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HomeMy WebLinkAbout1987-02-05 - Resolution No. 87-03YORBA LINDA WATER DISTRICT RESOLUTION NO. 87-03 RESOLUTION OF THE BOARD OF DIRECTORS OF YORBA LINDA WATER DISTRICT PROVIDING FOR THE ISSUANCE OF $11,915,000 PRINCIPAL AMOUNT OF YORBA LINDA WATER DISTRICT IMPROVEMENT DISTRICT NO. 2 1987 REFUNDING BONDS, FOR THE BENEFIT OF IMPROVEMENT DISTRICT NO. 2 OF YORBA LINDA COUNTY WATER DISTRICT; PRESCRIBING THE FORM AND TERMS OF SAID BONDS; PROVIDING FOR THE LEVY OF A TAX TO PAY THE PRINCIPAL AND INTEREST THEREOF; APPROVING THE FORMS OF ESCROW AGREEMENT AND OFFICIAL STATEMENT; AND OTHER MATTERS RELATING THERETO. WHEREAS, pursuant to Resolution No. 78-31 adopted by the Board of Directors (the "Board") of Yorba Linda County Water District (the "District") on May 4, 1978, a special election was duly and regularly held in Improvement District No. 2 (the "Improvement District") of the District on June 13, 1978, at which election there was submitted to the qualified voters of the Improvement District the following proposition: BOND PROPOSITION: Shall the Yorba Linda County Water District incur a bonded indebtedness for Improvement District No. 2 thereof in the sum of $41,660,000 for the purpose of the acquisition and con- struction of works and facilities useful or necessary to convey, supply, store or make use of water, including all land, easements, rights of way and other prop- erty necessary therefor, and including all engineering, inspection, legal and fiscal agent's fees, costs of the bond election and of the issuance of bonds, and bond interest estimated to accrue during the construction period and for a period not to exceed twelve months after the completion of construction, and all costs and estimated costs incidental to or connected with such acquisition, con- struction or financing of said facili- ties? -1- 6 and WHEREAS, said proposition received the affirmative vote of more than two-thirds of all the qualified voters casting votes at said election, and the Board was thereupon autho- rized to provide for the issuance of bonds in the amount of not to exceed $41,660,000 for the purposes set forth in said proposition; and WHEREAS, the Board determined to authorize the issuance of Yorba Linda County Water District Improvement District No. 2 1979 Water Bonds in such series from time to time as might thereafter be established by supplemental resolutions of the Board authorizing the issuance thereof, and adopted Resolu- tion No. 79-13 in order to declare the terms and conditions upon and subject to which said bonds were thereafter to be authorized and issued; WHEREAS, pursuant to Resolution No. 79-13, the Board on April 5, 1979 duly adopted its Resolution No. 79-14 authoriz- ing the issuance of $1,005,000 principal amount of Improve- ment District No. 2 1979 Water Bonds, Series A; WHEREAS, pursuant to Resolution No. 79-13, the Board on April 19, 1984 duly adopted its Resolution No. 84-06 authorizing the issuance of $10,000,000 principal amount of Improvement District No. 2 1979 Water Bonds, Series B; and WHEREAS, the District now desires to refund the Improvement District No. 2 1979 Water Bonds, Series B in the outstanding principal amount of $9,795,000 by the issuance of Improvement District No. 2, 1987 Refunding Bonds (the "Bonds") in the principal amount of $11,915,000, pursuant to the authority conferred by Title 5, Division 2, Part 1, Chapter 4, Article 11 of the Government Code of the State of California (commencing with Section 53580); and WHEREAS, it is necessary and appropriate to set forth the terms and conditions of the Bonds and such other matters incidental thereto by the adoption of this resolution, as permitted by Government Code Section 53583; NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of Yorba Linda Water District as follows: Section 1. The Board has reviewed all proceedings here- tofore taken relative to the authorization of the Bonds herein provided for and has found, as a result of such review, and hereby finds and determines that all things, con- ditions and acts required by law to exist, happen and be per- formed precedent to and in the issuance of the Bonds do exist, have happened and have been performed in due time, form and manner as required by law, and the District is now authorized, pursuant to each and every requirement of law, to -2- ~ M. issue the Bonds in the manner and upon the terms provided in this resolution. Section 2. Bonds of the District designated as "Yorba Linda Water District, Improvement District No. 2 1987 Refunding Bonds" (the "Bonds") in the principal amount of $11,915,000 are hereby authorized to be issued for the purpose of refunding $9,975,000 principal amount of Improvement District No. 2, 1979 Water Bonds, Series B, under and subject to the terms of this resolution and in accordance with Title 5, Division 2, Part 1, Chapter 4, Article 11 of the Government Code (commencing with Section 53580). The Bonds shall be issued as fully registered Bonds without coupons, in denominations of $5,000 or any integral multiple thereof, and shall be numbered in consecutive numerical order from R1 up. All of the Bonds shall be dated February 1, 1987, which is hereby fixed and determined to be the date of the issuance of the Bonds. The Series B Bonds shall bear interest at such rate or rates, not exceeding twelve percent (12%) per annum, as may be fixed by the Board at the sale thereof. Such interest shall be payable semiannually on November 1 and May 1 in each year. Each Bond shall bear interest from the interest payment date next preceding the date of authentication thereof unless it is authenticated as of the day during the period from the 16th day of month next preceding any interest payment date to the interest payment date, inclusive, in which event it shall bear interest from such interest payment date, or unless it is authenticated prior to the first interest payment date, in which event it shall bear interest from February 1, 1987. The Series B Bonds shall mature on May 1 in each year and become payable in consecutive numerical order from lower to higher, as set forth in the following schedule: Maturity Date (Mav 11 Principal Amount 1987 $250,000 1988 410,000 1989 430,000 1990 455,000 1991 480,000 1992 505,000 1993 535,000 1994 565,000 1995 605,000 1996 645,000 2004 7,035,000 -3- y ~ Both the principal of and premium, if any, on the Bonds shall be payable in lawful money of the United States of America to the registered owner thereof, upon the surrender thereof at the Corporate Agency Service Center of Bank of America National Trust and Savings Association in San Francisco, California, which is hereby appointed Paying Agent of the District for the Bonds (the "Paying Agent"). The interest on the Bonds shall be payable in like lawful money to the person whose name appears on the bond registration books of the Paying Agent as the owner thereof as of the close of business on the 15th day of the month immediately preceding an interest payment date whether or not such day is a business day, such interest to be paid by check mailed to such owner at such address as appears on such registration books or at such address as he may have filed with the Paying Agent for that purpose. Section 3. The Bonds maturing by their terms on or before May 1, 1996, shall not be subject to redemption before their respective stated maturities. Bonds maturing on May 1, 2004 shall be subject to mandatory redemption without premium and by lot prior to their respective stated maturity, from mandatory sinking fund deposits made by the District, on May 1, 1997 and on each May 1 thereafter to and including May 1, 2004, in the years and principal amounts set forth in the following table, together with accrued interest to the date of redemption: Year Amount 1997 $680,000 1998 725,000 1999 785,000 2000 840,000 2001 905,000 2002 970,000 2003 1,035,000 2004 11095,000 The Bonds maturing May 1, 2004 are also subject to redemption on or after May 1, 1996, at the option of the District, as a whole or in part, on any interest payment date on or after May 1, 1996 from funds derived by the District from any source other than sinking fund deposits, at a redemption price equal to the principal amount thereof and interest accrued thereon to the date fixed for redemption plus a premium as set forth below. -4- r y OPTIONAL REDEMPTION DATES AND PREMIUMS, On or After And Prior to May 1 May 1 Premium 1996 1997 2% 1997 1998 1-1/2 1998 1999 1 1999 2000 1/2 2000 2004 0 The District shall cause notice of any redemption to be published by the Paying Agent once a week for two successive weeks (the first publication to be not less than thirty days nor more than sixty days prior to the redemption date) in a financial newspaper or journal printed in the English language, of general circulation in Los Angeles, California. Such notice shall state the redemption date and the redemption price, shall designate the serial numbers of the Bonds to be redeemed by giving the individual number of each Bond or by stating that all Bonds between two stated numbers, both inclusive, have been called for redemption, shall require that such Bonds be then surrendered at the office of the Paying Agent, and shall state that interest on such Bonds will not accrue after the redemption date. A similar notice shall be mailed by the Paying Agent to the respective registered owners of any Bonds designated for redemption at least thirty but not more than sixty days prior to the redemption date, at their addresses appearing on the bond registration books in the office of the Paying Agent; but such mailing shall not be a condition precedent to such redemption and failure to mail or to receive any such notice shall not affect the validity of the proceedings for the redemption of such Bonds. Upon surrender of any Bond redeemed in part only, the Paying Agent shall execute and deliver to the owner thereof, at the expense of the District, a new Bond or Bonds, of the same maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the bond surrendered. After the date fixed for redemption, if notice of such redemption shall have been duly given and funds available for the payment of the principal of and interest and premium on the Bonds so called for redemption shall have been duly pro- vided, such Bonds so called shall cease to be entitled to any benefit under this resolution other than the right to receive payment of the redemption price, and no interest shall accrue -5- 40 • thereon on or after the redemption date specified in such notice. All Bonds redeemed pursuant to the provisions of this section, if any, shall be cancelled and shall not be reis- sued. Section 4. The Bonds and the Paying Agent's certificate of authentication and registration, and form of assignment to appear thereon, shall be in substantially the following forms, respectively, with necessary or appropriate varia- tions, omissions and insertions as permitted or required by this resolution and the resolution selling the Bonds to be adopted on February 5, 1987: (FORM OF BOND] UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF ORANGE YORBA LINDA WATER DISTRICT IMPROVEMENT DISTRICT NO. 2 1987 REFUNDING BOND No. $ INTEREST RATE MATURITY DATE CUSIP REGISTERED OWNER: PRINCIPAL AMOUNT: YORBA LINDA WATER DISTRICT (the "District") of Orange County, California, hereby acknowledges itself indebted and for value received promises to pay to the above-named person or registered assigns, on the maturity date specified above, (subject to any right of prior redemption hereinafter in this bond expressly reserved), in lawful money of the United States of America, the principal amount specified above and to pay interest thereon in like lawful money from the interest payment date next preceding the date of authenti- cation of this bond (unless this bond is authenticated as of the day during the period from the 16th day of the month next preceding any interest payment date to such interest payment date, inclusive, in which event it shall bear interest from such interest payment date, or unless this bond is authenticated prior to the first interest payment date, in which event it shall bear interest from February 1, 1987) at -6- ~ y the rate per annum specified above, payable on May 1, 1987 and thereafter semiannually on November 1 and May 1 in each year, until the payment of such principal sum in full. Both the principal (or redemption price) of this bond is payable to the registered owner hereof upon the surrender hereof at the Corporate Agency Service Center of Bank of America National Trust and Savings Association (herein called the "Paying Agent"), the Paying Agent of the District, in San Francisco, California. The interest hereon is payable to the person whose name appears on the bond registration books of the Paying Agent as the registered owner hereof as of the close of business on the 15th day of the month immediately preceding an interest payment date, whether or not such day is a business day, such interest to be paid by check mailed to such registered owner at his address as it appears on such registration books. THE PROVISIONS OF THE BOND ARE CONTINUED ON THE REVERSE HEREOF AND SUCH CONTINUED PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE. This bond shall not be entitled to any benefit under the Resolution, or become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been signed by the Paying Agent. IN WITNESS WHEREOF, the Board of Directors of Yorba Linda Water District has caused this bond to be signed in facsimile by its President and countersigned in facsimile by the Secretary of the District, and this bond to be dated February 1, 1987. [SEAL] Countersigned: President of the Board of Directors Secretary of Yorba Linda Water District [FORM OF REVERSE OF BOND] This bond is one of a duly authorized issue of bonds (the "bonds") aggregating $11,915,000 in principal amount. All of the bonds are issued under and pursuant to the Constitution and laws of the State of California, including Title 5, Division 1, Part 1, Chapter 4, Article 11 of the Government Code of the State of California, and pursuant to a -7- 40 *a resolution of the Board of Directors (the "Board") of the District, adopted February 5, 1987, providing for the issuance of the bonds, (the "Resolution"). Reference is hereby made to the provisions of the Resolution, all of the provisions of which are hereby incorporated herein, for a specific description of the security for the bonds and of the obligations of the District and the rights of the registered owners of the bonds, to all of which provisions the registered owner hereof by the acceptance of this bond consents and agrees. This bond is issued by the District for the benefit of the Improvement District and, except to the extent payable from revenues of the Improvement District as required or per- mitted by law, the principal of and interest on this bond are payable exclusively from taxes and standby charges levied on the taxable property of the Improvement District established by Resolution No. 78-30, adopted by the Board on May 4, 1978, to which resolution reference is hereby made for a description of the Improvement District and the boundaries thereof. The Bond maturing by their terms on or before May 1, 1996, shall not be subject to redemption before their respective stated maturities. Bonds maturing on May 1, 2004 shall be subject to mandatory redemption without premium and by lot prior to their stated maturity, from mandatory sinking fund deposits made by the District on May 1, 1997 and on each May 1 thereafter to and including May 1, 2004, in the years and principal amounts set forth in the following table, together with accrued interest to the date of redemption: Year Amount Year Amount 1997 $680,000 2001 $905,000 1998 725,000 2002 970,000 1999 785,000 2003 1,035,000 2000 840,000 2004 1,095,000 The Bonds maturing May 1, 2004 are also subject to redemption on or after May 1, 1996 from funds derived by the District from any source other than sinking fund deposits, at a redemption price equal to the principal amount thereof and interest thereon to the date fixed for redemption plus a premium as set forth below. -8- 40 OPTIONAL REDEMPTION DATES AND PREMIUMS On or After And Prior to May 1 May 1 Premium 1996 1997 2% 1997 1998 1-1/2 1998 1999 1 1999 2000 1/2 2000 2004 0 As provided in the Resolution notice of redemption shall be given by publication once a week for two successive weeks in a financial newspaper or journal printed in the English language and circulated in Los Angeles, California, the first such publication to be not less than thirty days nor more than sixty days prior to the redemption date. A similar notice shall be mailed to the respective registered owners of any bonds designated for redemption at their addresses appearing on the bond registration books in the office of the Paying Agent. If this bond is called for redemption and payment is duly provided therefor as specified in the Resolution, interest shall cease to accrue hereon from and after the date fixed for redemption. The bonds are issuable as fully registered bonds without coupons in denominations $5,000 or integral multiples thereof. Subject to the limitations and upon payment of the charges, if any, provided in the Resolution, bonds may be exchanged for a like aggregate principal amount of fully registered bonds of other authorized denominations. This bond is transferable by the registered owner hereof, in person or by his attorney duly authorized in writ- ing, at the Corporate Agency Service Center of Bank of America National Trust and Savings Association in San Francisco, California, but only in the manner, subject to the limitations and upon payment of the charges provided in the Resolution, and upon surrender and cancellation of this bond. Upon such transfer a new fully registered bond or bonds of authorized denomination or denominations, for the same aggregate principal amount will be issued to the transferee in exchange herefor. The District and the Paying Agent tered owner hereof as the absolute owner poses, and the District and the Paying affected by any notice to the contrary. may treat the regis- hereof for all pur- Agent shall not be -9- It is hereby certified, recited and declared that this bond is issued in strict conformity with the constitution and laws of the State of California and with the proceedings of the Board authorizing the same, and that all things, condi- tions and acts required by law to exist, happen and to be performed precedent to and in the issuance of this bond have existed, happened and been performed in due time, form and manner as required by law, and that the amount of this bond together with all other indebtedness of the Improvement Dis- trict does not exceed any limit prescribed by the Constitu- tion and statutes of said State, and that provision has been made as required by the statutes of said State for the levy and collection of an annual tax on the property in the Improvement District for the payment of the principal of and interest on this bond as the same become due. The full faith and credit of the Improvement District are hereby pledged for the punctual payment of the principal of and interest on this bond. [FORM OF PAYING AGENT'S CERTIFICATE OF AUTHENTICATION AND REGISTRATION] This is one of the bonds described in the within-men- tioned Resolution and authenticated and registered on BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Paying Agent By [FORM OF ASSIGNMENT] Authorized Officer For value received the undersigned do(es) hereby sell, assign and transfer unto the within-mentioned registered bond and hereby irrevocably con- stitutes(s) and appoint(s) attorney, to transfer the same on the books of the Paying Agent with full power of substitution in the premises. Dated: -10- t f Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within registered bond in every particular, without alteration or enlargement or any change whatsoever. Section 5. The Bonds shall be executed in the name of and on behalf of the District, and under its seal, with the manual or facsimile signature of the president of the Board and the manual or facsimile countersignature of the Secretary of the District. The seal of the District shall be affixed to the Bonds by printed, lithographed or other reproduction thereof. The Bonds shall then be delivered to the Paying Agent for authentication by it. If any member or officer whose signature appears on the Bonds shall cease to be such member or officer before the Bonds so signed and attested shall have been authenticated or delivered by the Paying Agent or issued by the District, such signature shall nevertheless be valid and sufficient for all purposes the same as if that member or officer had remained in office until the authentication, delivery and issuance of the bonds. Only Bonds bearing a certificate of authentication, exe- cuted by the Paying Agent of the District, shall be or become valid or obligatory for any purpose or entitled to the bene- fits of this resolution. Such certificate of the Paying Agent, when so executed, shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenti- cated and delivered hereunder and are entitled to the bene- fits of this resolution. Section 6. The District hereby covenants that, so long as any of the Bonds shall be outstanding and unpaid, it will at all times have a Paying Agent for the payment of the principal of and the interest on the Bonds in San Francisco, California. The Auditor of the District shall make such credit arrangements with such Paying Agent as may be necessary to assure, to the extent of the moneys held for such payment, the prompt payment of the principal of, and interest on, the Bonds. The District may at any time remove any Paying Agent and any successor thereto, and appoint a successor thereto. The Paying Agent of the District is hereby appointed as registration agent of the District to act as registrar of the Bonds. The Paying Agent will keep or cause to be kept at its Corporate Agency Service Center in San Francisco, California, sufficient books for the registration and transfer of the Bonds, which shall at all times be open to inspection by the District; and, upon presentation for such purpose, the Paying Agent shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books, Bonds as hereinafter provided. -11- • f Any Bond may, in accordance with its terms, be trans- ferred upon the books required to be kept by the Paying Agent, by the person in whose name it is registered, in per- son or by his duly authorized attorney, upon surrender of such fully registered Bond to the Paying Agent for can- cellation, accompanied by delivery of a written instrument of transfer in a form approved by the Paying Agent, duly executed. Whenever any Bond or Bonds shall be surrendered for transfer, the Payment Agent shall authenticate and deliver a new fully registered Bond or Bonds, for a like aggregate principal amount. The Paying Agent shall require the payment by the person requesting such transfer of any tax or other governmental charge required to be paid with respect to such transfer. Bonds may be exchanged at the Corporate Agency Service Center the Paying Agent in San Francisco, California for a like aggregate principal amount of Bonds of other authorized denominations, of the same maturity. The Paying Agent shall require the payment by the person requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. Section 7. Upon receipt of payment for any of the Bonds when the same shall have been duly sold by the District, the proceeds from the sale shall be paid to the Auditor of the District and shall be set aside as follows: (a) The Auditor of the District shall deposit in the Interest and Sinking Fund established pursuant to Section 8 a sum at least equal to any accrued interest and premium on the sale of the Bonds. (b) The Auditor of the District shall deposit $75,449.38 of such proceeds in a separate fund to be known as the "Water District Improvement District 1987 Refunding Bonds Costs of Issuance Fund" (the "Costs of Issuance Fund"), to be held and accounted for by the District. Said proceeds shall be applied solely to the payment of the costs of issuance of the Bonds. Any balance remaining in the Costs of Issuance Fund shall be transferred to the Interest and Sinking Fund established pursuant to Section 8. (c) The Auditor of the District shall transfer and deposit the remainder of such proceeds, in the amount of $11,642,953.12, with Bank of America National Trust and Savings Association, as escrow agent, under the Escrow Agreement (the "Escrow Agent") approved in Section 17 hereof, to be used and administered by the Escrow Agent as provided in said agreement. (d) The Auditor of the District shall additionally transfer and deposit with said Escrow Agent -12- t f the amount of $243,046.88 derived from amounts on hand in the Interest and Sinking Fund for the 1979 Water Bonds established pursuant to Section 8 of Resolution No. 79-13, as amended. (e) The Auditor of the District shall lastly transfer $1,180,200 of the amount on hand in the 1979 Water Bonds, Series B, Bond Reserve Fund, established pursuant to Section 20 of Resolution No. 84-06, to the 1987 Refunding Bonds Reserve Fund established by Section 11 hereof and transfer any balance remaining in the 1979 Water Bonds, Series B, Bond Reserve Fund to the Improvement Fund established pursuant to Section 7 of Resolution No. 79-13, as amended. Section 8. If the revenues of the Improvement District are, or in the judgment of the Board are likely to be, inadequate to pay the interest on or principal of the Bonds as the same become due, or any other expenses or claims against the Improvement District, the Board shall either: (a) annually, at least fifteen days before the first day of the month in which the Board of Supervisors of Orange County, California, is required by law to levy the amount of taxes required for county purposes, fur- nish to said Board of Supervisors, and to the Auditor of said County, respectively, in writing, (i) an estimate of the minimum amount of money required by the District from the Improvement District for the payment of the principal of or interest on the Bonds as the same become due, (ii) a description of the Improvement District, which is the improvement district benefited by incurring the indebtedness evidenced by the Bonds, and (iii) an estimate of the minimum amount of money required by the Improvement District to meet all charges, claims, expen- ditures and expenses other than a bonded debt; in which event, as required by law, said Board of Supervisors shall annually until the Bonds are paid (or moneys for the payment of both the principal and interest thereof as the same respectively become due are otherwise pro- vided from revenues of the Improvement District and are then on deposit in the Interest and Sinking Fund), levy upon all the property within the Improvement District a tax sufficient to pay the annual interest on the Bonds and also such part of the principal thereof as shall become due before the time for fixing the next general county tax levy; or (b) (i) elect to fix its own rates of taxation by resolution, pursuant to Section 31702.1 of the Water Code of the State of California, (ii) on or before Sep- tember 1 of each year fix the rates of taxation, based upon the written statement transmitted by the Auditor of said County to the board in such year showing the total -13- 0 6 value of all taxable property in the Improvement Dis- trict to be used by said County for taxation for such year, which rates of taxation shall be required for the payment of the principal of or interest on the Bonds as the same become due before the time for fixing the next general county tax levy and for each other purpose of the Improvement District for such year, making due allowance for delinquency as fixed by law or by the Board, and (iii) immediately certify said rates to said Auditor; which acts, as provided by law, shall be a valid assessment of the property and a valid levy of the taxes so fixed; or (c) provide for the assessment of all taxable property within the Improvement District and the levy and collection of taxes or standby charges thereon to pay the principal of and interest on the Bonds as the same become due, in any other manner provided by law. As currently provided by law, the Board of Supervisors of said County shall annually cause to be collected a tax sufficient to pay the annual interest on the Bonds and also such part of the principal thereof as shall become due before the time for fixing the next general county tax levy, such tax to be known as "Yorba Linda Water Improvement District No. 2 Bond Tax". Taxes for the payment of the interest on or principal of the Bonds shall be levied upon all the taxable property within the Improvement District and all such taxes shall be collected at the same time and in the same manner and form as county taxes are collected, and when collected shall be paid to the District, for deposit into a subaccount of the 1979 Water Board Interest and Sinking Fund established by Resolution No. 79-13, as amended, which is hereby established and designated "Yorba Linda County Water District Improvement District No. 2 1987 Refunding Bond Interest and Sinking Fund" (the "Interest and Sinking Fund"). The moneys in the Interest and Sinking Fund shall be used (and transferred to the Paying Agent for the Bonds as required) for the sole purpose of paying the principal of and interest on the Bonds. There shall likewise be deposited in said fund all moneys provided from revenues of the Improvement District for the payment of the principal of and interest on the Bonds. All such taxes for the payment of the Bonds or the interest thereon shall be a lien on all the taxable property in the territory comprising the Improvement District and said taxes shall be of the same force and effect as other liens for taxes and their collection shall be enforced by the same means as provided for the enforcement of liens for state and county taxes. Section 9. If the District shall (a) deposit in the Interest and Sinking Fund or in an escrow fund held by an escrow agent, at or before maturity, money or United States Treasury notes, bonds, bills or certificates of indebtedness -14- . I 1 6 or securities for which the faith and credit of the United States are pledged or general obligation bonds of the State of California in the necessary amount to pay or redeem outstanding Bonds (whether upon or prior to their maturity or the redemption date of such Bonds), and (b) if such Bonds are to be redeemed prior to the maturity thereof, irrevocable notice of such redemption shall have been given as provided herein, or provisions satisfactory to the Board shall have been made for the giving of such notice; then all obligations of the District under this resolution and all liability of the District in respect of such Bonds appertaining thereto shall cease, determine and be completely discharged; except that the owners thereof shall thereafter be entitled only to payment out of the money, bonds or other securities so deposited in the Interest and Sinking Fund or escrow funds. Section 10. The Board covenants with the holders of all Bonds at any time outstanding that it will make no use of the proceeds of the Bonds which will cause the Bonds to be "arbitrage bonds" subject to federal income taxation by reason of Section 148 of the Internal Revenue Code of 1986, as amended. To that end, so long as any of the Bonds are outstanding, the Board, with respect to the proceeds of the Bonds, shall comply with all requirements of said Section 148 and all regulations of the United States Department of the Treasury issued thereunder, to the extent that such requirements are, at the time, applicable and in effect. Subject to the foregoing and Section 14 hereof, the Auditor of the District is hereby authorized to invest or cause to be invested any money held pursuant to this resolution in any legal investments for the District which mature at such time or times as may be required to satisfy the needs of the fund or funds from which such moneys are invested. Section 11. There is hereby created and established a fund in the treasury of said District to be designated "1987 Refunding Bonds Reserve Fund" (the "Bond Reserve Fund"). Said fund shall be established out of the amounts required to be transferred by the Auditor pursuant to Section 7 hereof. The amount of said fund shall be at all times equal not more than $1,180,200 (the "Reserve Requirement"). Any amounts in excess of the Reserve Requirement, which are not Excess Earnings as defined in Section 14 hereof, shall be transferred to the Interest and Sinking Fund and used to pay principal and interest on the Bonds. If the amount in said fund falls below the Reserve Requirement said fund shall be restored by the inclusion of a amount sufficient to replenish said fund in the next annual assessment in Improvement District No. 2, except that to the extent that sufficient revenues from water charges from Improvement District No. 2 are on hand and allocated to said fund at the time of fixing the next annual assessment in the Improvement District No. 2 -15- 6 6 said inclusion need not be made. The moneys in the Bond Reserve Fund shall be used only in the event that there are insufficient moneys in the Interest and Sinking Fund to pay interest and principal on the Bonds as they become due and payable, whether at maturity or by reason of mandatory redemption pursuant to Section 3. In such event, the amount of such insufficiency shall be transferred from the Bond Reserve Fund to the Interest and Sinking Fund, and used solely to pay interest and principal on the Bonds. When, as and if the assessed valuation of the Improve- ment District, as shown of the secured property tax assess- ment roll, is $200,000,000 or greater, the Board may, solely in its discretion, reduce the Reserve Requirement to an amount which it deems necessary for the above purposes, but which in no way will materially reduce the security for or impair the obligation of the Bonds. When, as and if the assessed valuation of the Improvement District is completely sufficient to pay principal and interest on the Bonds, at an ad valorem tax rate not-to-exceed twenty cents per $100 and making due allowance for tax delinquencies, then the Board may reduce the Reserve Requirement to zero. All amounts in excess of Reserve Requirement fixed by the Board shall be transferred by the Auditor to the Improvement Fund to be expended in accordance with Section 7 of the Resolution No. 79-13, as amended. In the last year in which interest and principal on the Bonds is payable, any amount remaining in the Bond Reserve Fund shall be transferred to the Interest and Sinking Fund and utilized for payment of interest and principal on the Bonds. Section 12. On or before April 1 of each year, begin- ning on April 1, 1997, the Auditor shall deposit in the Interest and Sinking Fund an amount which, when added to the amount contained in said fund on that date, will be equal to the aggregate amount of the mandatory redemption to be made on the succeeding May 1 of such year. In the event that revenues or taxes shall in any year be insufficient to make the deposit then required, such deficiency shall be made up from the first available revenues and taxes in succeeding years, and the failure to make such payment in full shall not be deemed a default. All money in the Interest and Sinking Fund shall be withdrawn by the Auditor and transferred to the Paying Agent on or before May 1 of each year, beginning on May 1, 1997, for the redemption prior to maturity or payment at maturity of Bonds maturing on May 1, 2004, as set forth in Section 3 above. Section 13. The District hereby covenants to the regis- tered owners of the Bonds that it will observe all obligations and all remedies conferred upon it by that cer- tain agreement entitled "Agreement Re Sale of Series B Water Bonds of Improvement District No. 2 of Yorba Linda County Water District, Payment of Charges, Lien and Mortgage Rights -16- i • with Power of Sale," dated January 19, 1984, by and between the District and C-W Associates ("C-W"), a California part- nership. The Agreement, which was recorded on January 23, 1984 in the official Records of the County of Orange and con- stitutes a real covenant running with the "Subject Property", provides for the District to issue the 1979 Water Bonds, Series B refunded hereby and to levy and collect certain standby charges upon unimproved lands within the Improvement District No. 2 owned by C-W or their successors and assigns, in an amount which, in combination with ad valorem taxes, will be sufficient to pay "Bond Payments". For its part, C-W covenants, for itself and its successors and assigns, to pay both the ad valorem taxes and standby charges imposed on said property, and grants to the District a first lien and mortgage with power of sale enabling the District to foreclose upon said property in the event of default in the payment of said "Charges". Section 14. a) Definitions. As used in this Section, the following terms shall have the following meanings: "Arbitrage Profits" means, at all times during the then current Bond Year, an amount equal to the aggregate amount of Excess Earnings plus the cumulative net sum as of any Tax Computation Date of the difference between (i) the aggregate amount earned (excluding Excess Earnings) from the date hereof on all Nonpurpose Investments and (ii) the amount that would have been earned on such Nonpurpose Investments if the Yield on such Nonpurpose Investments had been equal to the Bond Yield. For purposes of calculating the Arbitrage Profits (i) the Yield on, and the aggregate amount earned with respect to, a Nonpurpose Investment shall be determined by assuming that the Nonpurpose Investment was acquired for an amount equal to its Fair Market Value at the time it becomes a Nonpurpose Investment; (ii) the aggregate amount earned with respect to a Nonpurpose Investment shall include all income that would be realized under federal income tax accounting principles (e.g., original issue discount and premium based on the assumed purchase at Fair Market Value shall be taken into account actuarially in the manner provided in Section 1272(a) of the Code) computed without regard to the transaction costs incurred in acquiring, carrying, selling or redeeming such Nonpurpose Investments, and gain on disposition shall be determined on the basis of the assumed purchase price at Fair Market Value (adjusted to take into account amounts received with respect to the Nonpurpose Investment and earned original issue discount or premium up to the date of determination) and without regard to any nonrecognition or deferral provision in the Code, and (iii) the aggregate amount earned with respect to any Nonpurpose -17- Investment shall include any unrealized gain or loss with respect to the Nonpurpose Investment (based on the assumed purchase price at Fair Market Value and adjusted to take into account amounts received with respect to the Nonpurpose Investment and earned original issue discount or premium) on the first date when there are no outstanding bonds or when the investment ceases to be a Nonpurpose Investment. The value of a Nonpurpose Investment at the time it becomes a Nonpurpose Investment shall be equal to its Fair Market Value at such time. The value of a Nonpurpose Investment at any time after such date shall be adjusted to take into account amounts received with respect to the Nonpurpose Investment and earned original issue discount or premium with respect to the Nonpurpose Investment (determined in the same manner as required for purposes of calculating the Arbitrage Profits). "Bond Service Account" means the Interest and Sinking Fund established pursuant to Section 8. "Bond Year" means the one year period beginning on the day after expiration of the preceding Bond Year. The first Bond Year shall begin on February 26, 1987. "Bond Yield" is that percentage rate which, when used in computing the present value of all payments of principal or "expected redemption price" of and interest on the Bonds, produces an amount equal to the issue price (within the mean- ing of Sections 1273 and 1274 of the Code), as offered to the public (not including bond houses and brokers, or similar persons or organizations acting in the capacity of underwrit- ers or wholesalers) at which a substantial amount of the obligations were sold or, if privately placed, the price paid by the first buyer of such obligations or the acquisition cost of the first buyer, without regard to Costs of Issuance, but taking into account premium costs for municipal bond insurance (net of a premium credit) and letter of credit fees to the extent they represent a charge for a transfer of cred- it risk. "Code" means the Internal Revenue Code of 1986, as amended. "Costs of Issuance" means the costs of issuing bonds, including, but not limited to bond counsel fees and disbursements, bond and official statement printing costs, consultant's fees, filing and recording fees, printing, advertising and posting of notices, and initial fees of escrow, registration and Paying Agents. "Excess Earnings" means, for any Bond Year, the total amount of earnings on the Arbitrage Profits for the preceding Bond Year (if such difference is greater than zero). For purposes of the first Bond Year, the Excess Earnings shall be assumed to be zero. -18- I • "Excess Earninas Trackina Account" means the account by that name established by this Section 14 to segregate the earnings on the Arbitrage Profits and the Excess Earnings from all other moneys. "Fair Market Value" for an Investment Property for which there is an established market shall be the mean of the bid and offered prices on an established market where such In- vestment Property is traded on the date a binding contract to acquire such Investment Property is entered into, or if there are no bid and offered prices on such date, on the first day preceding such date for which there are bid and offered prices. Such mean price may be determined by reference to any appropriate publication, such as, for example, "Composite Closing Quotations for United States Government Securities" published by the Federal Reserve Bank of New York. Where the price of any Investment Property is quoted on an established market in terms of yield, the Fair Market Value shall be the amount necessary to produce such Yield (including transaction costs). Notwithstanding the foregoing, the Fair Market Value of Investment Property may be established by the borrowing practices of the issuer of such Investment Property, as, for example, by determining the Fair Market Value based on the interest ordinarily paid by such issuer to persons other than governmental units with respect to Investment Property of comparable maturities. The market price of a time or demand deposit shall be determined under the preceding sentence by taking into account the Yield that would be paid by the ob- ligor if the deposit were held as an interest bearing deposit for the expected period of the deposit. The market price of a certificate of deposit issued by a commercial bank may be determined as the bona fide bid price quoted by a dealer who maintains an active secondary market in such certificates of deposit. Notwithstanding anything to the contrary in this subsection: (A) if Investment Property is acquired pursuant to an arm's length transaction without regard to any amount paid to reduce the Yield on the Investment Property, the Fair Market Value of the Investment Property shall be the amount paid for the Investment Property; (B) if Investment Property is sold or otherwise dispos- ed of in an arm's length transaction without regard to any reduction in the disposition price to reduce the Arbitrage Profits, the Fair Market Value of the Investment Property shall be the amount realized from the sale or other disposi- tion of the Investment Property; and (C) if a United States Treasury obligation is acquired directly from or disposed of directly to the United States Treasury (as in the case of SLGS), such acquisition or dis- position shall be treated as establishing a market for the -19- 4 a. obligation and as establishing the Fair Market Value of the obligation. (D) Except to the extent provided in (E) and (F) below, any Investment Property for which there is not an established market shall be considered acquired for an amount in excess of the Fair Market Value of the Investment Property. (E) In the case of a certificate of deposit issued by a commercial bank for which there is no active secondary mar- ket, the certificate of deposit shall be considered acquired or disposed of for an amount equal to the Fair Market Value of the certificate of deposit if the certificate of deposit has a Yield (i) in the case of an acquisition, as high or higher, or in the case of a disposition, as low or lower, than the Yield on comparable obligations traded on an active secondary market, as certified by a dealer; and (ii) in the case of an acquisition, as high or higher, or in the case of a disposition, as high or higher, than the Yield available on comparable obligations offered by the United States Treasury. The certification referred to in (i) must be executed by a dealer who maintains an active secondary market in comparable certificates of deposit and must be based on actual trades adjusted to reflect the size and term of that certificate of deposit and the stability and reputation of the person is- suing the certificate of deposit. (F) In the case of an investment contract or repurchase agreement, the obligations acquired thereunder shall be con- sidered acquired and disposed of for an amount equal to the Fair Market Value of such obligations if: (i) at least three bids on the investment contract or repurchase agreement are received from persons other than those with an interest in the Bonds (e.g. the Underwriters); (ii) a certification is provided by the person whose bid is accepted that, based on that person's reasonable expectations on the date the instrument or repurchase agree- ment is entered into, obligations will not be acquired pur- suant to such investment contract or repurchase agreement at a price in excess of their Fair Market Value or sold pursuant to the investment contract or repurchase agreement at a price less than Fair Market Value; (iii) the Yield on the investment contract or repur- chase agreement is at least equal to the Yield offered under the highest bid received from a non-interested party; and (iv) the Yield on the investment contract or repur- chase agreement is at least equal to the Yield offered on similar obligations under similar investment contracts or repurchase agreements (e.g., the Yield on investment con- -20- 1 4 tracts or repurchase agreements entered into by issuers of qualified mortgage bonds). "Governmental Purpose" means the governmental purpose of refunding the 1979 Water Bonds, Series B for which the Bonds will be issued. "Gross Proceeds" means (A) amounts received by the District from the sale of the Bonds; (B) amounts treated as transferred proceeds (as defined in Treasury Regulations Section 1.103-(e)(2)(ii)) of the Bonds; (C) amounts treated as proceeds under Treasury Regulations Section 1.103-13(g) (relating to invested sinking funds); (D) amounts invested in a reasonably required reserve or replacement fund (as defined in Treasury Regulation Section 1.103-14(d)) (E) securities or obligations pledged by the District as security for payment of debt service on the Bonds; (F) amounts used or available to pay debt service on the Bonds; and (G) amounts received as a result of investing any Gross Proceeds. The determination of whether an amount is included within this definition shall be made without regard to whether the amount is credited to any fund or account established under this resolution, or (except in the case of an amount described in (E) above) whether the amount is subject to the pledge of this resolu- tion. For purposes of (E) above, an amount is pledged to pay principal of or interest on the Bonds if there is reasonable assurance that the amount will be available for such purposes even if the District encounters financial difficulties. "Investment Earninas" include all interest, dividends and other amounts gained or lost with respect to the invest- ment. "Investment Property" means any security or obligation (other than Municipal Obligations), any annuity contract or any other investment-type property, as defined by the Code. "Materially Higher" shall have the meaning set forth in Treasury Regulations Section 1.103-13(b)(5) or any successor thereto. "Municipal Obliaations" means obligations issued by a state or local entity as permitted by law, the interest on which is excluded from gross income for purposes of federal taxation. "No Arbitrage Certificate" means the certification from the District as to the expected use of the Bond proceeds and other matters, delivered on the date hereof in connection with the issuance of the Bonds. "Nonourpose Investment" means any Investment Property in which Gross Proceeds are invested which is not acquired to carry out the Governmental Purpose of the Bonds (e.g. -21- f t obligations acquired with Gross Proceeds that are invested temporarily until needed for the Governmental Purpose of the Bonds), that are used to discharge a prior issue, that are invested in a reasonably required reserve or replacement fund (as defined in Treasury Regulations Section 1.103-14(d)), or that are part of the Bond Service Account; provided, however, for purposes of calculating the Arbitrage Profits, such term shall not include any amount earned on any Investment Prop- erty contributed to the Bond Service Account and amounts earned on such amounts (if said earnings are allocated to the Bond Service Account) for a particular Bond Year if the gross earnings on the Bond Service Account for such Bond Year (determined in the same manner as for purposes of the Arbitrage Profits) are less than $100,000. "ODinion of Bond Counsel" means an opinion of nationally recognized Bond Counsel. "Permitted Investments" means all of those investments in which the District is permitted to invest, pursuant to Government Code Section 53601, including any subsequent amendments thereto, the Local Agency Investment Fund established pursuant to Section 16429 of the Government Code and Municipal Obligations. "Proceeds of the Issue" includes the aggregate principal amount of the Bonds, plus premium, if any and accrued inter- est received. "Tax Computation Date" means for each Bond Year, the last date in such Bond Year when payment of principal of or interest on the Bonds is due. "Yield" means that yield which, when used in computing the present worth of payments of principal and interest to be paid on the obligations, produces an amount equal to its purchase price or market price as determined under Treasury Regulation Sec. 1.103-13(c)(1)(iii). Such yield shall be calculated on the basis of actual events. The Yield on acquired obligations shall be calculated by the use of the same frequency interval of compounding interest as that pro- vided on the Bonds. Any acquired obligations held beyond the last expected maturity date of the Bonds shall be deemed to be sold on such maturity date. b) Yield Restriction. Except for the investment of moneys in Municipal Obligations, and except with respect to Gross Proceeds of the Bonds invested in Permitted Investments (so long as such investments mature on or prior to the earliest of the Date of Completion, or the last day of the applicable Temporary Period, as defined in the Treasury Regulations) during an applicable Temporary Period, as expressly permitted by the Code and the Treasury Regulations, all Gross Proceeds, if any, shall be separately invested in -22- f • Permitted Investments, so long as such investments do not, at any time, produce a Yield which is Materially Higher than the Bond Yield. C) Arbitraae Profits Pavment. (i) Commutation. Within 25 days after each Tax Computation Date, the District shall compute the Arbitrage Profits for the Bond Year ending on such Tax Computation Date. The District will immediately transfer such Arbitrage Profits to the Excess Earnings Tracking Account, which is hereby established. (ii) Date for Pavment of 90%. Not later than 30 days from the fifth Tax Computation Date and every fifth Tax Computation Date thereafter, the District will remit to the Internal Revenue Service a payment which, when aggregated with all prior payments to the Internal Revenue Service under this Section ensures that the District has paid an amount which is equal to at least ninety percent (90%) of the Arbitrage Profits for the period from the Closing Date through such Tax Computation Date. (iii) Date for Pavment of Balance to Eaual 100%. No later than sixty (60) days after the day on which the last Bond is paid or redeemed, the District shall pay to the Internal Revenue Service an amount which, when added to all prior payments hereunder, is equal to 100 percent (100%) of the Arbitrage Profits for the period from the delivery date of the Bonds through the date that the last Bond is paid or redeemed. (iv) Place for Pavment: Returns and Records. Each payment required to be made pursuant hereto, shall be filed with the Internal Revenue Service Center, Philadelphia, Pennsylvania 19255, on or before the date such payment is due, and shall be accompanied by (a) a statement summarizing the determination of the amount required to be paid, and (b) a copy of the Internal Revenue Service Form 8038 filed with respect to the Bonds, if any, or such other form as may be required. The District must retain records of the determinations required by this Section 14 until six (6) years after the retirement of the last obligation of the Bonds. (v) Source of Pavment. The Arbitrage Profits Payment shall be made first from moneys in the Excess Earnings Tracking Account, and to the extent moneys are not available therefrom, from any other source of moneys available to the District. d) Exceptions to Reauirements. Notwithstanding any provision of this resolution, if both initial earnings and reinvestment earnings on the Bond Service Account for a -23- t 0 particular Bond Year are less than One Hundred Thousand Dollars ($100,000), such earnings are excluded from the requirements of Section 14(c) hereof, and the requirements of Section 14(c) are inapplicable to such earnings. e) Modification of Covenants. Notwithstanding any provision of this resolution, if the District receives an Opinion of Bond Counsel that any action required by this Section 14 is no longer required, or that some further action is required to maintain exclusion of such interest from gross income for federal income tax purposes, such covenants shall be deemed to be modified to that extent. f) Tax Covenant. In order to maintain the exemption from federal income taxation of interest on the Bonds, the District covenants to comply with all applicable requirements of the Code and all regulations, rulings and decisions in connection therewith. Section 15. In consideration of the acceptance of the Bonds, the issuance of which is authorized hereunder, by those who shall hold the same from time to time, this resolu- tion shall be deemed to be and shall constitute a contract between the District and the registered owners from time to time of the Bonds and interest coupons appertaining thereto, and the representations set forth herein and the covenants and agreements herein set forth to be performed on behalf of the District shall be for the equal and proportionate bene- fit, security and protection of all registered owners of the Bonds authorized hereunder, without preference, priority or distinction as to security or otherwise of any of the Bonds authorized hereunder over any of the others by reason of time of issue, sale or negotiation thereof or otherwise for any cause whatsoever, and except as Bonds of various series may differ with respect to date, number, interest rates, maturity, redemption provisions or otherwise as expressly authorized hereunder. Section 16. The official statement describing the Bonds in substantially the form submitted to the Board, subject to whatever additions and corrections may be deemed advisable by the District's underwriter, is hereby adopted as the official statement describing the Bonds and the underwriter, Bank of America National Trust and Savings Association, is hereby authorized and directed to distribute same to prospective purchasers of the Bonds. The Preliminary Official Statement heretofore distributed to prospective purchasers of the Bonds is hereby approved and such distribution is hereby ratified. The President of the Board or General Manager of the District are hereby authorized and directed to execute the Official Statement on behalf of the District. -24- f • Section 17. The Escrow Agreement, dated as of February 1, 1987, by and between the District and Bank of America National Savings Association, as escrow agent (the "Escrow Agreement") in substantially the form heretofore submitted to the Board, subject to whatever additions, amendments or omissions which may be deemed advisable by the District's special bond counsel, is hereby approved and the President of the Board is hereby authorized and directed to execute the Escrow Agreement on behalf of the District. As set forth in the Escrow Agreement, this Board further irrevocably instructs said Escrow Agent to cause notice of redemption of the 1979 Water Bonds, Series B to be given in the manner and at the earliest date permitted by Resolution No. 79-13, as amended. The Board further finds that the conditions of Section 9 of Resolution No. 79-13 for defeasance of the 1979 Water Bonds, Series B will be satisfied by the deposit of moneys and securities in accordance with the terms of the Escrow Agreement. PASSED AND ADOPTED this 5th day of February, 1987, by the following vote: AYES: Directors Paul Armstrong, Sterling Fox, M. Roy Knauft, Jr.,William R. Mills, NOES: None Whit Cromwell ABSTAIN: None ABSENT: None [SEAL) President of the Board of Directors of Yorba Linda Water District Attest: /fecre ary o Yorba inda Water District -25- 0 0 SECRETARY'S CERTIFICATE I, Ralph Shook, Secretary of Yorba Linda Water District, hereby certify that the foregoing is a full, true and correct copy of a resolution duly adopted at an adjourned regular meeting of the Board of Directors of said District duly and regularly held at the regular meeting place thereof on February 5, 1987, of which meeting all of the members of said Board had due notice and at which a majority thereof was present; and that at said meeting said resolution was adopted by the following vote: AYES: Directors Armstrong, Fox, Knauft, Mills, Cromwell NOES: None ABSTAIN: None ABSENT: None I further certify that I have carefully compared the same with the original resolution on file and of record in my office; that the foregoing is a full, true and correct copy of said original resolution adopted at said meeting; and that the foregoing has not been amended, modified or rescinded since the date of its adoption, and is now in full force and effect. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of said District on February 5, 1987. /6e *ra of Yorbe District [SEAL] 4/146/009412-0092/002 Linda Water -26-