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2017-02-13 - Board of Directors Meeting Agenda Packet (B)
AGENDA YORBA LINDA WATER DISTRICT BOARD OF DIRECTORS REGULAR MEETING Monday, February 13, 2017, 6:30 PM 1717 E Miraloma Ave, Placentia CA 92870 1. CALL TO ORDER 2. PLEDGE OF ALLEGIANCE 3. ROLL CALL J. Wayne Miller, President Al Nederhood, Vice President Andrew J. Hall, Director Phil Hawkins, Director Brooke Jones, Director 4. ADDITIONS/DELETIONS TO THE AGENDA 5. INTRODUCTIONS AND PRESENTATIONS 5.1. Elected Official Liaison Reports 6. 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. 7. 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. 7.1. Minutes of the Board of Directors Regular Meeting held December 8, 2016 Recommendation: That the Board of Directors approve the minutes as presented. 7.2. Payments of Bills, Refunds, and Wire Transfers Recommendation: That the Board of Directors ratify and authorize disbursements in the amount of $3,557,007.91. 8. ACTION CALENDAR This portion of the agenda is for items where staff presentations and Board discussions are needed prior to formal Board action. 8.1. Authorizing the Issuance of Revenue Refunding Bonds, Series 2017A Recommendation: That the Board of Directors adopt Resolution No. 17-02 Authorizing the Issuance of Not to Exceed $28,000,000 Refunding Revenue Bonds, Series 2017A, Approving the Execution of Certain Documents in Connection Therewith and Certain Other Matters, and rescinding Resolution No. 16-17. 8.2. Revised Budgeted Positions for the Remainder of FY 2016/2017 Recommendation: That the Board of Directors adopt Resolution No. 17-03 Revising the Budgeted Positions for the Remainder of Fiscal Year 2016/17 and Rescinding Resolution No. 16-20. 8.3. Ballot for Proposed Increased Assessment Affecting District Properties Located in Local Landscaping Zone 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 assessment for the parcel and authorize the General Manager to complete and submit the ballot as required. 9. DISCUSSION ITEMS This portion of the agenda is for matters that cannot reasonably be expected to be concluded by action of the Board of Directors at the meeting, such as technical presentations, drafts of proposed policies, or similar items for which staff is seeking the advice and counsel of the Board of Directors. Time permitting, it is generally in the District’s interest to discuss these more complex matters at one meeting and consider formal action at another meeting. This portion of the agenda may also include items for information only. 9.1. Status of Recruitment Process for Ad Hoc Citizens Advisory Committee 9.2. Rescheduling Regular Board Meeting on Wednesday, March 1, 2017 and Confirming Availability for Board Workshop Meeting on Thursday, March 16, 2017 10. REPORTS, INFORMATION ITEMS, AND COMMENTS 10.1. Directors' Reports · OCWD Field Headquarters Tour - January 26, 2017 (Nederhood/Jones) · OCWD Groundwater Replenishment System Tour - February 1, 2017 (Nederhood/Jones) · MWDSC Local Infrastructure Tour - February 3, 2017 (Hall/Miller) 10.2. General Manager's Report 10.3. General Counsel's Report 10.4. Future Agenda Items and Staff Tasks 11. COMMITTEE REPORTS 11.1. Interagency Committee with MWDOC and OCWD (Miller/Nederhood) · Next meeting scheduled March 23, 2017 at 4:00 p.m. 11.2. Joint Agency Committee with City of Yorba Linda (Miller/Hawkins) · Next meeting scheduled March 13, 2017 at 4:00 p.m. at YL City Hall. 11.3. Interagency Committee with City of Placentia and Golden State Water Company (Miller/Nederhood) · Next meeting yet to be scheduled. 12. INTERGOVERNMENTAL MEETINGS 12.1. OCSD Board - January 25, 2017 (Jones) 12.2. ISDOC - January 26, 2017 (Miller/Jones) 12.3. MWDOC Board - February 1, 2017 (Nederhood) 12.4. OCSD Operations Committee - February 1, 2017 (Hawkins) 12.5. OCWD Board - February 1, 2017 (Jones) 12.6. WACO - February 3, 2017 (Hawkins/Jones/Nederhood) 12.7. YL City Council - February 7, 2017 (Hall) 12.8. LAFCO - February 8, 2017 (Nederhood - As Needed) 13. BOARD OF DIRECTORS ACTIVITY CALENDAR 13.1. Meetings from February 14, 2017 - April 30, 2017 14. CONFERENCES, SEMINARS, AND SPECIAL EVENTS This section of the agenda is for the Board of Directors to authorize Director attendance at the listed events. 14.1. MWDOC Water Policy Forum - March 30, 2017 Recommendation: That the Board of Directors approve Director attendance at this event if desired. 15. ADJOURNMENT 15.1. The next Regular Board of Directors Meeting will be held Wednesday, March 1, 2017. Closed Session (if necessary) will begin at 5:30 p.m. and regular business will begin at 6:30 p.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. 7.1 AGENDA REPORT Meeting Date: February 13, 2017 Subject:Minutes of the Board of Directors Regular Meeting held December 8, 2016 STAFF RECOMMENDATION: That the Board of Directors approve the minutes as presented. ATTACHMENTS: Name:Description:Type: 2016-12-08_-_Minutes_-_BOD.doc Minutes Minutes Minutes of the YLWD Board of Directors Regular Meeting Held December 8, 2016 at 8:30 a.m. 1 2016-XXX MINUTES OF THE YORBA LINDA WATER DISTRICT BOARD OF DIRECTORS REGULAR MEETING Thursday, December 8, 2016, 8:30 a.m. 1717 E Miraloma Ave, Placentia CA 92870 1. CALL TO ORDER The December 8, 2016 Regular Meeting of the Yorba Linda Water District Board of Directors was called to order by Director Hawkins at 8:32 a.m. The meeting was held in the Board Room at the District’s Administration Building located at 1717 East Miraloma Avenue in Placentia, California 92870. 2. PLEDGE OF ALLEGIANCE Director Hawkins led the pledge. 3. ROLL CALL DIRECTORS PRESENT STAFF PRESENT Andrew Hall, Director Marc Marcantonio, General Manager Phil Hawkins, Director Steve Conklin, Engineering Manager Brooke Jones, Director John DeCriscio, Operations Manager Wayne Miller, Director Gina Knight, HR/Risk and Safety Manager Al Nederhood, Director Delia Lugo, Finance Manager Damon Micalizzi, Public Information Manager Art Vega, Information Technology Manager Annie Alexander, Executive Secretary Cindy Botts, Water Consv Sup/Mgmt Analyst Cat Erbacher, Water Conservation Rep Laurie McAllaster, Records Mgmt Admin Malissa Muttaraid, Public Affairs Representative Rachel Padilla, Customer Service Supervisor ALSO PRESENT Andrew Gagen, Partner, Kidman Law LLP Brett Barbre, Director, MWDSC and MWDOC Gene Hernandez, Councilmember, City of Yorba Linda Tom Lindsey, Mayor, City of Yorba Linda 4. ADDITIONS/DELETIONS TO THE AGENDA Mr. Marcantonio indicated that a correction was needed in the staff report for Item No. 8.2. Staff is recommending the purchase of one vehicle, not two. Minutes of the YLWD Board of Directors Regular Meeting Held December 8, 2016 at 8:30 a.m. 2 5. SEATING OF DIRECTORS 5.1. Reorganization of the Board of Directors and Appointment of Officers Mr. Marcantonio explained that pursuant to the Board of Directors’ Policies and Procedures (Resolution No 16-12), a President and Vice President of the Board shall be elected annually at the District’s reorganization meeting held at the first meeting of the Board in December of every year. Additionally, the Board is required to appoint the Municipal Corporation Officers of Secretary, Assistant Secretary, and Treasurer. Mr. Marcantonio provided an overview of the powers and duties of the aforementioned officers and noted that previously, he had been appointed as Secretary, Ms. Alexander as Assistant Secretary, and Mrs. Lugo as Treasurer. Director Jones nominated Director Miller to serve as President. Director Nederhood seconded the nomination. Director Hall suggested that for the purposes of continuity, Director Hawkins serve as President. The Board of Directors voted 5-0 to elect Director Miller as President for the next calendar year. Director Hawkins then turned the meeting over to President Miller as the presiding officer. Director Jones made a motion, seconded by Director Hawkins, to elect Director Nederhood to serve as Vice President for the next calendar year. Motion carried 5-0. Director Hawkins made a motion, seconded by Director Jones, to appoint Mr. Marcantonio as Secretary, Ms. Alexander as Assistant Secretary, and Mrs. Lugo as Treasurer for the next calendar year. Motion carried 5-0. 6. INTRODUCTIONS AND PRESENTATIONS 6.1. MWDSC/MWDOC Director’s Report Director Barbre offered his congratulations to the new members of the Board and stated that he would be making arrangements for a tour of the Diemer Treatment Plant. He noted that YLWD was one of very few agencies in the area with access to dual water sources. He also commented on the City’s decision to transfer responsibility for sewer service to the District, the associated seat on Orange County Sanitation District’s (OCSD) Board of Directors, litigation related to the County of Orange’s bankruptcy, and previous legislation proposing the consolidation of Orange County water districts. Director Barbre then commented on the California WaterFix, the State Water Resources Control Board’s (SWRCB) Minutes of the YLWD Board of Directors Regular Meeting Held December 8, 2016 at 8:30 a.m. 3 drought emergency regulations, various tours provided by MWDSC, and responded to questions from the Board. 7. PUBLIC COMMENTS Mayor Tom Lindsey congratulated the new Board members on their recent election and commented on the sewer transfer and associated seat on OCSD’s Board. He then commented on his previous experience serving as the City’s liaison to the District, Director Barbre’s knowledge and expertise, and the working relationship between YLWD and the City of Yorba Linda. He also encouraged the new Board to keep the joint agency committee meetings in place. Councilmember Hernandez commended Director Barbre and expressed his appreciation for MWDSC’s educational tours. He also encouraged the new Board to consider maintaining the joint agency committee meetings and praised District staff. Councilmember Hernandez wished the new Board well and commented on SWRCB’s conservation mandate. Mr. Kent Ebinger, resident, welcomed the new Board members and suggested that the District post monthly financial statements on its website and consider implementing an assistance program for low income customers. Mr. Greg Schultz, resident, welcomed the new Board members and commented on YLWD’s awards for its budget and audit documents and remarks made by a member of the public at the last meeting related to the District’s financials. He also suggested that the Board consider conducting its meetings in the evenings and commented on previous requests from the public for the District to refund revenue received from administrative penalties and the potential liability should this occur. Mr. Jon Hansen, resident, welcomed the new Board members and commented on previous requests from the public for YLWD to provide a refund to District customers, similar to what some insurance providers do at the end of the year. He also remarked on the District’s historical revenue and suggested implementation of an assistance program for low income customers. Mrs. Susan Decker, resident, thanked for the new Board members for their work prior to being elected and commented on remarks attributed to her regarding the District’s financials. Mrs. Julia Schultz, resident, welcomed the new Board and expressed her concerns related to the election campaign. She also commended staff for their work supporting the District’s operations. Mr. Ben Parker, resident, complimented the new Board members for their conduct during the election campaign. Minutes of the YLWD Board of Directors Regular Meeting Held December 8, 2016 at 8:30 a.m. 4 8. CONSENT CALENDAR Director Hawkins made a motion, seconded by Director Hall, to approve the Consent Calendar with the correction to Item No. 8.2. Motion carried 5-0. 8.1. Payments of Bills, Refunds, and Wire Transfers Recommendation: That the Board of Directors ratify and authorize disbursements in the amount of $496,964.73. 8.2. Vehicle Replacement Purchase Recommendation: That the Board of Directors authorize the General Manager to purchase one two vehicles from George Chevrolet for the total amount of $30,227.93. 8.3. Terms and Conditions for Water and Sewer Service with HQT HOMES 215, LLC. Recommendation: That the Board of Directors approve the Terms and Conditions for Water and Sewer Service with HQT HOMES 215, LLC., Job No. 2016-14. 9. ACTION CALENDAR 9.1. Amendments to the District’s Conflict of Interest Code Mr. Marcantonio explained that the Political Reform Act requires every local government agency to review its Conflict of Interest Code on a biennial basis. Staff recently reviewed the District’s code and identified some minor revisions. Amendments must be submitted in the County’s eDisclosure System by December 30, 2016 and aren’t considered to be in effect until approved by the Orange County Board of Supervisors. Director Hawkins made a motion, seconded by Director Hall, to approve Resolution No. 16-22 Adopting a Conflict of Interest Code which Supersedes all Prior Conflict of Interest Codes and Amendments Previously Adopted. Motion carried 5-0 on a Roll Call vote. 9.2. Establishment of Committees and Committee, Agency and Intergovernmental Meeting Assignments Mr. Marcantonio explained that pursuant to the Board of Directors’ Policies and Procedures (Resolution No. 16-12), the newly elected President was responsible for making committee, agency, and intergovernmental meeting assignments, subject to consent of the Board, following the annual reorganization of the Board of Directors. Additionally, the purpose of each established committee is to be reviewed by the Board, prior to Minutes of the YLWD Board of Directors Regular Meeting Held December 8, 2016 at 8:30 a.m. 5 making these assignments, in order to determine their continuing relevance. The previous Board established three joint/interagency committees and one citizens advisory committee. Two Board members will also need to be assigned to serve as Active and Alternate Directors for the Orange County Sanitation District (OCSD) and historically, the Directors have attended a number of intergovernmental meetings on a regular basis. Mr. Marcantonio then provided an overview of the Directors’ compensation for attendance at these meetings and suggested that requests for assignments be submitted to President Miller by Wednesday, December 14, 2016. He noted that the Board could elect to extend this process, however the assignments for OCSD would need to be made as soon as possible in order to avoid a vacancy for an extended period of time. Director Hawkins suggested that the Directors e-mail their top three choices to President Miller and that assignments be made at the next regular Board meeting. Mr. Gagen instructed the Board to e-mail their preferences directly to President Miller and to copy Mr. Marcantonio, not any other members of the Board. Director Hawkins made a motion, seconded by Director Hall, that the Board of Directors: (1) consider the currently established committees and determine their continuing relevance; and (2) review the available committee, agency and intergovernmental meeting assignments and provide their preferences to President Miller by Wednesday, December 14, 2016. Motion carried 5-0. 9.3. Determination of Agency Designated Representative Mrs. Knight explained that on October 27, 2016, the previous Board designated the former Board President as the District’s representative to negotiate with the General Manager regarding his salary and benefits and present a recommendation at a future meeting. On November 21, 2016, the previous Board voted to have the new Board negotiate the terms of the General Manager’s employment agreement. As the former designated representative is no longer with the District, the new Board needs to identify a replacement to continue negotiations with the General Manager. Pursuant Government Code § 54957.6, this action will need to occur prior to entering into Closed Session to discuss the General Manager’s employment agreement. The Board briefly discussed the possibility of having more than one designated representative, the negotiation process, and the benefits of having general counsel serve as the designated representative. Minutes of the YLWD Board of Directors Regular Meeting Held December 8, 2016 at 8:30 a.m. 6 Mrs. Knight clarified that the Board could change the designated representative at any time if needed. However, that action would need to take place during open session. Mr. Gagen noted that any final decision on the proposed terms of the General Manager’s employment agreement would also need to take place during open session. Mr. Jon Hansen, resident, suggested that the Board consider designating Director Hawkins and one of the new Board members as the District’s representatives. He asked if there would be an added cost should general counsel serve as the District’s designated representative. Mr. Gagen provided an overview of services included in the District’s retainer and indicated that unless special research was necessary, the costs associated with his potential service as the agency’s designated representative would be covered under same. Mrs. Knight noted that comparative compensation information would be provided to the Board. Director Hawkins made a motion, seconded by Director Nederhood, to appoint Mr. Andrew Gagen as the District’s designated representative to negotiate an amendment to the present employment agreement with the General Manager. Motion carried 5-0. President Miller declared a recess at 9:33 a.m. The meeting was reconvened at 9:46 a.m. 10. DISCUSSION ITEMS 10.1. Overview of the Ralph M. Brown Act and California Public Records Act Mr. Gagen provided an overview of the Ralph M. Brown Act and touched on the following topics: legislative intent of the Act; definition of a meeting; exceptions to meetings; collective briefings; serial meetings; noticing meetings; public participation in meetings; non-agenda items; closed sessions; and remedies for Brown Act violations. During the presentation, Mr. Gagen responded to questions from the Board regarding: Director participation in facility inspection tours, conferences, seminars, other agency meetings, etc.; and responding to public comments. Mrs. Cristy Parker, resident, asked for clarification regarding the term “open and publicized” in relation to community meetings. Minutes of the YLWD Board of Directors Regular Meeting Held December 8, 2016 at 8:30 a.m. 7 Mr. Gagen explained that a majority of the Board may attend community meetings that have been publicized and are open to the public. He then responded to questions from the Board regarding the necessity for Directors to declare whether they were representing themselves or the District when participating in community meetings. Mrs. McAllaster provided an overview of the California Public Records Act and touched on the following topics: the purpose of the Act; deadlines for response and disclosure as related to requests for records; receiving and responding to requests; and the use of District versus personal e-mail accounts. She then responded to questions from the Board regarding the number of requests received during the calendar year, the types of records requested, records available on the District’s website, the District’s records management policy and records retention schedule, and the handling of requests for sensitive records. Mrs. Knight commented on the District’s policy for handling DigAlert requests, upcoming staff training on the records management policy, and current litigation related to disclosure of personnel files. Mrs. Cristy Parker, resident, commented on the cost for printing agenda packets, ensuring that materials are legible when printed in black and white, and the District’s fees for paper copies of records. Mrs. Knight and Mrs. Lugo commented on the District’s costs associated with providing paper copies of records. 11. REPORTS, INFORMATION ITEMS, AND COMMENTS 11.1. Directors' Reports Vice President Nederhood commented on a recent notice he’d received from the District regarding roots growing in his sewer line. Mr. DeCriscio provided an overview of the District’s sewer line video inspection program and Mr. Marcantonio commented on the issues cause by roots and wipes in the District’s sewer lines. Director Hawkins welcomed the new Board members. 11.2. General Manager's Report Mr. Marcantonio asked each of the managers to report on activities within their respective departments. Mr. Micalizzi reported that staff was working on correspondence to SWRCB regarding the draft framework for long-term water conservation measures. Staff is also planning to join a coalition in signing a related Minutes of the YLWD Board of Directors Regular Meeting Held December 8, 2016 at 8:30 a.m. 8 letter being drafted by ACWA. Mr. Micalizzi noted that OCWD’s Board had adopted a resolution in support of the California WaterFix. Staff is planning to bring a similar item to the Board for consideration at a future meeting. The new Directors’ bios have been published on the District’s website and their photos will follow shortly. Vice President Nederhood asked about the need for displaying YLWD’s conservation target placards in the community and suggested placing a similar visual indicator on the District’s home page. Mr. Micalizzi explained that staff was in the process of developing a communications plan dependent on finalization of SWRCB’s long-term conservation measures. He then responded to questions from the Board regarding content on the District’s website and social media. President Miller declared a recess at 11:00 a.m. The meeting was reconvened at 11:17 a.m. Mr. Conklin reported on the status of various construction projects including the Waterline Replacement Project, Well 21 Project, Richfield Road Water Main Project, Fairmont Booster Station Upgrade Project, and the Well 22 Project. He noted that a public meeting regarding the Esperanza Hills development project was scheduled later that same evening at which a District representative would be present. Mr. Conklin and Mr. Gagen then responded to questions from the Board regarding the developer’s cost contribution and the water/sewer related facilities to be constructed. Mr. Marcantonio briefly commented on the terms of the District’s agreement with the developer. Vice President Nederhood suggested that more detailed information regarding the Esperanza Hills project be posted on the District’s website. Staff then responded to questions from the Board regarding anticipated water demand and the developer’s conservation efforts. Mr. DeCriscio stated he would defer his report to the next meeting as he was preparing several items for the Board’s consideration. Mrs. Lugo reported that staff was working on calendar year-end tasks, finalizing the RFP for auditing services, and upgrades to the District’s financial reporting system. Mr. Vega offered his congratulations to the new Directors and reported on staff’s mitigation efforts related to an issue with the District’s main phone line and the number of blocked threats during the previous and current month. Mr. Marcantonio stated that in consideration of time, he would e-mail his report to the Board. He then explained that historically, the Board Minutes of the YLWD Board of Directors Regular Meeting Held December 8, 2016 at 8:30 a.m. 9 reviewed its compensation rate at the second regular meeting in December each year. He requested direction from the Board as to when they would prefer to consider this matter, either at the next meeting or later in the year. Vice President Nederhood indicated that he wasn’t going to be present at the next meeting. Following brief discussion, the Board determined to discuss this matter at the first regular meeting in January. Mr. Marcantonio then welcomed and congratulated the new Board members and stated that he was looking forward to working with them. 11.3. General Counsel’s Report Mr. Gagen indicated there was a need for Closed Session. 11.4. Future Agenda Items and Staff Tasks Director Hall requested to add an item on the next agenda to discuss changing the time of regular Board meetings. 12. COMMITTEE REPORTS 12.1. Interagency Committee with MWDOC and OCWD Next meeting is scheduled January 24, 2017 at 4:00 p.m. 12.2. Joint Agency Committee with City of Yorba Linda Next meeting is yet to be scheduled. 12.3. Interagency Committee with City of Placentia and Golden State Water Company Next meeting is yet to be scheduled. 12.4. Citizens Advisory Committee Next meeting is scheduled January 23, 2017 at 8:30 a.m. President Miller requested that an item be added to the next agenda to discuss the Citizens Advisory Committee. 13. BOARD OF DIRECTORS ACTIVITY CALENDAR 13.1. Meetings from December 9, 2016 – January 31, 2017 The Board reviewed the activity calendar and made no changes. Minutes of the YLWD Board of Directors Regular Meeting Held December 8, 2016 at 8:30 a.m. 10 14. CONFERENCES, SEMINARS, AND SPECIAL EVENTS 14.1 CASA Winter Conference – January 18-20, 2017 UWI Spring Conference – February 8-10, 2017 CSDA Leadership Academy Conference – February 26 – March 1, 2017 Mr. Marcantonio noted that Director’s participation in the CSDA Leadership Academy would help the District maintain its SDLF Districts of Distinction accreditation. Director Hawkins made a motion, seconded by Director Hall, to approve Director attendance at these events if desired. Motion carried 5-0. Mr. Marcantonio provided an overview of the content presented during the CASA and UWI conferences. President Miller reported on his attendance at the ACWA fall conference. Mr. Marcantonio briefly commented on restrictions in Proposition 218 that preclude the District from offering an assistance program for low income customers at this time. Mrs. Lugo indicated that some Districts are able to support these types of programs as they receive a substantial amount of non-operating revenue from other sources whereas YLWD does not. The Board of Directors meeting was adjourned to the Public Financing Corporation meeting at 12:03 p.m. (Minutes of the Public Financing Corporation meeting have been recorded separately.) The Public Financing Corporation meeting was adjourned and the Board of Directors meeting was reconvened at 12:07 p.m. 15. CLOSED SESSION The meeting was adjourned to Closed Session at 12:08 p.m. All Directors in attendance were present. Also present were Messrs. Gagen and Marcantonio. 15.1. Conference with Legal Counsel – Existing Litigation Pursuant to Paragraph (1) of Subdivision (d) of Section 54956.9 of the California Government Code Name of Case: Julie Lonsdale vs. Yorba Linda Water District (OC Superior Court – Case No. 00808246) Minutes of the YLWD Board of Directors Regular Meeting Held December 8, 2016 at 8:30 a.m. 11 15.2. Conference with Legal Counsel – Existing Litigation Pursuant to Paragraph (1) of Subdivision (d) of Section 54956.9 of the California Government Code Name of Case: Irvine Ranch Water District vs. Orange County Water District (OC Superior Court – Case No. 00858584) Mr. Marcantonio left the Closed Session at this time. 15.3. Public Employee Performance Evaluation Pursuant to Section 54957 of the California Government Code Title: General Manager 15.4. Conference with Labor Negotiators Pursuant to Section 54957.6 of the California Government Code Agency Designated Representative: Mr. Andrew Gagen, Legal Counsel Unrepresented Employee: General Manager The Board reconvened in Open Session at 12:49 p.m. No action was taken during Closed Session that was required to be reported under the Brown Act. 16. ADJOURNMENT 16.1. The meeting was adjourned at 12:50 p.m. The next Regular Board of Directors Meeting will be held Thursday, December 22, 2016 at 8:30 a.m. Annie Alexander Assistant Board Secretary ITEM NO. 7.2 AGENDA REPORT Meeting Date: February 13, 2017 Budgeted:Yes To:Board of Directors Cost Estimate:$3,557,007.91 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 $3,557,007.91. DISCUSSION: The major items on this disbursement list are as follows: a wire in the amount of $2,758,692.84 for the District’s biannual payment to Orange County Water District for the Replenishment Assessment for the period of July through December 2016; a check of $49,100.00 to Robotic Sewer Solutions for sewer line repairs at 41 locations; and a check of $177,127.50 to TBU Inc. for Richfield Rd water main plant progress payment #03. The balance of $314,342.79 is routine invoices. The Accounts Payable check register total is $3,299,263.13; Payroll No. 02 total is $257,744.78; and the disbursements of this agenda report are $3,557,007.91. 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: 17-CS_0213.pdf Cap Sheet Backup Material 17_CC_0213.pdf Credit Card Summary Backup Material CkReg021317.pdf Check Register Backup Material February 13, 2017 CHECK NUMBERS & WIRES: Computer Checks 69063—69167 $ 540,570.29 ____________ $ 540,570.29 WIRES: W 013017 OCWD $ 2,758,692.84 ____________ $ 2,758,692.84 TOTAL OF CHECKS & WIRES $3,299,263.13 PAYROLL NO. 02: Direct Deposits $ 161,526.45 Third Party Checks 6593—6504 $ 50,823.24 Payroll Taxes $ 45,395.09 $ 257,744.78 TOTAL OF PAYROLL $257,744.78 ---------------------------------------------------------------------------------------------------------------------- DISBURSEMENT TOTAL: $3,557,007.91 ================================================================== APPROVED BY THE BOARD OF DIRECTORS MINUTE ORDER AT BOARD MEETING OF FEBRUARY 13, 2017 ==================================================================. Date Vendor Name Amount Description 1/4/2017 Technology Surplus Dept 3,884.36 MXU 520R-TC-TC meters 1/10/2017 Orvac Electronics 138.61 Electrical supplies 1/10/2017 Fairway Ford 17.39 Vehicle maintenance 1/10/2017 CDW 49.52 IT supplies 1/11/2017 Careers in Government, Inc 225.00 Communications manager recruitment advertisement 1/11/2017 Boxwood Technology, Inc.100.00 Communications manager recruitment advertisement 1/11/2017 Brown & Caldwell 400.00 Communications manager & Associate Engineer recruitment ad 1/11/2017 Public Relations Society of America 350.00 Communications manager recruitment advertisement 1/11/2017 Jobs Available, Inc.390.00 Communications manager recruitment advertisement 1/11/2017 Orchard Supply Hardware 75.40 Tools & equipment 1/11/2017 Lampost Pizza 9.29 Safety meeting - DeCriscio & Smith 1/11/2017 Dell 161.60 IT hardware supplies 1/11/2017 Answer One Communications 446.75 After hours answer service 1/12/2017 Home Depot 549.85 Parking lot stencils 1/16/2017 ISDOC 34.00 ISDOC Quarterly meeting - Dir. Miller & Marcantonio, M 1/17/2017 Home Depot 51.55 Sod for landscape repairs 1/18/2017 Home Depot 49.26 Hardware supplies 1/18/2017 Praxair Distribution 134.79 Welding supplies 1/18/2017 Interop 199.20 INTEROP/UBM Annual convention 1/19/2017 ARMA International 175.00 Annual ARMA International membership - Millen 1/19/2017 America's Instant Signs 862.00 (25) YLWD logo vehicle door decals 1/19/2017 Provisio.com 149.00 SiteKiosk Basics - software 1/19/2017 Verizon Wireless 3,830.77 Verizon Wireless - December 2016 1/19/2017 Placentia Disposal 593.18 (2) front loads - Richfield Rd 1/19/2017 Online Collections 520.40 Utility exchange report and collection fees 1/23/2017 The Public Retirement Journal 400.00 Registration for Public Retirement Seminar - Knight & Melton 1/23/2017 KB Design 473.76 YLWD uniforms 1/24/2017 Jobs Available, Inc.30.00 Annual online subscription 1/24/2017 Frazier Auto Upholstery 228.80 Reupholster vehicle seat - #172 1/25/2017 R.E. Michel 25.42 AC repair parts for Bldg 4 1/25/2017 Orchard Supply Hardware 20.46 Gate wheels 1/25/2017 OCWA 60.00 Annual membership - Marcantonio, M 1/25/2017 CDW 130.67 IT equipment 1/25/2017 Tom's Place 19.99 Meeting to discuss Adhoc committee meeting - Lugo & Botts 1/26/2017 Mc Master Carr 326.66 Production repair parts 1/26/2017 Dan Copp Crushing 400.00 Disposal of road material 1/26/2017 ISDOC 17.00 ISDOC Quarterly meeting - Dir. Jones 1/26/2017 Amazon 11.99 Cell phone case - SCADA 1/26/2017 Super Shuttle 31.00 Travel expense - CSMFO Conference - Lugo, D 1/26/2017 CSMFO 60.00 CSMFO OC Chapter meeting - Lugo & Knight 1/30/2017 Barkers & Sons Plumbing & Heating 1,590.64 Humidifier water line install for IT Dept server room 1/30/2017 CWEA 172.00 CWEA renewal - Woller, Z 1/30/2017 Home Depot 95.87 Ceiling tiles for buildings 1 & 2. 1/30/2017 AWWA 117.50 Publication - Principles of Water Rates 1/30/2017 CSMFO 170.00 CSMFO membership renewal - McCann, K 1/31/2017 Mc Master Carr 233.56 Shelves for pump stations 2/1/2017 Home Depot 380.14 Landscape supplies 2/1/2017 Orchard Supply Hardware 57.23 Hardware supplies 2/1/2017 Frazier Auto Upholstery 468.00 Reupholster vehicle seat - #160 18,917.61 Cal Card Credit Card U S Bank 1/04/17 - 02/01/17 Check No.Date Vendor Name Amount Description 69085 02/13/2017 A Plus Awards By Dewey 237.59 NAME PLATES (15) 69074 02/13/2017 ADAM SNYDER 51.32 CUSTOMER REFUND 69083 02/13/2017 Al Nederhood 64.95 MILEAGE REIMBURSEMENT - JANUARY 2017 69084 02/13/2017 Anaheim Wheel & Tire 599.00 MOUNT & BALANCE TIRES - #188, #198 & 211 69086 02/13/2017 Aqua-Metric Sales Co.17,402.85 WAREHOUSE STOCK 69087 02/13/2017 Aramark 723.93 UNIFORM SERVICE 69089 02/13/2017 AT & T 47.19 CIRCUIT #78KS315PT 69088 02/13/2017 AT & T - Calnet3 3,627.68 ATT CALNET3 - 12/12/16 - 01/11/17 69090 02/13/2017 Autoscribe Corporation 944.00 PAYMENT VISION GATEWAY 69072 02/13/2017 BAO VUONG 162.71 CUSTOMER REFUND 69091 02/13/2017 Battery Systems Inc 730.36 BATTERY REPLACEMENT - HIGHLAND & SANTIAGO STATIONS 69092 02/13/2017 BHI Management Consulting 6,950.00 BOARD ROLES & GOVERNANCE 69093 02/13/2017 BrightView Tree Care Services Inc.7,573.00 LANDSCAPE SERVICE - TREE CARE 69094 02/13/2017 Brooke Jones 94.16 MILEAGE REIMBURSEMENT - JAN 2017 69095 02/13/2017 Burtech Pipeline, Inc.12,407.69 J15-10S - SEWER REHABILITATION - RETENTION RELEASE 69106 02/13/2017 C. Wells Pipeline 1,047.33 HYDRANT REPAIR PARTS 69098 02/13/2017 CalCard US Bank 18,917.61 CREDIT CARD TRANSACTIONS - JANUARY & FEBRUARY 2017 69096 02/13/2017 Calolympic Safety Co.104.75 CALIBRATING EQUIPMENT 69097 02/13/2017 CalPERS 4,981.32 2017 - REPLACEMENT BENEFIT & 1959 SURVIVOR BENEFIT 07/1/16 - 06/30/17 69099 02/13/2017 Chambers Group Inc.139.00 PROFESSIONAL SERVICES - DECEMBER 2016 69100 02/13/2017 City Of Anaheim 29,089.18 LAKEVIEW & RICHFIELD -ELECTRIC CHARGES- 12/14/16 - 01/19/17 69101 02/13/2017 City Of Placentia 85.00 FALSE ALARM CHARGE #161970017 69081 02/13/2017 CITY VENTURES COMMUNITIES, LLC 41.24 CUSTOMER REFUND 69103 02/13/2017 CLIMATEC, LLC 796.65 TOOLS & EQUIPMENT 69102 02/13/2017 Clinical Lab. Of San Bern.1,670.00 WATER QUALITY - SAMPLES 69104 02/13/2017 Coastal Ignition & Controls 1,459.50 STATIONARY ENGINE MAINTENANCE 69077 02/13/2017 CRAIG SAMSON 92.31 CUSTOMER REFUND 69107 02/13/2017 Daniels Tire Service 813.47 VEHICLE MAINTENANCE - #169 & 175 69068 02/13/2017 DAVID VARGO 31.20 CUSTOMER REFUND 69110 02/13/2017 Dean Criske Trucking 724.73 ROAD MATERIAL - BASE & SAND 69108 02/13/2017 Dell Marketing L.P.3,637.58 PRO-SUPPORT - IT EQUIPMENT & VLA WINDOWS SERVERS STANDAR LICENSE 69071 02/13/2017 DENNIS BURK 58.80 CUSTOMER REFUND 69109 02/13/2017 Dion & Sons, Inc.4,480.44 VEHICLE MAINTENANCE - STATIONARY ENGINES 69111 02/13/2017 Eisel Enterprises, Inc.700.38 METER BOX, LIDS & COVERS 69112 02/13/2017 Energy Environmental Soln, Inc 2,400.00 ICE TESTING (YLWD-PASOFINO) 69113 02/13/2017 Enkay Engineering & Equipment Inc 900.00 PIPE REMOVAL & DISPOSAL 69067 02/13/2017 ERIC LUDWIG 2.70 CUSTOMER REFUND 69079 02/13/2017 ESSAM ALKASIH 54.02 CUSTOMER REFUND 69114 02/13/2017 Fairway Ford Sales, Inc.542.41 VEHICLE MAINTENANCE - #172 & #188 69115 02/13/2017 Federal Express 44.91 SHIPPING CHARGES 69065 02/13/2017 FIONA SAKARIA 135.00 CUSTOMER REFUND 69116 02/13/2017 Fleet Services, Inc 13.21 EQUIPMENT MAINTENANCE #E218 69117 02/13/2017 Francisco R. Quintero 60.00 CERTIFICATE REIMBURSEMENT - T-2 RENEWAL 69118 02/13/2017 Fry's Electronics 1,113.03 IT HARDWARE & EQUIPMENT 69119 02/13/2017 GCI Construction Inc.38,036.29 J14-12 - 2015 WATERLINE REPLACEMENT - RETENTION RELEASE 69073 02/13/2017 GREENVIEW VISTA LLC 25.87 CUSTOMER REFUND 69120 02/13/2017 Hach Company 1,452.83 WATER QUALITY SUPPLIES 69122 02/13/2017 Infosend Inc.10,758.27 POSTAGE BILLING - MONTHLY FEE 69124 02/13/2017 J.G. Tucker & Son Inc 1,273.31 SAFETY EQUIPMENT 69123 02/13/2017 Jackson's Auto Supply - Napa 450.54 VEHICLE MAINTENANCE - #144, #155, #160, & #186 69076 02/13/2017 JOHN S MEEK CO 1,875.88 CUSTOMER REFUND 69125 02/13/2017 Jorge Lopez 55.00 CERTIFICATE REIMBURSEMENT - T1 69126 02/13/2017 Kimball Midwest 488.36 MECHANIC SHOP SUPPLIES 69127 02/13/2017 Liebert Cassidy Whitmore 8,525.90 LEGAL SERVICE - NOVEMBER & DECEMBER 2016 69128 02/13/2017 Linda B. Patti 1,548.00 REFUND - OVERPAYMENT HEALT INSURANCE 69064 02/13/2017 LINDA MORLANG 31.08 CUSTOMER REFUND 69121 02/13/2017 MailFinance 313.30 HASLER LEASE #H12011971 69130 02/13/2017 Marc Marcantonio 43.60 MILEAGE REIMBURSEMENT - JANUARY 2017 69129 02/13/2017 MARS COMPANY 558.99 TOOLS & EQUIPMENT Yorba Linda Water District Check Register For Checks Dated: 01/25/2017 thru 02/13/2017 69131 02/13/2017 Mc Fadden-Dale Hardware 341.19 HARDWARE SUPPLIES 69105 02/13/2017 Merging Communications, Inc.370.00 SERVICE CALL - TROUBLESHOOT TELEPHONE SYSTEM 69132 02/13/2017 Minuteman Press 345.16 SERVICE SHUT OFF - DOOR HANGERS 69133 02/13/2017 Mudge Fasteners, Inc 2,434.71 MISCELLAENOUS WAREHOUSE PARTS 69167 02/13/2017 Municipal Water District 3,657.33 FY16/17 - CHOICE PROGRAM BILL 69134 02/13/2017 Muzak LLC 85.44 CUSTOMER MESSAGE/PHONE SERVICE - FEBRUARY 2017 69135 02/13/2017 Nickey Kard Lock Inc 5,384.68 FUEL - 01/01/17 - 01/15/17 69136 02/13/2017 Office Solutions 794.32 OFFICE SUPPLIES 69138 02/13/2017 Orange County - Tax Collector 475.03 INSPECTION & PLAN CHECK #2016-01050 69137 02/13/2017 Orange County Register 102.40 OC REGISTER - NEWSPAPER -M - F - 13 WEEKS 69139 02/13/2017 Orange County Water Assn 120.00 OCWA MEMBERSHIP & (2) OCWA LUNCHEON W013017 01/30/2017 Orange County Water District 2,758,692.84 REPLENISHMENT ASSESSMENT FOR PUMPED WATER JULY - DEC 2016 69140 02/13/2017 OUR FIRST AID COMPANY 101.90 FIRST AID SUPPLIES 69145 02/13/2017 P.T.I. Sand & Gravel, Inc.1,198.53 ROAD MATERIAL - COLD MIX ASPHALT 69141 02/13/2017 Pacific Hydrotech Corporation 26,411.90 J10-11B - FAIRMONT BPS - PROGRESS PAYMENT #02 69142 02/13/2017 Pete's Road Service Inc 1,841.17 VEHICLE MAINTENANCE - #197 69143 02/13/2017 Powerstride Battery 82.79 VEHICLE MAINTENANCE - #209 69144 02/13/2017 Praxair Distribution 160.28 WELDING SUPPLIES 69146 02/13/2017 Quinn Company 3.51 RICHFIELD GENERATOR MAITNENANCE 69147 02/13/2017 R.E. Michel Company, LLC 44.65 AC PARTS & MATERIALS 69148 02/13/2017 RKI Engineering, LLC 4,500.00 J09-22#21 - WELL SCADA PANEL PROGRAMMING 69069 02/13/2017 ROBERT BARRON 198.16 CUSTOMER REFUND 69149 02/13/2017 Robotic Sewer Solutions Inc 49,100.00 SEWER LINE REPAIRS - 41 LOCATIONS 69078 02/13/2017 SAEED SARDAR 75.72 CUSTOMER REFUND 69150 02/13/2017 Safety-Kleen Systems Inc 484.33 HAZARDOUS MATERIAL DISPOSAL 69080 02/13/2017 SAMANTHA PETRO 110.63 CUSTOMER REFUND 69075 02/13/2017 SANDRA FAVATA 49.81 CUSTOMER REFUND 69151 02/13/2017 SC Prime Source Inc.4,800.00 JANITORIAL SERVICE - JANUARY 2017 69152 02/13/2017 Security Solutions 459.80 ONSITE SERVICE 69153 02/13/2017 Solarwinds Inc.846.00 SOFTWARE LICENSE RENEWAL 69154 02/13/2017 South Coast AQMD 6,461.27 ANNUAL EMISSIONS & FEES #16239 & #94677 69155 02/13/2017 Staples Business Advantage 64.75 OFFICE EQUIPMENT - OFFICE CHAIR 69156 02/13/2017 Step Saver Inc 977.28 COARSE SALT 69157 02/13/2017 Switch Ltd 509.00 DATA HOSTING - CO-LOCATION 69158 02/13/2017 TBU Inc 177,127.50 J14-23- RICHFIELD RD WATER MAIN - PROGRESS PAYMENT #03 69159 02/13/2017 Time Warner Cable 3,757.00 ETHERNET INTERSTATE CO-LOCATION 69160 02/13/2017 TMobile 0.05 T-MOBILE - JANUARY 2017 69161 02/13/2017 Townsend Public Affairs, Inc.5,000.00 CONSULTING SERVICE - JANUARY 2017 69162 02/13/2017 UBC Construction Inc.8,176.00 ADMIN BUILDING - OFFICE IMPROVEMENTS 69163 02/13/2017 Underground Service Alert 280.50 DIGALERT - JANUARY 2017 69164 02/13/2017 United Industries 1,571.85 PPE EQUIPMENT 69166 02/13/2017 United Water Works, Inc.36,671.49 WAREHOUSE STOCK & WATER SERVICE REPAIR PARTS 69165 02/13/2017 UNUM Life Insurance Co. of America 3,498.95 LIFE, AD&D, STD, LTD - FEBRUARY 2017 69082 02/13/2017 WESTERN PACIFIC HOUSING INC.45.60 CUSTOMER REFUND 69066 02/13/2017 WILLIAM LLOYD 163.80 CUSTOMER REFUND 69063 02/13/2017 YL CHURCH OF CHRIST 450.00 CUSTOMER REFUND 69070 02/13/2017 YU-CHUN CHANG 46.39 CUSTOMER REFUND 3,299,263.13 ITEM NO. 8.1 AGENDA REPORT Meeting Date: February 13, 2017 To:Board of Directors From:Marc Marcantonio, General Manager Presented By:Delia Lugo, Finance Manager Dept:Finance Prepared By:Delia Lugo, Finance Manager Subject:Authorizing the Issuance of Revenue Refunding Bonds, Series 2017A SUMMARY: In 2008, the District sold $34,995,000 in Certificates of Participation ("2008 Certificates") to finance capital improvements to the Water System of the District. Based on preliminary financial assessments on January 21, 2016 and a more recent update on January 12, 2017, the 2008 Certificates present a potential refunding opportunity. The Board of Directors authorized staff to proceed with the advance refunding of the 2008 Certificates. STAFF RECOMMENDATION: That the Board of Directors adopt Resolution No. 17-02 Authorizing the Issuance of Not to Exceed $28,000,000 Refunding Revenue Bonds, Series 2017A, Approving the Execution of Certain Documents in Connection Therewith and Certain Other Matters, and rescinding Resolution No. 16- 17. DISCUSSION: The current interest rate environment has significantly changed since January 21, 2016 when the Board of Directors initially approved moving forward with the advance refunding of the 2008 Certificates. Staff is presenting legal documents setting the parameters pertaining to the structure of advance refunding the 2008 Certificates of Participation. There is a resolution to be adopted authorizing the issuance of the 2017 Bonds and approving the execution of certain documents and certain other matters: 1. Approve the 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 authorize the Board President and General Manager to execute said contract. 4. Approve Continuing Disclosure Certificate. 5. Approve preparation of Preliminary Disclosure 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. The first five of the above listed items are attached for review. PRIOR RELEVANT BOARD ACTION(S): On January 12, 2017, the Board of Directors approved moving forward with advance refunding the 2008 Certificates. ATTACHMENTS: Name:Description:Type: Resolution_No._17-02.docx Resolution Resolution Indenture_of_Trust.docx Indenture of Trust Backup Material Escrow_Agreement.docx Escrow Agreement Backup Material Purchase_Contract.docx Purchase Contract Backup Material Continuing_Disclosure_Certificate.docx Continuing Disclosure Certificate Backup Material Preliminary_Disclosure_Statement.docx Preliminary Disclosure Statement Backup Material Presentation.pdf Backup Material Distributed Less Than 72 Hours Prior to the Meeting Presentation Resolution No. 17-02 Authorizing the Issuance of Refunding Revenue Bonds, Series 2017A 1 RESOLUTION NO. 17-02 RESOLUTION OF THE BOARD OF DIRECTORS OF THE YORBA LINDA WATER DISTRICT AUTHORIZING THE ISSUANCE OF NOT TO EXCEED $28,000,000 REFUNDING REVENUE BONDS, SERIES 2017A, 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, 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 WHEREAS, to facilitate the issuance of its Refunding Revenue Bonds, Series 2017A (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 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; Resolution No. 17-02 Authorizing the Issuance of Refunding Revenue Bonds, Series 2017A 2 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 $28,000,000, 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 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 Resolution No. 17-02 Authorizing the Issuance of Refunding Revenue Bonds, Series 2017A 3 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. 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. Resolution No. 17-02 Authorizing the Issuance of Refunding Revenue Bonds, Series 2017A 4 SECTION 11. Resolution No. 16-17 is hereby rescinded and this resolution shall take effect immediately. PASSED AND ADOPTED this 13th day of February, 2017 by the following called vote: AYES: NOES: ABSENT: ABSTAIN: J. Wayne Miller, Ph.D., 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 1/17/17 INDENTURE OF TRUST Dated as of March 1, 2017 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 2017A 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......................................................................................................... 13 ARTICLE II THE 2017A BONDS Section 2.01. Authorization of 2017A Bonds ............................................................................. 14 Section 2.02. Terms of the 2017A Bonds ................................................................................... 14 Section 2.03. Transfer of 2017A Bonds ..................................................................................... 15 Section 2.04. Exchange of 2017A Bonds ................................................................................... 16 Section 2.05. Registration Books ................................................................................................ 16 Section 2.06. Form and Execution of 2017A Bonds .................................................................. 16 Section 2.07. 2017A Bonds Mutilated, Lost, Destroyed or Stolen ............................................. 17 Section 2.08. Book Entry System ............................................................................................... 17 ARTICLE III ISSUANCE OF 2017A BONDS; APPLICATION OF PROCEEDS Section 3.01. Issuance of the 2017A Bonds ............................................................................... 20 Section 3.02. Application of Proceeds of the 2017A Bonds and Certain Other Moneys ........... 20 Section 3.03. Establishment and Application of Costs of Issuance Fund ................................... 20 Section 3.04. Validity of 2017A Bonds ...................................................................................... 20 ARTICLE IV REDEMPTION OF 2017A BONDS Section 4.01. Terms of Redemption ........................................................................................... 21 Section 4.02. Selection of 2017A Bonds for Redemption .......................................................... 21 Section 4.03. Notice of Redemption ........................................................................................... 21 Section 4.04. Partial Redemption of 2017A 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 2017A Bonds are Outstanding .... 28 ARTICLE VI PARTICULAR COVENANTS Section 6.01. Punctual Payment ................................................................................................. 28 Section 6.02. Extension of Payment of 2017A Bonds ................................................................ 28 Section 6.03. Against Encumbrances ......................................................................................... 28 Section 6.04. Power to Issue 2017A 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 2017A 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 2017A Bond Owners .......................................................... 37 Section 7.05. 2017A 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 2017A Bonds; Preparation of New 2017A Bonds ..................... 45 Section 9.04. Amendment of Particular 2017A Bonds ............................................................... 45 ARTICLE X DEFEASANCE Section 10.01. Discharge of Indenture ......................................................................................... 46 Section 10.02. Discharge of Liability on 2017A Bonds ............................................................... 46 Section 10.03. Deposit of Money or Securities with Trustee ....................................................... 46 Section 10.04. Payment of 2017A 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 2017A Bond Owners .................................... 48 Section 11.04. Waiver of Notice; Requirement of Mailed Notice ................................................ 48 Section 11.05. Destruction of 2017A Bonds ................................................................................ 48 Section 11.06. Severability of Invalid Provisions ........................................................................ 48 Section 11.07. Notices .................................................................................................................. 49 Section 11.08. Evidence of Rights of 2017A Bond Owners ........................................................ 49 Section 11.09. Disqualified 2017A Bonds ................................................................................... 49 Section 11.10. Money Held for Particular 2017A 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 2017A Bond .......................................................................................... A-1 1 INDENTURE OF TRUST THIS INDENTURE OF TRUST (the “Indenture”) is made and entered into and dated as of March 1, 2017, 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”). 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 “2017A Bonds”), to establish and declare the terms and conditions upon which such 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 District under the Constitution of the State, the Government Code of the State and the Indenture and 2 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 2017A Bonds issued under and secured by the Indenture without privilege, priority or distinction as to the lien or otherwise of any of the 2017A Bonds over any of the other 2017A 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 2017A Bonds due or to become due thereon, at the times and in the manner provided in the 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bonds and any other cost, charge or fee in connection with the original issuance of the 2017A 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 2017A 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 March 1, 2017, 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 March 1, 2017, 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 _____ 1, 201__ 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bonds, means (subject to the provisions of Section 11.09) all 2017A Bonds theretofore, or thereupon being, authenticated and delivered by the Trustee under the Indenture except: (i) 2017A Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (ii) 2017A Bonds with respect to which all liability of the District shall have been discharged in accordance with Section 10.02, including 2017A Bonds (or portions thereof) described in Section 11.09; and (iii) 2017A Bonds for the transfer or exchange of or in lieu of or in substitution for which other 2017A Bonds shall have been authenticated and delivered by the Trustee pursuant to the Indenture. Owner; 2017A Bond Owner. The term “Owner” or “2017A Bond Owner,” whenever used herein with respect to a 2017A Bond, means the person in whose name the ownership of such 2017A 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 2017A 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 2017A 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 2017A Bond (or portion thereof), the principal amount of such 2017A 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 2017A 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 2017A 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. 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; (iii) the proceeds of any stand-by or water availability charges, development fees and connection charges collected by the District; and 12 (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 S&P Global Ratings, 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 2017A Bonds issued by the District on the date of issuance of the 2017A 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. 2017A Bonds. The term “2017A Bonds” means the Yorba Linda Water District Refunding Revenue Bonds, Series 2017A authorized pursuant to the Indenture. Water Service. The term “Water Service” means the water distribution service made available or provided by the Water System. 13 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. 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; (d) a statement of the assumptions upon which such certificate or opinion is based, and that such assumptions are reasonable; and (e) 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 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. 14 (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 2017A BONDS Section 2.01. Authorization of 2017A Bonds. The District hereby authorizes the issuance hereunder from time to time of the 2017A Bonds, which shall constitute special obligations of the District, for the purpose of refunding the Series 2008 Certificates. The 2017A Bonds are hereby designated the “Yorba Linda Water District Refunding Revenue Bonds, Series 2017A” in the aggregate principal amount of $_________. The Indenture constitutes a continuing agreement with the Owners from time to time of the 2017A Bonds to secure the full payment of the principal of and interest and premium (if any) on all the 2017A Bonds, subject to the covenants, provisions and conditions herein contained. The 2017A Bonds are special, limited obligations of the District payable solely from the sources described herein. Section 2.02. Terms of the 2017A Bonds. The 2017A Bonds shall be issued in fully registered form without coupons in denominations of $5,000 or any integral multiple thereof. The 2017A 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 2017A 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 2017A 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 2017A Bonds shall be payable in lawful money of the United States of America. Each 2017A 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, 2017, 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 2017A Bond, interest thereon is in default, such 2017A 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 2017A Bonds shall be calculated on the basis of a 360 day year composed of twelve 30 day months. Section 2.03. Transfer of 2017A Bonds. Any 2017A 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 2017A 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 2017A Bond during the period in which the Trustee is selecting 2017A Bonds for redemption and any 2017A Bond that has been selected for redemption. Whenever any 2017A Bond or 2017A Bonds shall be surrendered for transfer, the District shall execute and the Trustee shall authenticate and shall deliver a new 2017A Bond or 2017A Bonds of authorized denomination or denominations for a like series and aggregate principal amount of the same maturity. The Trustee shall require the 2017A 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 2017A Bonds, the Trustee will cancel and destroy the 2017A Bonds it has received. Section 2.04. Exchange of 2017A Bonds. 2017A 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 2017A Bond during the period in which the Trustee is selecting 2017A Bonds for redemption or any 2017A Bond that has been selected for redemption. The Trustee shall require the 2017A 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 2017A Bonds, the Trustee will cancel and destroy the 2017A 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 2017A 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 2017A Bonds as hereinbefore provided. The person in whose name any 2017A 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 2017A 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 2017A Bond to the extent of the sum or sums so paid. Section 2.06. Form and Execution of 2017A Bonds. The 2017A Bonds shall be in substantially the form set forth in Exhibit A hereto. The 2017A Bonds shall be executed in the name and on behalf of the District with the manual or facsimile signature of its President. The 2017A 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 2017A Bonds. The 2017A 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 2017A Bonds shall cease to be such officer or officers of the District before the 2017A Bonds so signed or attested shall have been authenticated or delivered by the Trustee, or issued by the District, such 2017A 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 2017A Bonds may be signed and attested on behalf of the District by such persons as at the actual date of execution of such 2017A Bonds shall be the proper officers of the District although at the nominal date of such 2017A Bonds any such person shall not have been such officer of the District. 17 Only those 2017A 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 2017A Bonds so authenticated have been duly executed, authenticated and delivered hereunder and are entitled to the benefits of the Indenture. Section 2.07. 2017A Bonds Mutilated, Lost, Destroyed or Stolen. If any 2017A Bond shall become mutilated, the District, at the expense of the Owner of said 2017A Bond, shall execute, and the Trustee shall thereupon authenticate and deliver, a new 2017A Bond of like tenor, series and authorized denomination in exchange and substitution for the 2017A Bonds so mutilated, but only upon surrender to the Trustee of the 2017A Bond so mutilated. Every mutilated 2017A Bond so surrendered to the Trustee shall be canceled by it. If any 2017A 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 2017A Bond of like tenor, series and authorized denomination in lieu of and in substitution for the 2017A Bond so lost, destroyed or stolen (or if any such 2017A Bond shall have matured or shall be about to mature, instead of issuing a substitute 2017A 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 2017A Bond issued under this Section and of the expenses which may be incurred by the District and the Trustee in the premises. Any 2017A Bond issued under the provisions of this Section in lieu of any 2017A 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 2017A 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 2017A Bonds secured by the Indenture. Notwithstanding any other provision of this Section, in lieu of delivering a new 2017A Bond for a 2017A 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 2017A 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 2017A Bonds, the District may provide that such 2017A Bonds shall be initially issued as book entry bonds. If the District shall elect to deliver any 2017A 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 2017A Bonds in an authorized denomination corresponding to that total principal amount of the 2017A Bonds designated to mature on such date. Upon initial issuance, the ownership of each such 2017A Bond shall be registered in the 2017A Bond Registration Books in the name of the Nominee, as nominee of the Depository, and ownership of the 2017A Bonds, or any portion thereof may not thereafter be transferred except as provided in Section 2.08(e). With respect to book entry 2017A 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 2017A 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 2017A Bonds; (ii) the delivery to any Participant or any other person, other than an Owner as shown in the 2017A Bond Registration Books, of any notice with 18 respect to book entry 2017A Bonds, including any notice of redemption; (iii) the selection by the Depository and its Participants of the beneficial interests in book entry 2017A Bonds to be redeemed in the event that the District redeems the 2017A 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 2017A Bonds. The District and the Trustee may treat and consider the person in whose name each book entry 2017A Bond is registered in the 2017A Bond Registration Books as the absolute Owner of such book entry 2017A Bond for the purpose of payment of principal of, premium and interest on such 2017A Bond, for the purpose of giving notices of redemption and other matters with respect to such 2017A Bond, for the purpose of registering transfers with respect to such 2017A Bond, and for all other purposes whatsoever. The Trustee shall pay all principal of, premium, if any, and interest on the 2017A Bonds only to or upon the order of the respective Owner, as shown in the 2017A 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 2017A Bonds to the extent of the sum or sums so paid. No person other than an Owner, as shown in the 2017A Bond Registration Books, shall receive a 2017A Bond evidencing the obligation to make payments of principal of, premium, if any, and interest on the 2017A 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 2017A 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 2017A Bonds other than the Owners, as shown on the 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bond for each of the maturity dates of such book entry 2017A 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 2017A Bonds shall no longer be restricted to being registered in such 2017A Bond Registration Books in the name of the Nominee, but shall be registered in whatever name or names the Owners transferring or exchanging such 2017A 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 2017A 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 2017A Bond and all notices with respect to such 2017A 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 2017A Bonds to Substitute Depository. (i) The 2017A Bonds shall be initially issued as provided in Section 2.01 hereof. Registered ownership of such 2017A 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 2017A Bonds by the Trustee, together with a Written Request of the District to the Trustee designating the Substitute Depository, a single new 2017A Bond, which the District shall prepare or cause to be prepared, shall be issued for each maturity of 2017A 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 2017A Bonds by the Trustee, together with a Written Request of the District to the Trustee, new 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bonds shall be controlling. 20 (iv) The District and the Trustee shall be entitled to treat the person in whose name any 2017A 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 2017A 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 2017A Bonds, and the Trustee may rely conclusively on its records as to the identity of the Owners of the 2017A Bonds. ARTICLE III ISSUANCE OF 2017A BONDS; APPLICATION OF PROCEEDS Section 3.01. Issuance of the 2017A 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 2017A Bonds in the aggregate principal amount of $_________. Section 3.02. Application of Proceeds of the 2017A Bonds and Certain Other Moneys. The proceeds received from the sale of the 2017A 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); and (ii) 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 2017A 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 2017A Bonds. The validity of the authorization and issuance of the 2017A 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 2017A 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 2017A BONDS Section 4.01. Terms of Redemption. (a) The 2017A 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 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 2017A Bonds maturing on or after October 1, 20__ shall be subject to redemption prior to their respective stated maturities or mandatory sinking fund payment dates, 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 or mandatory sinking fund payment date 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 2017A 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 2017A Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of less than all of the 2017A Bonds, the Trustee shall select the 2017A Bonds for redemption as a whole or in part on any date as directed by the District 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 2017A 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 2017A 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 2017A Bonds of any such maturity are to be redeemed, the serial numbers of the 2017A Bonds of such maturity to be redeemed by giving the individual number of each 2017A Bond or by stating that all 2017A Bonds between two stated numbers, both inclusive, have been called for redemption and, in the case of 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bond. Notice of redemption of 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bonds. Upon surrender of any 2017A 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 2017A Bond or 2017A Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the 2017A 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 2017A Bonds (or portions thereof) so called for redemption being held by the Trustee, on the Redemption Date designated in such notice, the 2017A Bonds (or portions thereof) so called for redemption shall become due and payable, interest on the 2017A Bonds so called for redemption shall cease to accrue, said 2017A Bonds (or portions thereof) shall cease to be entitled to any benefit or security under the Indenture, and the Owners of said 2017A 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 2017A Bonds to be redeemed on their Redemption Dates, pay such 2017A Bonds at the Redemption Price. All 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bonds and the 2012A Bonds. The Ad Valorem Tax Revenues shall not be used for any other purposes while any of the 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bonds remain unpaid. Except as directed herein, all payments of interest and principal on the 2017A 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 2017A 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 2017A 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 2017A Bonds then Outstanding. (b) Not later than the Business Day preceding each date on which the principal of the 2017A 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 2017A 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 2017A 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 2017A Bonds as it shall become due and payable (including accrued interest on any 2017A 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 2017A Bonds at maturity, mandatory sinking fund redemption, purchase or acceleration; provided, however, that at any time prior to selection for redemption of any such 2017A Bonds, upon written direction of the District, the Trustee shall apply such amounts to the purchase of 2017A 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 2017A 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 2017A 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 2017A Bonds, upon written direction of the District, the Trustee shall apply such amounts to the purchase of 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bonds. 28 Section 5.08. Application of Funds and Accounts When No 2017A Bonds are Outstanding. On the date on which all 2017A 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 2017A Bonds, in strict conformity with the terms of the 2017A 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 2017A Bonds. The District shall not directly or indirectly extend or assent to the extension of the maturity of any of the 2017A Bonds or the time of payment of any claims for interest by the purchase of such 2017A Bonds or by any other arrangement, and in case the maturity of any of the 2017A Bonds or the time of payment of any such claims for interest shall be extended, such 2017A 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 2017A 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 2017A Bonds, and such issuance shall not be deemed to constitute an extension of maturity of 2017A 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 2017A Bonds and Make Pledge and Assignment. The District is duly authorized pursuant to law to issue the 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bonds or of any other moneys or property which would cause the 2017A 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 2017A 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 2017A 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 2017A Bonds or take or omit to take any action that would cause the 2017A 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 2017A Bonds pursuant to Section 103(a) of the Code; (e) Hedge Bonds. The District will make no use of the proceeds of the 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bonds or involving the rights of the Trustee or any 2017A Bond Owner under the Indenture; provided that the Trustee or any 2017A 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 2017A 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 2017A 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 2017A Bonds. The District shall promptly reimburse the Trustee and any 2017A 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 2017A 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 2017A 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 2017A Bonds (including persons holding 2017A 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 have produced 32 a sum equal to at least one hundred twenty-five percent (125%) 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 twenty-five percent (125%) 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 twenty-five percent (125%) 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 2017A 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 2017A Bonds and if the proceeds of such sale are deposited in the Revenue Fund. 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 33 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 2017A 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 2017A 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 2017A 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 2017A Bonds as well as the entire obligations evidenced by Bonds and Contracts then remaining unpaid prior to 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, 34 betterments, extensions or improvements to the Water System; and thereupon such Net Proceeds shall be applied to the redemption of 2017A 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 2017A 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 twenty-five percent (125%) 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 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 35 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 2017A 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 2017A 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 2017A 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 2017A Bonds. ARTICLE VII EVENTS OF DEFAULT AND REMEDIES OF 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bonds Outstanding, a majority in principal amount of such Bond outstanding, or a majority in principal amount outstanding with 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 36 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 2017A Bonds at the time Outstanding, shall, in each case, upon notice in writing to the District, declare the principal of all of the 2017A 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 2017A 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 2017A Bonds payment of which is overdue, with interest on such overdue principal at the rate borne by the respective 2017A 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 2017A 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, then, and in every such case the Trustee shall on behalf of the Owners of all of the 2017A Bonds, rescind and annul such declaration and its consequences and waive such Event of Default; but no 37 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: (a) To the payment of any expenses necessary in the opinion of the Trustee to protect the interests of the Owners of the 2017A 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; (b) To the payment of Operating and Maintenance Costs and Non-Operating and Maintenance Costs; (c) To the payment of the principal of and interest then due on the 2017A Bonds (upon presentation of the 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bond Owners. The Trustee is hereby irrevocably appointed (and the successive respective Owners of the 2017A 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 2017A Bonds for the purpose of exercising and prosecuting on their behalf such rights and remedies as may be available to such Owners under the provisions of the 2017A Bonds or the Indenture and applicable provisions of law. Upon the occurrence and 38 continuance of an Event of Default or other occasion giving rise to a right in the Trustee to represent the 2017A 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 2017A 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 2017A 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 2017A Bonds or otherwise may be prosecuted and enforced by the Trustee without the possession of any of the 2017A 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 2017A Bonds, subject to the provisions of the Indenture. Section 7.05. 2017A Bond Owners’ Direction of Proceedings. Anything in the Indenture to the contrary notwithstanding, the Owners of a majority in aggregate principal amount of the 2017A 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 2017A Bond Owners not parties to such direction. Section 7.06. Suit by Owners. No Owner of any 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bonds of any remedy hereunder or under law; it being understood and intended that no one or more Owners of 2017A 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 2017A Bonds, or to enforce any right under the 2017A Bonds, the Indenture, or applicable law with respect to the 2017A 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 39 benefit and protection of all Owners of the Outstanding 2017A 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 2017A Bonds shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the principal of and interest on the 2017A Bonds to the respective Owners of the 2017A 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 2017A Bonds. Section 7.08. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee or to the Owners of the 2017A 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 2017A 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 2017A 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. (c) The Trustee may at any time resign by giving written notice of such resignation to the District and by giving the 2017A Bond Owners notice of such resignation by mail 40 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 2017A Bond Owner (on behalf of himself and all other 2017A 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 2017A Bonds and to the 2017A 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 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 41 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 2017A 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 2017A 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 2017A Bonds assigned to or imposed upon it. The Trustee shall, however, be responsible for its representations contained in its certificate of authentication on the 2017A 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 2017A 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 2017A Bond Owners, whether or not such committee shall represent the Owners of a majority in principal amount of the 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bonds appearing in the Trustee’s Registration Books as the absolute owners of the 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bonds then Outstanding, exclusive of 2017A 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 2017A 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 2017A Bond so affected; or (2) reduce the aforesaid percentage of 2017A 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 2017A 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 2017A Bonds then Outstanding. It shall not be necessary for the consent of the 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bonds; Preparation of New 2017A Bonds. 2017A 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 2017A Bonds Outstanding at the time of such execution and presentation of his or her 2017A 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 2017A Bonds. If the Supplemental Indenture shall so provide, new 2017A 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 2017A Bonds then Outstanding shall be exchanged at the Office of the Trustee, without cost to any 2017A Bond Owner, for 2017A Bonds then Outstanding, upon surrender for cancellation of such 2017A Bonds, in equal aggregate principal amount of the same maturity. Section 9.04. Amendment of Particular 2017A Bonds. The provisions of this Article shall not prevent any 2017A Bond Owner from accepting any amendment as to the particular 2017A Bonds held by him. 46 ARTICLE X DEFEASANCE Section 10.01. Discharge of Indenture. The 2017A 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 2017A 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 2017A Bonds then Outstanding; or (c) by delivering to the Trustee, for cancellation by it, all of the 2017A 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 2017A 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 2017A Bonds not theretofore surrendered for such payment or redemption to the District. Section 10.02. Discharge of Liability on 2017A 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 2017A Bonds (whether upon or prior to the maturity or the Redemption Date of such 2017A Bonds), provided that, if such Outstanding 2017A 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 2017A 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 2017A Bonds previously issued and delivered, which the District may have acquired in any manner whatsoever, and such 2017A 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 2017A 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 2017A Bonds and all unpaid interest thereon to maturity, except that, in the case of 2017A 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 2017A 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 2017A Bonds to be paid or redeemed, as such principal, interest and premium, if any, become due, provided that in the case of 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bonds and remaining unclaimed for two (2) years after the principal of all of the 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bond Owners. Nothing in the Indenture or in the 2017A 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 2017A 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 2017A 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 2017A Bonds. Whenever in the Indenture provision is made for the cancellation by the Trustee and the delivery to the District of any 2017A Bonds, the Trustee shall destroy such 2017A 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 2017A 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 2017A 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 2017A. 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 2017A Bond Owners. Any request, consent or other instrument required or permitted by the Indenture to be signed and executed by 2017A Bond Owners may be in any number of concurrent instruments of substantially similar tenor and shall be signed or executed by such 2017A 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 2017A 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 2017A Bonds shall be proved by the Registration Books. Any request, consent, or other instrument or writing of the Owner of any 2017A Bond shall bind every future Owner of the same 2017A Bond and the Owner of every 2017A 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 2017A Bonds. In determining whether the Owners of the requisite aggregate principal amount of 2017A Bonds have concurred in any demand, request, direction, consent or waiver under the Indenture, 2017A 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 2017A 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 2017A Bonds, shall be disregarded and deemed not to be Outstanding for the purpose of any such determination. 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bonds. The money held by the Trustee for the payment of the interest, principal or premium due on any date with respect to particular 2017A Bonds (or portions of 2017A Bonds in the case of registered 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bonds have been assigned by an independent service and are included in such notice solely for the convenience of the 2017A 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: J. Wayne Miller, President ATTEST: Marc Marcantonio, Board Secretary U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Authorized Officer A-1 EXHIBIT A FORM OF 2017A 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 2017A INTEREST RATE MATURITY DATE ORIGINAL ISSUE DATE CUSIP ____% October 1, 20__ March __, 2017 _____ ___ 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 March 15, 2017, 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 April 1 and October 1 of each year, commencing October 1, 2017, 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 ($1,000,000) or more in principal amount, such payment may, at such Registered Owner’s option, be made by wire transfer of immediately available funds to an account in the United States in accordance with written instructions provided to the Trustee by such Registered Owner prior to the fifteenth (15th) day of the month preceding such interest payment date). This Bond is not a debt of the State of California, or any of its political subdivisions (other than the District), and neither the State, nor any of its political subdivisions (other than the District), is liable hereon, nor in any event shall this Bond be payable out of any funds or properties of the District other than the Net Revenues (as such term is defined in the Indenture of Trust, dated as of March 1, 2017 (the “Indenture”), by and between the District and the Trustee) and other moneys pledged therefor under the Indenture. The obligation of the District to make payments in accordance with the Indenture is a limited obligation of the District as set forth in the Indenture and the District shall have no liability or obligation in connection herewith except with respect to such payments to be made pursuant to the Indenture. This Bond does not constitute an indebtedness of the District in contravention of any constitutional or statutory debt limitation or restriction. This Bond is one of a duly authorized issue of bonds of the District designated as the “Yorba Linda Water District Refunding Revenue Bonds, Series 2017A” (the “2017A Bonds”), of an aggregate principal amount of _____ Million _____ Hundred _____ Thousand Dollars ($_________), 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 2017A 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 2017A 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 2017A 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 2017A Bonds have been issued in fully registered form without coupons in denominations of $5,000 or any integral multiple thereof. The 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bond so affected; or (ii) reduce the aforesaid percentage of 2017A 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 2017A 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 2017A Bonds then Outstanding. The Indenture and the rights and obligations of the District, of the Trustee and the Owners of the 2017A 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 2017A 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 2017A Bonds. The 2017A 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 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 2017A Bonds maturing on or after October 1, 20__ are subject to redemption prior to their respective stated maturities or mandatory sinking fund payment dates, 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 or mandatory sinking fund payment date 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 2017A 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 Redemption 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 2017A 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 2017A 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 2017A Bond or 2017A 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 2017A 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 2017A 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: J. Wayne Miller, President ATTEST: Marc Marc Antonio, Board Secretary [FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION TO APPEAR ON BONDS] This is one of the Bonds described in the within-mentioned Indenture. Dated: March __, 2017 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 1/17/17 ESCROW AGREEMENT (2008 CERTIFICATES) THIS ESCROW AGREEMENT (2008 CERTIFICATES), dated as of March 1, 2017 (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. 17-__ of the District adopted on February 14, 2017 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 $29,070,000 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 2017A (the “Bonds”) issued pursuant to an Indenture of Trust, dated as of March 1, 2017, 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 April 1, 2017 and 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 Trustee under the 2008 Trust Agreement are also incorporated in this Agreement as if set forth in full 4 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 such counsel shall have full and complete authorization and protection in respect of any action taken, 5 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: J. Wayne Miller, President ATTEST: Marc Marcantonio, Board Secretary U.S. BANK NATIONAL ASSOCIATION, as Escrow Agent 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. To receive payment on the Prepayment Date, owners of the Certificates should present and surrender said Certificates on the Prepayment Date at the address of the 2008 Trustee set forth below: Delivery Instructions Exhibit A-2 U.S. Bank Global Corporate Trust Services 111 Fillmore Avenue E St. Paul, Minnesota 55107 REQUIREMENT INFORMATION For a list of redemption requirements please visit our website at www.usbank.com/corporatetrust and click on the “Bondholder Information” link for Redemption instructions. You may also contact our Bondholder Communications team at 1-800-934-6802 Monday through Friday from 8 AM to 6 PM CST. IMPORTANT NOTICE Federal law requires the 2008 Trustee to withhold taxes at the applicable rate from the payment if an IRS Form W-9 or applicable IRS Form W-8 is not provided. Please visit www.irs.gov for additional information on the tax forms and instructions. 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. Note: The District and the 2008 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 2008 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 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 and between the District and the Corporation, have ceased, terminated, become void and been Exhibit B-2 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 2008 Trustee DATED this ___th day of March, 2017. Gilmore & Bell DRAFT 02/10/2017 v4 PURCHASE CONTRACT YORBA LINDA WATER DISTRICT $____________ Refunding Revenue Bonds, Series 2017A __________, 2017 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 2017A (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 __________ 1, 2017 (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 __________, 2017 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”) and (ii) to pay costs of issuance of the Bonds. DRAFT 02-10-2017 2 In order to effect the refunding of the Refunded Certificates, the District will enter into the Escrow Agreement (2008 Certificates), dated as of __________ 1, 2017 (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 _________, 2017, 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 __________, 2017 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”), Newport Beach, 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.” DRAFT 02-10-2017 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, and assuming due authorization and execution by the other parties thereto, as applicable, 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 DRAFT 02-10-2017 4 of the Underwriter, which consent will not be unreasonably 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, 2016. (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 DRAFT 02-10-2017 5 adversely affect the transactions 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. (x) Further Cooperation: Blue Sky. The District will furnish such information, execute such instruments and take such other action in DRAFT 02-10-2017 6 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. (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 DRAFT 02-10-2017 7 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, for the last five years it has been 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 and 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 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 DRAFT 02-10-2017 8 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 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 DRAFT 02-10-2017 9 (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 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 DRAFT 02-10-2017 10 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: (A) The Purchase Contract has been duly authorized, executed and delivered by the District and, assuming due authorization and execution by the Underwriter, 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 DRAFT 02-10-2017 11 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 2017A BONDS,” “SECURITY FOR THE 2017A 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 assuming due authorization and execution by the other parties thereto, as applicable, 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; (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 DRAFT 02-10-2017 12 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; (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, DRAFT 02-10-2017 13 however, any opinion as to compliance with any applicable federal or state securities laws); (I) Except as described in the Official Statement, 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: (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, DRAFT 02-10-2017 14 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, 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 DRAFT 02-10-2017 15 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 (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; DRAFT 02-10-2017 16 (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. (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 DRAFT 02-10-2017 17 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) Parity Debt Certificate. A copy of the parity debt certificate prepared in accordance with the Indenture. (xxii) 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. 8. Expenses. (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 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 DRAFT 02-10-2017 18 specifically enumerated in paragraph (b) of this section incurred in connection with the execution of the Bonds. (b) 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. (c) 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. 9. 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. 10. 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 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. 11. 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. 12. 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. DRAFT 02-10-2017 19 13. STATE LAW GOVERNS. THE VALIDITY, INTERPRETATION AND PERFORMANCE OF THIS PURCHASE CONTRACT SHALL BE GOVERNED BY THE LAWS OF THE STATE. 14. 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. 15. 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 PURCHASE CONTRACT CITIGROUP GLOBAL MARKETS INC. By: Managing Director Accepted as of the date first stated above: YORBA LINDA WATER DISTRICT By: General Manager APPENDIX A APPENDIX A $____________ Yorba Linda Water District Refunding Revenue Bonds, Series 2017A Maturity (October 1) Principal Amount Interest Rate $ % Stradling Yocca Carlson & Rauth Draft of 1/17/17 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 2017A (the “Bonds”). The Bonds are being issued pursuant to an Indenture of Trust, dated as of March 1, 2017 (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 February __, 2017 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. 2 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) an Annual Report relating to the immediately preceding Fiscal Year which is consistent with the requirements of Section 4 of this Disclosure Certificate (provided that the first Annual Report may consist solely of this Official Statement), 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 substantially the form set forth 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 3 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; 4. substitution of credit or liquidity providers, or their failure to perform; 5. adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determination of taxability or Notices 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 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 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 5 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: March __, 2017 YORBA LINDA WATER DISTRICT By: J. Wayne Miller, President Stradling Yocca Carlson & Rauth Draft of 2/9/17 This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold, nor may offers to buy them be accepted, prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. PRELIMINARY OFFICIAL STATEMENT DATED FEBRUARY __, 2017 NEW ISSUE – BOOK-ENTRY ONLY RATINGS: See the caption “RATINGS” $___________* YORBA LINDA WATER DISTRICT REFUNDING REVENUE BONDS, SERIES 2017A Dated: Date of Issuance Due: October 1, as set forth on the inside cover The 2017A 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 2017A Bonds will not receive securities representing their beneficial ownership in the 2017A Bonds purchased. Interest on the 2017A Bonds is payable on October 1, 2017 and each April 1 and October 1 thereafter until the maturity thereof. The principal of and interest on the 2017A 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 2017A Bonds through their nominees. The 2017A Bonds are subject to optional, mandatory sinking fund and extraordinary redemption as more fully described herein. The 2017A 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; and (ii) to pay costs of issuance of the 2017A Bonds, all as more fully described herein. The 2017A Bonds are being issued pursuant to the Indenture of Trust, dated as of March 1, 2017, by and between the Yorba Linda Water District and U.S. Bank National Association, as trustee. The 2017A 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 2017A Bonds is payable on a parity with approximately $7,230,000 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bonds is exempt from State of California personal income tax. See the caption “TAX MATTERS.” ____________________________________ MATURITY SCHEDULE – See Inside Cover Page ____________________________________ The 2017A 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 2017A 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, for the Underwriter by its counsel, Gilmore & Bell, P.C., and for the Trustee by its counsel. It is anticipated that the 2017A Bonds will be available for delivery through the facilities of The Depository Trust Company on or about March __, 2017. CITIGROUP Dated: February __, 2017 * Preliminary; subject to change. $___________* YORBA LINDA WATER DISTRICT REFUNDING REVENUE BONDS, SERIES 2017A MATURITY SCHEDULE BASE CUSIP®† _____ Maturity Date (October 1) Principal Amount Interest Rate Yield Price CUSIP®† Suffix $ % % $_____ ___% Term 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE 2017A 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 2017A Bonds. YORBA LINDA WATER DISTRICT BOARD OF DIRECTORS J. Wayne Miller, Ph.D President Al Nederhood, Vice President Phil Hawkins, Director Andrew J. Hall, Director Brooke Jones, 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 Series 2008 Certificates ................................................................................................................................. 2 Verification .................................................................................................................................................... 2 THE 2017A BONDS ............................................................................................................................................ 2 General Provisions ......................................................................................................................................... 2 Transfers and Exchanges Upon Termination of Book-Entry Only System ................................................... 3 Redemption of the 2017A Bonds ................................................................................................................... 4 Notice of Redemption .................................................................................................................................... 4 Book-Entry Only System ............................................................................................................................... 5 DEBT SERVICE PAYMENT SCHEDULE ........................................................................................................ 6 SECURITY FOR THE 2017A 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 ............................................................................................................................................. 17 District Insurance ......................................................................................................................................... 18 Outstanding Obligations .............................................................................................................................. 18 Ad Valorem Tax Revenues .......................................................................................................................... 19 WATER SUPPLY .............................................................................................................................................. 21 General ......................................................................................................................................................... 21 Historic and Projected Water Supply ........................................................................................................... 24 THE WATER SYSTEM ..................................................................................................................................... 28 General ......................................................................................................................................................... 28 Historic Water Connections ......................................................................................................................... 29 Historic Water Deliveries ............................................................................................................................. 30 Historic Water Sales Revenues .................................................................................................................... 30 Largest Customers ....................................................................................................................................... 31 Water System Rates and Charges ................................................................................................................ 31 Collection Procedures .................................................................................................................................. 33 Projected Water Connections ....................................................................................................................... 33 Projected Water Deliveries .......................................................................................................................... 34 Projected Water Sales Revenues .................................................................................................................. 34 Future Water System Improvements ............................................................................................................ 35 TABLE OF CONTENTS (continued) Page ii WATER SYSTEM FINANCIAL INFORMATION .......................................................................................... 35 Financial Statements .................................................................................................................................... 35 Recovery of Wildfire Settlement Payment................................................................................................... 35 Investment of District Funds ........................................................................................................................ 36 Historic Operating Results and Debt Service Coverage .............................................................................. 37 Projected Operating Results and Debt Service Coverage ............................................................................ 38 CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES ......................................... 39 Article XIIIB ................................................................................................................................................ 39 Proposition 218 ............................................................................................................................................ 40 Future Initiatives .......................................................................................................................................... 42 APPROVAL OF LEGAL PROCEEDINGS ....................................................................................................... 42 LITIGATION ..................................................................................................................................................... 42 General ......................................................................................................................................................... 42 TAX MATTERS................................................................................................................................................. 42 FINANCIAL ADVISOR .................................................................................................................................... 44 RATINGS ........................................................................................................................................................... 44 UNDERWRITING ............................................................................................................................................. 44 CONTINUING DISCLOSURE UNDERTAKING ............................................................................................ 45 MISCELLANEOUS ........................................................................................................................................... 46 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 2017A 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 2017A 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; and (ii) to pay costs of issuance of the 2017A Bonds. See the captions “REFUNDING PLAN” and “ESTIMATED SOURCES AND USES OF FUNDS.” Security for the 2017A Bonds. The 2017A 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 2017A 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 2017A Bonds is payable on a parity with payments with respect to approximately $7,230,000 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 2017A Bonds in the future as described herein. The obligation of the District to pay principal of and interest on the 2017A 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 2017A 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 2017A BONDS.” The Refunding Plan. A portion of the proceeds of the 2017A 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 $29,070,000. 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 125% 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. See the caption “SECURITY FOR THE 2017A 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 2017A Bonds, provided ii that certain conditions are satisfied as described herein. See the caption “SECURITY FOR THE 2017A BONDS—Additional Indebtedness.” Redemption. The 2017A 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 2017A BONDS—Redemption of the 2017A 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 22.6 square miles. The District serves a population of approximately 76,000 and currently provides water service to approximately 24,864 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 2017A Bonds. Approximately 84% of the operating revenues of the District for Fiscal Year 2016 were 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 2017A 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 2017A (the “2017A Bonds”). The 2017A Bonds are being issued pursuant to an Indenture of Trust, dated as of March 1, 2017 (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 2017A 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”); and (ii) to pay costs of issuance of the 2017A Bonds. See the captions “REFUNDING PLAN” and “ESTIMATED SOURCES AND USES OF FUNDS.” The 2017A 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 2017A 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 2017A Bonds is payable on a parity with approximately $7,230,000 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 2017A Bonds in the future as described herein. See the caption “SECURITY FOR THE 2017A 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 2017A 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. The District has also undertaken to provide annual reports to the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System (“EMMA”) pursuant to a continuing disclosure certificate. See the caption “CONTINUING DISCLOSURE UNDERTAKING.” * Preliminary; subject to change. 2 REFUNDING PLAN Series 2008 Certificates The District caused the execution and delivery of the Series 2008 Certificates, which are currently outstanding in the aggregate principal amount of $29,070,000, 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 2017A Bonds to effect an advance refunding of the Series 2008 Certificates. Under an Escrow Agreement (2008 Certificates), dated as of March 1, 2017 (the “2008 Escrow Agreement”), by and between the District and the 2008 Trustee, the District will deliver a portion of the proceeds of the 2017A Bonds, together with amounts on deposit for the Series 2008 Certificates, 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 2017A 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 2017A Bonds. Verification Upon issuance of the 2017A 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 and principal 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 2017A Bonds and the Federal Securities which support Bond Counsel’s opinion that the interest on the 2017A Bonds is excluded from gross income for federal income tax purposes. THE 2017A BONDS General Provisions The 2017A Bonds will be issued in the aggregate principal amount of $___________.* The 2017A Bonds will be dated as of the date of initial issuance thereof (the “Issuance Date”), will bear interest from such * Preliminary; subject to change. 3 date at the rates per annum set forth on the inside cover page hereof, payable on October 1, 2017 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 2017A Bonds will be computed on the basis of a 360-day year of twelve thirty-day months. The 2017A 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 2017A Bonds. Ownership interests in the 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bonds will be payable in lawful money of the United States of America. Interest on any 2017A 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, 2017, 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 2017A Bonds will be printed and delivered as provided in the Indenture. Thereafter, any 2017A 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 2017A 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 2017A Bond during the period in which the Trustee is selecting 2017A Bonds for redemption and any 2017A Bond that has been selected for redemption. Whenever any 2017A Bond or 2017A Bonds is surrendered for transfer, the District will execute and the Trustee will authenticate and deliver a new 2017A Bond or 2017A Bonds of authorized denomination or denominations for a like series and aggregate principal amount of the same maturity. The Trustee will require the 2017A 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 2017A Bonds, the Trustee will cancel and destroy the 2017A Bonds it has received. 2017A 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 2017A Bond during the period in which the Trustee is selecting 2017A Bonds for redemption or any 2017A Bond that has been selected for redemption. The Trustee will require the 2017A Bond Owner requesting such exchange to pay any tax or other governmental charge required to be paid with respect to such exchange. 4 Following any exchange of 2017A Bonds, the Trustee will cancel and destroy the 2017A Bonds that it has received. Redemption of the 2017A Bonds Optional Redemption. The 2017A Bonds maturing on or after October 1, 20__ are subject to redemption prior to their respective stated maturities or mandatory sinking fund payment dates, 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 or mandatory sinking fund payment date 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 2017A 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 2017A 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 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 2017A 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 2017A 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 2017A 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 or places of redemption and the Redemption Price, will designate the maturities, CUSIP numbers, if any, and, if less than all 2017A Bonds of any such maturity are to be redeemed, the serial numbers of the 2017A Bonds of such maturity to be redeemed by giving the individual number of each 2017A Bond or by stating that all 2017A Bonds between two stated numbers, both inclusive, have been called for redemption and, in the case of 2017A 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 2017A Bonds or parts thereof designated for redemption the Redemption Price thereof or of said 5 specified portion of the principal thereof in the case of a 2017A 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 2017A 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 2017A Bond. Notice of redemption of 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bond of each maturity will be issued in the principal amount of the 2017A Bonds of such maturity. Such 2017A 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 2017A 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 2017A 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 2017A Bonds and the 2012A Bonds for the period ending June 30 in each of the years indicated: 2017A Bonds Period Ending June 30 2017A Bonds Principal 2017A Bonds Interest 2017A Bonds Total 2012A Bonds(1) Total 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 $10,543,693.75 (1) Includes principal of and interest on the 2012A Bonds. See the caption “YORBA LINDA WATER DISTRICT— Outstanding Obligations.” Source: Fieldman, Rolapp & Associates. SECURITY FOR THE 2017A BONDS Limited Obligations Payable From Net Revenues The District is obligated to make payments of principal of and interest on the 2017A 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 2017A 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 2017A 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 $7,230,000. 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 2017A 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 2017A 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 125% 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 2017A 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 125% 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 125% 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 125% 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 2017A 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 2017A Bonds. ESTIMATED SOURCES AND USES OF FUNDS The following table sets forth the estimated sources and uses of funds for the 2017A 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 22.6 square miles. The District serves a population of approximately 76,000 and currently provides water service to approximately 24,864 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 2017A Bonds. Approximately 84% of the operating revenues of the District for Fiscal Year 2016 were 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 after 2018. Currently, there are two limiting factors that prevent the District from achieving the basin production percentage set by OCWD (as described under the caption “WATER SUPPLY—General— Groundwater”): (i) the annexation agreement between OCWD and the District, which limits the District’s BPP to a maximum of 70%; and (ii) the limitations of existing water distribution infrastructure. 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 two years that will make it possible for the District to access its full allotment of groundwater. In addition, the District has entered into a Conjunctive Use Program Agreement (the “CUP”) with MWD, 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. Under the CUP, MWD may only call upon such water if it has sufficient storage in the Orange County Groundwater Basin. The maximum amount that the District is obligated to produce under the CUP is approximately 2,000 acre feet in any 12 month period. 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 In the November 2016 Board election, two members of the previous Board were recalled and two other members of the previous Board were not reelected. The sponsors of the recall effort included the named plaintiffs in the now-concluded legal action related to the District’s rate structure that is described under the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES—Proposition 218.” Board of Directors Member Expiration of Term Occupation J. Wayne Miller, Ph.D, President November 2020 Corporate Executive Al Nederhood, Vice President November 2018 Retired College President Phil Hawkins, Director November 2018 Real Estate Broker Andrew J. Hall, Director November 2020 Sanitation Engineer Brooke Jones, Director November 2018 Engineer 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, 2016, the District had 77 full-time equivalent employees, including 6 employees in the Administration Department, 10 employees in the Engineering Department, 12 employees in the Finance Department, 6 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 89% 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. 11 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. 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 who are enrolled in this plan are responsible for the full amount of the annual required contributions (7% of their annual covered salary) themselves. District employees who were hired on or after December 22, 2011 and prior to January 1, 2013, and employees who are defined as “Classic” members of CalPERS, participate in the 2.0% at 60 Risk Pool Retirement Plan at a contribution rate of 7% of their annual covered salary. Employees who are enrolled in this plan are responsible for the full amount of the annual required contributions (7% of their annual covered salary) themselves. District employees who were hired on and after January 1, 2013, and who are defined as “New” members of CalPERS, 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 in this plan are required to pay at least 50% of the total normal cost rate, which is set annually by CalPERS. AB 340 also caps pensionable income for 2016 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 liability 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 total minimum required employer contribution is the sum of each plan’s Employer Contribution Rate (express as a percentage of payroll) plus the Employer Unfunded Accrued Liability (“UAL”) Contribution Amount (in dollars). Beginning in Fiscal Year 2016, contributions to each employer’s plan for the UAL portion will be paid either over a 12 month period or as a prepaid lump sum. Employers that opt to prepay each plan’s UAL portion will experience annual cash flow savings. The District’s required Employer Contribution Rates for Fiscal Year 2016 (expressed as a percentage of payroll) were 8.512% for the 2.0% at 55 plan, 7.163% for the 2.0% at 60 plan and 6.237% for the 2.0% at 62 plan. The District opted to prepay in a lump sum the UAL portion of its required Employer Contribution Amounts of $206,605 for the 2.0% at 55 plan, $14 for the 2.0% at 60 plan and $0 for the 2.0 at 62 plan, which resulted in annual cash flow savings to the District of $7,607. 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 2016, 2015, 2014 and 2013, the District’s combined annual 12 employer’s contributions for all of its CalPERS plans were $674,827, $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 2016 was determined as part of the June 30, 2013, actuarial valuation of the District’s CalPERS plans using the Entry Age Normal Actuarial Cost Method. The actuarial assumptions for the June 30, 2013 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 2017, the District’s CalPERS annual employer contribution is expected to be $800,098, assuming budgeted salaries. The District’s required Employer Contribution Rates for Fiscal Year 2017, expressed as a percentage of payroll, are 8.880%, 7.612% and 6.555% of annual covered payroll for the 2.0% at 55 plan, 2.0% at 60 plan and 2.0% at 62 plan, respectively; and the required UAL portion of the Employer Contribution Prepayment Amounts is $251,346, $104 and $498 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 $5,926,324 for its CalPERS plan as of June 30, 2015, based on a market value of assets of $26,135,966, 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 August 2016 covered the District’s Fiscal Year ended June 30, 2015). 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, 2014 which was delivered in November 2015, affects the District’s Fiscal Year 2017 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 13 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 December 21, 2016, the CalPERS Board voted to lower its discount rate from the current rate of 7.50% to 7.00% over the next three years according to the following schedule. Fiscal Year Discount Rate 2017-18 7.375% 2018-19 7.250 2019-20 7.000 For public agencies such as the District, the new discount rate will take effect July 1, 2018. Lowering the discount rate means that employers that contract with CalPERS to administer their pension plans will see increases in their normal costs and unfunded actuarial liabilities. Active members hired after January 1, 2013 will also see their contribution rates rise under AB 340. The three-year reduction of the discount rate will result in average employer rate increases of approximately 1% to 3% of normal cost as a percentage of payroll for most miscellaneous retirement plans such as those of the District. Additionally, many employers will see a 30% to 40% increase in their current unfunded accrued liability payments. These payments are made to amortize unfunded liabilities over 20 years to bring pension funds to a fully funded status over the long-term. 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 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: 14 • 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 the District’s Proportionate Share of Net Pension Liability for GASB 68 reporting. The total changes in the net pension liability for the District’s CalPERS plan were as follows: YORBA LINDA WATER DISTRICT CHANGES IN NET PENSION LIABILITY / (ASSET) Increase / (Decrease) Total Pension Liability Plan Fiduciary Net Position Net Pension Liability / (Asset) Balance at June 30, 2015 $30,007,370 $24,914,744 $5,092,626 Balance at June 30, 2016 $31,776,496 $26,487,174 $5,289,322 Net Changes during Fiscal Year 2015-16 $ 1,769,126 $ 1,572,430 $ 196,696 Source: District. The following table presents the net pension liability of the District’s CalPERS plan, calculated using the discount rate of 7.65%, as well as what the net pension liability would be if it were calculated using a 15 discount rate that is 1 percentage point lower (6.65%) or 1 percentage point higher (8.65%) than the current rate. YORBA LINDA WATER DISTRICT SENSITIVITY OF THE NET PENSION LIABILITY TO CHANGES IN THE DISCOUNT RATE Discount Rate – 1% (6.65%) Current Discount Rate (7.65%) Discount Rate + 1% (8.65%) Plan’s Net Pension Liability/(Asset) $9,616,857 $5,289,322 $1,716,439 Source: District. The following table summarizes the District’s annual required contributions for its CalPERS plan for Fiscal Years 2012 through 2016: Fiscal Year Employer Contribution District-Funded Employee Contribution Employee Contribution Annual Pension Cost Percentage of Annual Pension Cost Contributed 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 2016 674,827 0 401,822 1,076,649 100 Source: CalPERS Contribution Summary Report. The following table summarizes the schedule of funding for all District plans as of June 30, 2015. The District’s required Employer Contribution Rates for Fiscal Year 2017, expressed as a percentage of payroll, are 8.880%, 7.612% and 6.555% of annual covered payroll for the 2.0% at 55 plan, 2.0% at 60 plan and 2.0% at 62 plan, respectively; and the required UAL portion of the Employer Contribution Prepayment Amounts is $251,346, $104 and $498 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 2015 32,062,290 26,135,966 5,926,324 81.6 5,532,136 Source: CalPERS Actuarial Valuation Report Dated June 30, 2015. For additional information relating to the District’s CalPERS plan, see Note 7 to the District’s audited financial statements for Fiscal Year 2016 attached hereto as Appendix A. CalPERS earnings reports for Fiscal Years 2010 through 2015 report an investment gain in excess of 13.0%, 21.7%, 1%, 12.5%, 18.4% and 2.4%, respectively, with a preliminary return of 0.61% reported for Fiscal Year 2016. Future earnings performance may increase or decrease future contribution rates for plan participants, including the District. 16 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, have a minimum of 5 years of service with the District and were employed by the District prior to December 8, 2011. 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 established a trust fund to fund future OPEB obligations. In Fiscal Years 2016, 2015 and 2014, the District made contributions of $211,867, $192,919 and $187,756 to the OPEB trust fund. The District has budgeted $217,693 to contribute to the OPEB trust fund in Fiscal Year 2017. 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 2016, the amount actually contributed to the plan, and changes in the District’s net OPEB obligation: OPEB ARC $ 211,867 Interest on Net OPEB Obligation (9,989) Adjustment to OPEB ARC 11,500 Annual OPEB Cost (Expense) 213,378 OPEB Contribution (211,867) Actual Contributions Made (135,100) Increase in Net OPEB Obligation 133,589 Net OPEB Asset – Beginning of Year (142,700) Net OPEB Asset – End of Year (276,289) 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: 17 Fiscal Year Ended June 30 Annual OPEB Costs Percentage of Annual OPEB Costs Contributed Net OPEB Obligation (Asset) 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) 2016 213,378 162.61 (276,289) 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. 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 2017A 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 21, 2016, the Board approved the budget for Fiscal Year 2017. 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. 18 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, 2016, 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- 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 2017A 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 On September 19, 2012, the District issued 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 $7,230,000. The 2012A Bonds are payable from Net Revenues and secured by 19 a lien on and pledge of Revenues on a parity with the payments of principal of and interest on the 2017A Bonds. 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 2016, the District received $1,615,454 in 1% ad valorem property tax revenues from the County. Such revenues constitute Ad Valorem Tax Revenues pledged, to the extent remaining after 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 2017A 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 20 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 2017A 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 2017A 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. 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 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 2016 21,302,966,019 286,272,664 21,589,238,683 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. 21 The table below sets forth property tax levies and delinquencies in the District as of June 30 for the last five 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 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 2016 1,533,676 35,420 2.28 (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 2016, Ad Valorem Tax Revenues constituted approximately 4.53% 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 Facility. 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 70% of annual customer demand within the District. Total average production from the District’s wells for calendar years 2011 through 2015 was approximately 17.90 million gallons per day (“mgd”), and total maximum daily production from the District’s wells is approximately 19.66 mgd. 22 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, and per statute, OCWD sets a basin production percentage (the “BPP”) for water to be extracted from the Orange County Groundwater Basin. The BPP represents the percentage of each groundwater producer’s (including the District’s) water supply that comes from groundwater pumped from the Orange County Groundwater Basin. It is set both annually and uniformly for all producers. Multiplying the BPP against a producer’s total water demand yields a groundwater production limit (the “BPP formula”), and OCWD imposes an additional assessment on the producer for all groundwater pumped in excess of that limit. 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 is comparable to 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 2012, 2013, 2014, 2015 and 2016, the BPP was 65%, 68%, 70%, 72% and 75%, respectively; however the annexation agreement between the District and OCWD (as discussed under the caption “YORBA LINDA WATER DISTRICT—General”) restricts the District’s BPP to 70% until 2019. Based on estimated water demands, the District projects that it will pump up to 65% of its water demand from the Orange County Groundwater Basin in Fiscal Year 2017, which equals approximately 11,502 acre feet. The District currently pays OCWD a replenishment assessment of $402 per acre foot for all groundwater pumped and a BEA equal to an additional $571 per acre foot for groundwater pumped in excess of the BPP formula, if any. The replenishment assessment for Fiscal Year 2017 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. Beginning in Fiscal Year 2016, the District will also pay OCWD an Annual Annexation Charge (as such term is defined in the annexation agreement between the District and OCWD that is discussed under the caption “YORBA LINDA WATER DISTRICT—General”). The Annual Annexation Charge replaces property tax revenues that would otherwise be received by OCWD had the annexation of the land that is the subject of the agreement not taken place. Annual Annexation Charge payments to OCWD are projected to be approximately $350,000. 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 EMMA, maintained on the Internet at http://emma.msrb.org. The OCWD Information is not incorporated 23 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 2017A BONDS TO PROVIDE OCWD INFORMATION TO THE DISTRICT OR THE OWNERS OF THE 2017A 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, 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 2017A BONDS UNDER RULE 15c2-12. Complaint against OCWD. As discussed under the caption “—Groundwater,” OCWD annually establishes the BPP, which is the amount of groundwater, as a percentage of total water demands, that groundwater producers can pump from the Orange County groundwater basin without incurring additional assessments. Currently, OCWD calculates total water demands without considering recycled water sales. Because OCWD does not consider recycled water sales in calculating a water service provider’s total water demands, OCWD considers the total water demands of a water service provider that sells recycled water to be lower than they would be if recycled water sales were counted. As a result, the amount of groundwater that such water service providers can pump from the Orange County groundwater basin without incurring additional assessments is lower than it would be if recycled water sales were considered. In June 2016, Irvine Ranch Water District (“IRWD”), a water service provider within OCWD boundaries that sells recycled water to its customers, filed a complaint (the “Complaint”) against OCWD in the Superior Court for the State of California, County of Orange, seeking an order determining that OCWD’s BPP calculation methodology is unlawful. In August 2016, OCWD filed an answer to the Complaint denying all substantive allegations. The District, the City of Anaheim, two other local water agencies and one private water company, which all produce groundwater from the Orange County groundwater basin, filed answers in order to join the litigation as interested parties. In September 2016, the parties entered into a stipulation under which: (i) the District amended the Complaint (the “Amended Complaint”) to clarify certain allegations; and (ii) venue was moved from Orange County to Los Angeles County. In addition to the aforementioned interested parties, the cities of Seal Beach and Buena Park answered IRWD’s Amended Complaint in order to join the litigation as interested parties. All seven interested parties, except the City of Seal Beach, as well as OCWD, filed cross-complaints against IRWD, each of which seek relief in opposition to the relief that IRWD seeks in its Amended Complaint. If IRWD’s Amended Complaint is successful and the cross-complaints are unsuccessful, IRWD would be able to pump additional amounts of groundwater, and such additional amounts of groundwater would not be subject to the BEA. Such an outcome could reduce the BPP for all other groundwater pumpers, including the District, and compel the District either to pay a BEA or to purchase more expensive imported water in order to make up the difference of groundwater that would otherwise be included within the District’s BPP. The projected water production expenses that are set forth under the caption “WATER SYSTEM FINANCIAL INFORMATION—Projected Operating Results and Debt Service Coverage” do not assume any reduction in the BPP as a result of IRWD’s Amended Complaint. 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 both the Colorado River via the Colorado River Aqueduct and 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 such as MWDOC. 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. District pipelines used 24 to deliver imported water have a combined capacity of approximately 26 mgd. The District currently has adequate capacity from MWDOC to meet its average daily demands from its customers. 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 approximately $261,000 per year; (c) a readiness-to-serve charge in the current amount of approximately $552,000 per year; and (d) an annual retail connection charge in the current amount of $10.95 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 2017A BONDS TO PROVIDE MWD INFORMATION TO THE DISTRICT OR THE OWNERS OF THE 2017A 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 2017A 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 decreases in water supply in Fiscal Years 2015 and 2016 reflect 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. TABLE 3 YORBA LINDA WATER DISTRICT HISTORIC WATER SUPPLY IN ACRE FEET PER YEAR Fiscal Year Groundwater Imported Water Total Increase/(Decrease) 2012 10,020 10,812 20,832 N/A% 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) 2016(1) 12,368 3,375 15,743 (20.43) (1) Decreases in Fiscal Year 2015 and 2016 reflect 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. 25 TABLE 4 YORBA LINDA WATER DISTRICT PROJECTED WATER SUPPLY IN ACRE FEET PER YEAR Fiscal Year Groundwater Imported Water Total Increase/(Decrease) 2017(1) 11,502 6,194 17,696 12.40%(3) 2018(1) 11,811 6,360 18,171 2.68 2019(2) 12,997 5,570 18,567 2.18 2020(2) 13,272 5,688 18,960 2.12 2021(2) 13,272 5,688 18,960 0.00 (1) Reflects satisfaction of 65% of total water demands by pumping from the Orange County Groundwater Basin. See the caption “—General—Groundwater.” (2) Reflects satisfaction of 70% of total water demands by pumping from the Orange County Groundwater Basin. See the caption “—General—Groundwater.” (3) Increase in Fiscal Year 2017 reflects elimination of 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. The District undertook efforts to comply with the regulations through its conservation ordinances, as discussed under the caption “—District Response to Drought.” MWD also invoked its Water Supply Allocation Plan (the “WSAP”). 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. As a result of improved hydrologic conditions, primarily in northern California, on May 10, 2016, MWD rescinded the WSAP, declared a Level 2 Water Supply Alert and decided not to implement the WSAP for Fiscal Year 2017. 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 26 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 required 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. After precipitation improved in California through the winter, on May 9, 2016 the California Governor issued Executive Order B-37-16, which required the SWRCB to adjust its emergency regulations through the end of January 2017 to account for differing water supply conditions across California. It also directed the SWRCB and DWR to develop a long-term framework and requirements for increasing water efficiency, eliminating water waste, and strengthening local resilience. On May 18, 2016 the SWRCB adopted a revised regulation giving water agencies the ability to establish their own conservation standards based on a “stress test” of supply reliability. By June 22, 2016, water agencies were required to submit self-certifications to the SWRCB demonstrating that they have sufficient supplies to withstand three additional years of severe drought. Any identified percentage gap between supplies and demands would become the water agency’s updated mandatory conservation target. As a result of significant investments in water supply reliability as described herein, the District demonstrated that it has more than sufficient supplies to meet its projected demands, even if California endures three more years of drought. Consequently, the District’s mandatory conservation target was eliminated, retroactive to June 1, 2016. Notwithstanding the elimination of mandatory State-imposed conservation orders, the District continues to implement Stage 1 of its Drought Ordinance as described under the caption “— District Response to Drought” and is asking its customers for a voluntary 10% water use reduction relative to use in 2013. In July 2016, the District’s customers collectively achieved a 36% reduction relative to 2013 potable water use. District Response to Drought. Under District Ordinance Nos. 09-01, 15-01 and 16-01 (collectively, the “Drought Ordinance”), the District may take the following actions in response to the mandatory conservation measures imposed by the State. Various stages of the Drought Ordinance were implemented in Fiscal Year 2016. However, currently, the District is only implementing Stage 1: First, the District may implement an allocation-based administrative penalty structure under which potable water customers are subject to the below penalties (per billing cycle) for water use that exceeds the following allocations: 27 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 Nos. 15-01 and 16-01. Second, the District may: (1) engage in public outreach and education efforts; (2) offer rebates for turf removal, the installation of rain barrels and smart irrigation meters and high efficiency appliances; (3) and impose the below-described mandatory restrictions on water use (beginning with irrigation and other outdoor uses) and enforcement actions. Third, the District may implement 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 administrative penalties and/or 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. 28 With the implementation of the Drought Ordinance, the District was able to achieve a 36% cumulative reduction in water usage compared to 2013, which reflected full compliance with 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.” The District believes that implementation of the Drought Ordinance was successful in achieving the mandated conservation requirements in Fiscal Year 2016; however, it also resulted in lower water sales revenues for such Fiscal Year. For Fiscal Year 2017, the District believes that water usage and the corresponding water sales revenue will increase from the prior Fiscal Year. The District has eased many of the requirements associated with the Drought Ordinance in response to the lifting of the mandated conservation by the SWRCB. Customers who heavily conserved water in response to the State mandates and the District rate increases discussed under the caption “THE WATER SYSTEM—Water System Rates and Charges” are anticipated to use additional water in future years, increasing their usage from the “Drought Year” (Fiscal Year 2015) beginning with an initial 12% rebound in Year 1 (Fiscal Year 2017) to a “new normal” in Year 5 (Fiscal Year 2021) of a 20% increase from the “Drought Year.” 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 projected operating results set forth under the caption “WATER AND SEWER SYSTEM FINANCIAL INFORMATION—Projected Operating Results” reflect the assumption of increased water sales via the anticipated 12% rebound in water use through Fiscal Year 2018. The District does not believe that the continued implementation of Stage 1 of the Drought Ordinance will have a material adverse effect on its ability to make payments of principal of and interest on the 2017A 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.” While under the restrictions of mandated conservation, the District was able to achieve its conservation goal, the level of restrictions may not be sustainable over the long term. 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 22.6 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 19.66 mgd. Additionally, the Water System contains three pipeline connections for potable imported water with a combined capacity of 26 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 29 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. 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 22,914 individually metered residential connections, 160 master-metered multifamily residential units, 903 commercial and industrial connections and 887 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, 2016. 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 22,914 92.16% 71% Master-Metered Multifamily 160 0.64 2 Commercial and Industrial 903 3.63 8 Irrigation 887 3.57 19 Total 24,864 100.00% 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) 2012 23,979 N/A% 2013 24,479 2.09 2014 24,584 0.43 2015 24,653 0.28 2016 24,864 0.86 (1) Excludes private fire connections. Source: District. 30 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. TABLE 7 YORBA LINDA WATER DISTRICT HISTORIC WATER DELIVERIES IN ACRE FEET PER YEAR Fiscal Year Water Deliveries(1) Increase/(Decrease) 2012 20,656 N/A% 2013 20,642 0.07 2014 21,085 2.15 2015(2) 17,849 (15.35) 2016(2) 14,354 (19.58) (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) Decreases in Fiscal Years 2015 and 2016 reflect 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) 2012 $24,998,673 N/A% 2013 26,369,940 5.49 2014 28,372,296 7.59 2015(1) 26,446,618 (6.79) 2016(2) 27,820,638 5.20 (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.” (2) Increase in Fiscal Year 2016 reflects rate restructuring, including increase in base fixed service charge, effective October 1, 2015. See the caption “—Water System Rates and Charges.” Source: District. 31 Largest Customers The following table sets forth the ten largest customers of the Water System as of June 30, 2016, 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 $1,903,365 5.76% Placentia-Yorba Linda USD Government 259,641 0.79 The Hills at Yorba Linda Homeowners Association 143,875 0.44 RRE Yorba Linda Holdings Manufacturer 126,312 0.38 Yorba Linda Villages Homeowners Association 109,975 0.33 Aspetic Tech Manufacturer 108,087 0.33 Fairmont Hill Community Association Homeowners Association 85,110 0.26 Lake Park Mobile Home Community Homeowners Association 74,207 0.23 Cartel Electronics Manufacturer 64,384 0.19 Cal Water Manufacturer 60,935 0.18 TOTAL $2,935,891 8.89% Source: District. These ten largest customers accounted for approximately 8.89% of total Water System Revenues of $33,042,847 for Fiscal Year 2016. 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 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 2017A Bonds. The District has adopted a policy whereby the Board, at its option and determination, may pass through increased 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 Orange County Water District and the Metropolitan Water District of Southern California via the Municipal Water District of Orange County 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 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. The monthly base service charge (as described below) was reduced in Fiscal Year 2017 as a result of the elimination of the mandatory State conservation orders relating to the drought. See the caption “WATER SUPPLY—Drought Proclamation.” 32 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 12% per annum in accordance with the recommendations that were set forth in a financial plan update that was 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. 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 can be imposed on customers for water use in excess of certain tier levels in light of the Statewide drought. In addition to consumption charges, 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) $ 19.45 1”(1) 32.49 1½” 64.78 2” 103.69 3” 227.04 4” 408.55 6” 907.95 (1) Approximately 92% of District connections, representing approximately 72% of Water System Revenues in Fiscal Year 2016, were to residential customers with 5/8”, 3/4” or 1” meters. Source: District. 33 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 July 1, 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 $111.94 East Orange County Water District 102.31 Serrano Water District 99.71 Mesa Water District 90.93 Yorba Linda Water District 81.09(1) City of Brea 77.74 (1) The water service charge for a single family residential user consuming 18 units per month is approximately $81.09 ($2.70 per unit multiplied by 18 units ($48.60) plus a $32.49 capacity charge for a 1” meter). 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, 2016, 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) 2017 24,950 0.35% 2018 25,100 0.60 2019 25,250 0.60 2020 25,400 0.59 2021 25,550 0.59 Source: District. 34 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) 2017 16,103 12.18% 2018 16,534 2.68 2019 16,896 2.19 2020 17,253 2.11 2021 17,253 0.00 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) 2017(1) $28,817,924 3.58% 2018 30,496,319 5.82 2019 32,382,327 6.18 2020 34,385,150 6.18 2021 36,512,035 6.19 (1) Increase reflects District projections of increased water use, 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 rate restructuring 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 Year 2017 and projected rate increases of approximately 12% 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. 35 Future Water System Improvements The District projects total capital improvements to the Water System of approximately $19,435,000 over the current and next four Fiscal Years, including the construction of new wells and pipelines and an upgrade to the Fairmont Booster Pump Station and Pressure Reducing Station, among others. The District expects that the projected capital improvements will be funded by grants and Revenues remaining after payment of Debt Service. 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 September 30, 2016 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 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 36 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. 16-18 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 16-06” adopted on October 13, 2016 (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. As of June 30, 2016 (excluding reserves for the Series 2008 Certificates and for conservation), the District had funds invested in the amount of $37,531,735 in authorized investments under the District Investment Policy, summarized as follows: money market securities ($552,474), government securities of the Federal Home Loan Bank ($2,002,580), certificates of deposit ($5,285,663), investment trusts in CalTrust 37 Short Term ($4,642) and CalTrust Medium Term ($19,831,487) and the State of California Local Agency Investment Fund ($9,854,889). As of June 30, 2016 (excluding reserves for the Series 2008 Certificates and for conservation), approximately 81% of the $33,995,384 in District reserves was attributable to the Water System, including an operating reserve ($4,132,257), an emergency reserve ($1,042,888), a capital project reserve ($25,524,730), a debt service reserve ($2,723,509), an employee liability reserve ($372,000) and a maintenance reserve ($200,000). 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) 2012 2013 2014 2015(4) 2016(5) Revenues Water Sales $ 24,998,673 $ 26,369,940 $ 28,372,296 $ 26,446,618 $ 27,820,638 Ad Valorem Tax Revenues 1,273,855 1,340,916 1,394,722 1,496,489 1,615,454 Interest Income 253,478 121,210 131,833 168,872 265,006 Other(1) 1,292,298 1,259,340 2,192,153 2,027,257 3,341,749 Total Revenues $ 27,818,304 $ 29,091,406 $ 32,091,004 $ 30,139,236 $ 33,042,847 Operating and Maintenance Costs Variable Water Costs $ 12,275,853 $ 13,509,336 $ 14,673,144 $ 12,733,762 $ 10,470,181 Personnel Services 6,125,692 6,390,207 6,728,455 6,885,991 7,244,718 Supplies & Services 3,461,250 3,890,552 3,451,602 3,482,354 3,895,962 Total Operating and Maintenance Costs $ 21,862,795 $ 23,790,095 $ 24,853,201 $ 23,102,107 $ 21,610,861 Net Operating Revenues $ 5,955,509 $ 5,301,311 $ 7,237,803 $ 7,037,129 $ 11,431,986 Non-Operating and Maintenance Costs $ 90,485 $ 35,954 $ 47,948 $ 116,528 $ 7,273 Net Revenues $ 5,865,024 $ 5,265,357 $ 7,189,855 $ 6,920,601 $ 11,424,713 Debt Service Series 2003 Installment Payments(2) $ 672,383 $ 461,488 $ - $ - $ - Series 2008 Installment Payments(3) 2,132,796 2,131,096 2,128,396 2,129,596 2,129,596 2012A Bonds 174,327 584,263 593,913 591,963 Total Debt Service $ 2,805,179 $ 2,766,911 $ 2,712,659 $ 2,723,509 $ 2,721,559 Remaining Revenues $ 3,059,845 $ 2,498,446 $ 4,477,196 $ 4,197,092 $ 8,703,154 Debt Service Coverage 2.09 1.90 2.65 2.54 4.20 (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 2017A Bonds. See the caption “REFUNDING PLAN.” (4) 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.” (5) Increase in Fiscal Year 2016 reflects rate restructuring, including increase in base fixed service charge, effective October 1, 2015. See the caption “—Water System Rates and Charges.” Source: District. 38 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 and the assumed continuation of the current conservation efforts under the Drought Ordinance described under the caption “WATER SUPPLY—Drought Proclamation” through Fiscal Year 2017, 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) 2017(1) 2018 2019 2020 2021 Revenues Water Sales(2) $ 28,817,924 $ 30,496,319 $ 32,382,327 $ 34,385,150 $ 36,512,035 Ad Valorem Tax Revenues(3) 1,450,000 1,479,000 1,493,790 1,508,728 1,523,815 Interest Income(4) 100,000 90,000 90,125 90,560 93,277 Other(5) 1,222,254 1,263,257 1,352,057 1,441,886 1,546,629 Total Revenues $ 31,590,178 $ 33,328,576 $ 35,318,299 $ 37,426,323 $ 39,675,756 Operating and Maintenance Costs Variable Water Costs(6) $ 13,179,477 $ 14,154,759 $ 15,428,687 $ 16,817,269 $ 18,330,823 Personnel Services(7) 8,279,036 8,692,988 9,127,637 9,584,019 10,063,220 Supplies & Services(8) 4,344,985 4,407,854 4,580,150 4,643,043 4,780,980 Total Operating and Maintenance Costs $ 25,803,498 $ 27,255,601 $ 29,136,474 $ 31,044,331 $ 33,175,023 Net Operating Revenues $ 5,786,680 $ 6,072,975 $ 6,181,825 $ 6,381,993 $ 6,500,733 Non-Operating and Maintenance Costs(9) $ 23,000 $ 23,000 $ 23,000 $ 23,000 $ 23,000 Net Revenues $ 5,763,680 $ 6,049,975 $ 6,158,825 $ 6,358,993 $ 6,477,733 Debt Service Series 2008 Installment Payments(10) $ 2,128,396 $ - $ - $ - $ - 2012A Bonds(11) 588,488 588,313 591,213 583,713 590,713 2017A Bonds* - 1,828,250 1,839,100 1,836,625 1,834,000 Total Debt Service* $ 2,716,884 $ 2,416,563 $ 2,430,313 $ 2,420,338 $ 2,424,713 Remaining Revenues* $ 3,046,796 $ 3,633,413 $ 3,728,513 $ 3,938,656 $ 4,053,021 Debt Service Coverage* 2.12 2.50 2.53 2.63 2.67 (1) Reflects Fiscal Year 2017 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 rates for Fiscal Year 2017 and projected rate increases of approximately 12% 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. 39 (3) Decrease from Fiscal Year 2016 amount in Fiscal Year 2017 reflects conservative budgeting. Projected to increase approximately 2% from Fiscal Year 2017 budgeted amount in Fiscal Year 2018 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. (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 7.4% from Fiscal Year 2017 budgeted amount in Fiscal Year 2018 and approximately 9% per annum thereafter. (7) Projected to increase approximately 5% per annum from Fiscal Year 2017 budgeted amount. (8) Based on District projections. (9) Projected to remain at Fiscal Year 2017 budgeted amount. (10) Expected to be refunded from proceeds of the 2017A 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 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 125% of Debt Service on the 2017A Bonds and other Bonds and Contracts for such Fiscal Year. See the caption “SECURITY FOR THE 2017A BONDS—Rate Covenant.” 40 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.” On January 12, 2016, Kent Ebinger, an individual, and the Yorba Linda Taxpayers Association, a nonprofit association (collectively, the “Plaintiffs”), 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 sought to obtain a writ of mandate to compel the District to comply with the terms of a purported referendum petition challenging the water rate restructuring that was adopted on September 17, 2015, as discussed under the caption “THE WATER SYSTEM—Water System Rates and Charges.” The purported referendum petition sought to require the District either to repeal the District’s rate restructuring or to submit the rate restructuring to the voters of the District to accept or repeal. The Petition did not seek court determination of the procedural or substantive validity of the District’s water rate structure, per se, under State law. On August 5, 2016, the Superior Court denied the Petition and entered judgment in favor of the District, holding that the District’s rate restructuring is not subject to a referendum because such a referendum would interfere with the District’s revenue necessary to provide essential government services (i.e. water and sewer service). The deadline for the Plaintiffs to appeal the ruling expired on October 4, 2016 with no appeal being filed. There can be no assurance that other challenges to the District’s rate structure will not be filed in the future. 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 41 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”) 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. 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 it was not addressing 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 (whether by initiative under Article XIIIC or otherwise, or by referendum, which is not authorized under Article XIIIC) to repeal or reduce rates and charges in a manner that would interfere with the contractual obligations of the District or the obligation of the District to maintain and operate the Water System. There can be no assurance of the availability of particular remedies adequate to protect the beneficial owners of the 2017A Bonds. Remedies that are available to beneficial owners of the 2017A 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. 42 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 2017A 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 attached as Appendix C, and such legal opinion will be attached to each 2017A 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, Gilmore & Bell, P.C., 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 2017A 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 2017A 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 2017A 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. 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 2017A 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 2017A Bonds is exempt from State of California personal income tax. Bond Counsel notes that, with respect to corporations, interest on the 2017A 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 2017A 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 2017A Bonds to assure that interest (and original issue discount) on the 2017A 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 2017A Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the 2017A Bonds. The District has covenanted to comply with all such requirements. 43 In the opinion of Bond Counsel, the difference between the issue price of a 2017A Bond (the first price at which a substantial amount of the 2017A Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity of such 2017A 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 2017A Bond. The amount of original issue discount that accrues to the Beneficial Owner of a 2017A 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 2017A Bond Owner’s original basis for determining loss on sale or exchange in the applicable 2017A 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 2017A Bond Owner’s basis in the applicable 2017A Bond (and the amount of tax-exempt interest received with respect to the 2017A 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 2017A Bond Owner realizing a taxable gain when a 2017A Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the 2017A Bond to the Owner. Purchasers of the 2017A 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 2017A Bonds will be selected for audit by the IRS. It is also possible that the market value of the 2017A Bonds might be affected as a result of such an audit of the 2017A 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 2017A Bonds to the extent that it adversely affects the exclusion from gross income of interest (and original issue discount) on the 2017A Bonds or their market value. SUBSEQUENT TO THE ISSUANCE OF THE 2017A 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 2017A BONDS OR THE MARKET VALUE OF THE 2017A 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 2017A BONDS. THE INTRODUCTION OR ENACTMENT OF ANY OF SUCH CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE 2017A BONDS. NO ASSURANCE CAN BE GIVEN THAT, SUBSEQUENT TO THE ISSUANCE OF THE 2017A BONDS, SUCH CHANGES (OR OTHER CHANGES) WILL NOT BE INTRODUCED OR ENACTED OR INTERPRETATIONS WILL NOT OCCUR. BEFORE PURCHASING ANY OF THE 2017A 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 2017A 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 2017A 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 2017A 44 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 2017A 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 2017A Bonds and the accrual or receipt of interest (and original issue discount) on the 2017A 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 2017A Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the 2017A Bonds. Should interest (and original issue discount) on the 2017A Bonds become includable in gross income for federal income tax purposes, the 2017A 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 2017A 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 S&P Global Ratings, a Standard & Poor’s Financial Services LLC business (“S&P”), will assign the 2017A Bonds the rating of “___” and that Fitch Ratings, Inc. (“Fitch”) will assign the 2017A Bonds the rating of “___”. There is no assurance that any credit rating given to the 2017A 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 2017A 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 2017A 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 2017A Bonds for an aggregate purchase price of $_____ (representing the principal amount of the 2017A 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 2017A 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 2017A Bonds to 45 certain dealers (including dealers depositing 2017A 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 2017A Bonds. The Underwriter and its affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities. The Underwriter and its affiliates have, from time to time, performed, and may in the future perform, various investment banking services for the District for which they received or will receive customary fees and expenses. In the ordinary course of their various business activities, the Underwriter and its affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (which may include bank loans and/or credit default swaps) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve securities and instruments of the District. CONTINUING DISCLOSURE UNDERTAKING The District has covenanted in a Continuing Disclosure Certificate for the benefit of the holders and beneficial owners of the 2017A 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 (provided that the first Annual Report will consist solely of this Official Statement), 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 enumerated 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. Although the District has covenanted in the Continuing Disclosure Certificate to provide notice of rating changes with respect to the 2017A Bonds, information relating to rating changes may be publicly available from the rating agencies prior to such information being provided to the District and prior to the date by which the District is obligated to file a notice of rating change. Owners of the 2017A Bonds are directed to the rating agencies and official media outlets for the most current rating information with respect to the 2017A Bonds. [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. 46 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 2017A Bonds. The execution and delivery of this Official Statement have been duly authorized by the District. YORBA LINDA WATER DISTRICT By: President A-1 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 2017A Bonds, Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, proposes to render its final approving opinion in substantially the following form: March __, 2017 Yorba Linda Water District 1717 East Miraloma Avenue Placentia, California 92870 Re: Yorba Linda Water District Refunding Revenue Bonds, Series 2017A 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 2017A, dated the date hereof (the “2017A 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 2017A Bonds and others. We have not undertaken to verify through independent investigation the accuracy of the representations and certifications relied upon by us. The 2017A Bonds are being issued pursuant to an Indenture of Trust, dated as of March 1, 2017 (the “Indenture”), by and between the District and U.S. Bank National Association, as trustee (the “Trustee”). The 2017A Bonds mature on the date and in the amount referenced in the Indenture. The 2017A Bonds are dated their date of delivery and bear interest at the rates per annum referenced in the Indenture. The 2017A 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 2017A 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 2017A 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 2017A 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 2017A 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 2017A Bonds is exempt from State of California personal income tax. C-2 5. The difference between the issue price of a 2017A Bond (the first price at which a substantial amount of the 2017A 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 2017A Bonds constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a 2017A Bond Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by the 2017A Bond Owner will increase the 2017A Bond Owner’s basis in the 2017A Bond. In the opinion of Bond Counsel, the amount of original issue discount that accrues to the owner of the 2017A 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 2017A Bond Owner’s original basis for determining loss on sale or exchange in the applicable 2017A 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 2017A Bond Owner’s basis in the applicable 2017A 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 2017A Bond premium may result in a 2017A Bond Owner realizing a taxable gain when a 2017A Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the 2017A Bond to the Owner. Purchasers of the 2017A 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 2017A 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 2017A Bonds to assure that such interest (and original issue discount) on the 2017A 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 2017A Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the 2017A 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 2017A 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 2017A Bonds for federal income tax purposes with respect to any 2017A 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 2017A 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 2017A 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 2017A Bonds or other offering material relating to the 2017A Bonds and expressly disclaim any duty to advise the owners of the 2017A 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 2017A Bonds, payment of principal, premium, if any, accreted value, if any, and interest on the 2017A Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the 2017A 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 2017A Bonds. The 2017A 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 2017A Bond will be issued for each annual maturity of the 2017A 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 2017A Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2017A Bonds on DTC’s records. The ownership interest of each actual purchaser of each 2017A 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 2017A 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 2017A Bonds, except in the event that use of the book-entry system for the 2017A Bonds is discontinued. To facilitate subsequent transfers, all 2017A 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 2017A 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 2017A Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such 2017A 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 2017A Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the 2017A Bonds, such as redemptions, tenders, defaults, and proposed amendments to the 2017A Bonds documents. For example, Beneficial Owners of 2017A Bonds may wish to ascertain that the nominee holding the 2017A 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 2017A 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 2017A 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 2017A Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the 2017A 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 2017A Bond Owner shall give notice to elect to have its 2017A Bonds purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such 2017A Bond by causing the Direct Participant to transfer the Participant’s interest in the 2017A Bonds, on DTC’s records, to the Trustee. The requirement for physical delivery of 2017A Bond in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the 2017A Bond are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered 2017A Bond to the Trustee’s DTC account. DTC may discontinue providing its services as depository with respect to the 2017A 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, 2017A Bonds will be printed and delivered to DTC. THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE 2017A 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 2017A 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 2017A 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 2017A (the “Bonds”). The Bonds are being issued pursuant to an Indenture of Trust, dated as of March 1, 2017 (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 February __, 2017 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 (provided that the first Annual Report may consist solely of this Official Statement), 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 substantially the form set forth 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; E-3 3. unscheduled draws on credit enhancements reflecting financial difficulties; 4. substitution of credit or liquidity providers, or their failure to perform; 5. adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determination of taxability or Notices 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. E-4 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. 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: March __, 2017 YORBA LINDA WATER DISTRICT By: Its: President Update on 2008 COP Refunding Structuring Options & Credit Rating Process Monday, February 13, 2017 Backup Material Distributed Less Than 72 Hours Prior to the Meeting MARKET UPDATES As of February 8, 2017 1 Backup Material Distributed Less Than 72 Hours Prior to the Meeting Municipal Market Update Tax-Exempt Interest Overview 2 ____________________ Source: Thomson Municipal Market Monitor. Backup Material Distributed Less Than 72 Hours Prior to the Meeting Municipal Market UpdateMarket Movements 3 ____________________ Source: Thomson Municipal Market Monitor. Backup Material Distributed Less Than 72 Hours Prior to the Meeting REFUNDING STRUCTURE OVERVIEW As of February 6, 2017 4 Backup Material Distributed Less Than 72 Hours Prior to the Meeting 5 Structure: Revenue Bonds Lease Revenues Bonds widely used borrowing instrument for non-utilities;the security basis is that the issuer will “budget and appropriate”to make annual lease payments on bonds. Lease payments must be based on use of specific real property. Debt service payments are subject to abatement.Budget and appropriate pledge and necessary use of specific real property requirement are less favored security by investors than typical revenue bonds, resulting in higher interest rates/yields. Revenues Bonds are widely used debt vehicle for water agency borrowings;the basis and strength of the credit is primarily the pledge of net operating revenues; issuer pledges to maintain rates and charges to maintain certain debt service coverage levels. Essential utility credits are well-received by investors and pricing is attractive in current market.Security is the pledge and the ability to increase rates and charges to meet financial covenants. Backup Material Distributed Less Than 72 Hours Prior to the Meeting Use of Interim Debt* While short-term interim financing rates are currently low, the concept introduces interest rate risk and uncertainty regarding District’s long-term repayment schedule and ultimate cost “All -in” cost in current market is approximately 1.45% - 1.55% SIFMA = 0.65% / 70% of 1-month Libor (0.54%) Credit Spread = 0.90% Does not including issuance fees, and future costs of periodic actions and potential future fix- out Interim financing typically requires an exit plan; otherwise issuer is indefinitely exposed to the risk that bank will not renew and /or related higher fixed interest rates in the future Does not take advantage of historically low medium-term fixed interest rates Since debt service is not known at time budget is established, District may need to create a cushion to offset potential use in rates to meet rate covenant Effectively a variable-rate form of borrowing; resulting in 75%of outstanding District debt being in variable-rate mode. Likely result in rating agency concerns / possible downgrade of credit rating. 6 *Commercial paper typically requires at least $50 million to be cost effective due to fee structure Backup Material Distributed Less Than 72 Hours Prior to the Meeting Use of VRDOs* VRDOs are long-dated debt that take advantage of short-term interest rates reduces uncertainty regarding District’s long-term repayment schedule and ultimate cost. Interest rates are subject to market dynamics. “All -in” cost in current market of approximately 1.25% SIFMA = 0.65%; Cost of letter of credit = 0.50%; Remarketing agent fees = .10% Does not including issuance fees, and future costs of periodic actions Short term rates subject to market dynamics, including the actions of the Federal Reserve SIFMA averaged 3.06% between January 1990 and December 2008 SIFMA averaged 2.20% between January 1990 and February 2017 All-in cost for longer term perspective of 2.80% - 3.66% Does not take advantage of historically low medium-term fixed interest rates Resulting credit concern of 75% of outstanding District debt being in variable-rate mode. Likely result in rating agency concerns / possible downgrade of credit rating. 7 *Commercial paper typically requires at least $50 million to be cost effective due to fee structure Backup Material Distributed Less Than 72 Hours Prior to the Meeting Use of Variable-Rate Debt 8 0.001.002.003.004.005.006.007.008.009.00% Historical Short Term SIFMA Weekly Index (January 3, 1990 through February 8, 2017) Backup Material Distributed Less Than 72 Hours Prior to the Meeting Use of Cash The use of District reserves to prepay 2008 Bonds requires ~$29.7 million to defease all outstanding bonds; District has ~$27 million in unrestricted water reserves Results in reduction of District’s reserves to levels not financially prudent or inconsistent with District Reserve Policies 9 *Does not include capital expenditures 127 123 250 320 574 -30 20 64 106 143 -$5,000,000 $0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 $40,000,000 -100 0 100 200 300 400 500 600 700 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Unrestricted ReservesDays Cash Fiscal Year Water Fund Reserves* ProjectedHistorical Backup Material Distributed Less Than 72 Hours Prior to the Meeting 2008 COP Overview The 2008 Certificates have interest rates between 4.00% and 5.00% 10 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% Comparison of 2008 Interest Rates and Current MMD Yields Current 2008 Coupons Projected 2017 Yields* *Projected yields are based on market conditions as of February 6, 2017 Backup Material Distributed Less Than 72 Hours Prior to the Meeting REFUNDING ANALYSIS / OPTIMIZATION OPTIONS As of February 6, 2017 11 Backup Material Distributed Less Than 72 Hours Prior to the Meeting Baseline Refunding Structure* Standard, vanilla structured matched maturity refunding Weighted average term of borrowing: 12.6 years Blended borrowing rate: 2.90% (arbitrage yield) Highest annual savings of ~$297,000 per year over near-term of options presented Net Present Value savings ~$3.5 million (12% of refunded amount) 12 *Based on market conditions as of February 6, 2017 (1)Existing Debt Service assumes forgone earnings on prior debt service reserve fund earn at a rate of 2.00%. Period Ending Existing 2008 Bonds Debt Service(1) Refunding Debt Service Annual Savings Present Value Annual Savings 6/30/2018 2,082,964.66 1,798,827.50 284,137.16 281,802.95 6/30/2019 2,084,264.66 1,785,750.00 298,514.66 287,700.24 6/30/2020 2,084,164.66 1,787,875.00 296,289.66 277,457.54 6/30/2021 2,082,664.66 1,788,250.00 294,414.66 267,881.31 6/30/2022 2,084,664.66 1,786,875.00 297,789.66 263,273.77 6/30/2023 2,080,164.66 1,783,750.00 296,414.66 254,622.50 6/30/2024 2,079,164.66 1,783,750.00 295,414.66 246,561.38 6/30/2025 2,080,783.41 1,786,625.00 294,158.41 238,549.91 6/30/2026 2,079,183.41 1,782,375.00 296,808.41 233,884.77 6/30/2027 2,074,694.66 1,776,125.00 298,569.66 228,613.47 6/30/2028 2,072,418.41 1,777,625.00 294,793.41 219,330.25 6/30/2029 2,072,402.78 1,776,625.00 295,777.78 213,835.63 6/30/2030 2,069,143.40 1,773,125.00 296,018.40 207,961.04 6/30/2031 2,067,493.40 1,772,000.00 295,493.40 201,724.21 6/30/2032 2,068,030.90 1,773,000.00 295,030.90 195,715.04 6/30/2033 2,065,643.40 1,771,000.00 294,643.40 189,932.52 6/30/2034 2,061,218.40 1,766,000.00 295,218.40 184,960.41 6/30/2035 2,059,218.40 1,762,875.00 296,343.40 180,455.75 6/30/2036 2,058,093.40 1,761,375.00 296,718.40 175,617.17 6/30/2037 2,057,593.40 1,761,250.00 296,343.40 170,479.77 6/30/2038 2,052,593.40 1,757,375.00 295,218.40 165,076.59 6/30/2039 -82,096.16 2,091,000.00 -2,173,096.16 -1,179,393.28 Total Savings $4,031,015 Net Present Value Savings $3,507,506 Percentage savings of refunded bonds 12.07% Backup Material Distributed Less Than 72 Hours Prior to the Meeting Alternate Savings Structure 1* Previously presented and recommended structure; more efficient in total present value savings Weighted average term of borrowing: 11.8 years Blended borrowing rate: 2.85% (arbitrage yield) Annual savings of ~$244,000 per year Net Present Value savings ~$3.8 million (13.1% of refunded amount) 13 *Based on market conditions as of February 6, 2017 Period Ending Existing 2008 Bonds Debt Service(1) Refunding Debt Service Annual Savings Present Value Annual Savings 6/30/2018 2,082,964.66 1,851,318.33 231,646.33 229,643.66 6/30/2019 2,084,264.66 1,840,250.00 244,014.66 235,174.32 6/30/2020 2,084,164.66 1,839,375.00 244,789.66 229,326.85 6/30/2021 2,082,664.66 1,841,625.00 241,039.66 219,487.82 6/30/2022 2,084,664.66 1,841,875.00 242,789.66 214,897.74 6/30/2023 2,080,164.66 1,835,250.00 244,914.66 210,714.19 6/30/2024 2,079,164.66 1,836,625.00 242,539.66 202,819.52 6/30/2025 2,080,783.41 1,840,625.00 240,158.41 195,200.18 6/30/2026 2,079,183.41 1,837,250.00 241,933.41 191,147.08 6/30/2027 2,074,694.66 1,831,625.00 243,069.66 186,677.51 6/30/2028 2,072,418.41 1,828,625.00 243,793.41 182,002.68 6/30/2029 2,072,402.78 1,828,000.00 244,402.78 177,358.35 6/30/2030 2,069,143.40 1,824,625.00 244,518.40 172,488.81 6/30/2031 2,067,493.40 1,823,375.00 244,118.40 167,396.88 6/30/2032 2,068,030.90 1,824,000.00 244,030.90 162,662.21 6/30/2033 2,065,643.40 1,821,375.00 244,268.40 158,271.13 6/30/2034 2,061,218.40 1,820,375.00 240,843.40 151,719.01 6/30/2035 2,059,218.40 1,815,875.00 243,343.40 149,049.59 6/30/2036 2,058,093.40 1,817,625.00 240,468.40 143,203.86 6/30/2037 2,057,593.40 1,815,375.00 242,218.40 140,253.81 6/30/2038 2,052,593.40 1,809,125.00 243,468.40 137,076.83 6/30/2039 -82,096.16 -82,096.16 -45,007.10 Total Savings $5,010,274 Net Present Value Savings $3,814,207 Percentage savings of refunded bonds 13.12% (1)Existing Debt Service assumes forgone earnings on prior debt service reserve fund earn at a rate of 2.00%. Backup Material Distributed Less Than 72 Hours Prior to the Meeting Alternate Savings Structure 2* Shortens repayment by 3 years, further optimizes present value savings and interest rate; however, reduces near-term annual savings Weighted average term of borrowing: 10.1 years Blended borrowing rate: 2.71% (arbitrage yield) Initial / near term annual savings of ~$100,000 per year Net Present Value savings ~$4.6 million (15.8% of refunded amount) 14 (1)Existing Debt Service assumes forgone earnings on prior debt service reserve fund earn at a rate of 2.00%. Period Ending Existing 2008 Bonds Debt Service(1) Refunding Debt Service Annual Savings Present Value Annual Savings 6/30/2018 2,082,964.66 1,984,703.33 98,261.33 97,061.93 6/30/2019 2,084,264.66 1,985,750.00 98,514.66 94,669.49 6/30/2020 2,084,164.66 1,986,625.00 97,539.66 91,173.22 6/30/2021 2,082,664.66 1,985,250.00 97,414.66 88,570.14 6/30/2022 2,084,664.66 1,986,500.00 98,164.66 86,816.63 6/30/2023 2,080,164.66 1,980,375.00 99,789.66 85,848.99 6/30/2024 2,079,164.66 1,981,750.00 97,414.66 81,482.14 6/30/2025 2,080,783.41 1,980,375.00 100,408.41 81,708.65 6/30/2026 2,079,183.41 1,981,125.00 98,058.41 77,585.01 6/30/2027 2,074,694.66 1,974,000.00 100,694.66 77,510.82 6/30/2028 2,072,418.41 1,973,875.00 98,543.41 73,749.95 6/30/2029 2,072,402.78 1,970,500.00 101,902.78 74,202.69 6/30/2030 2,069,143.40 1,968,750.00 100,393.40 71,079.49 6/30/2031 2,067,493.40 1,968,375.00 99,118.40 68,229.14 6/30/2032 2,068,030.90 1,969,125.00 98,905.90 66,199.45 6/30/2033 2,065,643.40 1,965,875.00 99,768.40 64,937.93 6/30/2034 2,061,218.40 1,963,500.00 97,718.40 61,845.52 6/30/2035 2,059,218.40 1,956,875.00 102,343.40 63,066.92 6/30/2036 2,058,093.40 717,500.00 1,340,593.40 819,335.37 6/30/2037 2,057,593.40 2,057,593.40 1,224,996.65 6/30/2038 2,052,593.40 2,052,593.40 1,189,889.83 6/30/2039 -82,096.16 -82,096.16 -46,334.17 Total Savings $7,153,639 Net Present Value Savings $4,598,325 Percentage savings of refunded bonds 15.82%*Based on market conditions as of February 6, 2017 Backup Material Distributed Less Than 72 Hours Prior to the Meeting RATING AGENCY UPDATE Yorba Linda Water District 15 Backup Material Distributed Less Than 72 Hours Prior to the Meeting Fitch Ratings Fitch expressed a continued concern over the change in District governance Potential strategy to allay their concerns would be for the Board to take an overt act that messages its intent on financial matters. Adopting of the FY2018 budget, following recent financial trends and rate-setting, would be such an overt act. Consequences to not waiting for budget approval would put the District at risk for a potential “negative outlook” Negative outlook estimated to result in higher interest rates Estimated reduction of NPV savings of $292,000 or $13,000 annual savings 16 Backup Material Distributed Less Than 72 Hours Prior to the Meeting Sensitivity Analysis Waiting for official FY 2018 budget approval requires delaying the deal to a June/July pricing and execution date Introduces interest rate risk (2-3 months), but ensures the District does not incur an interest rate penalty for a “negative outlook” Waiting has two other benefits: Executing the refunding within 90 days of the 2008 COP optional call date (October 1, 2017) in July would preserve the District’s “advance refunding” option for the future under IRS rules Allows for a shorter period refunding bond proceeds are held in escrow (refunding execution date to the COP call date) Interest rate sensitivity of waiting until July: District has a cushion of 14 basis points 17 Backup Material Distributed Less Than 72 Hours Prior to the Meeting February 2017 –Board Meeting March 2017 April 2017 May 2017 June2017 July2017 Financing Timing Options 18 February, 2017 Board Decision on Financing Path March, 2017 Receive credit Ratings and Price April, 2017 Close June, 2017 Receive credit Ratings and Price June, 2017 Budget Approval July, 2017 Close Backup Material Distributed Less Than 72 Hours Prior to the Meeting Recommendation Pursue fixed-rate refunding; continue to monitor market and structuring refinements Wait for official FY 2018 budget approval before pursuing credit ratings Delay the deal to June/July pricing and execution date in order to position the District to maintain its existing credit ratings and preserve its advance refunding opportunity for the future 19 Backup Material Distributed Less Than 72 Hours Prior to the Meeting Disclaimer 20 The scenarios are being provided for informational purposes only,and do not reflect any specific recommendation regarding a financial transaction.These materials include an assessment of current market conditions,and include Fieldman,Rolapp &Associates,Inc. assumptions about interest rates,execution costs,and other matters related to municipal securities issuance or municipal financial products.These assumptions may change at any time subsequent to the date these materials were provided.The refinancing and refunding scenarios presented herein are not intended to be inclusive of every feasible or suitable refinancing alternative. Fieldman, Rolapp &Associates,Inc.is an SEC-registered Municipal Advisor,undertaking a fiduciary duty in providing financial advice to public agencies.Compensation contingent on the completion of a financing or project is customary for municipal financial advisors.To the extent that our compensation for a transaction is contingent on successful completion of the transaction,a potential conflict of interest exists as we would have a potential incentive to recommend the completion of a transaction that might not be optimal for the public agency. However, Fieldman,Rolapp &Associates,Inc.undertakes a fiduciary duty in advising public agencies regardless of compensation structure. Backup Material Distributed Less Than 72 Hours Prior to the Meeting ITEM NO. 8.2 AGENDA REPORT Meeting Date: February 13, 2017 To:Board of Directors Funding Source:All Funds From:Marc Marcantonio, General Manager Presented By:Gina Knight, HR/Risk and Safety Manager Dept:Human Resources/Risk Management Prepared By:Gina Knight, HR/Risk and Safety Manager Subject:Revised Budgeted Positions for the Remainder of FY 2016/2017 SUMMARY: In mid-2011, the District's Assistant General Manager position became vacant. The Board of Directors did not authorize the General Manager to fill the vacancy and eventually decided to eliminate the position from the Budgeted List of Positions. The District's Board of Directors approves the funding and titles of proposed positions for a given fiscal year during the budget process. Adding budgeted positions or changing titles require the Board of Directors to approve a revision to the Budgeted Positions for a specific fiscal year. The California Code of Regulations (CCR) 570.5 as contained in the California Public Employees' Retirement Law (PERL), provides the Requirement for a Publicly Available Pay Schedule, (a) For purposes of determining the amount of "compensation earnable" pursuant to GC sections 20630, 20636, and 20631.1, pay rate shall be limited to the amount listed on a pay schedule that meets all of the following requirements: 1. Has been duly approved and adopted by the employer's governing body in accordance with requirements of applicable public meeting laws; 2. Identifies the position title for every employee position; 3. Shows the pay rate for each identified position, which may be stated as a single amount or as multiple amounts within a range; 4. Indicates the time base, including, but not limited to, whether the time base is hourly, daily, bi- weekly, monthly, bi-monthly, or annually; 5. Is posted at the office of the employer or immediately accessible and available for public review from the employer during normal business hours or posted on the employer's internet website; 6. Indicates an effective date and date of any revisions; 7. Is retained by the employer and available for public inspection for not less than five years; and 8. Does not reference another document in lieu of disclosing the pay rate. Whenever an agency does not provide a Publicly Available Pay Schedule as defined in CCR 570.5, CalPERS will determine that the pay amount reported fails to meet the definition of pay rate as provided in GC sections 20636 (b)(1), 20636.1 (b)(1) and 7522.34 (a), and will therefore be excluded when calculating a member's retirement benefit. STAFF RECOMMENDATION: That the Board of Directors adopt Resolution No. 17-03 Revising the Budgeted Positions for the Remainder of Fiscal Year 2016/17 and Rescinding Resolution No. 16-20. DISCUSSION: During an assessment of the District's staffing levels, management evaluated the need for an Assistant General Manager position . In developing a District succession plan, staff has identified key positions that are critical to ensure future continuity and performance. The Assistant General Manager will be mentored and through the guidance of the General Manager develop the leadership skills required for future advancement. Prior to May 2, 2011, the District had an Assistant General Manager position that provided highly responsible and professional assistance in the overall administration of the District. This position would: Direct and participate in the development of short- and long-term goals consistent with the District's strategic plan; Oversee the administration and development of the District's legislative and governmental affairs programs and the community outreach activities; Provide responsible staff assistance to both the General Manager and Board of Directors; Manage and direct a wide variety of functions, programs and staff engaged in governmental relations, public relations, outreach and education; Act as the General Manager in their absence. Staff is recommending that the vacant Communications Manager (Range ME37) position not be filled to help fund the Assistant General Manager position, and add an Assistant General Manager (Range EX40) position to the Budgeted Positions list for the remainder of FY 2016/2017. The proposed position will serve at the will of the General Manager. The Salary range for the proposed Assistant General Manager position will be Range EX40 ($11,918.76 - $15,257.03). The fiscal impact to the District would be an increase to salaries of approximately $1,300 for the remainder of FY 2016/2017 as this position most likely would be filled in early May of 2017. Staff is proposing not to fill the Communications Manager position during FY 2017/2018 and using those funds to finance the Assistant General Manager position. The fiscal impact to the District for FY 2017/2018 would be an increase to salaries only of approximately $10,000. ATTACHMENTS: Name:Description:Type: Resolution_No._17-03.doc Resolution Resolution Resolution_No._17-03_-_Exhibit_A.xlsx Exhibit Exhibit Resolution_No._17-03_-_Exhibit_A_-_Revised.pdf Backup Material Distributed Less Than 72 Hours Prior to the Meeting Backup Material Resolution No. 17-03 Revising Budgeted Positions for Remainder of FY 2016/17 1 RESOLUTION NO. 17-03 RESOLUTION OF THE BOARD OF DIRECTORS OF THE YORBA LINDA WATER DISTRICT REVISING THE BUDGETED POSITIONS FOR THE REMAINDER OF FISCAL YEAR 2016/17 AND RESCINDING RESOLUTION NO. 16-20 WHEREAS, the Board of Directors adopted Resolution No. 13-01 on January 24, 2013, the "Yorba Linda Water District Personnel Rules"; and WHEREAS, the “Personnel Rules” direct that the number of Authorized Positions and Salary Ranges are subject to approval by the Board of Directors; and WHEREAS, the Board of Directors adopted Resolution No. 16-20 on November 21, 2016, approving the budgeted positions for the remainder of Fiscal Year 2016/17; and WHEREAS, it is the desire of the Board of Directors to adopt Budgeted Positions for the remainder of Fiscal Year 2016/17 as set forth in Exhibit “A” attached hereto, and to rescind Resolution No. 16-20. NOW THEREFORE BE IT RESOLVED by the Board of Directors of the Yorba Linda Water District as follows: Section 1. The number of Budgeted Positions as set forth in Exhibit "A" attached hereto is approved and adopted for Fiscal Year 2016/17 effective February 13, 2017. Section 2. The General Manager is hereby authorized to employ up to the number of employees budgeted and funded in each fiscal year without further approval of the Board of Directors. Section 3. The General Manager is hereby authorized while this Resolution is active to fill a budgeted position that is vacated with a new employee at a lower or equal classification. The General Manager is further authorized to fill a budgeted position with a part time employee or contract staff. Section 4. That Resolution No. 16-20 is hereby rescinded effective February 13, 2017. Resolution No. 17-03 Revising Budgeted Positions for Remainder of FY 2016/17 2 PASSED AND ADOPTED this 13th day of February, 2017 by the following called vote: AYES: NOES: ABSENT: ABSTAIN: J. Wayne Miller, Ph.D., President Yorba Linda Water District ATTEST: Marc Marcantonio, Board Secretary Yorba Linda Water District Reviewed as to form by General Counsel: Andrew B. Gagen, Esq. Kidman Law, LLP Exhibit "A" Resolution No. 17-03 Revised Budgeted Positions for Remainder of Fiscal Year 2016-2017 Effective February 13, 2017 Salary Range Position Classification Budgeted as of 11/21/2016 Proposed Change Budgeted as of 2/13/2017 12 Office Clerk 1 1 Customer Service Rep I 0 0 Public Affairs Representative 1 1 16 Meter Reader I 1 1 Accounting Assistant I 1 1 Customer Service Rep II 2 2 Maintenance Worker I 9 9 Mechanic I 0 0 18 Meter Reader II 2 2 Customer Service Rep III 2 2 Operations/Warehouse Assistant 1 1 Records Management Specialist 1 1 Engineering Technician I 0 0 Maintenance Dist. Operator II 7 7 Water Quality Technician I 0 0 Accounting Assistant II 1 1 Facilities Maintenance 1 1 Mechanic II 1 1 Information Systems Tech I 1 1 Water Quality Technician II 1 1 Human Resources Technician 0 0 Maintenance Dist. Operator III 5 5 Mechanic III 1 1 Meter Services Lead 1 1 Plant Operator II 3 3 Construction Inspector 1 1 Engineering Technician II 2 2 Human Resources Analyst 2 2 Instrumentation Technician 1 1 GIS Analyst 1 1 Sr. Construction Inspector 1 1 Sr. Fleet Mechanic 1 1 Sr. Maintenance Dist. Operator 4 4 Sr. Plant Operator 1 1 Associate Engineer 1 1 Customer Service Supervisor 1 1 Safety and Training Analyst 1 1 Construction Project Supervisor 1 1 Management Analyst 1 1 Programmer Analyst 1 1 Chief Water System Operator 1 1 Water Conservation Supervisor 1 1 W 15 17 19 20 22 23 24 25 21 26 27 28 29 Page 1 of 2 Exhibit "A" Resolution No. 17-03 Revised Budgeted Positions for Remainder of Fiscal Year 2016-2017 Effective February 13, 2017 IS Administrator 1 1 Records Management Administrator 1 1 Sr. Accountant 1 1 Water Maint. Superintendent 1 1 Water Production Superintendent 1 1 Water Quality Engineer 1 1 32 Executive Assistant 1 1 34 Sr. Project Manager 1 1 Communications Manager 1 1 Engineering Manager 1 1 Finance Manager 1 1 Human Resources/Risk and Safety Manager 1 1 IT Manager 1 1 Operations Manager 1 1 40 Assistant General Manager 0 1 1 General Manager 1 1 Total 80 1 81 Salary Range Position Classification 10 Water Conservation Representative 0.5 0.5 X Office Clerk 1 1 Y Water Conservation Representative 1 1 Z Total 2.5 0 2.5 W X Y Z Limited-term, Full-time Water Conservation Representative position - Budgeted for the duration of the Governor's Emergency Drought Regulations Declaration. Limited-term, Full-time Office Clerk position - Budgeted for the duration of the Governor's Emergency Drought Regulations Declaration. 30 31 Salary Set by Board Limited-term Water Conservation Supervisor position filled with District employee serving in an acting capacity. Due to acting assignment, position is at a Range 29, at the conclusion of the acting assignment, position will return to Range 28. Position is budgeted for the duration of the Governor's Emergency Drought Regulations Declaration. Temporary, Part-time position. 12 37 Page 2 of 2 Exhibit "A" Resolution No. 17-03 Revised Budgeted Positions for Remainder of Fiscal Year 2016-2017 Effective February 13, 2017 Salary Range Position Classification Budgeted as of 11/21/2016 Proposed Change Budgeted as of 2/13/2017 12 Office Clerk 1 1 Customer Service Rep I 0 0 Public Affairs Representative 1 1 16 Meter Reader I 1 1 Accounting Assistant I 1 1 Customer Service Rep II 2 2 Maintenance Worker I 9 9 Mechanic I 0 0 18 Meter Reader II 2 2 Customer Service Rep III 2 2 Operations/Warehouse Assistant 1 1 Records Management Specialist 1 1 Engineering Technician I 0 0 Maintenance Dist. Operator II 7 7 Water Quality Technician I 0 0 Accounting Assistant II 1 1 Facilities Maintenance 1 1 Mechanic II 1 1 Information Systems Tech I 1 1 Water Quality Technician II 1 1 Human Resources Technician 0 0 Maintenance Dist. Operator III 5 5 Mechanic III 1 1 Meter Services Lead 1 1 Plant Operator II 3 3 Construction Inspector 1 1 Engineering Technician II 2 2 Human Resources Analyst 2 2 Instrumentation Technician 1 1 GIS Analyst 1 1 Sr. Construction Inspector 1 1 Sr. Fleet Mechanic 1 1 Sr. Maintenance Dist. Operator 4 4 Sr. Plant Operator 1 1 Associate Engineer 1 1 Customer Service Supervisor 1 1 Safety and Training Analyst 1 1 Construction Project Supervisor 1 1 Management Analyst 1 1 Programmer Analyst 1 1 Chief Water System Operator 1 1 Water Conservation Supervisor 1 1 W 15 17 19 20 22 23 24 25 21 26 27 28 29 Page 1 of 2 Backup Material Distributed Less Than 72 Hours Prior to the Meeting Revised Exhibit - ITEM NO. 8.2. Exhibit "A" Resolution No. 17-03 Revised Budgeted Positions for Remainder of Fiscal Year 2016-2017 Effective February 13, 2017 IS Administrator 1 1 Records Management Administrator 1 1 Sr. Accountant 1 1 Water Maint. Superintendent 1 1 Water Production Superintendent 1 1 Water Quality Engineer 1 1 32 Executive Assistant 1 1 34 Sr. Project Manager 1 1 Communications Manager 1 -1 0 Engineering Manager 1 1 Finance Manager 1 1 Human Resources/Risk and Safety Manager 1 1 IT Manager 1 1 Operations Manager 1 1 40 Assistant General Manager 0 1 1 General Manager 1 1 Total 80 0 80 Salary Range Position Classification 10 Water Conservation Representative 0.5 0.5 X Office Clerk 1 1 Y Water Conservation Representative 1 1 Z Total 2.5 0 2.5 W X Y Z Limited-term, Full-time Water Conservation Representative position - Budgeted for the duration of the Governor's Emergency Drought Regulations Declaration. Limited-term, Full-time Office Clerk position - Budgeted for the duration of the Governor's Emergency Drought Regulations Declaration. 30 31 Salary Set by Board Limited-term Water Conservation Supervisor position filled with District employee serving in an acting capacity. Due to acting assignment, position is at a Range 29, at the conclusion of the acting assignment, position will return to Range 28. Position is budgeted for the duration of the Governor's Emergency Drought Regulations Declaration. Temporary, Part-time position. 12 37 Page 2 of 2 Backup Material Distributed Less Than 72 Hours Prior to the Meeting Revised Exhibit - ITEM NO. 8.2. ITEM NO. 8.3 AGENDA REPORT Meeting Date: February 13, 2017 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:Cindy Botts, Water Conservation Supervisor Subject:Ballot for Proposed Increased Assessment Affecting District Properties Located in Local Landscaping Zone 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 assessment for the parcel and authorize the General Manager to complete and submit the ballot as required. DISCUSSION: The District recently received a ballot for a proposed increased assessment affecting one parcel owned by YLWD (Hidden Hills BPS) and located in Zone L-2N 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 a mail balloting process for proposed increased assessments before maintenance levels are affected. Each ballot is related to a specific zone's maintenance needs. The District's proposed Balloted Assessment Amount is $235.64 annually. Completed ballots must be received by the YL City Clerk no later than the Public Comment portion of the public hearing scheduled Tuesday, February 21, 2017. ATTACHMENTS: Name:Description:Type: LMAD_Ballot.pdf Backup Material Backup Material OFFICIAL ASSESSMENT BALLOT Local Landscaping Zone L-2N Street Lighting and Landscaping Maintenance District 9 17 YORBA LINDA WATER DISTRICT BY~~~~~~~~- This Ballot is for the property designated as Assessor's Parcel Number: 352-052-10 YORBA LINDA COUNTY WATER DIST PO BOX309 YORBA LINDA, CA 92885-0309 This is your official property owner assessment ballot regarding the proposed increased assessment for properties in Local Landscaping Zone L-2N ("Zone L-2N") of Street Lighting and Landscaping Maintenance District ("District") to fund the ongoing special benefit expenses associated with the maintenance of landscape improvements as outlined in the accompanying Notice and described more fully in the Engineer's Report, which is on file with the City Clerk and on the City's website. To complete your ballot, mark an {X) in the voting square next to the word "YES" or next to the word "NO" below, sign and date the ballot, and return the entire ballot to the City Clerk. If you wrongly mark, tear, or deface this ballot, return it to the City Clerk with a request for a replacement ballot. All ballots must be received by the City Clerk of the City of Yorba Linda no later than the close of testimony at the public hearing scheduled for February 21, 2017. D D Assessor's Parcel Number: 352-052-10 Current Maximum Assessment Rate: Proposed New Maximum Assessment Rate: Your Parcel's Balloted Assessment Amount: $ 334.36 per EBU (Equivalent Benefit Unit) $ 1,007.00 per EBU (Equivalent Benefit Unit) $ 235.64 This is an annual assessment that is collected as part of your County property tax bill. The amount assessed each fiscal year shall be based on the net expenses to be assessed, but the assessments may not exceed the Proposed New Maximum Assessment Rate shown above plus the annual inflation adjustment without the approval of the property owners. YES -IN FAVOR OF THE INCREASED ASSESSMENT proposed for Zone L-2N and the assessment for my property shown above including the annual inflation adjustment applicable to future assessments based on the percentage change in the Consumer Price Index (CPI). NO -OPPOSED TO THE INCREASED ASSESSMENT proposed for Zone L-2N and the assessment for my property shown above including the annual inflation adjustment applicable to future assessments based on the percentage change in the Consumer Price Index (CPI). 111111111111111111111111111111111111111111111111111111111111 111111111111111111111111111111111111111111111111111111111111 I hereby declare, under penalty of perjury, that I am the record owner of the property (Assessor's Parcel Number) identified on this ballot or I am the authorized representative of that record owner. Signed Date _________ _ Please see the back of this sheet for information about your assessment ballot and instructions for completion and delivery of the assessment ballot. INFORMATION ABOUT YOUR ASSESSMENT BALLOT AND INSTRUCTIONS FOR COMPLETION AND DELIVERY OF ASSESSMENT BALLOT Local Landscaping Zone L-2N Street Lighting and Landscaping Maintenance District City of Yorba Linda To Cast Your Ballot: Prior to the public hearing, completed ballots may be personally delivered to the City Clerk located at 4845 Casa Loma Avenue, Yorba Linda, California; or mailed to the City Clerk at the address indicated below. A return envelope has been provided for your convenience that is addressed to the City Clerk. You may also personally present completed ballots to the City Clerk at the public hearing on February 21, 2017. If you return your ballot by mail, please be sure to allow time for mail delivery; the City Clerk must receive all ballots no later than the end of the public testimony portion of the public hearing on February 21, 2017. If you damage or misplace your ballot, a replacement ballot can be obtained by contacting Michael Wolfe, Public Works Director, City of Yorba Linda as indicated on the Notice accompanying this Ballot. All submitted ballots must be clearly marked to indicate either "Yes -In Favor of the increased assessment" or "No -Opposed to the increased assessment" and signed; otherwise the ballot will be rejected and not counted. To ensure the privacy of your ballot prior to the tabulation, please return your ballot in the envelope provided, or in a sealed envelope that indicates that a ballot is enclosed by noting on the front of the envelope "Assessment Ballot, Do Not Open". A ballot previously submitted may be withdrawn at any time prior to the close of the public hearing by request to the City Clerk, by the person{s) that signed the submitted ballot. An assessment ballot may be changed at any time prior to the end of the public hearing by requesting a withdrawal of the previous ballot and requesting a replacement ballot. Only the person(s) signing the ballot may make such a request. The replacement ballot must be received by the City Clerk prior to the deadline set forth herein. If you have questions: Should you have any questions prior to the public hearing, you may call Michael Wolfe, Public Works Director at (714) 961-7100 during regular business hours. Additional information is also available on the City's website. City Clerk P.O. Box 87014 Yorba Linda, CA 92885 How to cast your ballot: 1. 0 Check Yes or No 2. .<r and date it Completed ballots MUST be received by the City Clerk no later than the close of the public testimony portion of the public hearing which is scheduled to begin on Tuesday, February 21, 2017 at 6:30 p.m., in the City Council Chambers at City Hall, located at 4845 Casa Loma Avenue, Yorba Linda, California 3. Return to the Clerk on or before the Public on, 21, 2017 in accordance with the deadlines referenced above NOTICE OF PUBLIC HEARING AND ASSESSMENT BALLOT PROCEDURES * LOCAL LANDSCAPING ZONE L-2N STREET LIGHTING AND LANDSCAPING MAINTENANCE DISTRICT CITY OF YORBA LINDA Purpose of this Notice The purpose of this notice, that includes both this document and the accompanying Assessment Ballot which also includes Instructions for Completion and Delivery of Assessment Ballot, is: • to provide information to the record owners of property within Local Landscaping Zone L-2N ("Zone L-2N") of Street Lighting and Landscaping Maintenance District ("District") of the City of Yorba Linda ("City"), regarding proceedings being undertaken by the City to levy new or increased annual assessments ("increased assessment") on those properties; • to transmit an Assessment Ballot to the owners of property within Zone L-2N, to enable such owner or owners to express support or opposition to the levy of the proposed increased assessment on such property, by completing and returning the Assessment Ballot; and • to identify the time and place of the scheduled public hearing on these matters and to provide instructions to the owner or owners to assist in completing the Assessment Ballot and returning it to the City. Reason for the Assessment The proposed increased assessment on properties within Zone L-2N will provide a stable revenue source to fund the ongoing special benefit expenses associated with the servicing and maintenance of local landscape improvements within Zone L-2N including, but not limited to approximately 993,987 square feet of designated landscape improvement area that incorporates an estimated 20,776 square feet of irrigated median landscaping; 726,003 square feet of irrigated sloped/mostly-sloped landscaped area; and 247,208 square feet of flat/moderately-sloped landscaped area of which 162,983 square feet is irrigated and 84,225 square feet is non-irrigated (6,650 square feet of natural vegetation, minimal- landscaped area, fallow area and 77,575 square feet of trails). These improvements are considered a particular and distinct special benefit to properties in Zone L-2N and the increased assessments are intended to support the continued maintenance of these improvements at an appropriate level of service as well as related renovations or capital improvements. Basis upon which the Increased assessments are Calculated Each year the City determines the estimated cost to maintain and service the improvements within each Zone of the District to appropriately allocate those costs to only the benefiting properties. The cost of providing the improvements determined to be of special benefit are allocated to parcels within each Zone based on a benefit formula that equitably distributes those costs based on the proportional special benefits to each parcel. Parcels within each Zone are assigned an Equivalent Benefit Unit (EBU) that reflects each parcel's proportional special benefit as compared to other parcels that benefit from the improvements. In Zone L-2N, the benefiting properties assessed are primarily residential properties, with each single-family residential parcel being assigned 1.00 EBU. Other land uses in this Zone are assigned a proportional EBU based on units or acreage and may include: Residential Multi-Family at 0.8 EBU per unit; Non-Residential Developed parcels at 3.0 EBU per acre; and Park or Vacant/Undeveloped parcels at 0.75 EBU per acre up to five acres. The total eligible special benefit expenses for Zone L-2N ("Balance to Levy"), is divided by the total EBU of all parcels within Zone L- 2N. The result of this calculation establishes an assessment rate per Equivalent Benefit Unit ("Levy per EBU" or "Assessment Rate"). This Assessment Rate multiplied by each parcel's assigned EBU equals each parcel's annual assessment amount. Total Balance to Levy/ Total EBU = Levy per EBU (Assessment Rate) Levy per EBU x Parcel EBU = Parcel Levy Amount A more detailed description of the improvements and basis upon which increased assessments have been calculated is described in the Engineer's Report, which is on file with the City and available on the City's website. The Total Annual Assessment Proposed to be Charged The total annual amount of the assessments being balloted to properties within Zone L-2N is $329,886.05. This total amount balloted divided by the total number of Equivalent Benefit Units (EBUs) within Zone L-2N results in an increased assessment rate to $1,007.00 per EBU (Maximum Assessment Rate for Fiscal Year 2017/2018). The amount of the increased assessment identified on the accompanying Assessment Ballot as "Your Parcel's Balloted Assessment Amount" is based upon this new Maximum Assessment Rate and your property's proportional special benefit based on your parcel's EBU assignment. Your parcel's actual assessment for Fiscal Year 2017/2018 may be equal to or less than the amount indicated on the accompanying Assessment Ballot as "Your Parcel's Balloted Assessment Amount". However, if the increased assessments are approved in these proceedings, your parcel's assessment amount and the assessment rate are subject to the annual inflationary adjustment described herein. Inflationary Adjustment Because the cost of servicing and maintaining local landscaping improvements are impacted by inflation over time, the proposed maximum assessment rate of $1,007.00 per EBU and your parcel's corresponding assessment includes an annual inflationary adjustment based on the annual percentage change in the local Consumer Price Index as reported by the United States Department of Labor, Bureau of Labor Statistics, for the Los Angeles-Riverside-Orange County Metropolitan Area for All Urban Consumers. As part of your support or opposition to the increased assessment described in this notice and presented on the accompanying Assessment Ballot, you are also indicating your support or opposition to this annual inflationary adjustment that may be applied to future assessments. If the increased assessment is approved, this annual inflationary adjustment shall be applied to the maximum assessment rate established in these proceedings (maximum assessment rate for Fiscal Year 2017/2018) and your calculated assessment each year may be adjusted accordingly. Duration of the Assessments If approved, the proposed assessment indicated on the accompanying ballot (plus the annual inflationary adjustment) may be assessed and appear on your 2017/2018 property tax bill. (At the City Council's discretion, a lesser amount may be assessed). Because the proposed assessments will provide annual funding for the ongoing maintenance and operation of the improvements, there is no sunset on the assessments (no end date), but the annual budget and assessments shall be presented at a public hearing each fiscal year, which is open to the public for comment and testimony. Public Hearing Notice is hereby given that a public hearing regarding the proposed levy of an increased assessment for Local Landscaping Zone L-2N, will be held during a regular meeting of the Yorba Linda City Council, in the City Council Chambers at City Hall, located at 4845 Casa Loma Avenue, Yorba Linda, California, on the following date and commencing at the following time: Tuesday, February 21, 2017, starting at 6:30 P.M. The City Council shall consider all objections and protests, if any, to the proposed increased assessment on properties within Zone L-2N which has been deemed necessary for the operation and maintenance of Zone L-2N's landscaping improvements. Any interested person shall be permitted to present written and oral testimony regarding these proceedings. The City Council may impose reasonable time limits on both the length of the entire public hearing and the length of each interested person's oral testimony. The City Council may also continue the public hearing from time to time. Protest Provisions Pursuant to California Constitution Article XIIID, Section 4 (e), at the Public Hearing, the City Council shall consider all protests against the proposed increased assessment. In addition to the property owner assessment ballots, written protests regarding the District and assessments may be filed with the City Clerk prior to or during the Public Hearing. The City shall not impose an assessment increase for Zone L-2N if there is a majority protest, as calculated set forth below. Assessment Ballot The amount of the assessment identified on the accompanying Assessment Ballot as "Your Parcel's Balloted Assessment Amount" represents your parcel's proportional special benefit of the total amount being balloted at the maximum assessment rate. Any time before the end of the Public Hearing, you may submit the Assessment Ballot to the City Clerk. To do so: mark the Ballot either" YES -IN FAVOR OF THE INCREASED ASSESSMENT' or" NO -OPPOSED TO THE INCREASED ASSESSMENT', sign the Ballot, seal the Ballot in the enclosed return envelope, and mail or deliver it to the City Clerk. If you do not use the envelope provided, the return envelope should have the words "ASSESSMENT BALLOT, DO NOT OPEN" printed on the outside to ensure it is not opened in advance of the Public Hearing. The Ballot may be submitted, changed or withdrawn at any time before the end of the Public Hearing. If you need a replacement Ballot, call the "Contact Person" listed below. Only ballots issued by the City are considered valid ballots (copies or facsimiles are not valid ballots). Any Ballot returned unmarked or unsigned, or not received by the City Clerk before the end of the public hearing will be rejected and not counted. The proposed new assessment will not be imposed for Zone L-2N if the Ballots submitted in opposition to the increased assessment exceed the Ballots submitted in favor of the assessment, with each Ballot weighted according to the dollar amount of the assessment on the property to which that Ballot relates. In such case, the properties within Zone L-2N will continue to be subject to annual assessments for maintenance of improvements up to the maximum assessment rate per EBU of $334.36 plus the annual inflationary adjustment based on the annual percentage change in the local Consumer Price Index that was previously established by the City Council for Zone L-2N. Only valid ballots received by the City Clerk before the end of the public hearing shall be counted. In addition to the property owner assessment ballots, written protests regarding the District and assessments may be filed with the Office of the City Clerk prior to or during the Public Hearing. Please ensure that your Assessor's Parcel Number (APN) listed on the accompanying Assessment Ballot is included on any written protest or correspondence so that your property can be correctly identified for the record. Please refer to the City's website for additional information and future actions upon completion of the ballot proceedings. Important Information For more information, please contact the City's Public Works Department at 714.961.7170. Additional information, including general information about subsequent actions the City may take if the proposed new assessment is approved or if the proposed new assessment is not approved can be found on the City's website http://www.ci.yorba- linda.ca.us/index.php/city-departments/public-works. ITEM NO. 13.1 AGENDA REPORT Meeting Date: February 13, 2017 Subject:Meetings from February 14, 2017 - April 30, 2017 ATTACHMENTS: Name:Description:Type: BOD_-_Activities_Calendar.pdf Backup Material Backup Material Event Date Attendance by: February 2017 MWDOC Wed, Feb 15 Nederhood OCWD Wed, Feb 15 Jones Yorba Linda Planning Commission Wed, Feb 15 Hawkins (As Needed) District Offices Closed Mon, Feb 20 YL City Council Tue, Feb 21 Hawkins OCSD Wed, Feb 22 Hawkins/Jones YLWD Facilities Tour Thu, Feb 23 Jones/Nederhood MWDSC State Water Project Tour Fri, Feb 24 Jones/Nederhood MWDSC State Water Project Tour Sat, Feb 25 Jones/Nederhood YLWD Facilities Tour Sat, Feb 25 Hall/Miller MWDSC State Water Project Tour Sun, Feb 26 Jones/Nederhood CSDA SDLA Conference Sun, Feb 26 Jones/Miller/Nederhood CSDA SDLA Conference Mon, Feb 27 Jones/Miller/Nederhood CSDA SDLA Conference Tue, Feb 28 Jones/Nederhood March 2017 CSDA SDLA Conference Wed, Mar 1 Jones/Nederhood Board of Directors Regular Meeting Wed, Mar 1 WACO Fri, Mar 3 Jones (All Directors PA) TENTATIVE - AHCAC Meeting Tue, Mar 7 Yorba Linda City Council Tue, Mar 7 Jones LAFCO Wed, Mar 8 Nederhood (As Needed) Joint Committee Meeting with City of Yorba Linda Mon, Mar 13 Miller/Hawkins Board of Directors Regular Meeting Tue, Mar 14 MWDOC Wed, Mar 15 Nederhood OCWD Wed, Mar 15 Jones Yorba Linda Planning Commission Wed, Mar 15 Hawkins (As Needed) Board of Directors Workshop Meeting Thu, Mar 16 TENTATIVE - AHCAC Meeting Mon, Mar 20 YL City Council Tue, Mar 21 Miller OCSD Wed, Mar 22 Hawkins/Jones Interagency Committee Meeting with MWDOC and OCWD Thu, Mar 23 Miller/Nederhood Board of Directors Regular Meeting Tue, Mar 28 Yorba Linda Planning Commission Wed, Mar 29 Hawkins (As Needed) ISDOC Thu, Mar 30 Hawkins (All Directors PA) MWDOC Water Policy Forum Thu, Mar 30 April 2017 TENTATIVE - AHCAC Meeting Mon, Apr 3 Yorba Linda City Council Tue, Apr 4 Nederhood MWDOC Wed, Apr 5 Nederhood OCSD Operations Committee Wed, Apr 5 Hawkins OCWD Wed, Apr 5 Jones MWDSC Hoover Dam Tour Fri, Apr 7 Jones/Nederhood WACO Fri, Apr 7 Jones (All Directors PA) MWDSC Hoover Dam Tour Sat, Apr 8 Jones/Nederhood MWDSC Hoover Dam Tour Sun, Apr 9 Jones/Nederhood Board of Directors Regular Meeting Tue, Apr 11 LAFCO Wed, Apr 12 Nederhood (As Needed) Yorba Linda Planning Commission Wed, Apr 12 Hawkins (As Needed) TENTATIVE - AHCAC Meeting Mon, Apr 17 YL City Council Tue, Apr 18 Hall MWDOC Wed, Apr 19 Nederhood OCWD Wed, Apr 19 Jones Board of Directors Workshop Meeting Thu, Apr 20 Board of Directors Regular Meeting Tue, Apr 25 MWDOC Elected Officials' Forum Wed, Apr 26 OCSD Wed, Apr 26 Hawkins/Jones Yorba Linda Planning Commission Wed, Apr 26 Hawkins (As Needed) PA = Preauthorized AHCAC = Ad Hoc Citizens Advisory Committee 5:30PM 6:00PM 6:00PM 6:30PM 6:30PM 8:30AM 5:30PM 4:00PM 5:30PM 8:00AM 6:30PM 6:30PM 7:15AM 7:30AM 7:00AM 7:00AM 6:30PM 6:30PM 8:30AM 5:00PM 5:30PM 4:00PM 5:30PM 6:30PM 11:30AM 5:30PM 5:30PM 6:30PM 4:00PM 6:30PM 6:30PM 6:00PM 5:30PM 6:30PM 8:00AM 4:00PM 5:30PM 8:30AM 8:30AM 8:30AM 5:30PM 7:30AM 5:15AM 5:30AM 8:00AM 7:00AM 5:00PM 8:30AM 5:30PM 6:30PM 7:00AM 6:30PM 6:00PM 8:00AM Board of Directors Activity Calendar Time 8:30AM 2/9/2017 2:35:34 PM ITEM NO. 14.1 AGENDA REPORT Meeting Date: February 13, 2017 Subject:MWDOC Water Policy Forum - March 30, 2017 STAFF RECOMMENDATION: That the Board of Directors approve Director attendance at this event if desired. ATTACHMENTS: Name:Description:Type: MWDOC_Policy_Forum.pdf Backup Material Backup Material SAVE THE DATE! MWDOC Water Policy Forum & Dinner Featuring Keynote Speaker Jeff Kightlinger General Manager Metropolitan Water District of Southern California From drought to flood, from the Delta to wastewater recycling, from state regulations to local control, water issues are swirling in California, and the Metropolitan Water District of Southern California (MET) is in the center of them all. Save the date and join us for a MWDOC Water Policy Forum & Dinner featuring keynote speaker, MET General Manager and Chief Executive Officer, Jeff Kightlinger, Thursday, March 30th from 5:30 p.m. to 8:00 p.m. *A formal invitation will be sent in the next few weeks with additional details, and links to register for this special event. Thursday March 30th 5:30 PM - 8:00 PM Great Wolf Lodge 12681 Harbor Blvd. Garden Grove, CA 92840 Municipal Water District of Orange County | http://www.mwdoc.com 18700 Ward Street, Fountain Valley, CA 92708 OTHER MATERIALS SUBMITTED DURING THE MEETING MATERIALS SUBMITTED BY: Brett Barbre MEETING DATE: February 13, 2017