District’s General Manager since September 2014. He is responsible for the daily operations of the District and for ensuring that policies established by the Board are followed and goals and objectives of the Board are carried out. Prior to his appointment as General Manager, Mr. Marcantonio served as General Manager of the Mt. View-Edgewood Water Company in Washington State and as President of the Regional Water Cooperative of Pierce County, an association of 25 water and wastewater agencies in the greater Seattle area. Mr. Marcantonio retired from the United States Army as a Lieutenant Colonel after 23 years of active duty, including 20 years with the California National Guard. Delia Lugo is the Finance Manager of the District. Ms. Lugo was named Finance Manager in 2013 and manages the Finance Department, which consists of the Accounting, Customer Service and Meter Reading sections. Prior to being named Finance Manager, Ms. Lugo served as Senior Accountant for the District. Ms. Lugo has a Bachelor of Arts degree from California State University, Fullerton, with an emphasis in Financial Management. Employees and Employee Benefits General. As of June 30, 2015, the District had 76 full-time equivalent employees, including 7 employees in the Administration Department, 9 employees in the Engineering Department, 13 employees in the Finance Department, 4 employees in the Human Resources Department, 5 employees in the Information Technology Department and 38 employees in the Operations Department. Non-management and non-supervisory employees of the District are represented by the Yorba Linda Water District Employees Association (the “Association”). The current memorandum of understanding between the District and the Association expires on June 30, 2018. The District has not experienced any strikes or other labor actions. Of the total District employment, approximately 92% of the associated costs are chargeable to the Water System. Pension Benefits. This caption contains certain information relating to the California Public Employees Retirement System (“CalPERS”). The information is primarily derived from information produced by CalPERS, its independent accountants and its actuaries. The District has not independently verified the information provided by CalPERS and makes no representations nor expresses any opinion as to the accuracy of the information provided by CalPERS. The comprehensive annual financial reports of CalPERS are available on its Internet website at www.calpers.ca.gov. The CalPERS website also contains CalPERS’ most recent actuarial valuation reports and other information concerning benefits and other matters. The textual reference to such Internet website is provided for convenience only. None of the information on such Internet website is incorporated by reference herein. The District cannot guarantee the accuracy of such information. Actuarial assessments are “forward-looking” statements that reflect the judgment of the fiduciaries of the pension plans, and are based upon a variety of assumptions, one or more of which may not materialize or be changed in the future. The District participates in the 2.0% at 55, 2.0% at 60 and 2.0% at 62 CalPERS Risk Pools, which are cost sharing multiple-employer defined benefit pension plans. CalPERS provides retirement and disability benefits, annual cost-of-living adjustments and death benefits to plan members and beneficiaries. CalPERS acts as a common investment and administrative agent for participating public entities within the State. Benefit provisions and all other requirements are established by State statute and District ordinance. 11 The contribution rate for plan members in the CalPERS 2.0% at 55 Risk Pool Retirement Plan (those District employees who were hired prior to December 22, 2011) is 7% of their annual covered salary. Employees in the 2.0% at 55 plan make the full amount of the required contributions themselves. District employees who were hired on and after December 22, 2011 and prior to January 1, 2013 participate in the 2.0% at 60 Risk Pool Retirement Plan at a contribution rate of 7% of their annual covered salary. Employees in the 2.0% at 60 plan make the full amount of the required contributions themselves. District employees who were hired on and after January 1, 2013 participate in the District’s 2.0% at 62 Risk Pool Retirement Plan; such employees are required to make the full amount of required contributions themselves under the California Public Employees’ Pension Reform Act of 2013 (“AB 340”), which was signed by the State Governor on September 12, 2012. AB 340 established a new pension tier (2.0% at 62 formula) with a maximum benefit formula of 2.5% at age 67. Benefits for such participants are calculated on the highest average annual compensation over a consecutive 36 month period. Employees are required to pay at least 50% of the total normal cost rate. AB 340 also caps pensionable income for 2015 at $117,020 ($140,424 for employees not enrolled in Social Security) subject to Consumer Price Index increases and prohibits retroactive benefits increases, generally prohibiting contribution holidays and purchases of additional non-qualified service credit. CalPERS estimates savings for local agency plans as a result of AB 340 of approximately $1.653 billion to $2.355 billion over the next 30 years, primarily due to increased employee contributions and, as the workforce turns over, lower benefit formulas that will gradually reduce normal costs. Savings specific to the District have not been quantified. Provisions in AB 340 will not likely have a material effect on District contributions in the short term. However, additional employee contributions, limits on pensionable compensation and higher retirement ages for new members will reduce the District’s unfunded pension lability and potentially reduce District contribution levels in the long term. The District is also required to contribute the actuarially determined remaining amounts necessary to fund the benefits for its members. The required employer contribution rates for Fiscal Year 2015 were 11.522% for the 2.0% at 55 plan, 8.435% for the 2.0% at 60 plan and 6.25% for the 2.0% at 62 plan. The contribution requirements of the plan members are established by State statute, and the employer contribution rate is established and may be amended by CalPERS. For Fiscal Years 2015, 2014 and 2013, the District’s combined annual employer’s contributions for all of its CalPERS plans were $587,176, $537,843 and $505,243, respectively, and were equal to the District’s required and actual contributions for each year. The required employer contribution for Fiscal Year 2015 was determined as part of the June 30, 2012, actuarial valuation of the District’s CalPERS plans using the Entry Age Normal Actuarial Cost Method. The actuarial assumptions for the June 30, 2012 valuation included: (a) 7.50% investment rate of return (net of administrative expenses); (b) projected annual salary increases that vary from 3.30% to 14.20%; and (c) a 2.75% inflation component. The actuarial value of CalPERS assets was determined using a technique that smoothes the effect of volatility in the market value of investments over a fifteen-year period. CalPERS’ initial unfunded liabilities are amortized over a closed period that depends on the plan’s date of entry into CalPERS. Subsequent plan amendments are amortized as a level percentage of pay over a closed 20-year period. Required employer and employee contributions are determined from rates established by CalPERS based upon various actuarial assumptions which are revised annually. The District currently funds the normal pension costs, which are determined by CalPERS using the Entry Age Normal Actuarial Cost Method, as well as an amortization of the District’s unfunded actuarial liability. For Fiscal Year 2016, the District’s CalPERS contribution is expected to be $703,372, assuming budgeted salaries and contribution rates of 8.512%, 7.163% 12 and 6.237% of annual covered payroll for the 2.0% at 55 plan, 2.0% at 60 plan and 2.0% at 62 plan, respectively. The District had an unfunded accrued liability of $4,427,056 for its CalPERS plan as of June 30, 2014, based on a market value of assets of $26,178,857, as set forth in the most recent actuarial report prepared by CalPERS. The staff actuaries at CalPERS annually prepare an actuarial valuation which covers a Fiscal Year ending approximately 15 months before the actuarial valuation is delivered (thus, the actuarial valuation dated November 2015 covered the District’s Fiscal Year ended June 30, 2014). The actuarial valuations express the District’s required contribution rates in percentages of covered payroll, which percentages the District must contribute in the Fiscal Year immediately following the Fiscal Year in which the actuarial valuation is prepared (thus, the District’s contribution rate derived from the actuarial valuation as of June 30, 2013 which was delivered in October 2014, affects the District’s Fiscal Year 2016 required contribution rate). CalPERS rules require the District to implement the actuary’s recommended rates. In calculating the annual actuarially recommended contribution rates, the CalPERS actuary calculates on the basis of certain assumptions the actuarial present value of benefits that CalPERS will fund under the CalPERS plans, which includes two components, the normal cost and the unfunded actuarial accrued liability (the “UAL”). The normal cost represents the actuarial present value of benefits that CalPERS will fund under the CalPERS plans that are attributed to the current year, and the actuarial accrued liability represents the actuarial present value of benefits that CalPERS will fund that are attributed to past years. The UAL represents an estimate of the actuarial shortfall between actuarial value of assets on deposit at CalPERS and the present value of the benefits that CalPERS will pay under the CalPERS plans to retirees and active employees upon their retirement. The UAL is based on several assumptions such as, among others, the rate of investment return, average life expectancy, average age of retirement, inflation, salary increases and occurrences of disabilities. In addition, the UAL includes certain actuarial adjustments such as, among others, the actuarial practice of smoothing losses and gains over multiple years (which is described in more detail below). As a result, the UAL may be considered an estimate of the unfunded actuarial present value of the benefits that CalPERS will fund under the CalPERS plans to retirees and active employees upon their retirement and not as a fixed expression of the liability that the District owes to CalPERS under its CalPERS plans. Commencing with the June 30, 2013 valuation, all new gains or losses are tracked and amortized over a fixed 30-year period with a five year ramp up at the beginning and a five year ramp down at the end of the amortization period. All changes in liability due to plan amendments (other than “golden handshakes,” which are amortized over a five year period), changes in actuarial assumptions, or changes in actuarial methodology are amortized separately over a 20-year period with a five year ramp up at the beginning and a five-year ramp down at the end of the amortization period. In each actuarial valuation, the CalPERS actuary estimates the actuarial value of the assets (the “Actuarial Value”) of the CalPERS plans at the end of the Fiscal Year (which assumes, among other things, that the rate of return during that Fiscal Year equaled the assumed rate of return (currently 7.50%)). The CalPERS actuary uses a smoothing technique to determine Actuarial Value that is calculated based on certain policies. Certain significant recent changes in assumptions include the following. On November 17, 2015, the CalPERS Board approved changes that could affect the assumed investment return rate in the future. In years in which CalPERS’ investment returns are more than 2% greater than forecast, the long-term assumed investment return rate will be reduced by a maximum of 0.25%. CalPERS estimates that this change will reduce the assumed investment return rate by approximately 1% (to 6.5%) within 20 years. On February 18, 2014, the CalPERS Board approved changes to actuarial assumptions and methods based upon a recently completed experience study. These changes include: moving from using smoothing of the market value of assets to obtain the actuarial value of assets to direct smoothing of employer contribution 13 rates; increased life expectancy; changes to retirement ages (earlier for some groups and later for others); lower rates of disability retirement; and other changes. On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS amortization and rate smoothing policies. Beginning with the June 30, 2013 valuations (which set the Fiscal Year 2016 rates), CalPERS employs an amortization and smoothing policy that pays for all gains and losses over a fixed 30-year period with the increases or decreases in the rate spread directly over a five- year period. CalPERS no longer uses the actuarial value of assets and only uses the market value of assets. This direct rate smoothing method is equivalent to a method using a five year asset smoothing period with no actuarial value of asset corridor and a 25-year amortization period for gains and losses. On March 14, 2012, the CalPERS Board approved a change in the inflation assumption used in the actuarial valuations used to determine employer contribution rates. The inflation assumption was changed from 3% to 2.75% effective July 1, 2012. The change impacted the inflation component of the annual investment return assumption and the long term payroll growth assumption as follows: • The annual assumed investment return decreased from 7.75% to 7.50%. • The long term payroll growth assumption decreased from 3.25% to 3.00%. • The inflation component of individual salary scales decreased from 3.25% to 3.00%. Such contributions have been factored into the District’s contribution rates set by CalPERS. Future changes in CalPERS funding policies and assumptions, including those related to assumed rates of investment return and inflation, could trigger increases in the District’s annual required contributions, and such increases could be material to the finances of the Water System. Reporting obligations under Governmental Accounting Standards Board Statement No. 68 (“GASB 68”) commenced with financial statements for Fiscal Year 2015. Under GASB 68, an employer reports the net pension liability, pension expense and deferred outflows/deferred inflows of resources (as such terms are described in the following paragraph) related to pensions in its financial statements as part of its financial position. As a result of this change in accounting standards, the District’s total net position decreased by approximately $7.2 million in Fiscal Year 2015, primarily due to an adjustment of approximately $6.9 million to the unrestricted net position balance as a result of the adoption of GASB 68. The net pension liability is the plan’s total pension liability based on the Entry Age Normal Actuarial Cost Method less the plan’s fiduciary net position. The pension expense is the change in net pension liability from the previous fiscal year to the current fiscal year, less adjustments. Deferred outflows and deferred inflows of resources related to pensions are certain changes in total pension liability and fiduciary net position that are to be recognized in future pension expense. Under GASB 68, deferred inflows and deferred outflows of resources related to pensions are recognized in pension expense systematically over time. The first amortized amounts are recognized in pension expense for the year in which the gain or loss occurs. The remaining amounts are categorized as deferred inflows and deferred outflows to be recognized in future pension expense. GASB 68 is a change in accounting reporting standards, but it does not change the District’s CalPERS plan funding obligations. See Note 7 in Appendix A for further information with respect to GASB 68. 14 The following table summarizes the District’s annual required contributions for its CalPERS plan for Fiscal Years 2011 through 2015: Fiscal Year Employer Contribution District-Funded Employee Contribution Employee Contribution Annual Pension Cost Percentage of Annual Pension Cost Contributed 2011 $527,743 $353,133 $ 0 $880,876 100% 2012 549,308 333,408 942 883,658 100 2013 505,243 244,475 103,320 853,038 100 2014 537,843 114,713 246,612 899,168 100 2015 587,176 0 383,504 970,680 100 The following table summarizes the schedule of funding for all District plans as of June 30, 2014. The employer contribution rates for Fiscal Year 2016 are 8.512%, 7.163% and 6.237% of annual covered payroll for the 2.0% at 55 plan, 2.0% at 60 plan and 2.0% at 62 plan, respectively. Valuation Date (June 30) Accrued Liability Market Value of Assets Unfunded Liability Funded Ratio Annual Covered Payroll 2010 $25,148,893 $22,392,702 $2,756,191 89.0% $5,643,289 2011 25,412,948 20,098,223 5,314,725 79.1 5,011,006 2012 25,751,755 19,228,607 6,523,148 74.7 5,027,288 2013 26,981,627 21,929,626 5,052,001 81.4 4,907,053 2014 30,605,913 26,178,857 4,427,056 85.5 5,184,402 Source: CalPERS Actuarial Report Dated November 2015. For additional information relating to the District’s CalPERS plan, see Note 7 to the District’s audited financial statements for Fiscal Year 2011 attached hereto as Appendix A. CalPERS earnings reports for Fiscal Years 2010, 2011, 2012, 2013, 2014 and 2015 report an investment gain in excess of 13.0%, 21.7%, 1%, 12.5%, 18.4% and 2.4%, respectively. Future earnings performance may increase or decrease future contribution rates for plan participants, including the District. The District’s projections of Operating and Maintenance Costs shown under the caption “WATER SYSTEM FINANCIAL INFORMATION—Projected Operating Results and Debt Service Coverage” do not assume further unusual increases in CalPERS contributions or other labor costs. However, no assurance can be provided that such expenses will not increase significantly in the future. Other Post-Employment Benefits. The District, through a single employer defined benefit plan, provides post-employment health care benefits (“OPEB”). Specifically, the District provides health (medical, dental and vision) insurance for its retired employees and directors, their dependent spouses (if married and covered on the District’s plan at time of retirement), or survivors, in accordance with Board resolutions. Medical coverage is provided for retired employees who are age 50 or over and who have a minimum of 5 years of service with the District. The District pays 100% of the premium for the retiree and two-thirds of the premium amount for eligible dependents accrued at a rate of one year for every three years of service. Two-thirds of the premium amount of medical coverage is provided for the surviving spouse of retired employees for the remaining vested period. The OPEB plan does not provide a publicly available financial report. The contribution requirements of OPEB plan members and the District are established and may be amended by the Board. Currently, contributions are not required from plan members. The District has 15 established a trust fund to fund future OPEB obligation. In Fiscal Years 2015 and 2014, the District made contributions of $175,297 and $187,756 to the OPEB trust fund. The District has budgeted $197,912 to contribute to the OPEB trust fund in Fiscal Year 2016. Governmental Accounting Standards Board Statement No. 45 (“GASB 45”) requires governmental agencies to account for and report the outstanding obligations and commitments related to other post-employment benefits in essentially the same manner as for pensions. While requiring the District to disclose the unfunded actuarial accrued liability and the annual required contribution (the actuarial value of benefits earned during a Fiscal Year plus costs to amortize the unfunded actuarial accrued liability, or “OPEB ARC”) in its financial statements, GASB 45 does not require the District to fund such OPEB ARC. The OPEB ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and to amortize any unfunded liabilities of the plan over a period not to exceed thirty years. The following table shows the components of the District’s annual OPEB cost for Fiscal Year 2015, the amount actually contributed to the plan, and changes in the District’s net OPEB obligation: OPEB ARC $ 187,756 Interest on Net OPEB Obligation (10,073) Adjustment to OPEB ARC 11,479 Annual OPEB Cost (Expense) 189,162 OPEB Contribution (51,001) Actual Contributions Made (141,918) Increase in Net OPEB Obligation 3,757 Net OPEB Asset – Beginning of Year (138,943) Net OPEB Asset – End of Year (142,700) The District’s annual OPEB cost, the percentage of annual OPEB cost contributed to the OPEB plan, and the net OPEB obligation for the last five Fiscal Years were as follows: Fiscal Year Ended June 30 Annual OPEB Costs Percentage of Annual OPEB Costs Contributed Net OPEB Obligation (Asset) 2011 $189,147 160.49% $122,065 2012 164,390 194.10 (32,630) 2013 170,501 163.87 (140,364) 2014 189,177 99.25 (138,943) 2015 189,162 101.99 (142,700) As of July 1, 2015, the District’s OPEB plan was 34.75% funded. The actuarial accrued liability for benefits was $2,136,644 and the actuarial value of assets was $742,379, resulting in an unfunded actuarial accrued liability (the “OPEB UAL”) of $1,394,265. The covered payroll (annual payroll of active employees covered by the plan) was $5,564,327 and the ratio of the OPEB UAL to the covered payroll was 25.06%. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about rates of employee turnover, retirement and mortality, as well as economic assumptions regarding claim costs per retiree, healthcare inflation and interest rates. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress set forth below presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. 16 Valuation Date Actuarial Accrued Liability (a) Actuarial Value of Assets (b) OPEB UAL (a) – (b) Funded Ratio (b) / (a) Annual Covered Payroll OPEB UAL as Percentage of Annual Covered Payroll 6/30/2011 $1,597,488 $164,291 $1,433,197 10.28% $4,773,686 30.02% 7/01/2013 1,896,791 537,913 1,358,878 28.36 5,200,000 26.13 7/01/2015 2,136,644 742,379 1,394,265 34.75 5,564,327 25.06 The District’s projections of Operating and Maintenance Costs shown under the caption “WATER SYSTEM FINANCIAL INFORMATION—Projected Operating Results and Debt Service Coverage” do not assume further unusual increases in OPEB funding expenses. However, future changes in OPEB funding policies and assumptions, including those related to assumed rates of investment return and inflation, could trigger increases in the District’s annual required contributions, and such increases could be material to the finances of the Water System. No assurance can be provided that such expenses will not increase significantly in the future. The District does not expect that any increased funding of OPEB will have a material adverse effect on the ability of the District to make payments of principal of and interest on the 2016A Bonds. Budget Process Prior to June 30 of each year, District staff submits a proposed budget for the following Fiscal Year to the Board. The Board generally conducts a public workshop to obtain comments from residents and ratepayers before adopting the budget. On July 9, 2015, the Board approved the budget for Fiscal Year 2016. Decisions by the Board and the General Manager during the period covered by the budget are flexible so that the District can respond to changing conditions as necessary, while meeting the generally basic budgetary objectives of the Board. Water rates, fees and customer service charges are presented to the Board in June of each year, prior to approval of the budget. District Insurance The District is exposed to various risks of loss related to torts, theft of, damage to and destruction of assets, errors and omissions, injuries to employees and natural disasters. In an effort to manage its risk exposure, the District is a member of the Association of California Water Agencies/Joint Powers Insurance Authority (“ACWA/JPIA”). ACWA/JPIA is a risk-pooling self-insurance authority, created under provisions of State law. The purpose of ACWA/JPIA is to arrange and administer programs of insurance for the pooling of self-insured losses and to purchase excess insurance coverage. As of June 30, 2015, as a member of ACWA/JPIA, the District participated in the following insurance programs: • General and auto liability, public officials and employee’s error and omissions: Total risk financing self-insurance limits of $2,000,000 and combined single limit at $2,000,000 per occurrence. ACWA/JPIA purchases additional excess coverage layers as follows: $58 million for general, auto and public officials liability, which increases the limits on the insurance coverage noted above. • Employee dishonesty coverage up to $100,000 per loss, including public employee dishonesty, forgery or alteration and theft, disappearance and destruction coverages, subject to a $1,000 deductible per occurrence. • Property loss is paid at the replacement cost for property on file, if replaced within two years after the loss; otherwise, property loss is paid on an actual cash value basis. The District’s Retrospective Allocation Point (deductible) is $25,000 per occurrence. ACWA/JPIA is self- 17 insured for the first $100,000, and purchases excess coverage up to $100 million, subject to a $1,000 deductible, except for a $500 deductible on vehicles. • Boiler and machinery coverage for the replacement cost up to $100 million per occurrence, subject to various deductibles depending on the type of equipment. • Workers’ compensation insurance up to State statutory limits for all work related injuries/illnesses covered by State law. The District maintains earthquake insurance through the ACWA/JPIA risk pool in the amount (shared with other entities in the pool) of $2,500,000. The occurrence of an earthquake or other natural disaster in or near the District’s service area, including, without limitation, wildfire, landslide, high winds, drought or flood, could have an adverse material impact on the economy within the District, the Water System and the Net Revenues available for the payment of the 2016A Bonds. Portions of the Water System may be at risk of damage or destruction from wildfires or subject to unpredictable seismic activity. There can be no assurance that specific losses will be covered by insurance or, if covered, that claims will be paid in full by the applicable insurers. Settled claims have not exceeded any of the coverage amounts in any of the last three Fiscal Years. See the caption “WATER SYSTEM FINANCIAL INFORMATION—Recovery of Wildfire Settlement Payment” for a discussion of prior litigation with the District’s excess liability insurers relating to insurance coverage. Outstanding Obligations Parity Obligations. On September 19, 2012, the District issued its Refunding Revenue Bonds, Series 2012A (the “2012A Bonds”) for the purpose of refinancing certain capital improvements to the Water System of the District. The 2012A Bonds are currently outstanding in the aggregate principal amount of $7,515,000. The 2012A Bonds are payable from Net Revenues and secured by a lien on and pledge of Revenues on a parity with the payments of principal of and interest on the 2016A Bonds. [REVISE IF REFUNDED] [Subordinate Obligations. On September 24, 2012, the District entered into a revolving line of credit with Wells Fargo Bank, National Association (the “Line of Credit”). The Line of Credit is in the maximum outstanding principal amount of $7,000,000 and has an interest rate equal to 70% of the 1-month LIBOR rate plus 0.90% per annum. The District has drawn upon the Line of Credit to fund certain costs and projects associated with the District’s ongoing Capital Improvement Program. The District’s obligations outstanding under the Line of Credit are payable from Net Revenues on a subordinate basis to the payments of principal of and interest on the 2016A Bonds. The Line of Credit expires on September 30, 2016 and is outstanding in the principal amount of $6,458,297 as of January 1, 2016.] Ad Valorem Tax Revenues General. The County levies a 1% ad valorem property tax on behalf of all taxing agencies in the County, including the District. The taxes collected are allocated to taxing agencies within the County, including the District, on the basis of a formula established by State law enacted in 1979. Under this formula, the County and all other taxing entities receive a base year allocation plus an allocation on the basis of “situs” growth in assessed value (new construction, change of ownership, and inflation) prorated among the jurisdictions which serve the tax rate areas within which the growth occurs. Tax rate areas are specifically defined geographic areas which were developed to permit the levying of taxes for less than county-wide or less than city-wide special districts. In Fiscal Year 2015, the District received $1,496,489 in 1% ad valorem property tax revenues from the County. Such revenues constitute Ad Valorem Tax Revenues pledged, to the extent remaining after 18 payment of Operating and Maintenance Costs and Non-Operating and Maintenance Costs, as the first source of payment of the principal of and interest on the 2016A Bonds. From time to time legislation has been considered as part of the State budget to shift Property Tax Revenues from special districts to school districts or other governmental entities. Legislation enacted in connection with the 1992-93 State budget shifted approximately 35% of many special districts’ shares of the countywide 1% ad valorem tax, including the District’s share. The 2004-05 State budget reallocated additional portions of the special districts’ shares of the countywide 1% ad valorem tax, shifting a portion of the Ad Valorem Tax Revenues collected by the County from special districts to school districts. As a result of the 2004-05 State budget, the District lost approximately $1,586,028 of Ad Valorem Tax Revenues, cumulatively, over Fiscal Years 2005 and 2006. Pursuant to the 2004-05 State budget, such Ad Valorem Tax Revenues reverted to the District in Fiscal Year 2007. On November 2, 2004, State voters approved Proposition 1A, which amends the State Constitution to significantly reduce the State’s authority over major local government revenue sources. Under Proposition 1A, the State may not, among other things: (i) shift property taxes from local governments to schools or community colleges; or (ii) change how 1% ad valorem property tax revenues are shared among local governments without two-thirds approval of both houses of the State Legislature. Beginning in State fiscal year 2009-10, the State may shift to schools and community colleges a limited amount of local government 1% ad valorem property tax revenues if certain conditions are met, including: (a) a proclamation by the Governor that the shift is needed due to a severe financial hardship of the State; and (b) approval of the shift by the State Legislature with a two-thirds vote of both houses. Under such a shift, the State must repay local governments for their property tax losses, with interest, within three years and no additional shifts may occur until the State repays the shifted revenues. Proposition 1A does allow the State to approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. On July 27, 2009, the Governor of the State signed a revised fiscal year 2009-10 State budget which included a shift of approximately 8% of 1% ad valorem property tax revenues from certain local agencies, including the District, to school districts and other governmental agencies. The State repaid the portion of the Ad Valorem Tax Revenues that were subject to such shift, totaling $102,192, to the District in Fiscal Year 2013, plus interest at the rate of 2% per annum, all in accordance with Proposition 1A. There can be no assurance that the Ad Valorem Tax Revenues that the District currently expects to receive will not be temporarily shifted from the District pursuant to Proposition 1A in future years, or reduced pursuant to State legislation enacted in the future. If the property tax formula is changed for a State fiscal year or permanently changed in the future, it could have a material adverse effect on the receipt of Ad Valorem Tax Revenues by the District, to the extent received by the District in accordance with State law. Ad Valorem Tax Revenues comprise a portion of Revenues from which Operating and Maintenance Costs and Non-Operating and Maintenance Costs are payable, but the District has no taxing power. See the caption “SECURITY FOR THE 2016A BONDS—Limited Obligations Payable From Net Revenues” for a discussion of the extent to which Ad Valorem Tax Revenues are available to make payments of principal of and interest on the 2016A Bonds. Assessed Valuation. The assessed valuation of the property in the County is established by the County Assessor, except for public utility property, which is assessed by the State Board of Equalization. Generally, property can be reappraised to market value only upon a change in ownership or completion of new construction. The assessed value of property that has not incurred a change of ownership or new construction must be adjusted annually to reflect inflation at a rate not to exceed 2% per year based on the State consumer price index. In the event of declining property value caused by substantial damage, destruction, economic or other factors, the assessed value must be reduced temporarily to reflect market value. 19 The County Assessor determines and enrolls a value for each parcel of taxable real property in the County every year. The value review may result in a reduction in value. Taxpayers in the County also may appeal the determination of the County Assessor with respect to the assessed value of their property. The table below sets forth the secured and unsecured assessed valuations for property in the District for the last five Fiscal Years. The information in the table below has been provided by the County Auditor-Controller. The District has not independently verified the information in the table below and does not guarantee its accuracy. TABLE 1 YORBA LINDA WATER DISTRICT ASSESSED VALUATION Fiscal Year Local Secured Unsecured Total 2011 $16,518,679,174 $279,460,021 $16,798,139,195 2012 16,999,386,679 246,912,352 17,246,299,031 2013 17,641,280,663 225,542,596 17,866,823,259 2014 18,668,404,485 314,678,102 18,983,082,587 2015 19,954,785,758 288,290,618 20,243,076,376 Source: Orange County Auditor-Controller. Tax Levies and Delinquencies. In accordance with the State Revenue and Taxation Code, the County tax collector collects secured tax levies for each Fiscal Year. Property taxes on the secured roll are due in two installments, on November 1 and February 1. If unpaid, such taxes become delinquent after December 10 and April 10, respectively, and a 10% penalty attaches to any delinquent payment. In addition, property on the secured roll with respect to which taxes are delinquent is declared tax-defaulted on or about June 30. Such property may thereafter be redeemed by payment of the delinquent taxes and the delinquency penalty, plus costs and a redemption penalty of 1.5% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the tax-defaulted property is subject to sale by the County Treasurer-Tax Collector. Property taxes on the unsecured roll are due as of a January 1 lien date and become delinquent, if unpaid, on August 31. A 10% penalty attaches to delinquent taxes on property on the unsecured roll and an additional penalty of 1.5% per month begins to accrue on November 1. The taxing authority has four ways of collecting unsecured personal property taxes: (1) a civil action against the taxpayer; (2) filing a certificate in the office of the County Clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for recordation in the County Recorder’s office in order to obtain a lien on certain property of the taxpayer; and (4) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the taxpayer. 20 The table below sets forth property tax levies and delinquencies in the District as of June 30 for the last five available Fiscal Years. TABLE 2 YORBA LINDA WATER DISTRICT PROPERTY TAX LEVIES AND COLLECTIONS Fiscal Year Secured Tax Charge(1) Amount Delinquent June 30 Percent Delinquent June 30 2011 $1,194,554 $17,622 1.48% 2012 1,225,270 16,476 1.34 2013(2) 1,246,033 12,002 0.96 2014 1,294,007 9,706 0.75 2015 1,390,316 9,654 0.69 (1) 1% General Fund apportionment. Includes secured and supplemental rolls. (2) Includes repayment of $102,192 of Ad Valorem Tax Revenues pursuant to Proposition 1A. See the caption “—General.” Source: California Municipal Statistics Inc. In Fiscal Year 2015, Ad Valorem Tax Revenues constituted approximately 4.97% of total Revenues received by the District. The Board of Supervisors of the County has approved the implementation of the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”), as provided for in Section 4701 et seq. of the State Revenue and Taxation Code. As a result of the implementation of the Teeter Plan by the County, the County apportions secured property taxes and assessments on an accrual basis when due (irrespective of actual collections) to participating local political subdivisions for which the County acts as the levying or collecting agency. The District does not participate in the Teeter Plan. As a result, the District is subject to the risk that delinquencies in the payment of 1% ad valorem property taxes could reduce the amount of Ad Valorem Property Taxes received by the District. Conversely, the District will benefit from Ad Valorem Property Taxes generated by penalties and interest charged on delinquent ad valorem property taxes. WATER SUPPLY General The District currently has two primary sources of water: (i) groundwater pumped from ten active wells; and (ii) imported water purchased from MWDOC delivered from MWD. Groundwater. The District operates ten active water wells. Wells 1, 5, 7, 10, 12, 18 and 19 are located at the District’s Richfield Plant. Wells 11, 15 and 20 are located in the City of Anaheim adjacent to OCWD’s spreading basins. In 1998, the District renovated Wells 1, 5, 7 and 12, upgrading them to the latest standards and to a single lift operation, which improves operational performance and reliability. The District’s wells draw water from the Orange County Groundwater Basin, which is managed by OCWD. The Orange County Groundwater Basin is estimated to have a total water storage capacity of approximately 66,000,000 acre feet. The District’s wells have been drilled to an average depth of 400 feet and produce high quality water that meets all State and federal drinking water standards in sufficient quantities to supply approximately 75% of the water demand within the District. Total maximum daily production from the District’s wells is approximately 21 million gallons per day (“mgd”). From 2010 through 2015, the District’s maximum daily water demand was approximately 29 million gallons, while the average daily water demand was approximately 19 million gallons. 21 District groundwater pumping is affected by policies of OCWD, the agency responsible for managing the Orange County Groundwater Basin, including the setting of replenishment assessments, basin production percentages of total water demand by agencies pumping basin groundwater and basin equity assessments. OCWD establishes and collects replenishment assessments as a means of purchasing water and funding projects for the purpose of replenishing the Orange County Groundwater Basin. The replenishment assessment is established annually by OCWD and applies to every acre foot of groundwater produced from the Orange County Groundwater Basin. In addition, each year, OCWD sets a basin production percentage (the “BPP”) for water to be extracted from the Orange County Groundwater Basin. The BPP is the amount of groundwater, as a percentage of a groundwater pumping agency’s total water demands, that can be pumped from the Orange County Groundwater Basin during the year by the groundwater pumping agency without incurring the additional assessment described in the following paragraph. The amount of groundwater that an agency can pump without incurring the additional assessment is calculated by multiplying the total water use of such agency by the BPP (the “BPP formula”). The additional assessment incurred by an agency that pumps groundwater above the limit established by the BPP formula is called the basin equity assessment (the “BEA”). The BEA is established annually by OCWD and is intended to discourage pumping of amounts above the BPP formula by raising the cost of producing groundwater so that it equals the cost of importing water, thereby encouraging groundwater pumping agencies to supplement their groundwater production with imported water for the portion of their water use that exceeds the BPP. The BEA is a surcharge to discourage, yet still allow for, the production of groundwater in excess of the BPP formula. One of the District’s operating objectives is to minimize the production of groundwater in excess of the BPP formula in order to minimize the BEA payment. In Fiscal Year 2015, the District did not pay a BEA to OCWD. For Fiscal Years 2011, 2012, 2013, 2014 and 2015, the BPP was 62%, 65%, 68%, 70% and 72%, respectively. The BPP for Fiscal Year 2016 is expected to be set at 75% which, based on estimated demands, would allow the District to pump approximately 11,200 acre feet from the Orange County Groundwater Basin without incurring any BEA. The District currently pays OCWD a replenishment assessment of $322 per acre foot for all groundwater pumped and a BEA equal to an additional $584 per acre foot for groundwater pumped in excess of the BPP formula. The replenishment assessment for Fiscal Year 2016 has not yet been determined. See the caption “YORBA LINDA WATER DISTRICT—General” for a discussion of certain limitations on the District’s ability to pump groundwater up to the BPP at the present time. OCWD faces various challenges in managing the Orange County Groundwater Basin. A description of these challenges as well as a variety of other operating information with respect to OCWD is included in certain disclosure documents prepared by OCWD. OCWD has certain publicly available documents and has entered into certain continuing disclosure agreements pursuant to which OCWD is contractually obligated, for the benefit of owners of certain of its outstanding obligations, to file certain annual reports, notices of certain enumerated events as defined under Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, as amended (“Rule 15c2-12”), and annual audited financial statements (collectively, the “OCWD Information”), with the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System (“EMMA”), maintained on the Internet at http://emma.msrb.org. The OCWD Information is not incorporated herein by reference thereto, and the District makes no representation as to the accuracy or completeness of such information. OCWD HAS NOT ENTERED INTO ANY CONTRACTUAL COMMITMENT WITH THE DISTRICT, THE TRUSTEE OR THE OWNERS OF THE 2016A BONDS TO PROVIDE OCWD INFORMATION TO THE DISTRICT OR THE OWNERS OF THE 2016A BONDS. OCWD HAS NOT REVIEWED THIS OFFICIAL STATEMENT AND HAS NOT MADE ANY REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED OR INCORPORATED HEREIN, 22 INCLUDING INFORMATION WITH REGARD TO OCWD. OCWD IS NOT CONTRACTUALLY OBLIGATED, AND HAS NOT UNDERTAKEN, TO UPDATE SUCH INFORMATION FOR THE BENEFIT OF THE DISTRICT OR THE OWNERS OF THE 2016A BONDS UNDER RULE 15c2-12. Imported Water. The other source of supply available to the District is water that the District purchases from MWDOC, a member of MWD. MWD imports water into southern California from the Colorado River via the Colorado River Aqueduct, and from northern California via the State Water Project. MWD is the largest wholesale water agency in the United States, distributing water to a service area that extends from Ventura to the California-Mexico border. MWD’s distribution system sells water directly to certain agencies and through subsidiary agencies such as MWDOC to other agencies such as the District. The District pays for its imported water through MWDOC but takes actual delivery of the water that it purchases through pipelines owned by MWD in the Orange County area. The pipelines used to import water have a combined capacity of approximately 26 mgd. The District currently has adequate capacity with existing pipelines to meet its peak demand. MWDOC’s charge to the District consists of four components: (a) MWDOC’s cost to purchase water from MWD; (b) a capacity charge in the current amount of $222,825 per year; (c) a readiness-to-serve charge in the current amount of $702,290 per year; and (d) a retail connection charge in the current amount of $10.50 per connection. MWD faces various challenges in the continued supply of imported water to MWDOC. A description of these challenges as well as a variety of other operating information with respect to MWD is included in certain disclosure documents prepared by MWD. MWD has certain publicly available documents and has entered into certain continuing disclosure agreements pursuant to which MWD is contractually obligated, for the benefit of owners of certain of its outstanding obligations, to file certain annual reports, notices of certain enumerated events as defined under Rule 15c2-12 and annual audited financial statements (collectively, the “MWD Information”) with EMMA. The MWD Information is not incorporated herein by reference thereto, and the District makes no representation as to the accuracy or completeness of such information. MWD HAS NOT ENTERED INTO ANY CONTRACTUAL COMMITMENT WITH THE DISTRICT, THE TRUSTEE OR THE OWNERS OF THE 2016A BONDS TO PROVIDE MWD INFORMATION TO THE DISTRICT OR THE OWNERS OF THE 2016A BONDS. MWD HAS NOT REVIEWED THIS OFFICIAL STATEMENT AND HAS NOT MADE ANY REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED OR INCORPORATED HEREIN, INCLUDING INFORMATION WITH REGARD TO MWD. MWD IS NOT CONTRACTUALLY OBLIGATED, AND HAS NOT UNDERTAKEN, TO UPDATE SUCH INFORMATION FOR THE BENEFIT OF THE DISTRICT OR THE OWNERS OF THE 2016A BONDS UNDER RULE 15c2-12. Historic and Projected Water Supply Set forth below is a summary of the District’s sources of water supply for the last five Fiscal Years. The decrease in water supply since 2011 reflects a combination of conservation initiatives by the District in coordination with MWDOC and the mandatory conservation measures that have been imposed by the State in response to the Statewide drought, as discussed under the caption “—Drought Proclamation.” Although reductions in water supply result in lower Water System Revenues, they also result in reduced Operating and Maintenance Costs to the District. 23 TABLE 3 YORBA LINDA WATER DISTRICT HISTORIC WATER SUPPLY IN ACRE FEET PER YEAR Fiscal Year Groundwater Imported Water Total Increase/(Decrease) 2011 8,853 10,435 19,288 (4.30)% 2012 10,020 10,812 20,832 8.00 2013 10,981 10,826 21,807 4.68 2014 12,609 10,005 22,614 3.70 2015(1) 14,181 5,605 19,786 (12.51) (1) Decrease in Fiscal Year 2015 reflects the District’s efforts to comply with State conservation mandates relating to drought. See the caption “—Drought Proclamation.” Source: District. Set forth below is a summary of the District’s projected sources of water supply for the current and next four Fiscal Years. TABLE 4 YORBA LINDA WATER DISTRICT PROJECTED WATER SUPPLY IN ACRE FEET PER YEAR Fiscal Year Groundwater Imported Water Total Increase/(Decrease) 2016 11,293 4,536 15,829 (20.00%)(1) 2017 11,620 4,620 16,240 2.60 2018 11,969 4,820 16,789 3.38 2019 12,567 5,061 17,628 5.00 2020 12,819 5,162 17,981 2.00 (1) Decrease in Fiscal Year 2016 reflects the District’s efforts to comply with State conservation mandates relating to drought. See the caption “—Drought Proclamation.” Source: District. Drought Proclamation State Orders. Precipitation in the Santa Ana River Watershed and the State as a whole has been below average in recent years. On January 17, 2014, the California Governor declared a statewide drought state of emergency through Proclamation 1-17-2014 (the “Proclamation”) with immediate effect. The Proclamation includes the following orders, among others: (a) local urban water suppliers, including the District, are encouraged to implement their local water shortage contingency plans; the District’s plan is discussed under the caption “—District Response to Drought;” (b) local urban water suppliers, including the District, are encouraged to update their urban water management plans to prepare for extended drought conditions; (c) The State Department of Water Resources (“DWR”) and the State Water Resources Control Board (the “SWRCB”) are directed to expedite the processing of water transfers; (d) the SWRCB is directed to put water rights holders on notice that they may be required to cease or reduce water diversions in the future; (e) the SWRCB is directed to consider modifying requirements for reservoir releases or diversion limitations; and (f) DWR is directed to take necessary actions to protect water quality and supply in the Sacramento-San Joaquin River Delta/San Francisco Bay Estuary (the “Bay-Delta”), including the installation of temporary barriers or temporary water supply connections, while minimizing impacts to aquatic species. In addition, on July 15, 2014, the SWRCB adopted emergency measures requiring water suppliers to implement mandatory Statewide water conservation actions. 24 On March 17, 2015, the SWRCB adopted additional emergency regulations limiting outdoor irrigation to two days per week, extending certain measures set forth in the July 15, 2014 action for an additional 270 days, prohibiting outdoor irrigation for 48 hours following rain and prohibiting restaurants from serving water to customers unless requested. The District is undertaking efforts to comply with the new regulations through its conservation ordinances, as discussed under the caption “—District Response to Drought.” MWD has also invoked its Water Supply Allocation Plan (the “WSAP”) in response to the March 17, 2015 regulations. The WSAP provides for the equitable distribution of available water supplies in case of extreme water shortage within MWD’s service area. On April 14, 2015, MWD approved implementation of WSAP Level 3 (Water Supply Allocation) effective July 1, 2015, which among other things imposes a surcharge of between $1,480 and $2,960 per acre foot of water usage above MWD members’ water allocation. To date, no surcharges have been imposed on the District; any such surcharges would be passed through to customers. On April 1, 2015, the California Governor issued an Executive Order extending the measures set forth in the Proclamation and adopting the following additional orders, among others: (i) the SWRCB is directed to impose restrictions to reduce potable urban water usage, including usage by commercial, industrial and institutional properties and golf courses, by 25% from 2013 amounts through February 28, 2016; portions of a water supplier’s service area with higher per capita use must achieve proportionally greater reductions than areas with lower per capita use; (ii) DWR is directed to lead a statewide initiative to replace 50 million square feet of lawns with drought tolerant landscaping; (iii) the California Energy Commission is directed to implement a rebate program for replacement of inefficient appliances; (iv) urban water suppliers are required to provide monthly water usage, conservation and enforcement information; (v) service providers are required to monitor groundwater basin levels in accordance with California Water Code § 10933; (vi) permitting agencies are required to prioritize approval of water infrastructure and supply projects; and (vii) DWR is required to plan salinity barriers in the Bay-Delta. On May 6, 2015, the SWRCB adopted regulations in response to the Governor’s executive order that require the District to effect a 36% reduction from 2013 water usage. On November 13, 2015, the Governor issued Executive Order B-36-15, which calls for an extension of urban water use restrictions until October 31, 2016 should drought conditions persist through April 2016. On February 2, 2016, the SWRCB extended its previous emergency regulations through October 2016 while making available credits and adjustments of up to 8% in urban water suppliers’ conservation mandates based upon climate, water-efficient growth and investments in drought-resilient supply sources. The District is unable to determine at this time whether it will be eligible for any credits or adjustments. The SWRCB will review the February 2, 2016 regulations in May 2016 to determine whether to give urban water suppliers more flexibility based on updated water supply information through April 2016. District Response to Drought. Under District Ordinance Nos. 09-01 and 15-01 (collectively, the “Drought Ordinance”), the District has undertaken the following actions in response to the Proclamation and the mandatory conservation measures imposed by the State: First, the District is implementing an allocation-based tiered rate structure under which potable water customers are subject to the below penalties (per billing cycle) for water use that exceeds the following allocations: 25 YORBA LINDA WATER DISTRICT ADMINISTRATIVE PENALTIES UNDER DROUGHT ORDINANCE(1) Residential Penalty Block 1 1-18 Units $ - Block 2 19-29 Units 10.00 Block 3 30-49 Units 20.00 Block 4 50-74 Units 40.00 Block 5 75-99 Units 80.00 Block 6 100+ Units 160.00 Commercial Penalty Block 1 1-50 Units $ - Block 2 51-75 Units 25.00 Block 3 76-100 Units 50.00 Block 4 100-150 Units 100.00 Block 5 151-200 Units 200.00 Block 6 200+ Units 400.00 Irrigation Penalty Block 1 1-115 Units $ - Block 2 116-200 Units 65.00 Block 3 201-300 Units 130.00 Block 4 301-400 Units 260.00 Block 5 401-500 Units 520.00 Block 6 500+ Units 1,000.00 (1) A unit equals 100 cubic feet (748 gallons) of water. Source: District Ordinance No. 15-01. Second, the District has: (1) engaged in public outreach and education efforts; (2) offered rebates for turf removal, the installation of rain barrels and smart irrigation meters and high efficiency appliances; (3) and imposed the below-described mandatory restrictions on water use (beginning with irrigation and other outdoor uses) and enforcement actions. Third, the District is implementing a Stage Three Water Alert, which is intended to reduce water use by up to 35% and includes the following measures, among others: (i) potable water irrigation is prohibited between 9:00 a.m. and 6:00 p.m. and limited to two days a week during summer months and one day a week during winter months for no more than 15 minutes per station; (ii) filling or refilling (more than one foot) of residential swimming pools is prohibited; (iii) potable water irrigation runoff and watering during rain events is prohibited; (iv) cars must be washed with hoses that have shutoff nozzles; and (v) using potable water to wash paved areas is prohibited. Violations of the Drought Ordinance are subject to fines that are collected on customer water bills. See the caption “THE WATER SYSTEM—Collection Procedures.” For initial violations, the District hand delivers a door hanger to the location of the violation and mail a notice to the current billing address. For second violations within one year, the District imposes a $100 fine. For third violations within one year, the District imposes a $250 fine. For additional violations within one year, the District imposes a $500 fine and may install a water flow restrictor or disconnect service for willful violations. 26 The District believes that implementation of the Drought Ordinance will likely enable it to reduce water usage by up to 30% from 2013 amounts, which is less than the 36% reduction called for by the regulations adopted by the SWRCB on May 6, 2015. The District has maintained communication with the SWRCB to explain the District’s efforts to cause its customers to reduce water usage further. The District is also engaged in a continuing effort to modify the SWRCB’s regulations to reflect the District’s climate, population growth and the danger of wildfire within the District. See the caption “WATER SYSTEM FINANCIAL INFORMATION—Recovery of Wildfire Settlement Payment.” In some cases, actions taken pursuant to the Proclamation could result in additional water being made available to the District, while in other cases, actions taken pursuant to the Proclamation could reduce water supplies. The District expects that implementation of the Drought Ordinance will result in lower water sales revenues in Fiscal Year 2016 as customers conserve water in response to the State mandates and given that the District rate increases discussed under the caption “THE WATER SYSTEM—Water System Rates and Charges” were adopted in the middle of such Fiscal Year. While implementation of the Ordinance in future years may result in lower water sales revenues, it is also likely to result in lower water purchase costs, water pumping costs and energy costs for water deliveries. As discussed under the caption “THE WATER SYSTEM—Water System Rates and Charges,” the District’s rate structure consists of variable and fixed rate components; the rate increase discussed under such caption is intended to allow the District to recover a greater proportion of the District’s cost of service. The District believes that the rate increase, together with the reduction in operating costs resulting from lower water production, will ultimately render the State conservation mandates revenue neutral to the District. As a result, the District does not currently anticipate a significant shortfall in Net Revenues of the Water System as a result of the implementation of the Drought Ordinance. The projected operating results set forth under the caption “WATER AND SEWER SYSTEM FINANCIAL INFORMATION—Projected Operating Results” reflect the implementation of the Drought Ordinance through Fiscal Year 2017. The District does not believe that the implementation of the Drought Ordinance will have a material adverse effect on its ability to make payments of principal of and interest on the 2016A Bonds from Net Revenues. The District notes that Net Revenues include Ad Valorem Tax Revenues. See the caption “YORBA LINDA WATER DISTRICT—Ad Valorem Tax Revenues.” If the Statewide water shortage should persist or worsen, legal issues exist as to whether different State Water Code provisions should be invoked to require reasonable regulations for the allocation of water in time of shortage. Any curtailment pursuant to State orders that is accompanied by an increase in MWD water charges (such as the surcharge under MWD’s WSAP discussed under the caption “—State Orders”) to its member agencies could necessitate an increase in the District’s water rates to District customers. See the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES—Proposition 218” for a discussion of certain restrictions on the District’s ability to raise water rates. THE WATER SYSTEM General The Water System of the District serves approximately 23.7 square miles of territory. The Water System consists of more than 347 miles of water pipeline of various diameters, 14 active reservoirs with a combined capacity of approximately 57,000,000 gallons, and ten active water wells providing a combined maximum capacity of approximately 20 mgd. Additionally, the Water System contains three pipeline connections for potable imported water with a combined capacity of 29 mgd, and one pipeline connection for non-potable water with a capacity of 2.6 mgd. The well depths of the Water System are monitored on a continuous basis. The entire Water System is linked to the Supervisory Control and Data Acquisition System, a computer software system that monitors and controls the wells, tanks, lift stations and booster stations. The District has an automatic meter reading system for water consumption, which is recorded through radio reads and downloaded into the District’s computer system for billing. 27 The District classifies its customers into the following major categories: residential, commercial and industrial, landscape, private fire service, construction and untreated water. As shown in the table below, the District provides service to approximately 22,649 individually metered residential connections, 230 master-metered multifamily residential units, 898 commercial and industrial connections and 876 irrigation connections. The commercial and industrial customer base is composed primarily of service businesses such as markets, service stations and restaurants as well as hospitals, office buildings, car washes and other commercial service establishments. The City of Yorba Linda is the District’s largest customer, primarily using water to irrigate landscaping in parks, street medians and slopes. The table below illustrates the number of customers in each major category and percent of total as of June 30, 2015. TABLE 5 YORBA LINDA WATER DISTRICT NUMBER OF UNITS SERVED AND WATER USE BY CATEGORY Customer Category Number of Connections Percent of Total Connections Percent of Water Use Residential 22,649 91.87% 71% Master-Metered Multifamily 230 0.93 2 Commercial and Industrial 898 3.64 8 Irrigation 876 3.55 19 Total 24,653 100.00% 100% Source: District. Historic Water Connections The following table shows the number of water connections to the Water System for the last five Fiscal Years. TABLE 6 YORBA LINDA WATER DISTRICT HISTORIC WATER CONNECTIONS Fiscal Year Connections(1) Increase/(Decrease) 2011 23,644(2) (0.61)% 2012 23,979 1.42 2013 24,479 2.09 2014 24,584 0.43 2015 24,653 0.28 (1) Excludes private fire connections. (2) Decrease in Fiscal Year 2011 connections reflects effects of the economic recession. Source: District. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 28 Historic Water Deliveries The following table presents a summary of historic water deliveries for the Water System in acre feet per year for the last five Fiscal Years. The decrease in water deliveries in Fiscal Year 2011 reflects a combination of conservation initiatives by the District in coordination with MWDOC and the effects of the economic recession. Although water deliveries decreased in Fiscal Year 2011, water sales revenues increased as a result of rate increases adopted by the Board. TABLE 7 YORBA LINDA WATER DISTRICT HISTORIC WATER DELIVERIES IN ACRE FEET PER YEAR Fiscal Year Water Deliveries(1) Increase/(Decrease) 2011 17,907 (7.46)% 2012 20,656 15.35 2013 20,642 0.07 2014 21,085 2.15 2015(2) 17,849 (15.35) (1) The differences between historic water deliveries and historic water supply set forth in Table 3 under the caption “WATER SUPPLY—Historic and Projected Water Supply” reflect system losses. (2) Decrease in Fiscal Year 2015 reflects the District’s efforts to comply with State conservation mandates relating to drought. See the caption “WATER SUPPLY—Drought Proclamation.” Source: District. Historic Water Sales Revenues The following table shows annual water sales revenues of the District for the last five Fiscal Years. TABLE 8 YORBA LINDA WATER DISTRICT HISTORIC WATER SALES REVENUES Fiscal Year Sales Revenues Increase/(Decrease) 2011 $22,686,251 2.46% 2012 24,998,673 10.19 2013 26,369,940 5.49 2014 28,372,296 7.59 2015(1) 26,446,618 (6.79) (1) Decrease in Fiscal Year 2015 reflects the District’s efforts to comply with State conservation mandates relating to drought. See the caption “WATER SUPPLY—Drought Proclamation.” Source: District. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 29 Largest Customers The following table sets forth the ten largest customers of the Water System as of June 30, 2015, as determined by annual payments. TABLE 9 YORBA LINDA WATER DISTRICT TEN LARGEST WATER SYSTEM CUSTOMERS Customer Type of Business Annual Payments Percent of Total City of Yorba Linda Government $2,331,179 7.73% Placentia-Yorba Linda USD Government 305,915 1.02 Tolls Brothers Developer 131,157 0.44 RRE Yorba Linda Holdings Manufacturer 130,572 0.43 The Hills at Yorba Linda Homeowners Association 127,406 0.42 Yorba Linda Villages Homeowners Association 120,873 0.40 Fairmont Hill Community Association Homeowners Association 109,828 0.36 Lake Park Mobile Home Community Homeowners Association 77,327 0.26 Aspetic Tech Manufacturer 65,020 0.22 Woodgate Condominiums Homeowners Association 63,688 0.21 TOTAL $3,462,966 11.49% Source: District. These ten largest customers accounted for approximately 11.49% of total Water System Revenues of $30,139,236 for Fiscal Year 2015. Water System Rates and Charges General. District rates and charges for water service in the District’s service area are set by the Board and are not subject by statute to the jurisdiction of, or regulation by, the California Public Utilities Commission or any other regulatory body. The Board currently sets water charges to pay the costs of water pumping and to recover operating expenses of the Water System. Capital improvements and debt service payments for the Water System are funded from capital facilities fees, property tax revenues and water rates. The District generally applies one schedule of rates and charges for the Water System, with the exception of separately stated rates for construction water, untreated water and private fire water. Additionally, the District sets separate rates and charges for its sewer operations, the revenues from which are not pledged to the payment of principal of and interest on the 2016A Bonds. The District has adopted a policy whereby the Board, at its option and determination, may pass through increased wholesale water costs to its customers. Any costs passed through to customers must be approved in advance by the Board. Pursuant to the policy “increased costs of purchased wholesale water costs which are charged to [the District] by the Municipal Water District of Orange County, Orange County Water District and the Metropolitan Water Agency will pass through by determining the unit cost per 100 cubic feet of water and then applying such cost to retail accounts on the basis of water usage.” The Board has indicated that its intent is to provide notice to District customers for any increased wholesale water costs resulting from any of such pass throughs. On September 17, 2015, after compliance with the notice, hearing and protest provisions of Proposition 218 described under the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES—Proposition 218,” the Board adopted a resolution implementing water rate increases effective October 1, 2015. 30 The projected water revenues for Fiscal Years 2018 and thereafter set forth under the caption “WATER SYSTEM FINANCIAL INFORMATION—Projected Operating Results and Debt Service Coverage” assume additional rate increases above current rates of approximately 11% per annum in accordance with the recommendations that were set forth in a rate study prepared for the District by Raftelis Financial Consultants, Inc. All rate increases are subject to the notice, public hearing and protest provisions of Proposition 218. See the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES—Proposition 218.” There can be no assurance that the Board will adopt additional rate increases in the future or that currently adopted rate increases will not be overturned in accordance with the provisions of Proposition 218 in the future. See the caption “LITIGATION—Challenge to Rate Increase” for a discussion of a challenge to the September 17, 2015 rate increase. Water Service Charges. The District requires water meters for all of its customers. Since July 1, 2014, the District’s water consumption charge has been $2.70 per 100 cubic feet (748 gallons) (a “unit”) of water use. See the caption “WATER SUPPLY—Drought Proclamation—District Response to Drought” for a description of additional charges that are currently imposed on customers for water use in excess of certain tier levels in light of the Statewide drought. In addition to consumption charges, effective October 1, 2015, customers are charged the following monthly capacity charge based on meter size: TABLE 10 YORBA LINDA WATER DISTRICT MONTHLY CAPACITY CHARGES Meter Size Monthly Capacity Charge 5/8” and 3/4”(1) $ 26.29 1”(1) 41.57 1½” 79.77 2” 125.61 3” 270.77 4” 484.69 6” 1,225.77 (1) Approximately 92% of District connections, representing approximately 74% of Water System Revenues in Fiscal Year 2015, were to residential customers with 5/8”, 3/4” or 1” meters. Source: District. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 31 The table below sets forth a comparison of the District’s annual water rates and charges for a single family residential user to those of nearby water purveyors as of January 31, 2016. All amounts reflect the billing for 18 units of water use per month: TABLE 11 YORBA LINDA WATER DISTRICT WATER SERVICE CHARGE COMPARISON Water Purveyor Total Bill Golden State Water Company $106.88 East Orange County Water District 102.31 Serrano Water District 99.71 Mesa Water District 90.93 Yorba Linda Water District 90.17(1) City of Brea 76.19(2) (1) As set forth in Table 10 above, District water service charges increased on October 1, 2015. The water service charge for a single family residential user consuming 18 units per month is approximately $90.17 ($2.70 per unit multiplied by 18 units ($48.60) plus a $41.57 capacity charge for a 1” meter). (2) A proposed rate increase is scheduled to take effect on March 9, 2016. Source: District. Collection Procedures The District is on a monthly billing cycle for Water Service, sending out bills every 28 to 36 days for the preceding month’s service. If payment is not received within 27 days, a late notice is rendered and a 10% late charge (capped at $10) is assessed. Eight days after the generation of a late notice, a 7-day shut-off (yellow tag) door hanger is posted at the location(s) of all unpaid accounts. If any account remains unpaid after such 7-day period, water is turned off and the meter is locked until all balances are paid. As of June 30, 2015, accounts comprising less than 1% of the total Water System Revenues were delinquent. The District reports, however, that upon receipt of the notices described above, almost all of its customers pay delinquent amounts before the end of the billing cycle. All accounts not paid in full at the end of the billing cycle will be discontinued until full payment is made plus a $225 deposit and an $80 reconnection assessment. Projected Water Connections The following table shows the number of connections to the Water System projected by the District for the current and next four Fiscal Years. TABLE 12 YORBA LINDA WATER DISTRICT PROJECTED WATER CONNECTIONS Fiscal Year Connections Increase/(Decrease) 2016 24,793 0.57% 2017 24,893 0.40 2018 24,993 0.40 2019 25,093 0.40 2020 25,193 0.40 Source: District. 32 Projected Water Deliveries The following table shows the Water System deliveries in acre feet per year projected by the District for the current and next four Fiscal Years. There can be no assurance that the projected water deliveries set forth below will be achieved, whether occasioned by a shortfall of water deliveries due to continued drought or other limiting conditions. See the caption “WATER SUPPLY” for a discussion of factors that could affect the District’s water supply. TABLE 13 YORBA LINDA WATER DISTRICT PROJECTED WATER DELIVERIES IN ACRE FEET PER YEAR Fiscal Year Deliveries Increase/(Decrease) 2016 15,829 (11.32)% 2017 16,240 2.60 2018 16,789 3.38 2019 17,628 5.00 2020 17,981 2.00 Source: District. Projected Water Sales Revenues The following table shows annual water sales revenues projected by the District for the current and next four Fiscal Years. TABLE 14 YORBA LINDA WATER DISTRICT PROJECTED WATER SALES REVENUES Fiscal Year Sales Revenues Increase/(Decrease) 2016 $26,464,602 0.07% 2017(1) 28,876,087 9.11 2018 30,910,600 7.05 2019 33,441,966 8.19 2020 35,648,649 6.60 (1) Increase reflects District projections of slightly increased water use despite the ongoing Statewide drought, as described under the caption “—Projected Water Deliveries,” increased connections, as described under the caption “—Projected Water Connections,” and a full year of higher revenues from the September 17, 2015 rate increase described under the caption “— Water System Rates and Charges—General.” Source: District. The above projections are based on the projected water deliveries described under the caption “— Projected Water Deliveries,” the rates described under the caption “—Water System Rates and Charges” for Fiscal Years 2016 and 2017 and projected rate increases of approximately 11% per annum thereafter. Projected water rate increases for Fiscal Years 2018 and thereafter have not yet been authorized. Such rate increases are subject to the notice, public hearing and protest provisions of Proposition 218. See the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES—Proposition 218.” There can be no assurance that the Board will adopt such rate increases as currently projected. There can be no assurance that the projected water sales revenues set forth above will be achieved. 33 The above projections also assume that there will be no reductions in rates as a result of the challenge to the September 17, 2015 rate increase that is discussed under the caption “LITIGATION—Challenge to Rate Increase.” Future Water System Improvements The District projects total capital improvements to the Water System of approximately $21,600,000 over the current and next four Fiscal Years, including the construction of new wells and pipelines and an upgrade to the Fairmont Booster Pressure Reducing Station, among others. The District expects that the projected capital improvements will be funded by grants, Revenues remaining after payment of Debt Service [and draws on the subordinate Line of Credit described under the caption “YORBA LINDA WATER DISTRICT—Outstanding Obligations.”] [REVISE IF LINE OF CREDIT REFUNDED] The District does not expect to enter into additional obligations payable from Net Revenues to finance such capital improvements. Completion of certain of the above-described capital improvements is expected to enable the District to pump groundwater from the Orange County Groundwater Basin up to the full BPP. See the caption “YORBA LINDA WATER DISTRICT—General.” WATER SYSTEM FINANCIAL INFORMATION Financial Statements A copy of the most recent financial statements of the District audited by White Nelson Diehl Evans LLP, Certified Public Accountants & Consultants, Irvine, California (the “Auditor”) are included as Appendix A hereto (the “Financial Statements”) and should be read in their entirety. The Auditor’s letter dated October 29, 2015 is set forth therein. The Financial Statements are public documents and are included within this Official Statement without the prior approval of the Auditor. Accordingly, the Auditor has not performed any post-audit analysis of the financial condition of the District, nor has the Auditor reviewed or audited this Official Statement. The summary operating results contained under the caption “—Historic Operating Results and Debt Service Coverage” are derived from the Financial Statements and audited financial statements for prior Fiscal Years (excluding certain non-cash items and after certain other adjustments, including adjustments to reflect the receipt of certain development fees in a given Fiscal Year that the District’s audited financial statements display on an amortized basis over a 40-year period on the advice of the District’s Auditor). The summary operating results contained under the caption “—Historic Operating Results and Debt Service Coverage” are qualified in their entirety by reference to such statements, including the notes thereto. The Auditor has not reviewed or audited the summary operating results or any other portion of this Official Statement. The District accounts for moneys received and expenses paid in accordance with generally accepted accounting principles applicable to governmental agencies such as the District (“GAAP”). In certain cases, GAAP requires or permits moneys collected in one Fiscal Year to be recognized as revenue in a subsequent Fiscal Year and requires or permits expenses paid or incurred in one Fiscal Year to be recognized as expenses in a subsequent Fiscal Year. See Appendix A. Except as otherwise expressly noted herein, all financial information derived from the District’s audited financial statements reflects the application of GAAP. Recovery of Wildfire Settlement Payment In 2008, a firestorm known as the Freeway Complex Fire, the largest wildfire in the County in half a century, resulted in the destruction of several homes served by the District. Certain homeowners sued the District, alleging that the District’s water system failed to provide sufficient water for fire protection purposes. In 2012, after the District’s excess liability insurers denied coverage for the Freeway Complex Fire lawsuit, the 34 District, with no admission of liability, paid $5,000,000 (the “Settlement Amount”) from District reserves as part of a settlement with the plaintiff-homeowners. Under the settlement, the District joined with the plaintiff-homeowners in separate litigation against the District’s excess liability insurers (the “Coverage Litigation”) to recover the settlement amount. See the caption “YORBA LINDA WATER DISTRICT— District Insurance.” In 2014, the $5,000,000 Settlement Amount was fully reimbursed to the District after a partial settlement of the Coverage Litigation. The claims of the District and its primary insurance provider were fully satisfied by the Coverage Litigation settlement and they were dismissed from the litigation, which continued between the plaintiff-homeowners and the excess insurance carriers. The District is protected from any further financial liability arising from the Freeway Complex Fire litigation and the Coverage Litigation. The historic Water System operating results set forth in Table 15 under the caption “—Historic Operating Results and Debt Service Coverage” do not reflect the payment of the Settlement Amount in Fiscal Year 2012 because the Settlement Amount was not paid from operating Revenues or Net Revenues of the Water System. Investment of District Funds The District invests its funds in accordance with Resolution No. 15-03 of the District entitled “Resolution of the Board of Directors of the Yorba Linda Water District Setting Forth Public Funds Investment Policy and Rescinding Resolution 14-05” adopted on June 11, 2015 (the “District Investment Policy”). The District Investment Policy sets forth the policies and procedures applicable to the investment of District funds and designates eligible investments. The District Investment Policy also sets forth stated objectives, including the assurance of the safety of invested funds, the maintenance of sufficient liquidity and the attainment of the best yield or returns on investments. The Board has delegated the authority for investing the funds of the District to the General Manager. Such authority is subject to renewal each year. The General Manager is authorized to designate representatives to manage the funds of the District and has designated such authority to the Finance Manager of the District and the Senior Accountant of the District. The District Investment Policy provides a number of permitted investment categories authorized under State law. The permitted investment categories include the following: (i) Federal Deposit Insurance Corporation- or Federal Savings and Loan Insurance Corporation-insured or collateralized obligations of banks or savings and loan institutions; (ii) certificates of deposit issued by financial institutions which maintain a rating equivalent of “A” or higher by one of the nationally recognized statistical rating organizations (“NRSROs”) up to a maximum of $250,000 and a maximum maturity of 5 years, provided that the maximum investment in this category does not exceed 30% of the investment portfolio in the aggregate; (iii) the State Local Agency Investment Fund; (iv) the Orange County Treasurer’s Commingled Investment Pool; (v) the California Asset Management Program, limited to bond proceeds; (vi) treasury bills, notes and bonds, with maturities not to exceed five years; (vii) obligations issued by federal agencies and United States government-sponsored enterprises, such as the Federal National Mortgage Association, the Federal Land Bank and the Federal Home Loan Bank, with maturities not to exceed five years, and provided that the maximum investment in this category does not exceed 50% of the investment portfolio in the aggregate; (viii) corporate bonds rated “A” or its equivalent or better by an NRSRO, provided that the maximum maturity is limited to five years and the maximum investment in this category does not exceed 30% of the investment portfolio in the aggregate; (ix) banker’s acceptances, provided that the maximum term does not to exceed 180 days and the maximum investment in this category does not exceed 10% of the investment portfolio in the aggregate; (x) commercial paper, provided that the corporation has assets in excess of $500,000,000 and its commercial paper is rated “a-1” or higher by an NRSRO and that the investment matures in 270 days or less, and provided that the maximum investment in this category does not exceed 25% of the investment portfolio in aggregate; (xi) the Investment Trust of California; and (xii) Money Market Funds. The Board may revise the District Investment Policy from time to time. 35 As of June 30, 2015 (excluding reserves for the Series 2008 Certificates), the District had funds invested in the amount of $30,967,805 in authorized investments under the District Investment Policy, summarized as follows: money market securities ($663,271), government securities of the Federal Home Loan Bank ($2,491,785), certificates of deposit ($4,792,097), investment trusts in CalTrust Short Term ($2,727) and CalTrust Medium Term ($13,852,344) and the State of California Local Agency Investment Fund ($9,165,581). As of June 30, 2015 (excluding reserves for the Series 2008 Certificates), approximately 82% of the $27,174,488 in District reserves was attributable to the Water System, including an operating reserve ($4,101,809), an emergency reserve ($1,024,991), a capital project reserve ($17,137,297), a debt service reserve ($4,409,456), an employee liability reserve ($300,322) and a maintenance reserve ($200,613). Historic Operating Results and Debt Service Coverage The following table sets forth the operating results of the Water System of the District for the last five Fiscal Years. TABLE 15 YORBA LINDA WATER DISTRICT HISTORIC OPERATING RESULTS (FISCAL YEAR ENDED JUNE 30) 2011 2012 2013 2014 2015(4) Revenues Water Sales $ 22,686,251 $ 24,998,673 $ 26,369,940 $ 28,372,296 $ 26,446,618 Ad Valorem Tax Revenues 1,258,769 1,273,855 1,340,916 1,394,722 1,496,489 Interest Income 252,522 253,478 121,210 131,833 168,872 Other(1) 1,714,109 1,292,298 1,259,340 2,192,153 2,027,257 Total Revenues $ 25,911,651 $ 27,818,304 $ 29,091,406 $ 32,091,004 $ 30,139,236 Operating and Maintenance Costs Variable Water Costs $ 11,267,615 $ 12,275,853 $ 13,509,336 $ 14,673,144 $ 12,733,762 Personnel Services 6,114,939 6,125,692 6,390,207 6,728,455 6,885,991 Supplies & Services 3,160,419 3,461,250 3,890,552 3,451,602 3,482,354 Total Operating and Maintenance Costs $ 20,542,973 $ 21,862,795 $ 23,790,095 $ 24,853,201 $ 23,102,107 Net Operating Revenues $ 5,368,678 $ 5,955,509 $ 5,301,311 $ 7,237,803 $ 7,037,129 Non-Operating and Maintenance Costs $ 291,195 $ 90,485 $ 35,954 $ 47,948 $ 116,528 Net Revenues $ 5,077,483 $ 5,865,024 $ 5,265,357 $ 7,189,855 $ 6,920,601 Debt Service Series 2003 Installment Payments(2) $ 670,726 $ 672,383 $ 461,488 $ - $ - Series 2008 Installment Payments(3) 2,133,496 2,132,796 2,131,096 2,128,396 2,129,596 2012A Bonds - - 174,327 584,263 593,913 Total Debt Service $ 2,804,222 $ 2,805,179 $ 2,766,911 $ 2,712,659 $ 2,723,509 Remaining Revenues $ 2,273,260 $ 3,059,845 $ 2,498,446 $ 4,477,196 $ 4,197,092 Debt Service Coverage 1.81 2.09 1.90 2.65 2.54 (1) Includes customer service charges, rental and royalty income and other miscellaneous revenues. Also includes certain development fees earned in each Fiscal Year that the District’s audited financial statements display on an amortized basis over a 40-year period on the advice of the District’s Auditor. See the caption “—Financial Statements.” (2) This obligation was refunded from proceeds of the 2012A Bonds. (3) This obligation is being refunded from proceeds of the 2016A Bonds. See the caption “REFUNDING PLAN.” (4) Decreases in Fiscal Year 2015 reflect the District’s efforts to comply with State conservation mandates relating to drought. See the caption “WATER SUPPLY—Drought Proclamation.” Source: District. 36 Projected Operating Results and Debt Service Coverage The following table sets forth the projected operating results of the Water System of the District for the current and next four Fiscal Years, reflecting certain significant assumptions concerning future events and circumstances. The financial forecast represents the District’s estimate of projected financial results based on several significant assumptions, including the assumptions set forth in the footnotes to the chart set forth below, the assumed continuation of the drought-related conversation mandates described under the caption “WATER SUPPLY—Drought Proclamation through Fiscal Year 2017 and no reductions in rates as a result of the challenge to the September 17, 2015 rate increase that is discussed under the caption “LITIGATION— Challenge to Rate Increase.” All of such assumptions are material in the development of the District’s financial projections, and variations in the assumptions may produce substantially different financial results. Although the District believes these projections to be reasonable, actual operating results achieved during the projection period may vary from those presented in the forecast and such variations may be material. TABLE 16 YORBA LINDA WATER DISTRICT PROJECTED OPERATING RESULTS (FISCAL YEAR ENDING JUNE 30) 2016(1) 2017 2018 2019 2020 Revenues Water Sales(2) $ 26,464,602 $ 28,876,887 $ 30,910,600 $ 33,441,966 $ 35,648,649 Ad Valorem Tax Revenues(3) 1,395,000 1,534,500 1,549,845 1,565,343 1,580,997 Interest Income(4) 85,000 100,000 118,000 138,000 153,000 Other(5) 4,151,908 1,480,543 1,528,187 1,633,040 1,741,860 Total Revenues $ 32,096,510 $ 31,991,930 $ 34,106,632 $ 36,778,349 $ 39,124,506 Operating and Maintenance Costs Variable Water Costs(6) $ 12,080,410 $ 12,201,214 $ 12,933,287 $ 13,579,951 $ 14,258,949 Personnel Services(7) 8,118,352 8,615,443 9,089,292 9,543,756 10,020,944 Supplies & Services(8) 6,576,551 4,161,766 3,715,849 3,885,663 3,928,923 Total Operating and Maintenance Costs $ 26,775,313 $ 24,978,423 $ 25,738,428 $ 27,009,370 $ 28,208,816 Net Operating Revenues $ 5,321,197 $ 7,013,507 $ 8,368,204 $ 9,768,979 $ 10,915,690 Non-Operating and Maintenance Costs(9) $ 22,000 $ 22,000 $ 22,000 $ 22,000 $ 22,000 Net Revenues $ 5,299,197 $ 6,991,507 $ 8,346,204 $ 9,746,979 $ 10,893,690 Debt Service Series 2008 Installment Payments(10) $ 2,129,596 $ - $ - $ - $ - 2012A Bonds(11) 591,963 588,488 588,313 591,213 583,713 2016A Bonds* - 1,805,985 1,802,050 1,804,150 1,802,050 Total Debt Service* $ 2,721,559 $ 2,394,473 $ 2,390,363 $ 2,395,363 $ 2,385,763 Remaining Revenues* $ 2,577,638 $ 4,597,034 $ 5,955,841 $ 7,351,616 $ 8,507,927 Debt Service Coverage* 1.95 2.92 3.49 4.07 4.57 (1) Reflects Fiscal Year 2016 budgeted amounts with certain adjustments. See the caption “YORBA LINDA WATER DISTRICT—Budget Process.” (2) Reflects projected water deliveries described under the caption “THE WATER SYSTEM—Projected Water Deliveries,” approved rate increases for Fiscal Year 2016 and projected rate increases of approximately 11% per annum beginning in Fiscal Year 2018, as described under the caption “THE WATER SYSTEM—Water System Rates and Charges.” Future water rate increases for Fiscal Years 2018 and thereafter have not yet been authorized. Such rate increases are subject to the notice, public hearing and protest provisions of Proposition 218. See the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES—Proposition 218.” There can be no assurance that the Board will adopt such rate increases as currently projected. * Preliminary; subject to change. 37 (3) Decrease from Fiscal Year 2015 amount in Fiscal Year 2016 reflects conservative budgeting. Projected to increase approximately 10% from Fiscal Year 2016 budgeted amount in Fiscal Year 2017 and approximately 1% per annum thereafter. (4) Projected to vary as a result of the expenditure of reserves on capital improvements. (5) Includes customer service charges, rental and royalty income and other miscellaneous revenues. Fiscal Year 2016 includes projected proceeds of administrative penalties imposed under Drought Ordinance, as described under the caption “WATER SUPPLY—Drought Proclamation—District Response to Drought.” (6) Reflects expenses of groundwater production and water purchases from MWDOC. See Table 4 under the caption “WATER SUPPLY—Historic and Projected Water Supply.” Projected to increase approximately 1% from Fiscal Year 2016 budgeted amount in Fiscal Year 2017, approximately 6% from Fiscal Year 2017 amount in Fiscal Year 2018 and approximately 5% per annum thereafter. (7) Increase from Fiscal Year 2015 amount in Fiscal Year 2016 reflects hiring of a conservation specialist and four temporary employees to manage the District’s response to the Statewide drought. See the caption “WATER SUPPLY—Drought Proclamation.” Projected to increase between approximately 5% per annum and 7% per annum from Fiscal Year 2016 budgeted amount. (8) Increase from Fiscal Year 2015 amount in Fiscal Year 2016 reflects District budgeting of full amount of possible fines imposed by the SWRCB under SWRCB orders relating to the Statewide drought. To date, no such fines have been imposed on the District. See the caption “WATER SUPPLY—Drought Proclamation.” (9) Projected to remain at Fiscal Year 2016 budgeted amount. (10) Expected to be refunded from proceeds of the 2016A Bonds. See the caption “REFUNDING PLAN.” (11) Reflects scheduled payments. See the caption “YORBA LINDA WATER DISTRICT—Outstanding Obligations—Parity Obligations.” Source: District. CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES Article XIIIB Article XIIIB of the State Constitution limits the annual appropriations of the State and of any city, county, school district, authority or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living and population. The “base year” for establishing such appropriation limit is the 1978-79 State fiscal year, and the limit is to be adjusted annually to reflect changes in population and consumer prices. Adjustments in the appropriations limit of an entity may also be made if: (i) the financial responsibility for a service is transferred to another public entity or to a private entity; (ii) the financial source for the provision of services is transferred from taxes to other revenues; or (iii) the voters of the entity approve a change in the limit for a period of time not to exceed four years. Appropriations that are subject to Article XIIIB generally include the proceeds of taxes levied by or for the State or other entity of local government, exclusive of certain State subventions, refunds of taxes and benefit payments from retirement, unemployment, insurance and disability insurance funds. “Proceeds of taxes” include, but are not limited to, all tax revenues and 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 reasonably borne by the entity in providing the service or regulation); and (2) the investment of tax revenues. Article XIIIB includes a requirement that if an entity’s revenues in any year exceed the amounts permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years. Certain expenditures are excluded from the appropriations limit, including payments of indebtedness existing or legally authorized as of January 1, 1979, or of bonded indebtedness thereafter approved by a vote of electors of the issuing entity and payments required to comply with court or federal mandates which without discretion require an expenditure for additional services or which unavoidably make the providing of existing services more costly. The District is of the opinion that its water charges do not exceed the costs it reasonably bears in providing such services and therefore are not subject to the limits of Article XIIIB. The District has 38 covenanted in the Indenture, to the fullest extent permitted by law, to fix and prescribe, at the commencement of each Fiscal Year, rates and charges for the Water Service which are reasonably expected, at the commencement of each Fiscal Year, to be at least sufficient to yield during each Fiscal Year Net Revenues equal to 110% of Debt Service on the 2016A Bonds and other Bonds and Contracts for such Fiscal Year. See the caption “SECURITY FOR THE 2016A BONDS—Rate Covenant.” Proposition 218 General. An initiative measure entitled the “Right to Vote on Taxes Act” (the “Initiative”) was approved by the voters of the State at the November 5, 1996 general election. The Initiative added Articles XIIIC and XIIID to the State Constitution. According to the “Title and Summary” of the Initiative prepared by the State Attorney General, the Initiative limits “the authority of local governments to impose taxes and property-related assessments, fees and charges.” Article XIIID. Article XIIID defines the terms “fee” and “charge” to mean “any levy other than an ad valorem tax, a special tax or an assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership, including user fees or charges for a property-related service.” A “property-related service” is defined as “a public service having a direct relationship to property ownership.” Article XIIID further provides that reliance by an agency on any parcel map (including an assessor’s parcel map) may be considered a significant factor in determining whether a fee or charge is imposed as an incident of property ownership. Article XIIID requires that any agency imposing or increasing any property-related fee or charge must provide written notice thereof to the record owner of each identified parcel upon which such fee or charge is to be imposed and must conduct a public hearing with respect thereto. The proposed fee or charge may not be imposed or increased if a majority of owners of the identified parcels file written protests against it. As a result, if and to the extent that a fee or charge imposed by a local government for water service is ultimately determined to be a “fee” or “charge” as defined in Article XIIID, the local government’s ability to increase such fee or charge may be limited by a majority protest. In addition, Article XIIID includes a number of limitations applicable to existing fees and charges, including provisions to the effect that: (i) revenues derived from the fee or charge shall not exceed the funds required to provide the property-related service; (ii) such revenues shall not be used for any purpose other than that for which the fee or charge was imposed; (iii) the amount of a fee or charge imposed upon any parcel or person as an incident of property ownership shall not exceed the proportional cost of the service attributable to the parcel; and (iv) no such fee or charge may be imposed for a service unless that service is actually used by, or immediately available to, the owner of the property in question. Property-related fees or charges based on potential or future use of a service are not permitted. Based upon the State Court of Appeal decision in Howard Jarvis Taxpayers Association v. City of Los Angeles, 85 Cal. App. 4th 79 (2000), which was denied review by the State Supreme Court, it was generally believed that Article XIIID did not apply to charges for water services that are “primarily based on the amount consumed” (i.e., metered water rates), which had been held to be commodity charges related to consumption of the service, not property ownership. The Supreme Court ruled in Bighorn-Desert View Water Agency v. Verjil, 39 Cal.4th 205 (2006) (the “Bighorn Case”), however, that fees for ongoing water service through an existing connection were property-related fees and charges. The Supreme Court specifically disapproved the holding in Howard Jarvis Taxpayers Association v. City of Los Angeles that metered water rates are not subject to Proposition 218. The District has complied with the notice, hearing and protest procedures in Article XIIID with respect to water rate increases, as further explained by the State Supreme Court decision in the Bighorn Case, since 2007. On April 20, 2015, the California Court of Appeal, Fourth District, issued an opinion in Capistrano Taxpayers Association, Inc. v. City of San Juan Capistrano, 235 Cal. App. 4th 1493 (2015) (the “SJC Case”) 39 upholding tiered water rates under Proposition 218 provided that the tiers correspond to the actual cost of furnishing service at a given level of usage. The opinion was specific to the facts of the case, including a finding that the City of San Juan Capistrano did not attempt to calculate the actual costs of providing water at various tier levels. The District’s water rates, which are described under the caption “THE WATER SYSTEM—Water System Rates and Charges,” do not currently include tiered rates based on usage. See the caption “WATER SUPPLY—Drought Proclamation—District Response to Drought” for a description of additional charges that are currently imposed on customers for water use in excess of certain tier levels in light of the Statewide drought. The District does not currently expect the decision in the SJC Case to affect its water rate structure. The District believes that its current water rates comply with the requirements of Proposition 218 and expects that any future water rate increases will comply with Proposition 218’s procedural and substantive requirements to the extent applicable thereto. Article XIIIC. Article XIIIC provides that the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge and that the power of initiative to affect local taxes, assessments, fees and charges shall be applicable to all local governments. Article XIIIC does not define the terms “local tax,” “assessment,” “fee” or “charge,” so it was unclear whether the definitions set forth in Article XIIID (which are referred to above) are applicable to Article XIIIC. Moreover, the provisions of Article XIIIC are not expressly limited to local taxes, assessments, fees and charges imposed after November 6, 1996. On July 24, 2006, the State Supreme Court held in the Bighorn Case that the provisions of Article XIIIC applied to rates and fees charged for domestic water use. In the decision, the Court noted that the decision did not address whether an initiative to reduce fees and charges could override statutory rate setting obligations. In any event, the District and its general counsel do not believe that Article XIIIC grants to the voters within the District the power to repeal or reduce rates and charges in a manner that would be inconsistent with the contractual obligations of the District. See the caption “LITIGATION—Challenge to Rate Increase” for a discussion of a petition to repeal the District’s September 17, 2015 water rate increase. There can be no assurance of the availability of particular remedies adequate to protect the beneficial owners of the 2016A Bonds. Remedies that are available to beneficial owners of the 2016A Bonds in the event of a default by the District are dependent upon judicial actions which are often subject to discretion, and delay and could prove both expensive and time-consuming to obtain. In addition to the specific limitations on remedies contained in the applicable documents themselves, the right and obligation with respect to the Indenture is subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors’ rights, to the application of equitable principles if equitable remedies are sought, and to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public agencies in the State. The various opinions of counsel to be delivered with respect to such documents, including the opinion of Bond Counsel (the form of which is attached as Appendix C), will be similarly qualified. The District believes that its current water rates and land based charges comply with the requirements of Proposition 218 and expects that any future water rates and land based charges will comply with Proposition 218’s procedural and substantive requirements to the extent applicable thereto. Future Initiatives Articles XIIIB, XIIIC and XIIID were adopted as a measure that qualified for the ballot pursuant to the State’s initiative process. From time to time other initiatives could be proposed and adopted affecting the District’s revenues or ability to increase revenues. APPROVAL OF LEGAL PROCEEDINGS The valid, legal and binding nature of the 2016A Bonds is subject to the approval of Stradling Yocca Carlson & Rauth, a Professional Corporation, acting as Bond Counsel. The form of such legal opinion is 40 attached as Appendix C, and such legal opinion will be attached to each 2016A Bond. Certain matters will be passed upon for the District by Kidman Law LLP, Irvine, California, general counsel to the District, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, as Disclosure Counsel, for the Underwriter by its counsel, _____, and for the Trustee by its counsel. LITIGATION General There is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body, pending or, to the knowledge of the District, threatened against the District affecting the existence of the District or the titles of its directors or officers to their respective offices or seeking to restrain or to enjoin the sale or issuance of the 2016A Bonds, the application of the proceeds thereof in accordance with the Indenture, or in any way contesting or affecting the validity or enforceability of the 2016A Bonds, the Indenture, or any action of the District contemplated by any of said documents, or in any way contesting the completeness or accuracy of this Official Statement or any amendment or supplement thereto, or contesting the powers of the District or its authority with respect to the 2016A Bonds or any action of the District contemplated by any of said documents, nor to the knowledge of the District, is there any basis therefor. Challenge to Rate Increase On January 12, 2016, Kent Ebinger, an individual, and the Yorba Linda Taxpayers Association, a nonprofit association (collectively, the “Petitioners”), filed a complaint and petition for writ of mandate (collectively, the “Petition”) against the District in the Superior Court of California, County of Orange (the “Superior Court”). The Petition’s sole purpose is to seek a writ of mandate to compel the District to comply with the terms of a purported referendum petition relating to the water rate increase that was adopted on September 17, 2015 (as discussed under the caption “THE WATER SYSTEM—Water System Rates and Charges,” the “Rate Increase”), which referendum petition was rejected by the Board as invalid on November 5, 2015. The Petition does not seek court determination of the procedural or substantive validity of the Rate Increase. On January 28, 2016, the Superior Court denied an ex parte application by the Petitioners seeking an Alternative Writ of Mandate: (1) to comply with the purported referendum petition; or, in the alternative, (2) to appear in court on an expedited hearing schedule to show cause why the District is not required to comply with the purported referendum petition. The District believes that the Rate Increase was adopted in compliance with Proposition 218 (as discussed under the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES—Proposition 218) and that the relief that the Petitioners seek is not permitted under the State Constitution. Accordingly, the District intends to oppose the Petition. [UPDATE?] [The Superior Court has established a briefing schedule and scheduled a hearing on the Petition for June 13, 2016.] Although the District believes that it has meritorious defenses to the allegations in the Petition, there can be no assurance that the Superior Court or an appellate court will not rule in favor of the Petitioners, nor can there be any assurance as to the timing of a final decision. In the event that the Petitioners ultimately prevail on their claims, it is possible that the District could be compelled to repeal the Rate Increase or, in the alternative, to place the Rate Increase before the voters of the District. If the Rate Increase is repealed by the District or disapproved by the voters, the status of Revenues received since September 17, 2015 as a result of the increased rates is uncertain. Such actions could reduce the amount of Revenues that are pledged to payment of the 2016A Bonds and cause debt service coverage to fall below the amounts projected herein. Table 11 under the caption “THE WATER SYSTEM—Projected Water Sales Revenues” and Table 16 under the caption “WATER SYSTEM FINANCIAL INFORMATION—Projected Operating Results and Debt Service Coverage” assume that there will be no reduction in the District’s water rates as a result of the Petition. 41 TAX MATTERS In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the 2016A Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest (and original issue discount) on the 2016A Bonds is exempt from State of California personal income tax. Bond Counsel notes that, with respect to corporations, interest on the 2016A Bonds may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of such corporations. Bond Counsel’s opinion as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on the 2016A Bonds is based upon certain representations of fact and certifications made by the District and others and is subject to the condition that the District complies with all requirements of the Code that must be satisfied subsequent to the issuance of the 2016A Bonds to assure that interest (and original issue discount) on the 2016A Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the 2016A Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the 2016A Bonds. The District has covenanted to comply with all such requirements. In the opinion of Bond Counsel, the difference between the issue price of a 2016A Bond (the first price at which a substantial amount of the 2016A Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity of such 2016A Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Beneficial Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Beneficial Owner will increase the Beneficial Owner’s basis in the applicable 2016A Bond. The amount of original issue discount that accrues to the Beneficial Owner of a 2016A Bond is excluded from the gross income of such Beneficial Owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State of California personal income tax. The amount by which a 2016A Bond Owner’s original basis for determining loss on sale or exchange in the applicable 2016A Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable bond premium, which must be amortized under Section 171 of the Code; such amortizable bond premium reduces the 2016A Bond Owner’s basis in the applicable 2016A Bond (and the amount of tax-exempt interest received with respect to the 2016A Bonds), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of bond premium may result in a 2016A Bond Owner realizing a taxable gain when a 2016A Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the 2016A Bond to the Owner. Purchasers of the 2016A Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable bond premium. The Internal Revenue Service (the “IRS”) has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the 2016A Bonds will be selected for audit by the IRS. It is also possible that the market value of the 2016A Bonds might be affected as a result of such an audit of the 2016A Bonds (or by an audit of similar municipal obligations). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof) subsequent to the issuance of the 2016A Bonds to the extent that it adversely affects the exclusion from gross income of interest (and original issue discount) on the 2016A Bonds or their market value. 42 SUBSEQUENT TO THE ISSUANCE OF THE 2016A BONDS, THERE MIGHT BE FEDERAL, STATE OR LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY INTERPRETATIONS OF FEDERAL, STATE OR LOCAL LAW) THAT AFFECT THE FEDERAL, STATE OR LOCAL TAX TREATMENT OF THE 2016A BONDS OR THE MARKET VALUE OF THE 2016A BONDS. LEGISLATIVE CHANGES HAVE BEEN PROPOSED IN CONGRESS, WHICH, IF ENACTED, WOULD RESULT IN ADDITIONAL FEDERAL INCOME TAX BEING IMPOSED ON CERTAIN OWNERS OF TAX-EXEMPT STATE OR LOCAL OBLIGATIONS, SUCH AS THE 2016A BONDS. THE INTRODUCTION OR ENACTMENT OF ANY OF SUCH CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE 2016A BONDS. NO ASSURANCE CAN BE GIVEN THAT, SUBSEQUENT TO THE ISSUANCE OF THE 2016A BONDS, SUCH CHANGES (OR OTHER CHANGES) WILL NOT BE INTRODUCED OR ENACTED OR INTERPRETATIONS WILL NOT OCCUR. BEFORE PURCHASING ANY OF THE 2016A BONDS, ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING POSSIBLE STATUTORY CHANGES OR JUDICIAL OR REGULATORY CHANGES OR INTERPRETATIONS, AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE 2016A BONDS. Bond Counsel’s opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Indenture and the Tax Certificate relating to the 2016A Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income of interest (and original issue discount) for federal income tax purposes with respect to any 2016A Bond if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation. Although Bond Counsel has rendered an opinion that interest (and original issue discount) on the 2016A Bonds is excluded from gross income for federal income tax purposes provided that the District continues to comply with certain requirements of the Code, the ownership of the 2016A Bonds and the accrual or receipt of interest (and original issue discount) on the 2016A Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the 2016A Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the 2016A Bonds. Should interest (and original issue discount) on the 2016A Bonds become includable in gross income for federal income tax purposes, the 2016A Bonds are not subject to early redemption or an increase in interest rates and will remain outstanding until maturity or until redeemed in accordance with the Indenture. A complete copy of the proposed opinion of Bond Counsel is set forth in Appendix C. FINANCIAL ADVISOR The District has retained Fieldman, Rolapp & Associates, Irvine, California, as financial advisor (the “Financial Advisor”) in connection with the issuance of the 2016A Bonds. The Financial Advisor has not undertaken to make an independent verification or to assume responsibility for the accuracy, completeness, or fairness of the information contained in this Official Statement. The Financial Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities. RATINGS The District expects that Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business (“S&P”), will assign the 2016A Bonds the rating of “___” and that Fitch Ratings, Inc. (“Fitch”) will assign the 2016A Bonds the rating of “___”. There is no assurance that any credit rating given to the 43 2016A Bonds will be maintained for any period of time or that the ratings may not be lowered or withdrawn entirely by S&P or Fitch, respectively, if, in the judgment of S&P or Fitch, as applicable, circumstances so warrant. Any downward revision or withdrawal of such ratings may have an adverse effect on the market price of the 2016A Bonds. Such ratings reflect only the views of S&P and Fitch, respectively, and an explanation of the significance of such ratings may be obtained from S&P and Fitch, as applicable. Generally, rating agencies base their ratings on information and materials furnished to them (which may include information and material from the District that is not included in this Official Statement) and on investigations, studies and assumptions by the rating agencies. UNDERWRITING The 2016A Bonds will be purchased by Citigroup Global Markets Inc. (the “Underwriter”) pursuant to an agreement, dated the date hereof, by and between the District and the Underwriter (the “Purchase Contract”). Under the Purchase Contract, the Underwriter has agreed to purchase all, but not less than all, of the 2016A Bonds for an aggregate purchase price of $_____ (representing the principal amount of the 2016A Bonds, less an Underwriter’s discount of $______, plus/less a net original issue premium/discount of $______). The Purchase Contract provides that the Underwriter will purchase all of the 2016A Bonds if any are purchased, the obligation to make such a purchase being subject to certain terms and conditions set forth in the Purchase Contract, the approval of certain legal matters by counsel and certain other conditions. The initial public offering prices stated on the inside front cover of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell the 2016A Bonds to certain dealers (including dealers depositing 2016A Bonds into investment trusts), dealer banks, banks acting as agents and others at prices lower than said public offering prices. The Underwriter has entered into a retail distribution agreement with each of TMC Bonds L.L.C. (“TMC”) and UBS Financial Services Inc. (“UBSFS”). Under these distribution agreements, the Underwriter may distribute municipal securities to retail investors through the financial advisor network of UBSFS and the electronic primary offering platform of TMC. As part of this arrangement, the Underwriter may compensate TMC (and TMC may compensate its electronic platform member firms) and UBSFS for their selling efforts with respect to the 2016A Bonds. CONTINUING DISCLOSURE UNDERTAKING The District has covenanted in a Continuing Disclosure Certificate for the benefit of the holders and beneficial owners of the 2016A Bonds to provide certain financial information and operating data relating to the District by not later than each April 1 following the end of the District’s Fiscal Year (currently its Fiscal Year ends on June 30) (the “Annual Report”), commencing with the Annual Report for the Fiscal Year ending June 30, 2016, and to provide notices of the occurrence of certain enumerated events. The Annual Report and the notices of enumerated events will be filed by the District with the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System. The specific nature of the information to be contained in the Annual Report and the notice of material events is set forth in Appendix E. These covenants have been made in order to assist the Underwriter in complying with Section (b)(5) of Rule 15c2-12 adopted by the Securities and Exchange Commission. [DISCUSSION OF PRIOR COMPLIANCE TO COME] Except as set forth in the previous sentence, the District has not failed to comply with the terms of its prior continuing disclosure undertakings in the last five years in any material respect. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 44 MISCELLANEOUS Insofar as any statements made in this Official Statement involve matters of opinion or estimates, whether or not expressly stated, they are set forth as such and not as representations of fact. No representation is made that any of such statements made will be realized. Neither this Official Statement nor any statement which may have been made verbally or in writing is to be construed as a contract with the Owners of the 2016A Bonds. The execution and delivery of this Official Statement have been duly authorized by the District. YORBA LINDA WATER DISTRICT By: President APPENDIX A YORBA LINDA WATER DISTRICT FINANCIAL STATEMENTS B-1 APPENDIX B DEFINITIONS AND SUMMARY OF THE INDENTURE The following is a summary of certain provisions of the Indenture which are not described elsewhere. This summary does not purport to be comprehensive and reference should be made to the Indenture for a full and complete statement of the provisions thereof. [TO COME] C-1 APPENDIX C FORM OF OPINION OF BOND COUNSEL Upon the issuance of the 2016A Bonds, Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, proposes to render its final approving opinion in substantially the following form: April __, 2016 Yorba Linda Water District 1717 East Miraloma Avenue Placentia, California 92870 Re: Yorba Linda Water District Refunding Revenue Bonds, Series 2016A Members of the Board of Directors: We have examined a certified copy of the record of the proceedings of the Yorba Linda Water District (the “District”) relative to the issuance of the $___________ Refunding Revenue Bonds, Series 2016A, dated the date hereof (the “2016A Bonds”), and such other information and documents as we consider necessary to render this opinion. In rendering this opinion, we have relied upon certain representations of fact and certifications made by the District, the initial purchaser of the 2016A Bonds and others. We have not undertaken to verify through independent investigation the accuracy of the representations and certifications relied upon by us. The 2016A Bonds are being issued pursuant to an Indenture of Trust, dated as of April 1, 2016 (the “Indenture”), by and between the District and U.S. Bank National Association, as trustee (the “Trustee”). The 2016A Bonds mature on the date and in the amount referenced in the Indenture. The 2016A Bonds are dated their date of delivery and bear interest at the rates per annum referenced in the Indenture. The 2016A Bonds are registered in the form set forth in the Indenture. Based on our examination as Bond Counsel of existing law, certified copies of such legal proceedings and such other proofs as we deem necessary to render this opinion, we are of the opinion, as of the date hereof and under existing law, that: 1. The proceedings of the District show lawful authority for the issuance and sale of the 2016A Bonds under the laws of the State of California now in force, and the Indenture has been duly authorized, executed and delivered by the District, and, assuming due authorization, execution and delivery by the Trustee, as appropriate, the 2016A Bonds and the Indenture are valid and binding obligations of the District enforceable against the District in accordance with their terms. 2. The obligation of the District to make the payments of principal of and interest on the 2016A Bonds from Net Revenues (as such term is defined in the Indenture) is an enforceable obligation of the District and does not constitute an indebtedness of the District in contravention of any constitutional or statutory debt limit or restriction. 3. Under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the 2016A Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. It should be noted that, with respect to corporations, such interest (and original issue discount) may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of such corporations. 4. Interest (and original issue discount) on the 2016A Bonds is exempt from State of California personal income tax. C-2 5. The difference between the issue price of a 2016A Bond (the first price at which a substantial amount of the 2016A Bonds of the same series and maturity is to be sold to the public) and the stated redemption price at maturity with respect to such 2016A Bonds constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a 2016A Bond Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by the 2016A Bond Owner will increase the 2016A Bond Owner’s basis in the 2016A Bond. In the opinion of Bond Counsel, the amount of original issue discount that accrues to the owner of the 2016A Bond is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State of California personal income tax. 6. The amount by which a 2016A Bond Owner’s original basis for determining loss on sale or exchange in the applicable 2016A Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable bond premium, which must be amortized under Section 171 of the Internal Revenue Code of 1986, as amended (the “Code”); such amortizable bond premium reduces the 2016A Bond Owner’s basis in the applicable 2016A Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of 2016A Bond premium may result in a 2016A Bond Owner realizing a taxable gain when a 2016A Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the 2016A Bond to the Owner. Purchasers of the 2016A Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable bond premium. The opinions expressed herein as to the exclusion from gross income of interest on the 2016A Bonds are based upon certain representations of fact and certifications made by the District and are subject to the condition that the District comply with all requirements of the Code that must be satisfied subsequent to the issuance of the 2016A Bonds to assure that such interest (and original issue discount) on the 2016A Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the 2016A Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the 2016A Bonds. The District has covenanted to comply with all such requirements. The opinions expressed herein may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Indenture and the Tax Certificate relating to the 2016A Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. No opinion is expressed herein as to the effect on the exclusion from gross income of interest (and original issue discount) on the 2016A Bonds for federal income tax purposes with respect to any 2016A Bond if any such action is taken or omitted based upon the opinion or advice of counsel other than ourselves. Other than as expressly stated herein, we express no other opinion regarding tax consequences with respect to the 2016A Bonds. The opinions expressed herein are based upon our analysis and interpretation of existing laws, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities. We call attention to the fact that the rights and obligations under the Indenture and the 2016A Bonds are subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors’ rights, to the application of equitable principles if equitable remedies are sought, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public agencies in the State of California. Our opinion is limited to matters governed by the laws of the State of California and federal law. We assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction. We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement relating to the 2016A Bonds or other offering material relating to the 2016A Bonds and expressly disclaim any duty to advise the owners of the 2016A Bonds with respect to matters contained in the Official Statement. Respectfully submitted, D-1 APPENDIX D INFORMATION CONCERNING DTC The information in this section concerning DTC and DTC’s book-entry only system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the 2016A Bonds, payment of principal, premium, if any, accreted value, if any, and interest on the 2016A Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the 2016A Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the 2016A Bonds. The 2016A Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered 2016A Bond will be issued for each annual maturity of the 2016A Bonds, each in the aggregate principal amount of such annual maturity, and will be deposited with DTC. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC is rated AA+ by Standard & Poor’s. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of 2016A Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2016A Bonds on DTC’s records. The ownership interest of each actual purchaser of each 2016A Bonds (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the 2016A Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive bonds representing their ownership interests in 2016A Bonds, except in the event that use of the book-entry system for the 2016A Bonds is discontinued. To facilitate subsequent transfers, all 2016A Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of 2016A Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the 2016A Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such 2016A Bonds are credited, which may or may not be the Beneficial Owners. D-2 The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of 2016A Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the 2016A Bonds, such as redemptions, tenders, defaults, and proposed amendments to the 2016A Bonds documents. For example, Beneficial Owners of 2016A Bonds may wish to ascertain that the nominee holding the 2016A Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the 2016A Bonds within a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to 2016A Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District 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 2016A Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the 2016A Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the District or the Trustee, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. A 2016A Bond Owner shall give notice to elect to have its 2016A Bonds purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such 2016A Bond by causing the Direct Participant to transfer the Participant’s interest in the 2016A Bonds, on DTC’s records, to the Trustee. The requirement for physical delivery of 2016A Bond in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the 2016A Bond are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered 2016A Bond to the Trustee’s DTC account. DTC may discontinue providing its services as depository with respect to the 2016A Bonds at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered. The District may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, 2016A Bonds will be printed and delivered to DTC. THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE 2016A BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE 2016A BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. E-1 APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE Upon the issuance of the 2016A Bonds, the District proposes to enter into a Continuing Disclosure Certificate in substantially the following form: This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by the Yorba Linda Water District (the “District”) in connection with the execution and delivery of $___________ Refunding Revenue Bonds, Series 2016A (the “Bonds”). The Bonds are being issued pursuant to an Indenture of Trust, dated as of April 1, 2016 (the “Indenture of Trust”), by and between the District and U.S. Bank National Association, as trustee (the “Trustee”). The District covenants and agrees as follows: 1. Purpose of this Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the District for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule. 2. Definitions. In addition to the definitions set forth in the Indenture of Trust, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: Annual Report. The term “Annual Report” means any Annual Report provided by the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. Beneficial Owner. The term “Beneficial Owner” means any person which: (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries); or (b) is treated as the owner of any Bonds for federal income tax purposes. EMMA. The term “EMMA” means the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System for municipal securities disclosures, maintained on the Internet at http://emma.msrb.org/. Fiscal Year. The term “Fiscal Year” means the one-year period ending on the last day of June of each year, or any other period selected as the District’s fiscal year. In the event of a change in the District’s Fiscal Year, the District shall give notice of such change in the same manner as for a Listed Event under Section 5(a). Holder. The term “Holder” means a registered owner of the Bonds. Listed Events. The term “Listed Events” means any of the events listed in Sections 5(a) and (b) of this Disclosure Certificate. Official Statement. The term “Official Statement” means the Official Statement of the District dated April __, 2016 delivered in connection with the issuance of the Bonds. Participating Underwriter. The term “Participating Underwriter” means the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. Rule. The term “Rule” means Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. 3. Provision of Annual Reports. (a) The District shall provide to EMMA not later than each April 1 following the end of its Fiscal Year (commencing April 1, 2017) to EMMA an Annual Report relating to the immediately preceding Fiscal E-2 Year which is consistent with the requirements of Section 4 of this Disclosure Certificate, which Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate. (b) If the District is unable to provide to EMMA an Annual Report by the date required in subsection (a), the District shall send to EMMA a notice in substantially the manner prescribed by the Municipal Securities Rulemaking Board. 4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference the following: (a) The audited financial statements of the District 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 District’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Principal amount of the Bonds outstanding. (c) An update of the information in the following tables in the Official Statement: 1. Table 2 “PROPERTY TAX LEVIES AND COLLECTIONS;” 2. Table 3 “HISTORIC WATER SUPPLY IN ACRE FEET PER YEAR;” 3. Table 6 “HISTORIC WATER CONNECTIONS;” 4. Table 7 “HISTORIC WATER DELIVERIES IN ACRE FEET PER YEAR;” 5. Table 8 “HISTORIC WATER SALES REVENUES;” 6. Table 9 “TEN LARGEST WATER SYSTEM CUSTOMERS;” and 7. Table 15 “HISTORIC OPERATING RESULTS.” 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 District or related public entities, which have been submitted to EMMA or the Securities and Exchange Commission; provided that if any document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board; and provided further that the District shall clearly identify each such document so included by reference. 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds in a timely manner not more than ten (10) Business Days after the event: 1. principal and interest payment delinquencies; 2. unscheduled draws on debt service reserves reflecting financial difficulties; 3. unscheduled draws on credit enhancements reflecting financial difficulties; E-3 4. substitution of credit or liquidity providers, or their failure to perform; 5. issuance by the Internal Revenue Service of proposed or final determination of taxability or of a Notice of Proposed Issue (IRS Form 5701-TEB); 6. tender offers; 7. defeasances; 8. ratings changes; and 9. bankruptcy, insolvency, receivership or similar proceedings. Note: For the purposes of the event identified in subparagraph (9), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. (b) Pursuant to the provisions of this Section 5, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: 1. unless described in Section 5(a)(5), other notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other events affecting the tax status of the Bonds; 2. modifications to the rights of Bondholders; 3. optional, unscheduled or contingent Bond calls; 4. release, substitution or sale of property securing repayment of the Bonds; 5. non-payment related defaults; 6. the consummation of a merger, consolidation, or acquisition involving the District or the sale of all or substantially all of the assets of the District, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms; and 7. appointment of a successor or additional trustee or the change of the name of a trustee. (c) If the District determines that knowledge of the occurrence of a Listed Event under Section 5(b) would be material under applicable federal securities laws, the District shall file a notice of such occurrence with EMMA in a timely manner not more than ten (10) Business Days after the event. 6. Customarily Prepared and Public Information. Upon request, the District shall provide to any person financial information and operating data regarding the District which is customarily prepared by the District and is publicly available. 7. Termination of Obligation. The District’s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination E-4 occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5(a). 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that, in the opinion of nationally recognized bond counsel, such amendment or waiver is permitted by the Rule. 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall not thereby have any obligation under this Disclosure Certificate to update such information or include it in any future notice of occurrence of a Listed Event. 10. Default. In the event of a failure of the District to comply with any provision of this Disclosure Certificate, any Holders or Beneficial Owners of at least 50% aggregate principal amount of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture of Trust, and the sole remedy under this Disclosure Certificate in the event of any failure of the District to comply with this Disclosure Certificate shall be an action to compel performance. No Holder or Beneficial Owner of the Bonds may institute such action, suit or proceeding to compel performance unless they shall have first delivered to the District satisfactory written evidence of their status as such, and a written notice of and request to cure such failure, and the District shall have refused to comply therewith within a reasonable time. 11. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Participating Underwriter and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. 12. Filings with the MSRB. All financial information, operating data, financial statements, notices, and other documents provided to the Municipal Securities Rulemaking Board in accordance with this Disclosure Certificate shall be provided in an electronic format prescribed by the Municipal Securities Rulemaking Board and shall be accompanied by identifying information as prescribed by the Municipal Securities Rulemaking Board. Dated: April __, 2016 YORBA LINDA WATER DISTRICT By: Its: President ITEM NO. 9.3 AGENDA REPORT Meeting Date: March 24, 2016 Subject:Interagency Committee with City of Placentia and Golden State Water Company (Collett/Kiley) · Minutes of the meeting held March 8, 2016 at 2:00 p.m. · Next meeting is yet to be scheduled. ATTACHMENTS: Name:Description:Type: 2016-03-08_-_Minutes_-_YLWD-City_of_Placentia- GSWC.doc Minutes Minutes 1 MINUTES OF THE YORBA LINDA WATER DISTRICT INTERAGENCY COMMITTEE MEETING WITH CITY OF PLACENTIA AND GSWC Tuesday, March 8, 2016, 2:00 p.m. 1717 E Miraloma Avenue, Placentia CA 92870 1. CALL TO ORDER The March 8, 2016 interagency meeting of the YLWD/City of Placentia/GSWC was called to order at 2:00 p.m. The meeting was held in the Training Room at the District’s Administration Building located at 1717 East Miraloma Avenue in Placentia, California 92870. 2. ROLL CALL YLWD COMMITTEE MEMBERS YLWD STAFF Ric Collett, Director Marc Marcantonio, General Manager Bob Kiley, Director Steve Conklin, Engineering Manager Damon Micalizzi, Public Information Manager CITY OF PLACENTIA MEMBERS CITY OF PLACENTIA STAFF None. Luis Estevez, Public Works Manager Joel Cardenas, Public Works Superintendent GSWC COMMITTEE MEMBERS MEMBERS OF THE PUBLIC Ken Vecchiarelli, General Manager Ben Parker Del Webb, Superintendent Emil Bereczky 3. PUBLIC COMMENTS Mr. Emil Bereczky, a GSWC customer, commented on rebates for residential irrigation controllers, customer education regarding these controllers and the benefits of hand held watering, and potential City code issues with unkempt lawns due to reduced or discontinued watering. Mr. Ben Parker, a YLWD customer, commented on the accessibility of the District’s meeting schedule on its website and how drought penalties were being recorded in the financials. 2 4. DISCUSSION ITEMS 4.1. City of Placentia Compliance with Drought Mandate Mr. Vecchiarelli reported that for the customers served by GSWC in the City of Placentia, GSWC has met its water conservation goal of 25% reduction through February 2016. He noted that GSWC anticipates receiving a 7% credit for its participation in OCWD’s GW RS project, which would reduce the conservation goal to 18%. With that new goal, Mr. Vecchiarelli expects that GSWC would be able to meet the new conservation goal through summer 2016. 4.2. YLWD Drought Response, Water Conservation/Drought Penalty Ordinances, and Community Outreach Efforts Mr. Micalizzi reported that YLWD had met its water conservation goal of 36% through February 2016, which includes those customers served in the City of Placentia (which is approximately 10% of YLWD’s customer base). He noted that YLWD is expecting similar credits on its conservation goal as described above. 4.3. Enforcement of Governor’s Mandate on Water Use Restrictions Mr. Vecchiarelli commented that GSWC had not issued any fines on its customers. Mr. Micalizzi said that he is not aware of any fines on District customers in Placentia. 4.4. GSWC Drought Response, Water Conservation Statute, Rule 14.1, Schedule 14.1, and Continuing Community Outreach Efforts Mr. Vecchiarelli reported that the only GSWC area where there has been an issue with meeting the conservation goal is Cowan Heights (in Orange), where there is a 36% conservation goal. He noted that extra measures have been instituted and that the customers are responding favorably. Mr. Vecchiarelli also indicated that GSWC will be initiating a 30-cent/CCF increase in its water rate effective March 1, 2016 to compensate for the 25% reduction in water sales. This is an interim increase in effect until the Public Utilities Commission takes action on the current GSWC rate increase request. 4.5. GSWC Capital Projects Update Mr. Vecchiarelli reported that GSWC is completing construction of the Wilson Well Project at Wilson and Melrose. They anticipate a flow rate of 1500 to 2500 gpm from the new well, which will significantly reduce the use of import water. In the future, they are looking at the replacement of water reservoirs for the Placentia/Yorba Linda service area. 4.6. GSWC’s 2014 General Rate Case Update Mr. Vecchiarelli reported that the PUC has not yet acted on the 2014 rate case. 3 4.7. Items for Next Agenda No new items were requested. 5. ADJOURNMENT 5.1. The meeting was adjourned at 3:10 p.m. The next YLWD/City of Placentia/GSWC Interagency Committee meeting has not been scheduled. SC ITEM NO. 11.1 AGENDA REPORT Meeting Date: March 24, 2016 Subject:Meetings from March 25, 2016 - April 30, 2016 ATTACHMENTS: Name:Description:Type: BOD_-_Activities_Calendar.pdf Backup Material Backup Material Event Date Attendance by: March 2016 Citizens Advisory Committee MeetingMon, Mar 28Melton Board of Directors Workshop MeetingWed, Mar 30 ISDOCThu, Mar 31Hawkins/Kiley Water UCI LectureThu, Mar 31Collett April 2016 WACOFri, Apr 1Hawkins/Kiley Yorba Linda City CouncilTue, Apr 5Beverage MWDOCWed, Apr 6Melton OCSD Operations CommitteeWed, Apr 6Kiley/Beverage OCWDWed, Apr 6Collett MWDOC Elected Officials ForumThu, Apr 7Collett LAFCOWed, Apr 13Beverage (As Needed) Yorba Linda Planning CommissionWed, Apr 13Melton Board of Directors Regular MeetingThu, Apr 14 Yorba Linda City CouncilTue, Apr 19Collett MWDOCWed, Apr 20Melton OCWDWed, Apr 20Kiley Board of Directors Workshop MeetingThu, Apr 21 Citizens Advisory Committee MeetingMon, Apr 25Melton OCSDWed, Apr 27Kiley/Beverage Yorba Linda Planning CommissionWed, Apr 27Hawkins Board of Directors Regular MeetingThu, Apr 28 8:30AM 6:00PM 6:30PM 8:30AM 6:30PM 8:30AM 6:30PM 8:30AM 5:30PM 3:00PM 6:30PM 8:30AM 5:00PM 5:30PM 6:00PM 8:00AM 3:00PM 11:30AM 1:00PM 7:30AM Board of Directors Activity Calendar Time 8:30AM 3/21/2016 6:11:45 AM ITEM NO. 12.1 AGENDA REPORT Meeting Date: March 24, 2016 Subject:MWDOC Elected Officials' Forum - April 7, 2016 ACWA/JPIA Spring Conference - May 2-3, 2016 ACWA Spring Conference - May 3-6, 2016 OC Water Summit - May 20, 2016 STAFF RECOMMENDATION: That the Board of Directors approve Director attendance at these events if desired. ATTACHMENTS: Name:Description:Type: MWDOC_Forum.pdf Backup Material Backup Material ACWA-JPIA_Conf.pdf Backup Material Backup Material ACWA_Conf.pdf Backup Material Backup Material OC_Water_Summit.pdf Backup Material Backup Material Semiannual Elected Officials' Forum April 7, 2016 6:00 p.m. to 8:00 p.m. *Due to the hour, a modest meal will be provided Please Join Us We would like to invite you to join us for our semiannual Elected Officials' Forum on Thursday, April 7, 2016. The spring meeting usually focuses on: MWDOC Annual Budget for Fiscal Year 2016‐2017 You can access our budget using this link: http://www.mwdoc.com/filesgallery/3b_FY16_17_Pub_Draft_1.pdf We strive to provide an educational and relevant experience for all attendees and we are soliciting your input. In addition to the budget, we would like to know what other topics interest you. If you have additional items you would like to discuss, please let us know through the registration link. Logistics We request that each City and Water District designate one elected official to attend the meeting as their official representative. Other elected officials or staff are, of course, welcome to attend. We will be providing a modest meal of sandwiches, beverages, and light snacks. The meeting will begin at 6:00 p.m. In order to provide name plates and sufficient seating, please register all attendees using the link provided in the sidebar, or contact Pari Francisco at (714) 593‐5001 or pfrancisco@mwdoc.com. ~Please register all attendees~ Register Now When: Thursday, April 7, 2016 6:00 p.m. to 8:00 p.m. *Due to the hour, a modest meal will be provided. Where: MWDOC Board Room 18700 Ward Street Fountain Valley, CA 92708 Directions RSVP Contact: Pari Francisco Administrative Assistant (714) 593‐5001 pfrancisco@mwdoc.com To: JPIA Members From: Sylvia Robinson, Publications & Web Editor Date: February 9, 2016 Subject: Board of Directors’ Meeting and 2016 Spring Conference Notice The JPIA’s Board of Directors’ meeting for the 2016 Spring ACWA Conference in Monterey, California is scheduled as follows: Monday – May 2, 2016 – (1:30 – 4 p.m.) Monterey Marriott – 350 Calle Principal, Monterey, CA 93940 For a copy of the JPIA’s preliminary 2016 Spring Conference schedule, click here. JPIA Conference Packet: The Packet will be available on the JPIA’s website approximately 14 days prior to the date of the meeting. This JPIA Conference Packet will include all the meeting packets for the JPIA’s meetings at the conference as well as a welcome letter from the Board President, the JPIA’s conference schedule, and a summary description of the JPIA’s seminars and speakers for the conference. The handouts for the seminars will be distributed at the time of the sessions. JPIA Directors: If you do not wish to download and/or print the JPIA Conference Packet, use the online JPIA Conference Packet request form (found on the JPIA’s website) to have the JPIA Conference Packet and name badge mailed to you. If you do not complete the form, you will receive a copy of the Board of Directors agenda only, which will be mailed approximately 14 days prior to the meeting. Others who attend the meetings: If you do not wish to download and/or print the JPIA Conference Packet, use the online JPIA Conference Packet request form (found on the JPIA’s website) to have the JPIA Conference Packet and name badge mailed to you. Name Badge Only: If you are planning to download your own JPIA Conference Packet, but would still like to have a name badge, use the online JPIA Conference Packet request form to request a name badge only. RSVP for Pre-Board Meeting Lunch with Keynote Speaker: The JPIA will be hosting a pre-Board meeting lunch with a keynote speaker. An RSVP for this event is required in order to attend. Please use the online JPIA Conference Packet request form to RSVP. The online JPIA Conference Packet request form and lunch RSVP must be completed by April 8, 2016. The JPIA Conference Packets will be mailed approximately 14 days prior to the meeting. There are no registration fees to attend any of the JPIA’s seminars or meetings. However, if you are planning to attend the ACWA conference, please check the ACWA website at http://www.acwa.com to get information about how to register. ACWA’s procedure for acquiring hotel rooms at the conference requires attendees to register for the ACWA conference before they can receive the hotel registration form. However, JPIA members, who need hotel rooms but are not attending the ACWA conference, should contact Teresa Taylor at the ACWA office, (916) 441-4545. Indicate that you are a JPIA member who is definitely attending only the JPIA’s portion of the conference and she will provide you with the hotel registration information. Preliminary JPIA 2016 Spring Conference Schedule Marriott Hotel – Monterey Your Best Protection Monday – May 2, 2016 8:00 a.m. – 9:00 a.m. Protect Your Health Walk – (Join JPIA for a morning walk) 9:45 a.m. – Light Continental Breakfast (for those attending the meetings) San Carlos Ballroom I-II 10:15 a.m. – 11:15 a.m. Executive Committee Meeting San Carlos Ballroom I-II 11:30 a.m. – 1:00 p.m. Pre-Board Meeting Lunch With Keynote Speaker RSVP by 4/8/16 required to attend this event. San Carlos Ballroom IV 1:30 p.m. – 4:00 p.m. Board of Directors’ Meeting San Carlos Ballroom I-III 4:00 p.m. – 5:00 p.m. Town Hall Meeting San Carlos Ballroom I-III 5:00 p.m. – 6:00 p.m. ACWA/JPIA Reception Ferrantes Bay View Room Tuesday – May 3, 2016 7:30 a.m. – Light Continental Breakfast (for those attending the seminars) San Carlos Ballroom III-IV 8:00 a.m. – 9:30 a.m. Seminar I San Carlos Ballroom III-IV 9:45 a.m. – 11:45 a.m. Protecting Your Board Meeting From Chaos: Managing strong feelings and difficult meetings during drought and uncertainty Presenter: Ann Macfarlane, Professional Registered Parliamentarian, Jurassic Parliament San Carlos Ballroom III-IV 1:30 p.m. – 3:30 p.m. Sexual Harassment Prevention for Board Members & Managers (AB1825 & AB2053) Presenters: JPIA staff – Nancy Stangel, Director of Administration; Patricia Slaven, Training Manager; and Robert Greenfield, Counsel to Casualty Operations San Carlos Ballroom IV 5:00 p.m. – 6:30 p.m. ACWA Conference Welcome Reception Portola Hotel Wednesday – May 4, 2016 9:00 a.m. – 5:00 p.m. Exhibit Booth 201 & 202 De Anza Ballroom Foyer Thursday – May 5, 2016 8:00 a.m. – 12:00 p.m. Exhibit Booth 201 & 202 De Anza Ballroom Foyer ACWA 2016 Spring Conference & Exhibition REGISTRATION, MEALS & HOTEL PRICING Monterey Marriott & Portola Hotel PRICING REFERENCE SHEET REGISTRATION FEES & OPTIONS REGULAR ONSITE Advantage (For ACWA public agency members, affiliates & associates ONLY) (ends 4/8/16) Full Conference Registration & Meals Package . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $695 Not Avail . Full Conference Registration Only (meals sold separately) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $535 $560 One-Day Conference Registration (meals sold separately): Wednesday 5/4 -OR- Thursday 5/5 . . . . . . . . . . . . . . . . $300 $325 Wednesday registration includes Welcome Reception on Tuesday evening. Thursday registration includes ability to purchase a ticket for Friday breakfast. Standard (Applies to non-members of ACWA) Full Conference Registration Only (meals sold separately) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $805 $830 One-Day Conference Registration (meals sold separately): Wednesday 5/4 -OR- Thursday 5/5 . . . . . . . . . . . . . . . . $450 $475 Wednesday registration includes Welcome Reception on Tuesday evening. Thursday registration includes ability to purchase a ticket for Friday breakfast. Guest (Guest registration is not available to anyone with a professional reason to attend.) Guest Conference Registration (meals sold separately) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $45 $45 MEAL FUNCTIONS REGULAR ONSITE Wednesday – May 4 Opening Breakfast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $45 $50 Wednesday Luncheon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $50 $55 Thursday – May 5 Networking Continental Breakfast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $35 $40 Thursday Luncheon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $50 $55 Thursday Dinner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $65 $70 Friday – May 6 Friday Breakfast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $45 $50 HOTEL INFORMATION Reservations will not be accepted until February 22, 2016. MAY3–6 2016 Register online @ acwa.com Regular registration and cancellation deadline is April 8, 2016 • 4:30 p.m. (PST) Questions? Contact us at 916 .441 .4545, toll free 888 .666 .2292 . Conference terms and conditions available at acwa.com in the event section. You must be registered for the ACWA conference in order to receive hotel reservation information and conference special room rate. Conference special rate is available February 22 – April 11, based on availability. Special Hotel Rates Monterey Marriott Hotel . . . . . . . . . . . . . . . . Single/Double $205 Subject to 14.345% tax + $2.00 tourism fee (per room per night) Portola Hotel Monterey . . . . . . . . . . . . . . . . Single/Double $203 Subject to 14.345% tax + $2.00 tourism fee (per room per night) Hotel Pacific . . . . . . . . . . . . . . . . . . . . . . . . . .Single/Double $240 Subject to 14.345% tax + $1.00 tourism fee (per room per night). Hotel rate includes breakfast. Important Dates: For those registering for conference prior to February 22, hotel information will be provided via e-mail on February 22 . For those registering for conference from February 22 to April 11, your confirmation e-mail will include hotel reservation information and an opportunity to receive a conference special hotel rate . Hotel Reservation Questions? Call each hotel directly . NEED TO REGISTER ON SOMEONE ELSE’S BEHALF? YOU CAN NOW SIGN-IN AS YOURSELF - After you’ve logged-in, you can select from a list of people affiliated with your company and proceed to register him/her for the event . If the registrant is not listed, you will have the opportunity to create a Portal profile for him/her before registering . Last modified: 3/4/16 ACWA 2016 Spring Conference & ExhibitionPRELIMINARY AGENDA Monterey Marriott & Portola Hotel MAY3–62016 All conference programs are subject to change. ACWA/JPIA - MONDAY, MAY 2 8:00 – 10:00 AM • Join ACWA/JPIA for a Protect Your Health Walk! 10:15 – 11:15 AM • ACWA/JPIA Executive Committee 1:30 – 4:00 PM • ACWA/JPIA Board of Directors 4:00 – 5:00 PM • ACWA/JPIA Town Hall 5:00 – 6:00 PM • ACWA/JPIA Reception TUESDAY, MAY 3 8:00 AM – 6:00 PM • Registration 8:00 AM – 11:45 AM • ACWA/JPIA: Seminars 10:00 – 11:45 AM • Groundwater Committee • Local Government Committee 11:00 AM – Noon • Outreach Task Force Noon – 2:00 PM • ACWA 101 & Luncheon • Committee Lunch Break 1:00 – 2:45 PM • Energy Committee • Finance Committee • Scholarship & Awards Subcommittee • Water Management Committee 2:00 – 4:00 PM • SDLF Special District Administrator Certification Test 1:30 – 3:30 PM • ACWA/JPIA: Sexual Harassament Prevention for Board Members & Managers (AB 1825) 3:00 – 4:45 PM • Communications Committee • Federal Affairs Committee • Membership Committee • Water Quality Committee 5:00 – 6:30 PM • Welcome Reception in the Exhibit Hall WEDNESDAY, MAY 4 7:30 AM – 5 PM • Registration 8:00 – 9:45 AM • Opening Breakfast (Ticket Required) 9:00 AM – Noon & 1:30 – 5:00 PM • Exhibit Hall 10:00 – 11:30 AM • Attorneys Program • Energy Committee Program • Exhibitor Technical Presentations • Finance Program • Region Issue Forum • Statewide Issue Forum • Water Industry Trends Program 11:30 – 11:45 AM • Prize Drawing in the Exhibit Hall 11:45 AM – 1:45 PM • General Session & Luncheon (Ticket Required) 2:00 – 3:15 PM • Aquatic Resources Subommittee • Attorneys Program • Exhibitor Technical Presentation • Region Program • Statewide Issue Forum • Water Industry Trends Program 3:30 – 4:45 PM • Communications Committee Program • Energy Committee Program • Exhibitor Technical Presentation • Finance Program • Statewide Issue Forum 4:00 – 6:00 PM • Legal Affairs Committee 5:00 – 7:00 PM • CalDesal Hosted Mixer 5:30 – 7:00 PM • CH2M Hosted Reception THURSDAY, MAY 5 7:30 AM – 4 PM • Registration 8:00 AM – Noon • Exhibit Hall 8:00 – 9:15 AM • Networking Continental Breakfast (Ticket Required) 9:30 – 11:00 AM • Attorneys Program • Exhibitor Technical Presentations • Finance Program • Region Issue Forum • Statewide Issue Forum • Water Industry Trends Program 9:30 - 11:45 AM • Ethics Training (AB 1234) - Limited Seating 11:00 – 11:30 AM • Prize Drawings in the Exhibit Hall 11:45 AM – 1:45 PM • General Session & Luncheon (Ticket Required) 2:00 – 3:15 PM • Attorneys Program • Exhibitor Technical Presentations • Federal Issues Forum • Town Hall • Water Industry Trends Program 3:30 – 5 PM • Regions 1 –10 Membership Meetings 5:30 – 6:30 PM • New Water Professionals No-Host Reception 7:00 – 9:30 PM • Dinner & Entertainment (Ticket Required) FRIDAY, MAY 6 8:00 – 9:30 AM • Registration 8:30 – 10:00 AM • ACWA’s Hans Doe Past Presidents’ Breakfast in Partnership with ACWA/JPIA (Ticket Required) OTHER EVENTS THURSDAY, MAY 5 6:45 – 8:30 AM • San Joaquin Valley Agricultural Water Committee FRIDAY MAY 20, 2016 7:30 AM - 1:30 PM THE WESTIN SOUTH COAST PLAZA HOTEL GRAND BALLROOM 686 Anton Blvd. Costa Mesa, CA 92626 Please Join Us! Whether El Niño delivers on its promise of a wet winter, water agencies across Orange County face a perfect storm of challenges in delivering reliable water that serves as the lifeblood for 3 million residents and business communities that produce a gross county product of $223.2 billion. The system of reservoirs and aqueducts that carries water hundreds of miles to reach our county are aging and susceptible to earthquakes and political tremors. Agencies have been ordered to cut their water use or face fines and ever-changing laws make developing fair and accurate rates more and more complex. Join us for the 9th Annual OC Water Summit to learn about the Orange County projects that will provide shelter from the storms, and lessons learned from businesses that are harvesting profits despite the clouds. VIEW THE EVENT FLYER! Click on the image below to view and print the event flyer PROGRAM & SPEAKERS SESSION 1: THE PERFECT STORM - ORANGE COUNTY'S WATER SUPPLY PORTFOLIO Rob Hunter, General Manager, Municipal Water District of Orange County: Imported Water (Confirmed) Michael R. Markus, P.E., D.WRE, General Manager, Orange County Water District: Groundwater (Confirmed) SESSION 2: STORMS ON THE HORIZON - THREATS TO OUR WATER SUPPLY Moderator: Dr. David Feldman, Professor, UCI (Confirmed) JPL/NASA: Overuse/Management (Invited) Dr. Lisa Grand Ludwig, UCI: Geologic Hazards (Confirmed) SESSION 3: THE WIND CHILL FACTOR - IMPACTS OF NO WATER Moderator: Jennifer Farrell, Rutan & Tucker (Confirmed) Kelly Salt, Best Best & Krieger: Rate Setting & District Finances (Confirmed) Dr. Mark Gold, Associate Vice Chancellor for Environment & Sustainability, UCLA (Invited) SESSION 4: THE FORECAST - SUNSHINE AHEAD Moderator: Charlie Wilson, Executive Director, Southern California Water Committee (Confirmed) Helene Schneider, Mayor, City of Santa Barbara (Invited) Debra Man, AGM, COO, Metropolitan Water District of Southern California: Regional Recycled Water Program and California WaterFix (Confirmed) SESSION 5: SINGING IN THE RAIN - COMPANIES THAT SURVIVE THE STORM Moderator: Michael Battaglia, President, Building Industry Association (Confirmed) Rancho Mission Viego: Building Drought Proof Homes (Invited) Shocktop/Strauss Brewery (Invited) SESSION 6: TROPICAL DEPRESSION - SURVIVING TURBULENT TIMES Richard Wilson, Author, Death of a Water District (Confirmed) SPONSORSHIP OPPORTUNITIES AVAILABLE! Click on the image below to view and print the Sponsorship Brochure For More Information: www.OCWaterSummit.com Jonathan Volzke or Tiffany Baca (MWDOC) jvolzke@mwdoc.com / tbaca@mwdoc.com 714) 593-5029 or 714) 593-5013 Eleanor Torres (OCWD) etorres@ocwd.com 714) 378-3268 *INDIVIDUAL TICKET - $130. Please note that the registration fee will increase to $150 per person beginning May 6, 2016. Cancellations made after this date (and event no-shows) will be fully charged.