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HomeMy WebLinkAboutItem 2b: Adopt Resolution No. 6848 providing for the issuance of General Obligation Refunding Bonds (Police Station) (2). STAFF REPORT Development Services Department DATE: September 18, 2012 TO: Honorable Mayor and City Council FROM: Hue Quach, Administrative Services Director `'D �• By: Jerry Schwartz,- Economic Development Manager jg SUBJECT: RESOLUTION NO. 6848 OF THE CITY COUNCIL PROVIDING FOR THE ISSUANCE OF GENERAL OBLIGATION REFUNDING BONDS, SERIES 2012 (POLICE STATION) IN THE PRINCIPAL AMOUNT NOT TO EXCEED SEVEN MILLION DOLLARS ($7,000,000) Recommended Action: Adopt SUMMARY On May 16, 2001, the City issued $8,000,000 of 30 -year General Obligation Bonds to fund a portion of the construction of the Police Station (the remainder was funded with tax allocation bonds). The true interest cost on the bonds was 5.10 %. During a City Council Study Session on August 7, 2012, the City Council authorized proceeding with refunding the outstanding remaining principal bond amount of $6,110,000. The bonds would be called as of February 1, 2013, with the true interest cost of the refunding estimated to be 3.02 %. The term of the bonds would not be extended by the refunding. The resolution and documents included with this report are necessary to effectuate the refunding. BACKGROUND At an election of registered voters of the City held on November 2, 1999, more than two - thirds (2/3) of the votes cast supported the issuance and sale of $8.0 million principal of General Obligation bonds to finance the majority of the costs of constructing a new police station facility at its current location in the Civic Center, south of the City Council Chambers. The remaining costs were funded through the issuance of redevelopment tax allocation bonds. The General Obligation bonds were issued on May 16, 2001. As indicated in the proposition before the voters in 2001, the Police Station includes facilities for emergency operations, police dispatch, 911 communications, detective bureau, records, police laboratory, jail facility, evidence storage, and other facilities necessary for effective law enforcement. The Police Station was dedicated on Resolution No. 6848 September 18, 2012 Page 2 of 5 October 3, 2003. Regular principal and interest payments have been made on the bonds for the past 11 years. Because interest rates are extremely low, staff and its financial advisor, Fieldman, Rolapp & Associates, presented the possibility of refunding these bonds, lowering the true interest cost from 5.10% to approximately 3.02% while reducing the assessment to property owners in Arcadia over the remaining life of the bonds. At the August 7 Study Session, the City Council authorized staff to proceed with the refunding. Resolution No. 6848 provides for the issuance of not to exceed $7.0 million principal amount to refund the remaining 2001 General Obligation bonds. Other documents that are part of the refunding process are also included. DISCUSSION The $8.0 million General Obligation bond for construction of the Police Station was issued on May 16, 2001. The bonds were issued based on the approval of more than 2/3 of the votes cast. The true interest cost of the bonds was 5.10 %. Based on current interest rates being close to historic lows, it is possible to do a current refunding of the remaining $6.11 million principal amount of bonds, and generate a present value savings of almost $1.0 million over the remaining life of the bonds. This can be accomplished because the true interest cost of the refunded bonds is anticipated to be approximately 3.02 %. This would be considered a current refunding, with the outstanding bonds to be called in February 2013. After receiving authorization from the City Council, staff and the consultant team, headed by Fieldman Rolapp & Associates, have been working on draft documents in preparation for a competitive sale of the bonds on October 23, 2012. City staff and Fieldman Rolapp & Associates held a conference call with a representative of Standard & Poor's on August 27 to discuss the City's financial status and the specifics of the refunding in an effort to receive a high rating on the refunding. Standard & Poor's gave the bonds a rating of AA +, with a stable outlook. The high rating enhances the attractiveness of the bonds in the marketplace, generally allowing them to be sold at slightly lower interest rates in comparison to the overall market. The City also received a AA+ rating when it issued the 2011 General Obligation Bonds for the Santa Anita Avenue Grade Separation. Through the preliminary work done on the refunding, it was determined that this issuance can qualify as a Bank Qualified issue. Per Fieldman Rolapp & Associates' recommendation, it would be in the best interest of the taxpayers to designate the 2012 G.O. bond refunding as "qualified tax - exempt obligations" (i.e. Bank Qualified) for the purposes of Section 265 (b)(3) of the Internal Revenue Code of 1986. The 2011 Grade Separation bonds were also "Bank Qualified ". It should be noted that designating the 2012 G.O. Bonds as Bank Qualified will most likely prohibit the City, or any of its related entities, from issuing any additional bonded Resolution No. 6848 September 18, 2012 Page 3 of 5 indebtedness for the balance of 2012, since the exemption states that the issuer of Bank Qualified debt cannot issue more than $10.0 million in debt during that calendar year. With the proposed sale date of these bonds in mid - October, there would not be enough time to issue additional debt in 2012. Having the 2012 G.O. Bonds as designated as Bank Qualified will allow them to be purchased by certain institutions, namely bank trust departments, that otherwise would not purchase tax - exempt securities. The addition of these buyers should enhance competition for the City's debt and likely produce lower overall borrowing costs for this transaction. Bond Documents There are several documents in the agenda package related to the G.O. Bond issue for your consideration and approval: Attachment 1 — Draft Preliminary Official Statement (POS) for the issuance of approximately $6.11 million in G.O. Bonds. This document was prepared by the City's Disclosure Counsel, Best Best & Krieger, and reviewed by staff and the City's bond counsel, Stradling, Yocca, Carlson & Rauth. The POS is a document that states the major facts about the City, its current financial and development history, its management system, the bond issue's purpose, bid, sale, and awards procedures, the procedure to call the outstanding bonds from 2001, payments of principal and interest, the term of the bonds (still paid off in 2031; no extension of the term as part of the refunding), registration, redemption, transfer and exchange of bonds, creation of funds for the accounting of the bonds, continuing disclosure requirements, tax exempt opinion, and Constitution and State provisions affecting this bond issue. It also includes the Continuing Disclosure language that requires the City to notify bondholders of any occurrence that might involve some risk to the principal or interest payments. The POS is the basic source of information to the potential. bond buyer and as such it is essential that the information be accurate and complete. Attachment 2 — Escrow Agreement Relating to the Defeasance of the City of Arcadia Bonds. This is an agreement between the City and Bank of New York Mellon Trust Company, N.A., which acts as the escrow agent for the 2001 Bonds and will perform in the same capacity for the 2012 Refunding Bonds. The escrow agreement spells out the timing and process for calling and paying off the 2001 bonds and the rules governing investment of -iunds and other essential details. Attachment 3 — Paying Agency Agreement. This is also an agreement between the City and Bank of New York Mellon Trust Company, N.A. regarding its role as the paying agent and transfer agent for the 2012 Refunding Bonds. Resolution No. 6848 September 18, 2012 Page 4of5 Attachment 4 — Resolution No. 6848. This Resolution approves the 2012 G.O. Bond refunding. The Resolution includes the essential elements November 2, 1999, vote to issue the bonds to construct the Police Station and the $8.0 million G.O. Bond issue of 2001 to fund a large portion of the project, and the basic steps necessary to call the remaining 2001 bonds as a current refunding, and to issue up to $7.0 million to as part of the 2012 G.O. Bond refunding. There is also a Supplement to Resolution No. 6848 that sets forth the terms that govern the G.O. Bond refunding, including how the bonds will be denominated ($5,000), bid, sold, awarded, executed, authenticated, registered, transferred, exchanged, and redeemed. It also establishes the investment policy (pursuant to federal and state law) and tax covenants. Costs and Benefits of G.O. Bond Refunding The G.O. Bond refunding will reduce the net interest cost from 5.10% in 2001 to approximately 3.02 %. This will result in a net present value savings of almost $1 million, which will directly benefit the Arcadia tax payers by lowering the amount of their assessment for the final 19 years of the bond issue. There are costs involved in this refunding as there are with any bond issue. These costs have been factored into the calculation of net present value savings referenced above. While this would be a current refunding, there is a 1 % premium that will be paid to bondholders to call the bonds in February 2013 as is planned. There are costs associated with the experienced team that has been assembled to complete the refunding. The functions and estimated costs are shown in the table below: Function Estimated Cost Bond Counsel $37,500 City Attorney 7,500 Disclosure Counsel 25,000 Financial Advisor 45,500 Rating Agency 15,000 Paying Agent 2,500 Underwriters Discount 61,100 Printing/Publication/Disclosure/Contingency 17,000 Total $211,100 Steps to Complete Refunding Upon approval of the proposed actions, there are a few very important steps remaining before the bonds close and the process to call the existing bonds proceeds. The Preliminary Official Statement will be distributed and made available for downloading on Resolution No. 6848 September 18, 2012 Page 5 of 5 the Fieldman Rolapp & Associates website. The date of the sale is anticipated to be October 23, 2012, on a competitive bid basis with all electronic bids to be submitted via Parity, the electronic bidding system. The bonds will close on or around November 6, 2012, and on February 1, 2013, the 2001 G.O. bonds will be redeemed. CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) The issuance of the 2012 G.O. Refunding Bonds is not considered a project under CEQA Section 15378, and thus is not subject to CEQA pursuant to Section 15060 (c)(3). FISCAL IMPACT There is no impact on the City or the General Fund from the 2012 G.O. Bond refunding. The benefit will accrue to the Arcadia taxpayers from the reduction in annual assessments over the remaining 19 years of the bond issue, which will be paid off in 2031. In present value, that savings is estimated at nearly $1 million, including the cost associated with the refunding. RECOMMENDATION Adopt Resolution No. 6848 providing for the issuance of General Obligation Refunding Bonds, Series 2012 (Police Station) in the principal amount not to exceed seven million dollars ($7,000,000). Approved: �cLaz�ret�to� Cit y Manager Attachment 1 — Preliminary Official Statement Attachment 2 — Escrow Agreement Relating to the Defeasance of the City of Arcadia Bonds Attachment 3 — Paying Agency Agreement Attachment 4 — Resolution No. 6848 ATTACHEMENT 1 E 8 •L" H A 30 0 CL 4j O H ..g • a C � O C C G C � •a�H .= o 5 N � F C d _ u Q Vi i' W v V �� 4n = S .L G 0Ew .c � o 3•� c 4 Cj L V. 0 C 7 a C U d h G O _ C yea 0 g =' u L ,�C U U 5 C eL o;. s C =.r : O u L.- PRELIMINARY OFFICIAL STATEMENT DATED SEPTEMBER _, 2012 . NEW ISSUE — BOOK -ENTRY ONLY RATINGS: S &P: "AA +" (See "RATINGS" herein) In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, under existing laws, regulations, rulings and judicial decisions, and assuming certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the 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 Bonds is exempt from State of California personal income taxes. The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity with respect to the Bond constitutes original issue discount. See "LEGAL MATTERS" herein. $6,110,000" CITY OF ARCADIA General Obligation Refunding Bonds, Series 2012 (Police Station Project) (Bank Qualified) Dated: Date of Delivery Due: August I as shown below The general obligation bonds captioned above (the `Bonds ") are being issued by the City of Arcadia (the "City") under the provisions of Chapter 4 (commencing with Section 43600) of Division 4 of Title 4 and Articles 9 and 11, Chapter 3, Part 1 of Division 2 of the California Government Code, pursuant to Resolution No. 6848 and Supplement to Resolution No. 6848, each adopted by the City Council of the City on September 18, 2012 (as supplemented, the "Resolution "). The City has appointed The Bank of New York Mellon Trust Company, N.A. (the "Paying Agent ") to act as paying agent for the Bonds. The proceeds of the Bonds will be used to refund the City's Series A of 2001 General Obligation Bonds of the City of Arcadia (Police Station Project) (the "Prior Bonds ") and to pay costs relating to the issuance of the Bonds and the refunding of the Prior Bonds. Proceeds of the Prior Bonds were used to finance the construction and completion of a police station in the Arcadia Civic Center and related facilities. See "PLAN OF REFUNDING." The Bonds are general obligations of the City, payable solely from ad valorem property taxes levied on behalf of the City and collected by Los Angeles County (the "County"). The City Council is empowered to direct the County, and the County is obligated to levy ad valorem taxes for the payment of principal of and interest on the Bonds upon all property subject to taxation by the City, without limitation of rate or amount (except certain personal property which is taxable at limited rates). See "SECURITY FOR THE BONDS" herein. The Bonds will be issued in book -entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York ( "DTC "). The Bonds are issuable as fully registered securities in denominations of $5,000 or any integral multiple of $5,000. Purchasers of the Bonds (the "Beneficial Owners ") will not receive physical certificates representing their interest in the Bonds. See "THE BONDS" herein and "APPENDIX F —DTC AND THE BOOK -ENTRY ONLY SYSTEM." Interest nn the Bonds accrues from the date of delivery and is payable semiannually on February ! and August I of each year, commencing February 1, 2013. Payments of principal of and interest on the Bonds will be paid by the Paying Agent, to DTC for subsequent disbursement to DTC Participants, which will remit such payments to the Beneficial Owners of the Bonds. See "THE BONDS — Description of the Bonds" herein. The Bonds are subject to redemption prior to maturity. See "THE BONDS— Redemption" herein. * Preliminary, Subject to change. $6,110,000' CITY OF ARCADIA General Obligation Bonds, Series 2012 (Police Station Project (Bank Qualified) MATURITY SCHEDULE" $ Serial Bonds CUSIPt Prefix Maturity Principal Interest Au ust 1 Amount Rate Yield $ – % Term Bonds maturing August 1, 20_; Yield: $ – % Term Bonds maturing August 1, 20_; Yield: CUSIP* Suffix %— CUSIPI: %— CUSIP *: This cover page contains information for general reference only. It is not a summary of this issue. Potential purchasers of the Bonds are advised to read the entire Official Statement to obtain information essential to making an informed investment decision. The Bonds were sold at competitive bid on , 2012 at a true interest cost of % in accordance with the provisions of the Notice Inviting Proposals for Purchase of Bonds, dated ' 2012. The Bonds will be offered when, as and if issued and received by the Underwriter subject to the approval of legality by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel. Certain disclosure matters will be passed upon for the City by Best Best & Krieger LLP, Riverside, California, Disclosure Counsel. Certain matters will be passed upon for the City by Best Best & Krieger LLP, the City Attorney. It is expected that the Bonds, in book -entry form, will be available for delivery on or about November _, 2012. Dated: 2012 Preliminary, subject to change. Copyright 2011, American Bankers Association. CUSIP® is a registered trademark of the American Bankers Association. CUSIP data herein is provided by the CUSIP Service Bureau, operated by Standard & Poor's, a division of The McGraw -Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services Bureau. CUSIP numbers have been assigned by an independent company not affiliated with the City and are included solely for the convenience of the holders of the Bonds. The City is not responsible for the selection or uses of these CUSIP nufnbers, and no representation is made as to their correctness on the Bonds or as included herein, The CUSIP number for a specific maturity is subject to being changed after the issuance of the Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Bonds. GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT Use of Official Statement. This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official Statement is not a contract between any bond owner and the City or the Underwriter. This Official Statement and the information contained herein are subject to completion or amendment without notice. No Offering Except by This Official Statement. No dealer, broker, salesperson or other person has been authorized by the City or the Underwriter to give any information or to make any representations other than those contained in this Official Statement and, if given or made, such other information or representation must not be relied upon as having been authorized by the City or the Underwriter. No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. Estimates and Projections. When used in this Official Statement and in any continuing disclosure by the City, in any press release and in any oral statement made with the approval of an authorized officer of the City, the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimate," "project," "forecast," "expect," "intend" and similar expressions identify "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward - looking statements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material. Information in Official Statement. The information set forth in this Official Statement has been furnished by the City and other sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness by the City. The City maintains a website. Unless specifically indicated otherwise, the information presented on such website is not incorporated by reference as part of this Official Statement and should not be relied upon in making investment decisions with respect to the Bonds. Document Summaries. All summaries of the Resolution or other documents referred to in this Official Statement are made subject to the provisions of such documents and qualified in their entirety by reference to such documents, and do not purport to be complete statements of any or all of such provisions. No Securities Laws Registration. The Bonds have not been registered under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, in reliance upon exceptions therein for the issuance and sale of municipal securities. The Bonds have not been registered or qualified under the securities laws of any state. Effective Date. This Official Statement speaks only as of its date, and the information and expressions of opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official Statement nor any sale of the Bonds will, under any circumstances, give rise to any implication that there has been no change in the affairs of the City, or the other parties described in this Official Statement, or the condition of the property within the City since the date of this Official Statement. CITY OF ARCADIA (Los Angeles County, California) 240 West Huntington Drive Arcadia, California 91066 CITY COUNCIL MEMBERS Robert C. Harbicht, Mayor Mickey Segal, Mayor Pro Tem Peter Amundson, Council Member Gary A. Kovacic Council Member John Wuo, Council Member CITY CLERK Gene Glasco CITY STAFF Dominic Lazzaretto, City Manager Jason Kruckeberg, Assistant City Manager /Development Services Director Hue Quach, Administrative Services Director P. Shannon Huang, Financial Services Manager /City Treasurer Jerry Schwartz, Economic Development Manager SPECIAL SERVICES Bond Counsel Stradling Yocca Carlson & Rauth a Professional Corporation Newport Beach, California Disclosure Counsel Best Best & Krieger LLP Riverside, California Financial Advisor Fieldman, Rolapp & Associates Irvine, California Paying Agent, Escrow Agent and Dissemination Agent The Bank of New York Mellon Trust Company, N.A. Global Corporate Trust Los Angeles, California Verification Agent Grant Thornton Minneapolis, Minnesota TABLE OF CONTENTS Page INTRODUCTION................................................................................................................................... ............................... 1 PLANOF FINANCE ............................................................................................................................... ....I.......................... 2 Refundingof Prior Bonds ................................................................................................................ ............................... 2 Sourcesand Uses of Funds .............................................................................................................. ............................... 3 THEBONDS ........................................................................................................................................... ............................... 3 Authorityfor Issuance ..................................................................................................................... ............................... 3 Descriptionof the Bonds ................................................................................................................. ............................... 3 Redemption..................................................................................................................................... ............................... 4 Selectionof Bonds for Redemption ................................................................................................. ............................... 5 Noticeof Redemption ...................................................................................................................... ............................... 5 Effectof Redemption ...................................................................................................................... ............................... 6 Registration, Transfer and Exchange of Bonds ............................................................................... ............................... 6 DebtService .................................................................................................................................... ............................... 6 Creationand Establishment of Funds .............................................................................................. ............................... 6 TaxCovenants ................................................................................................................................. ............................... 8 Amendmentto Resolution ............................................................................................................... ............................... 9 Defeasance....................................................................................................................................... ............................... 9 DEBTSERVICE SCHEDULE .............................................................................................................. ............................... 10 SECURITYFOR THE BONDS ............................................................................................................ ............................... I 1 AdValorem Taxes ......................................................................................................................... ............................... I 1 LimitedObligation ........................................................................................................................ ............................... 12 PROPERTYTAXATION ...................................................................................................................... ............................... 12 PropertyTax Collection Procedures .............................................................................................. ............................... 12 Taxation of State- Assessed Utility Property .................................................................................. ............................... 12 AssessedValuation ........................................................................................................................ ............................... 13 TaxRates ....................................................................................................................................... ............................... 15 Tax Levies and Delinquencies on Outstanding City General Obligation Bonds ........................... ............................... 16 MajorTaxpayers ............................................................................................................................ ............................... 16 Directand Overlapping Debt ......................................................................................................... ............................... 17 CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING CITY REVENUES AND APPROPRIATIONS................................................................................................................ ............................... 18 Article XIIIA of the State Constitution ......................................................................................... ............................... 19 Legislation Implementing Article XIIIA ....................................................................................... ............................... 19 Article XIIIB of the State Constitution .......................................................................................... ............................... 19 Articles XIIIC and XIIID of the State Constitution ....................................................................... ............................... 20 Proposition62 ................................................................................................................................ ............................... 21 Proposition1A ................................................................................................................................. .............................21 PossibleFuture Initiatives ............................................................................................................. ............................... 22 LEGALMATTERS ............................................................................................................................... ............................... 22 Approvalof Legal Proceedings ..............................................................................................:...... ............................... 22 Absenceof Material Litigation ...................................................................................................... ............................... 22 TaxMatters .................................................................................................................................... ............................... 22 BANKQUALIFIED .............................................................................................................................. ............................... 24 CONTINUINGDISCLOSURE ............................................................................................................... .............................24 RATINGS.............................................................................................................................................. ............................... 24 FINANCIALADVISOR ....................................................................................................................... ............................... 24 UNDERWRITING................................................................................................................................. ............................... 25 VERIFICATION.................................................................................................................................... ............................... 25 EXECUTION......................................................................................................................................... ............................... 25 APPENDIX A — GENERAL DEMOGRAPHIC AND ECONOMIC INFORMATION REGARDING THE CITY OF ARCADIA AND LOS ANGELES COUNTY ................................................................ ............................A -1 APPENDIX B — CITY OF ARCADIA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2011 ................................................................................................... ............................... B -1 APPENDIX C — PROPOSED FORM OF OPINION OF BOND COUNSEL ...................................... ............................... C -1 APPENDIX D — FORM OF CONTINUING DISCLOSURE CERTIFICATE .................................... ............................... D -1 APPENDIX E — DTC AND THE BOOK -ENTRY ONLY SYSTEM .................................................. ............................... E -1 CITY OF ARCADIA LOCATION MAP City of Arcadia i (Los Angeles Countyy California) 0 Regional Location Map LOS AN G E L E S 1 C O U N T Y 1 Fernando l� Burbank Paw Arca ' Glendora 1� romnna Ontario ... Covina Chino Los _ Angeles Whittier m r� Yorba' ., Linda `, Norco !, m Fulknion m oron Torrance } i � Garden '. Grove ti GRANGE SiMa COUNTY Ana Be Code Irvine N .... ' ,Mesa fi � F �r F sS i i ,t r $6,110,000` CITY OF ARCADIA General Obligation Refunding Bonds, Series 2012 (Police Station Project) (Bank Qualified) The purpose of this Official Statement, which includes the cover page and attached appendices, is to set forth certain information concerning the sale and delivery of the bonds captioned above (the "Bonds ") by the City of Arcadia (the "City"). All capitalized terms used in this Official Statement, unless noted otherwise, have the meanings set forth in the Resolution (as defined below). INTRODUCTION This Introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement and the documents summarized or described herein. A full review should be made of the entire Official Statement. The offering of Bonds to potential investors is made only by means of the entire Official Statement. The City. The City is located in Los Angeles County (the "County "), about 20 miles northeast of Los Angeles. The City is a chartered city incorporated in 1903 with a Council - Manager form of government made up of five City Council Members elected to four -year overlapping terms. The City encompasses an area of approximately 11.2 square miles and has a population of 56,546 as of January 1, 2012. The City provides police protection, fire protection, animal control, emergency medical aid, building safety regulation and inspection, street lighting, water and sewer service, refuse collection, land use planning, and zoning, maintenance and improvement of street and related structures, traffic safety maintenance and improvement and recreational and cultural programs for citizen participation. See APPENDIX A— GENERAL DEMOGRAPHIC AND ECONOMIC INFORMATION REGARDING THE CITY OF ARCADIA AND LOS ANGELES COUNTY and APPENDIX B— CITY OF ARCADIA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2011, for certain demographic, statistical and financial information regarding the City. Authority for Issuance. The Bonds are being issued under the provisions of Chapter 4 (commencing with Section 43600) of Division 4 of Title 4 and Articles 9 and 11, Chapter 3, Part 1 of Division 2 of the California Government Code (the "Law" and the "Bond Law ", respectively) and Resolution No. 6848 and Supplement to Resolution No. 6848, dated as of November 1, 2012, each adopted by the City Council of the City (the "City Council ") on September 18, 2012 (as supplemented, the "Resolution "). See "THE BONDS — Authority for Issuance." The City has appointed The Bank of New York Mellon Trust Company, N.A. (the "Paying Agent ") to act as paying agent for the Bonds. Purpose for Issuance. The proceeds of the Bonds will be used to refund the City's Series A of 2001 General Obligation Bonds of the City of Arcadia (Police Station Project) (the "Prior Bonds ") and to pay costs relating to the issuance of the Bonds and refunding of the Prior Bonds. Pursuant to the provisions of the Law, as amended, the Prior Bonds were authorized at an election of the registered voters of the City held on November 2, 1999, at which more than two- thirds of the persons voting on the proposition voted to authorize the issuance and sale of not to exceed $8,000,000 principal amount of general obligation bonds to finance the construction and completion of a police station in the Arcadia Civic Center, including facilities for emergency operations, police dispatch and 911 emergency communications, detective bureau, records, police laboratory, jail facility, evidence storage and other related words, property or structures (the "Project "). See "PLAN OF FINANCE — Refunding of Prior Bonds." Preliminary, subject to change. Security and Sources of Payment for the Bonds. The Bonds are general obligations of the City payable solely from ad valorem property taxes levied and collected by the County. The City Council is empowered to direct the County and the County is obligated to annually levy ad valorem taxes for the payment of the Bonds and the interest thereon upon all property within the City subject to taxation by the City, without limitation of rate or amount (except with respect to certain personal property which is taxable at limited rates). See "SECURITY FOR THE BONDS." Payment and Registration of the Bonds. The Bonds will be dated their date of original issuance and delivery (the "Dated Date ") and will be issued as fully registered bonds, without coupons, in the denominations of $5,000 or any integral multiple of $5,000, registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York ( "DTC "), and will be available under the book -entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants as described below. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. See "THE BONDS" and APPENDIX E—DTC AND THE BOOK -ENTRY ONLY SYSTEM. Interest on the Bonds accrues from the Dated Date and is payable semiannually on February 1 and August 1 of each year, commencing February 1, 2013. See "THE BONDS— Description of the Bonds." Early Redemption. The Bonds are subject to optional and mandatory sinking fund redemption prior to their maturity as described in "THE BONDS — Redemption." Other Information. This Official Statement speaks only as of its date, and the information contained herein is subject to change. Copies of documents referred to in this Official Statement and information concerning the Bonds are available from the City of Arcadia City Clerk, 240 West Huntington Drive, Arcadia, California 91066, (626) 574 -5400. The City may impose a charge for copying, mailing and handling. PLAN OF FINANCE Refunding of Prior Bonds Pursuant to the Law, as amended, the Prior Bonds were authorized at an election of the registered voters of the City held on November 2, 1999, at which more than two- thirds of the persons voting on the proposition voted to authorize the issuance and sale of not to exceed $8,000,000 principal amount of general obligation bonds to finance the construction and completion of the Project. The Prior Bonds were issued in the principal amount of $8,000,000 pursuant to provisions of the Law, Resolution No. 6218 adopted by the City Council on April 3, 2001, and that certain Supplement to Resolution No. 6218 dated as of June 1, 2001. All of the proceeds of the Prior Bonds were spent on the Project. A portion of the proceeds of the Bonds will be deposited with the Bank of New York Mellon Trust Company, N.A., as escrow agent (the "Escrow Agent ") under an Escrow Agreement, dated as of November 1, 2012 ( "the Escrow Agreement ") by and between the City and the Escrow Agent. The amount deposited under the Escrow Agreement will be held by the Escrow Agent and will be in an amount sufficient, together with investment earnings thereon, to pay the principal, redemption premium (if any) and interest on the Prior Bonds to the redemption date of February 1, 2013. Upon such deposit, all obligations of the City with respect to the Prior Bonds will cease, except for the City's obligation to pay the principal redemption premium, if any, and interest on the Prior Bonds from such funds deposited with the Escrow Agent. Upon delivery of the Bonds, Grant Thornton, Minneapolis, Minnesota, acting as verification agent, will deliver a report verifying the mathematical accuracy of certain computations conceming (i) the adequacy of the maturing principal of and interest earned on the Defeasance Obligations, together with the cash to be concurrently deposited under the Escrow Agreement, to pay all of the principal and interest due with respect to the Refunded Bonds and to defease and prepay all the outstanding Prior Bonds in full on February 1, 2013, and (ii) the yield on the Defeasance Obligations and the Bonds considered by Bond Counsel in its determination that interest on the Bonds is excluded from gross income for federal income tax purposes. Sources and Uses of Funds The estimated sources and uses of funds with respect to the Bonds will be applied as follows: Sources of Funds Principal Amount of Bonds $ Plus net original offering Premium _ Total Sources $ Uses of Funds Deposit to Escrow Fund $ Deposit for Costs of Issuance Underwriter's Discount _ Total Uses $ (1) Includes Bond Counsel and Disclosure Counsel fees, financial advisor fees, rating fees, printing expenses and other costs of issuance with respect to the Bonds. THE BONDS Authority for Issuance The Bonds are issued under the provisions of the Bond Law and the Resolution. The Bond Law authorizes the City to issue general obligation bonds to refund all or a portion of outstanding bonds previously issued by the City if the total net interest cost to maturity on the refunding bonds plus the principal amount of the refunding bonds does not exceed the total net interest cost to maturity of the outstanding bonds plus the principal amount of the outstanding bonds to be refunded. Description of the Bonds Paying Agent. The Bank of New York Mellon Trust Company, N.A., located in Los Angeles, California, will act as the registrar, transfer agent, and paying agent for the Bonds (the "Paying Agent "). Book -Entry Form. The Bonds will be issued in book -entry form only, and will be initially issued and registered in the name of Cede & Co. as nominee of The Depository Trust Company, New York, New York ( "DTC "). Purchasers of the Bonds (the `Beneficial Owners ") will not receive physical certificates representing their interest in the Bonds. Payments of principal of and interest on the Bonds will be paid by the Paying Agent to DTC for subsequent disbursement to DTC Participants which will remit such payments to the Beneficial Owners of the Bonds. As long as DTC's book -entry method is used for the Bonds, the Paying Agent will send any notice of prepayment 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 such notice and its content or effect will not affect the validity or sufficiency of the proceedings relating to the prepayment of the Bonds called for prepayment or of any other action premised on sv h notice. The Paying Agent, the City, and the Underwriter of the Bonds have no responsibility or liability for any aspects of the records relating to or payments made on account of beneficial ownership, or for maintaining, supervising or reviewing any records relating to beneficial ownership, of interests in the Bonds. In the event that either (i) DTC determines not to continue to act as securities depository for the Bonds, or (ii) the City determines to terminate DTC as a securities depository for the Bonds, then the City will 3 discontinue the book entry system with DTC. If the City fails to identify another securities depository to replace DTC, then the Bonds shall no longer be required to be registered in the registration books maintained by the Paying Agent in the name of DTC, but shall be registered in whatever name or names the owners transferring or exchanging Bonds shall designate, in accordance with the provisions of the Resolution. See APPENDIX E —DTC AND THE BOOK -ENTRY ONLY SYSTEM. Payment of Principal and Interest. The Bonds will be dated their Dated Date, will bear interest from their Dated Date, payable semiannually on February 1 and August 1 (each, and "Interest Payment Date "), commencing February 1, 2013, and will mature on August 1 in each of the designated years and in the principal amounts shown on the cover of this Official Statement. Interest will be calculated on the basis of a 360 -day year composed of twelve 30 -day months. Each Bond shall bear interest from the Interest Payment Date next preceding the date of authentication with respect to which interest has been paid or provided for (unless (i) the date of authentication is prior to the first Regular Record Date, in which event from the Dated Date, (ii) the date of authentication is after a Regular Record Date and before the following Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (iii) it is authenticated as of an Interest Payment Date, in which event it shall bear interest from such date) until the principal thereof shall have been paid. The Bonds will be in fully registered form, without coupons, in the denominations of $5,000 or any integral multiple thereof, provided that no Bond will have principal maturing on more than one principal maturity date. Interest on each Bond shall be paid by the Paying Agent by check mailed by first class mail, postage prepaid, on the Interest Payment Date to the owner as his or her name and address appear on the register kept by the Paying Agent at the close of business on the applicable Record Date. At the request of any owner of at least $1,000,000 in aggregate principal amount of Bonds, interest on the Bonds will be paid by wire transfer in immediately available funds if such request is made at least fifteen days before the Record Date for such payment, any such designation to remain in effect until withdrawn. Principal of the Bonds is payable in lawful money of the United States of America at the principal office of the Paying Agent in Los Angeles, California. Denominations and Maturity. The Bonds will be issued in the denomination of $5,000 each or any integral multiple of $5,000. The Bonds mature August 1 in the years and in the amounts set forth on the cover page of this Official Statement. See the maturity schedule on the cover page hereof and "DEBT SERVICE SCHEDULE" below. Redemption" Optional Redemption. Bonds maturing on or after August 1, 20 —, are subject, at the option of the City, to redemption prior to their stated maturities in whole or in part on any date commencing August 1, 20_, selected among maturities, if in part, as nearly as practicable on a pro -rata basis, and by lot within a maturity, at the following redemption prices, expressed as a percentage of the principal amount thereof, together with accrued interest to the date fixed for redemption, without premium. Mandatory Sinking Fund Redemption. The Bonds maturing on August 1, 20 —, and August 1, 20_ are subject to mandatory sinking fund redemption, in part by lot, prior to their stated maturity, on each August 1 on and after August 1, 20 —, and August 1, 20_, respectively, at a redemption price equal to 100% of the principal amount thereof called for redemption, without premium, plus accrued interest thereon to the date of redemption in the aggregate respective principal amounts set forth in the following table: Preliminary, subject to change. 4 Term Bond Maturing August 1, 20_ Redemption Date Principal Amount of Au ust 1 Bonds to be Redeemed Term Bond Maturity August 1, 20_ Redemption Date Principal Amount of Au ust 1 Bonds to be Redeemed Selection of Bonds for Redemption If less than all of the Bonds outstanding are to be redeemed, the portion of any Bond of a denomination of more than $5,000 to be redeemed shall be in the principal amount of $5,000 or an integral multiple thereof, and, in selecting portions of such Bond for redemption, the Paying Agent shall treat each such Bond as representing that number of Bonds of $5,000 denominations which is obtained by dividing the principal amount of such Bond to be redeemed in part by $5,000. The Paying Agent shall promptly notify the City in writing of the Bonds, or portions thereof, selected for redemption. Notice of Redemption The Paying Agent shall provide written notice to Bond Owners of all Bonds to be redeemed by first class mail within sixty (60) days, but in no event later than thirty (30) days prior to the date of such redemption. The date on which the Bonds which are called for redemption are to be presented for redemption shall be referred to as the "redemption date ". The notice of redemption shall (a) state the redemption date; (b) state the redemption price; (c) state the dates of maturity of the Bonds and, if less than all of any such maturity is called for redemption the distinctive numbers of the Bonds of such maturity to be redeemed, and in the case of Bonds redeemed in part only, the respective portions of the principal amount thereof, to be redeemed; (d) state the CUSIP number, if any, of each Bond to be redeemed; (e) give notice that further interest on such Bonds will not accrue after the designated redemption date; and (f) any other descriptive information regarding the Bonds needed to identify accurately the Bonds being redeemed. The actual receipt by the Owner of notice of such redemption shall not be a condition precedent to redemption, and failure to receive such notice shall not affect the validity of the proceedings for the redemption of such Bonds or the cessation of interest on the date fixed for redemption. At least 25 days before the redemption date, notice shall also be given to DTC and in accordance with then current guidelines of the Securities and Exchange Commission, to any other firm or service regularly providing information with respect to the redemption of Bonds designated to the Paying Agent by the City. With respect to the optional redemption of Bonds, at the direction of the City filed with the Paying Agent, the notice of such redemption shall state that such redemption is conditioned upon the receipt by the Paying Agent on or before the date fixed for such redemption of sufficient funds for such purpose from any issue of refunding bonds. In the event that sufficient funds shall not have been deposited with the raying Agent on or before the date fixed for redemption, the Paying Agent shall promptly notify the Owners of the Bonds by telephone, facsimile transmission or other form of telecommunications, promptly confirmed in writing; and thereupon such redemption and the notice thereof shall be deemed to be canceled and rescinded. Effect of Redemption When notice of redemption has been given, and when the amount necessary for the redemption of the Bonds called for redemption (principal and premium, if any) is set aside for that purpose in the Debt Service Fund created under the Resolution, the Bonds designated for redemption shall become due and payable on the date fixed for redemption thereof, and upon presentation and surrender of said Bonds at the place specified in the notice of redemption, such Bonds shall be redeemed and paid at said redemption price out of said Debt Service Fund, and no interest will accrue on such Bonds called for redemption after the redemption date specified in such notice and the owners of the Bonds so called for redemption after such redemption date shall look only to the funds held for such purpose in the Debt Service Fund (or held for such specific purpose in the Bond Fund held by the Paying Agent). All Bonds redeemed shall be cancelled forthwith by the Paying Agent and shall not be reissued. The City shall establish a separate account in the Debt Service Fund to hold funds available for payment of called bonds after the redemption date. Registration, Transfer and Exchange of Bonds The Paying Agent shall keep or cause to be kept sufficient books for the registration and transfer of the Bonds (the "Bond Register"), which shall at all times be open to inspection by the City upon reasonable notice; 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, the Bonds. In the event that the book entry system as described above is no longer used with respect to the Bonds, the following provisions will govern the registration, transfer, and exchange of the Bonds. Any Bond may, in accordance with its terms, be transferred, upon the registration books required to be kept by the Paying Agent, by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such fully registered Bond for cancellation, 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 Paying Agent shall authenticate and deliver a new Bond or Bonds of the same series and maturity, for the like aggregate principal amount of Bond or Bonds surrendered. Bonds may be exchanged at the principal corporate trust office of the Paying Agent in Los Angeles, California, for a like aggregate principal amount of Bonds of other authorized denominations of the same series and maturity. The person, firm or corporation requesting the transfer or exchange shall pay any costs or charges in connection with the transfer or exchange as are established by the Paying Agent, in addition to paying any tax or governmental charge that may be imposed in connection with the transfer or exchange. The Paying Agent shall not be required, however, to register a transfer or make an exchange of any Bond (i) during the 15 days before the selection of Bonds for redemption, or (ii) if such Bond has been called for redemption in whole or in part. Debt Service Pursuant to the Resolution, the Administrative Services Director will transfer available monies from the Debt Service Fund (as defined herein) to the Paying Agent in amounts sufficient and at such time as are necessary to promptly pay principal and interest on the Bonds as such shall become due. Creation and Establishment of Funds Costs of Issuance Fund. A portion of the proceeds of the sale of the Bonds shall be transferred to the Paying Agent for deposit into the Costs of Issuance Fund and used to pay Costs of Issuance. 6 Escrow Fund. The remaining proceeds of the sale of the Bonds shall be forthwith transferred to the Escrow Agent for deposit in the Escrow Fund under the Escrow Agreement and used to redeem the Prior Bonds on February 1, 2013. Debt Service Fund. All moneys derived from such taxes and all other moneys allocated and designated for payment of said Bonds and the interest thereon shall be placed in a fund of the City and designated "City of Arcadia (Series 2012 General Obligation Refunding Bonds (Police Station Project)) Debt Service Fund" (the "Debt Service Fund ") (and accounts therein to the extent created pursuant to the Resolution), shall be kept separate and apart from all other funds of the City (and are irrevocably pledged for the payment of the Bonds in accordance with the purpose and intent of the Resolution), and until all of said Bonds and all interest thereon have been fully paid (or defeased) the moneys in said fund shall be used for no other purpose than the payment of said Bonds and the interest thereon; provided, however, that when all of the principal and interest on all of the Bonds have been paid, any balance of money then remaining in said funds shall be transferred to the general fund of the City. Interest earned on the investment of monies in the Debt Service Fund shall be retained in the Debt Service Fund and used by the City to pay principal and interest on the Bonds when due. Bond Fund. The City shall transfer available monies from the Debt Service Fund to the Paying Agent in amounts sufficient and at such time as are necessary to promptly pay principal (including mandatory sinking fund payments), interest and redemption premium, if any, on the Bonds as such shall become due; and the Paying Agent shall establish a fund designated the "City of Arcadia (Series 2012 General Obligation Refunding Bonds (Police Station Project)) Bond Fund" (the "Bond Fund ") for such purpose and shall make payments to the Bond Owners of principal (including mandatory sinking fund payments), interest and redemption premium, if any, on the Bonds as such shall become due; provided that, in the event of any deficiencies, moneys on deposit in the Bond Fund shall be applied first to the payment of interest and then to the payment of principal and, in all such cases, ratably and without preference among all maturities. Rebate Fund. The City shall calculate rebatable arbitrage for the Bonds and shall pay required amounts to the United States Government pursuant to the Internal Revenue Code of 1986, as amended (the "Code "). Investment of Funds. Moneys in the Debt Service Fund and in the Bond Fund shall be invested only in Authorized Investments which will by their terns mature, or in the case of an Investment Agreement are available for withdrawal without penalty, on such dates so as to ensure the payment of principal of, premium, if any, and interest on the Bonds as the same becomes due. The City and the Paying Agent, at the direction of the City, shall sell at the best price obtainable, or present for redemption, any obligations so purchased whenever it may be necessary to do so in order to provide moneys to meet any payment of transfer to such funds and accounts or from such funds and accounts. For the purpose of determining at any given time the balance in any such funds, any such investments constituting a part of such funds and accounts shall be valued at their market value. Pursuant to the Resolution, Authorized Investments means any investments permitted by law to be made with any moneys belonging to or in custody of the City and by any policy guidelines adopted by the City. Currently, the City is authorized by the Resolution to invest in the following (subject to any limitations in the City's Investment Policy (as amended from time to time, the "Investment Policy "), as it may exist from time to time): 1. Generally approved qualifying investment instruments: a. Obligations of the U.S. Government, its agencies, and instrumentalities. b. Certificates of deposit with banks and savings and loans doing business in the State of California. C. Prime Banker's Acceptances. VA d. Prime Commercial Paper. e. Repurchase Agreements and Money Market Funds whose underlying collateral consists of the foregoing. f. Los Angeles County's Investment Pool for local agencies, which includes the purchase of Reverse Repurchase Agreements. g. Pools and other investment structures incorporating investments listed in a. through e. Generally approved qualifying investment instruments for City funds, as further limited by the investment policy: a. United States Treasury Bills, Bonds, and Notes, or those for which the full faith and credit of the United States are pledged for payment of principal and interest. b. Obligations issued b� the United States Government Agencies such as the Government National Mortgage Association (GNMA), Federal Farm Credit Bank System (FFCB), the Federal Home Loan Bank Board (FHLB), the Federal Home Loan Mortgage Corporation (FHLMC), the Federal National Mortgage Association (FNMA), and the Student Loan Marketing Association (SLMA). C. Bills of exchange or time drafts drawn on and accepted by a commercial bank otherwise known as banker's acceptances. Purchases of banker's acceptances may not exceed 180 days to maturity. d. Commercial paper ranked PI by Moody's Investor Services and Al by Standard and Poor's, and issued by a domestic corporation having assets in excess of $500 million and having an A or better rating on its long -term debentures as provided by Moody's or Standard and Poor's. e. Local Agency Investment Fund. The City may invest in the Local Agency Investment Fund (LAIF) established by the State Treasurer for the benefit of local agencies up to the maximum amount permitted by State law. f. Money market funds rated in the highest category of Moody's or Standard and Poor's, or administered by a domestic bank with long -term debt rated in one of the top two categories of Moody's or Standard and Poor's. Pursuant to the City's Investment Policy, the concentration, maturity and type of investments is further restricted. The investments are directed by the City Treasurer or other City officials to whom such function is delegated, in accordance with the procedures set forth in the investment policy. The City's Investment Policy is subject to change by the City from time to time. Tax Covenants In order to preserve the exclusion from gross income for federal income tax purposes of interest due with respect to the Bonds, the City covenants to comply with all applicable requirements of the Code, together with any amendments thereto or regulations promulgated thereunder necessary to preserve such exclusion. See "LEGAL MATTERS — Tax Matters" herein. Amendment to Resolution The Resolution may be modified or amended at any time by a supplemental resolution adopted by the City with the written consent of Owners owning at least 60% in aggregate principal amount of the outstanding Bonds under the circumstances set forth in the Resolution; provided, however, that no such modification or amendment shall, without the express consent of the Owner of each Bond affected, reduce the principal amount of any Bond, reduce the interest rate payable thereon, advance the earliest redemption date thereof, extend its maturity or the times for paying interest thereon or change the monetary medium in which principal and interest is payable, nor shall any modification or amendment reduce the percentage of consents required for amendment or modification. In addition, amendments to the Resolution may be made without the consent of the owners to add to the covenants and agreements of the City, to cure any ambiguity or defect or to amend or supplement the Resolution in any other respect, provided such supplemental resolution does not adversely affect the interests of the Owners. Defeasance The Bonds may be defeased in whole or in part prior to maturity by irrevocably depositing with the City (or an entity designated by the City to act as escrow agent with respect thereto): (a) An amount of cash which together with amounts then on deposit in the Debt Service Fund, is sufficient, without reinvestment, to pay and discharge all or part of the Bonds outstanding (including all principal, interest and premium, if any) at or before their stated maturity date; or (b) Federal Securities (as hereinafter defined) not subject to call, together with cash, if required, in such amount as will, without reinvestment, in the opinion of an independent certified public accountant, together with interest to accrue thereon and moneys then on deposit in the Debt Service Fund together with the interest to accrue thereon, be fully sufficient to pay and discharge all of the corresponding Bonds (including all principal and interest and premium, if any) to be defeased at or before their stated maturity date. In such event, notwithstanding that any of the Bonds shall not have been surrendered for payment, all obligations of the City with respect to all said outstanding Bonds shall cease and terminate, except only the obligation of the City to pay or cause to be paid from funds deposited pursuant to paragraphs (a) or (b) above, to the owners of said Bonds not so surrendered and paid all sums due with respect thereto; provided that the City shall have received an opinion of bond counsel for said Bonds, that said Bonds have been defeased. For purposes of defeasance of the Bonds, "Federal Securities" shall mean direct or indirect noncallable obligations of, or noncallable, nonrepayable obligations unconditionally guaranteed as to full and timely payment of principal and interest by, the United States of America, but excluding investments in mutual funds or unit investment trusts. Z DEBT SERVICE SCHEDULE The following table shows the semi - annual debt service schedule with respect to the Bonds (assuming no optional redemptions). Period Endin¢ 02/01/2013 08/01/2013 02/01/2014 08/01/2014 02/01/2015 08/01/2015 02/01/2016 08/01/2016 02/01/2017 08/01/2017 02/01/2018 08/01/2018 02/01/2019 08/01/2019 02/01/2020 08/01/2020 02/01/2021 08/01/2021 02/01/2022 08/01/2022 02/01/2023 08/01/2023 02/01/2024 08/01/2024 02/01/2025 08/01/2025 02/01/2026 08/01/2026 02/01/2027 08/01/2027 02/01/2028 08/01/2028 02/01/2029 08/01/2029 02/01/2030 08/01/2030 02/01/2031 08/01/2031 Totals Principal Interest Annual Payment* Payment Debt Service Includes mandatory sinking fund payments. 10 SECURITY FOR THE BONDS Ad Valorem Taxes Bonds Payable from Ad Valorem Property Taxes. The Bonds are general obligations of the City, payable solely from ad valorem property taxes levied and collected pursuant to the Authorization. The City has the power, is obligated and has covenanted to direct the County to levy ad valorem taxes upon all property within the City subject to taxation without limitation of rate or amount (except certain personal property which is taxable at limited rates) for the payment of the Bonds and the interest thereon. All such taxes for the payment of principal and interest on such Bonds shall be established, levied and collected as provided in the provisions of Chapter 4 (commencing with Section 43600) of Division 4 of Title 4 of the California Government Code. The first such levy for the Bonds will occur in Fiscal Year 2012 -13. Levy and Collection. Each year, the City Council, so far as is practicable, shall fix such rate for a tax to be levied in the City as will result in revenues which will pay the interest on the Bonds, and provide a sinking or other fund for the payment of the principal of the Bonds as such principal may become due. The City Council shall determine the fiscal year for all of the amounts above set forth, and shall fix the rate of tax to be levied which will raise the amounts of money required by the City for such purposes, and as required by the provisions of the law, the City Council shall certify to the County Auditor of the County of Los Angeles (the "Auditor ") the rate so fixed. The City shall furnish to the Auditor a statement in writing containing the following: (a) an estimate of the minimum amount of money required to be raised by taxation during the fiscal year for the payment of the principal of and interest on the Bonds, as will become due before the proceeds of a tax levied at the next general tax levy will be available; and (b) any other items required by the provisions of the Law. The Auditor shall compute and enter in the County assessment roll the respective sums to be paid as a City tax on the property within the City using the property subject to the tax. Information regarding assessed valuation of taxable property in the City is set forth below under "TAX BASE FOR REPAYMENT OF BONDS ". The City will levy and the County will collect such ad valorem taxes in such amounts and at such times as is necessary to ensure the timely payment of debt service. Such taxes, when collected, will be deposited into the "City of Arcadia (Series 2012 General Obligation Refunding Bonds (Police Station Project)) Debt Service Fund" (the "Debt Service Fund ") which is held by the City separate and apart from all other funds of the City and which is irrevocably pledged for the payment of principal of and interest on the Bonds when due. City property taxes are assessed and collected by the County in the same manner and at the same time, and in the same installments as other ad valorem taxes on real property, and will have the same priority, become delinquent at the same times and in the same proportionate amounts, and bear the same proportionate penalties and interest after delinquency, as do the other ad valorem taxes on real property. Annual Tax Rates. The amount of the annual ad valorem tax levied by the County to repay the Bonds will be determined by the relationship between the assessed valuation of taxable property in the City and the amount of debt service due on the Bonds. Fluctuations in the annual debt service on the Bonds and the assessed value of taxable property in the City may cause the annual tax rate to fluctuate. Economic and other factors beyond the City's control, such as economic recession, deflation of land values, a relocation out of the City or financial difficulty or bankruptcy by one or more major property taxpayers, or the complete or partial destruction of taxable property caused by, among other eventualities, earthquake, flood or other natural disaster, could cause a reduction in the assessed value within the City and necessitate a corresponding increase in the annual tax rate. 11 Limited Obligation The Bonds are payable solely from the proceeds of an ad valorem tax levied by the City, and collected by the County, for the payment of principal and interest on the Bonds. Although the County is obligated to levy and collect the ad valorem tax for the payment of the Bonds, the Bonds are not a debt of the County. PROPERTY TAXATION Property Tax Collection Procedures In California, property which is subject to ad valorem taxes is classified as "secured" or "unsecured." The "secured roll" is that part of the assessment roll containing state assessed public utilities' property and property, the taxes on which are a lien on real property sufficient, in the opinion of the county assessor, to secure payment of the taxes. A tax levied on unsecured property does not become a lien against such unsecured property, but may become a lien on certain other property owned by the taxpayer. Every tax which becomes a lien on secured property has priority over all other liens arising pursuant to State law on such secured property, regardless of the time of the creation of the other liens. Secured and unsecured property are entered separately on the assessment roll maintained by the county assessor. The method of collecting delinquent taxes is substantially different for the two classifications of property. Property taxes on the secured roll are due in two installments, on November 1 and February I of each fiscal year. 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 of the fiscal year. Such property may thereafter be redeemed by payment of the delinquent taxes and a delinquency penalty, plus a redemption penalty of 1 -1/2% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is subject to sale by the County. Property taxes are levied for each fiscal year on taxable real and personal property situated in the taxing jurisdiction as of the preceding January 1. A bill enacted in 1983, SB813 (Statutes of 1983, Chapter 498), however, provided for the supplemental assessment and taxation of property as of the occurrence of a change of ownership or completion of new construction. Thus, this legislation eliminated delays in the realization of increased property taxes from new assessments. As amended, SB813 provided increased revenue to taxing jurisdictions to the extent that supplemental assessments of new construction or changes of ownership occur subsequent to the January 1 lien date and result in increased assessed value. Property taxes on the unsecured roll are due on the January 1 lien date and become delinquent, if unpaid on the following August 31. A 10% penalty is also attached to delinquent taxes in respect of property on the unsecured roll, and further, an additional penalty of 1 -1/2% per month accrues with respect to such taxes beginning the first day of the third month following the delinquency date. 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 record 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 assessee. The exclusive means of enforcing the payment of delinquent taxes in respect of property on the secured roll is the sale of the property securing the taxes for the amount of taxes which are delinquent. Taxation of State - Assessed Utility Property The State Constitution provides that most classes of property owned or used by regulated utilities be assessed by the State Board of Equalization ( "SBE ") and taxed locally. property valued by the SBE as an operating unit in a primary function of the utility taxpayer is known as "unitary property," a concept designed to permit assessment of the utility as a going concern rather than assessment of each individual element of real and 12 personal property owned by the utility taxpayer. State- assessed unitary and "operating nonunitary" property (which excludes nommitary property of regulated railways) is allocated to the counties based on the situs of the various components of the unitary property. Except for unitary property of regulated railways and certain other excepted property, all unitary and operating nonunitary property is taxed at special county -wide rates and tax proceeds are distributed to taxing jurisdictions according to statutory formulae generally based on the distribution of taxes in the prior year. Assessed Valuation Assessed Valuation History. The table below shows a five -year history of the City's assessed valuation. TABLE 1 CITY OF ARCADIA Assessed Valuations of Taxable Property Fiscal Years 2007 -08 to 2011 -12 Source: California Municipal Statistics, Inc. Assessed Valuation by Land Use. The following table shows the land use of parcels in the City, according to assessed valuation. As shown, the majority of land in the City is used for residential purposes. 13 Total Before Fiscal Redevelopment Year Local Secured Utili Unsecured Increment 2007 -08 $8,928,185,181 $0 $176,741,897 $9,104,927,078 2008 -09 9,476,065,354 0 194,154,570 9,670,219,924 2009 -10 9,692,304,609 0 194,734,357 9,887,038,966 2010 -11 10,109,348,638 0 212,196,911 10,321,545,549 2011 -12 10,406,778,429 0 203,553,191 10,610,331,620 Source: California Municipal Statistics, Inc. Assessed Valuation by Land Use. The following table shows the land use of parcels in the City, according to assessed valuation. As shown, the majority of land in the City is used for residential purposes. 13 TABLE 2 CITY OF ARCADIA Assessed Valuation and Parcels by Land Use Fiscal Year 2011 -12 Non - Residential: Commercial/Office Vacant Commercial Industrial Vacant Industrial Recreational Government/Social/Institutional Miscellaneous _. Subtotal Non - Residential Residential: Single Family Residence Condominium/Townhouse 4 Residential Units 5+ Residential Units /Apartments Vacant Residential Subtotal Residential Total 2011 -12 Assessed % of No. of % of Valuation Total Parcels Total $1,182,374,677 11.36% 604 3.66% 59,180,013 0.57 61 0.37 194,039,166 1.86 202 1.22 19,266,487 0.19 60 0.36 194,107,146 1.87 9 0.05 37,388,310 0.36 186 1.13 90,568 0.00 4 0.02 $1,686,446,367 16.21% 1,126 6.82% $6,760,860,981 64.97% 11,019 66.78% 1,116,515,225 10.73 3,022 18.32 252,119,517 2.42 551 3.34 385,721,136 3.71 311 1.88 205,115,203 1.97 471 2.85 $8,720,332,062 83.79% 15,374 93.18% $10,406,778,429 100.00% 16,500 100.00% (1) Local Secured Assessed Valuation; excluding tax - exempt property. Source: California Municipal Statistics, Inc. Assessed Valuation of Single Family Residential Parcels. The following table shows a break down of the assessed valuations of Single Family Residential parcels in the City, according to assessed valuation. 14 TABLE 3 CITY OF ARCADIA Per Parcel 2011 -12 Assessed Valuation of Single Family Homes (1) Improved single family residential parcels. Excludes condominiums and parcels with multiple family units. Source; California Municipal Statistics, Inc. Tax Rates The table below summarizes the total ad valorem tax rates levied by all taxing entities in Tax Rate Area 6 -001 for each $100 of assessed valuation during the fiscal years 2007 -08 through 2011 -12. Such rates do not reflect any levy related to the Bonds. 15 No. of 2011 -12 Average Median Parcels Assessed Valuation Assessed Valuation Assessed Valuation Single Family Residential 11,019 $6,760,860,981 $613,564 $512,735 2011 -12 No. of % of Cumulative Total % of Cumulative Assessed Valuation Parcels(i) Total % of Total Valuation Total % of Total $0-$99,999 883 8.013% 8.013% $69,898,720 1.034% 1.034% $100,000 - $199,999 1,403 12.733 20.746 196,963,550 2.913 3.947 $200,000 - $299,999 816 7.405 28.151 203,869,554 3.015 6.963 $300,000 - $399,999 1,047 9.502 37.653 367,841,078 5.441 12.403 $400,000 - $499,999 1,212 19:999 48.652 545,462,922 8.068 20.471 $500,000 - $599,999 1,057 9.593 58.245 578,666,480 8.559 29.030 $600,000 - $699,999 861 7.814 66.059 559,716,975 8.279 37.309 $700,000 - $799,999 882 8.004 74.063 659,650,229 9.757 47.066 $800,000 - $899,999 693 6.289 80.352 586,372,524 8.673 55.739 $900,000 - $999,999 487 4.420 84.772 461,361,919 6.824 62.563 $1,000,000 - $1,099,999 338 3.067 87.839 353,811,297 5.233 67.796 $1,100,000 - $1,199,999 258 2.341 90.181 295,527,868 4.371 72.167 $1,200,000 - $1,299,999 191 1.733 91.914 237,838,886 3.518 75.685 $1,300,000 - $1,399,999 156 1.416 93.330 209,652,332 3.101 78.786 $1,400,000 - $1.,499,999 130 1.180 94.509 188,012,317 2.781 81.567 $1,500,000 - $1,599,999 96 0.871 95.381 148,574,541 2.198 83.765 $1,600,000 - $1,699,999 90 0.817 96.197 148,267,523 2.193 85.958 $1,700,000 - $1,799,999 60 0.545 96.742 104,937,627 1.552 87.510 $1,800,000 - $1,899,999 58 0.526 97.268 107,262,461 1.587 89.096 $1,900,000 - $1,999,999 47 0.427 97.695 91,717,445 1.357 90.453 $2,000,000 and greater 254 2.305 100.000 645,454,733 9.547 100.000 Total 11,019 100.000% $6,760,860,981 100.000% (1) Improved single family residential parcels. Excludes condominiums and parcels with multiple family units. Source; California Municipal Statistics, Inc. Tax Rates The table below summarizes the total ad valorem tax rates levied by all taxing entities in Tax Rate Area 6 -001 for each $100 of assessed valuation during the fiscal years 2007 -08 through 2011 -12. Such rates do not reflect any levy related to the Bonds. 15 TABLE 4 CITY OF ARCADIA Summary of Ad Valorem Tax Rates $1 per $100 of Assessed Valuation Fiscal Years 2007 -08 to 2011 -12 (Tax Rate Area 6 -001) Ad Valorem Tax 2007 -08 2008 -09 2009 -10 2010 -11 2011 -12 General Tax Rate 1.000000 1.000000 1.000000 1.000000 1.000000 City of Arcadia .005107 .005490 .005304 .005000 .004985 Arcadia Unified School District .080858 .079107 .075606 .074561 .076915 Pasadena Area Community College District .019720 .017417 .023002 .019864 .019556 Metropolitan Water District .004500 .004300 .004300 .003700 .003700 Total Tax Rate 1.110185 1.106314 1.108212 1.103125 1.105156 Source: California Municipal Statistics, Inc. Tax Levies and Delinquencies on Outstanding City General Obligation Bonds The following table is a five year summary of property tax levies to pay debt service on outstanding City general obligation debt, delinquency amounts and delinquency rates. TABLE 5 CITY OF ARCADIA Total Property Tax Levies, Collections and Delinquencies to Pay City General Obligation Debt Service (As of June 30) 2006 -07 through 2010 -I1 (1) Bond debt service levy only. Source: California Municipal Statistics, Inc. Major Taxpayers The following table shows the largest taxpayers in the City as determined by their secured assessed valuations in 2010-11: 16 Amount Fiscal Secured Delinquent % Delinquent Year Tax Charee June 30 June 30 2006 -07 $438,113.06 $6,361.76 1.45% 2007 -08 452,315.71 7,346.44 1.62 2008 -09 515,148.21 11,816.86 2.29 2009 -10 510,011.85 5,730.52 1.12 2010 -11 498,898.90 4,402.49 0.88 (1) Bond debt service levy only. Source: California Municipal Statistics, Inc. Major Taxpayers The following table shows the largest taxpayers in the City as determined by their secured assessed valuations in 2010-11: 16 TABLE 6 CITY OF ARCADIA Largest 2010 -11 Local Secured Taxpayers Total City -Wide Taxable Assessed Value for FY 2011 -12 is $10, 610,331,620 (1) Estimated total tax revenue is a calculation of total City share of direct rate times assessed value. Source: City of Arcadia Comprehensive Annual Financial Report June 30, 2011. Direct and Overlapping Debt Set forth below is a direct and overlapping debt report (the "Debt Report") prepared by California Municipal Statistics, Inc. and effective as of August 1, 2012. The Debt Report is included for general information purposes only. The City has not reviewed the Debt Report for completeness or accuracy and makes no representation in connection therewith. The Debt Report generally includes long -term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the City in whole or in part. Such long -term obligations generally are not payable from revenues of the City (except as indicated) nor are they necessarily obligations secured by land within the City. In many cases, long -term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency. 17 2011 -12 Estimated Assessed Total Tax % of Property Owner Valuation Revenue(l) Total 1. Santa Anita Fashion Park LLC $282,124,222 $386,172 2.66% 2. Santa Anita Land Holdings 172,534,868 236,166 1.63 3. Baldwin Arcadia Center LP 85,887,000 117,562 0.81 4. Santa Anita Fashion Park LLC 69,562,586 95,217 0.66 5. Safeway Inc. 25,806,690 35,324 0.24 6. Marriott Residence Inn II Limited 29,771,400 40,751 0.28 7. Arcadia Hotel Venture Limited Partnership 25,785,064 35,295 0.24 8. Apple Six Hospitality Inc. 20,486,990 28,043 0.20 9. Arcadia Gateway Centre Delaware Partnership 18,866,767 25,825 0.18 10. Pecos Properties LP 18,461,419 25,270 0.17 TOTAL $749,287,006 $1,025,625 7.07% Total City -Wide Taxable Assessed Value for FY 2011 -12 is $10, 610,331,620 (1) Estimated total tax revenue is a calculation of total City share of direct rate times assessed value. Source: City of Arcadia Comprehensive Annual Financial Report June 30, 2011. Direct and Overlapping Debt Set forth below is a direct and overlapping debt report (the "Debt Report") prepared by California Municipal Statistics, Inc. and effective as of August 1, 2012. The Debt Report is included for general information purposes only. The City has not reviewed the Debt Report for completeness or accuracy and makes no representation in connection therewith. The Debt Report generally includes long -term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the City in whole or in part. Such long -term obligations generally are not payable from revenues of the City (except as indicated) nor are they necessarily obligations secured by land within the City. In many cases, long -term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency. 17 TABLE 7 CITY OF ARCADIA STATEMENT OF DIRECT AND OVERLAPPING BONDED DEBT (As of August 1, 2012) 2011 -12 Assessed Valuation: $10,610,331,620 Redevelopment Incremental Valuation: 448,742,424 Adjusted Assessed Valuation: $10,161,589,196 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 8/1/12 Los Angeles County Flood Control District 1.123% $ 417,700 Metropolitan Water District 0.563 1,106,548 Citrus Community College District 0.205 162,781 Pasadena Area Community College District 17.445 18,196,071 Rio Hondo Community College District 0.660 1,106,346 Arcadia Unified School District 96.180 162,236,225 Monrovia Unified School District 0.863 603,475 Pasadena Unified School District 0.020 78,117 Temple City Unified School District - 8.718 1,497,911 El Monte Union High School District 2.417 3,707,665 El Monte School District 4.728 5,148,540 City of Arcadia 100. 14,135,000 (1) Los Angeles County Regional Park and Open Space Assessment District 1.095 1.869.439 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $210,265,818 OVERLAPPING GENERAL FUND DEBT: Los Angeles County General Fund Obligations 1.095% $16,141,644 Los Angeles County Superintendent of Schools Certificates of Participation 1.095 113,631 Pasadena Area Community College District Certificates of Participation 17.445 213,701 Other School District General Fund Obligations Various 139,208 Los Angeles County Sanitation District No. 15 Authority 23.646 7,387,881 Los Angeles County Sanitation District No. 22 Authority 0.186 29.615 TOTAL GROSS OVERLAPPING GENERAL FUND DEBT $24,025,680 Less: Los Angeles County General Fund Obligations supported by landfill revenues 182.845 TOTAL NET OVERLAPPING GENERAL FUND DEBT $23,842,835 GROSS COMBINED TOTAL DEBT $234,291,498 (2) NET COMBINED TOTAL DEBT $234,108,653 (1) Excludes issue to be sold. (2) Excludes tax and revenue anticipation notes, revenue, mortgage revenue and tax allocation bonds and non - bonded capital lease obligations. Ratios to 2011 -12 Assessed Valuation: Direct Debt ($14,135, 000) ........................... ............................... ..........................0.13% Total Direct and Overlapping Tax and Assessment Debt ....... ............................... 1.98% Ratios to Adjusted Assessed Valuation: GrossCombined Total Debt ................................................... ............................... 2.31% NetCombined Total Debt ....................................................... ............................... 2.30% STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/12: $0 Source: California Municipal Statistics, Inc. CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING CITY REVENUES AND APPROPRIATIONS Principal of and interest on the Bonds are payable from the proceeds of an ad valorem tax levied by the City for the payment thereof. See "The Bonds — Security for the Bonds" above. Articles XIIIA, XIIIB, XIIIC 18 and XIIID of the State Constitution, Propositions 62, 111, and 218 and IA, and certain other provisions of law discussed below are included in this section to describe the potential effect of these Constitutional and statutory measures on the ability of the City to levy taxes and spend tax proceeds for operating and other purposes, and it should not be inferred from the inclusion of such materials that these laws impose any limitation on the ability of the City to levy taxes for payment of the Bonds. The tax levied by the City for payment of the Bonds was approved by the City's voters in compliance with Article XIIIA and all applicable laws. Article XIIIA of the State Constitution On June 6, 1978, California voters approved Proposition 13, which added Article XIIIA to the State Constitution. Article XIIIA, as amended, limits the amount of any ad valorem tax on real property to one percent of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service (i) on indebtedness approved by the voters prior to July 1, 1978, (ii) on bonded indebtedness approved by a two- thirds vote on or after July 1, 1978, for the acquisition or improvement of real property or (iii) bonded indebtedness incurred by a school district, community college district or county office of education for the construction, reconstruction, rehabilitation or replacement- of school facilities, including the furnishing and equipping of school facilities or the acquisition or lease of real property for school facilities, approved by 55 percent of the voters voting on the proposition. Article XIIIA defines full cash value to mean "the county assessor's valuation of real property as shown on the 1975 -76 tax bill under "full cash value," or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment." This full cash value may be increased at a rate not to exceed two percent per year to account for inflation. Article XIIIA has subsequently been amended to permit reduction of the "full cash value" base in the event of declining property values caused by damage, destruction or other factors, to provide that there would be no increase in the "full cash value" base in the event of reconstruction of property damaged or destroyed in a disaster, and in other minor or technical ways. Legislation Implementing Article XIIIA Legislation has been enacted and amended a number of times since 1978 to implement Article XIIIA. Under current law, local agencies are no longer permitted to levy directly any property tax (except to pay voter - approved indebtedness). The one percent property tax is automatically levied by the County and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1989. Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the two percent annual adjustment are allocated among the various jurisdictions in the "taxing area" based upon their respective "situs." Any such allocation made to a local agency continues as part of its allocation in future years. All taxable property is shown at full market value on the tax rolls. Consequently, the tax rate is expressed as $1 per $100 of taxable value. All taxable property value included in this Official Statement is shown at 100 percent of market value (unless noted differently) and all tax rates reflect the $1 per $100 of taxable value. Article XM of the State Constitution In addition to the limits Article XIIIA imposes on property taxes that may be collected by local governments, certain other revenues of the State and most local governments are subject to an annual "appropriations limit" imposed by Article XIIIB which effectively limits the amount of such revenues those entities are permitted to spend. Article XIIIB, approved by the voters in June 1979, was modified substantially by Proposition 111 in 1990. The appropriations limit of each government entity applies to "proceeds of taxes," which consist of tax revenues, State subventions and certain other funds, including proceeds from regulatory 19 licenses, user charges or other fees to the extent that such proceeds exceed "the cost reasonably borne by such entity in providing the regulation, product or service." "Proceeds of taxes" excludes tax refunds and some benefit payments such as unemployment insurance. No limit is imposed on the appropriation of funds which are not "proceeds of taxes," such as reasonable user charges or fees, and certain other non -tax funds. Article XIIIB also does not limit appropriation of local revenues to pay debt service on Bonds existing or authorized by January 1, 1979, or subsequently authorized by the voters, appropriations required to comply with mandates of courts or the federal government, appropriations for qualified capital outlay projects, and appropriation by the State of revenues derived from any increase in gasoline taxes and motor vehicle weight fees above January 1, 1990, levels. The appropriations limit may also be exceeded in case of emergency; however, the appropriations limit for the next three years following such emergency appropriation must be reduced to the extent by which it was exceeded, unless the emergency arises from civil disturbance or natural disaster declared by the Governor, and the expenditure is approved by two- thirds of the legislative body of the local government. The State and each local government entity has its own appropriations limit. Each year, the limit is adjusted to allow for changes, if any, in the cost of living, the population of the jurisdiction, and any transfer to or from another government entity of financial responsibility for providing services. Proposition 11 -1 requires that each agency's actual appropriations be tested against its limit every two years. If the aggregate "proceeds of taxes" for the preceding two -year period exceeds the aggregate limit, the excess must be returned to the agency's taxpayers through tax rate or fee reductions over the following two years. The City has never exceeded its appropriations limit. Articles XMC and Xl® of the State Constitution On November 5, 1996, the voters of the State approved Proposition 218, known as the "Right to Vote on Taxes Act." Proposition 218 adds Articles XIIIC and MID to the California Constitution and contains a number of interrelated provisions affecting the ability of the City to levy and collect both existing and future taxes, assessments, fees and charges. The interpretation and application of Proposition 218 will ultimately be determined by the courts with respect to a number of the matters discussed below, and it is not possible at this time to predict with certainty the outcome of such determination. Article XIIIC requires that all new local taxes be submitted to the electorate before they become effective. Taxes for general governmental purposes of the City require a majority vote and taxes for specific purposes, even if deposited in the City's General Fund, require a two- thirds vote. The voter approval requirements of Proposition 218 reduce the flexibility of the City to raise revenues for the General Fund, and no assurance can be given that the City will be able to impose, extend or increase such taxes in the future to meet increased expenditure needs. Article XIIID also adds several provisions making it generally more difficult for local agencies to levy and maintain property- related fees, charges, and assessments for municipal services and programs. These provisions include, among other things, (i) a prohibition against assessments which exceed the reasonable cost of the proportional special benefit conferred on a parcel, (ii) a requirement that assessments must confer a "special benefit," as defined in Article XIIID, over and above any general benefits conferred, (iii) a majority protest procedure for assessments which involves the mailing of notice and a ballot to the record owner of each affected parcel, a public hearing and the tabulation of ballots weighted according to the proportional financial obligation of the affected party, and (iv) a prohibition against fees and charges which are used for general governmental services, including police, fire or library services, where the service is available to the public at large in substantially the same manner as it is to property owners. If the City is unable to continue to collect these revenues, the services and programs funded with these revenues would have to be curtailed and/or the City's General Fund might have to be used to support them. The City is unable to predict whether or not in the future it will be able to continue all existing services and programs funded by the fees, charges and assessments 20 in light of Proposition 218 or, if these services and programs are continued, which amounts (if any) would be used from the City's General Fund to continue to support these activities. Article XIIIC also removes limitations on the initiative power in matters of reducing or repealing local taxes, assessments, fees or charges. No assurance can be given that the voters of the City will not, in the future, approve an initiative or initiatives which reduce or repeal local taxes, assessments, fees or charges currently comprising a substantial part of the City's General Fund. Proposition 62 Proposition 62 was adopted by the voters at the November 4, 1986, general election and (a) requires that any new or higher taxes for general governmental purposes imposed by local governmental entities such as the City be approved by a two- thirds vote of the governmental entity's legislative body and by a majority vote of the voters of the governmental entity voting in an election on the tax, (b) requires that any special tax (defined as taxes levied for other than general governmental purposes) imposed by a local governmental entity be approved by a two- thirds vote of the voters of the govenmental entity voting in an election on the tax, (c) restricts the use of revenues from a special tax to the purposes or for the service for which the special tax was imposed, (d) prohibits the imposition of ad valorem taxes on real property by local governmental entities except as permitted by Article XIIIA, (e) prohibits the imposition of transaction taxes and sales taxes on the sale of real property by local governmental entities, and (f) requires that any tax imposed by a local governmental entity on or after August 1, 1985, be ratified by a majority vote of the voters voting in an election on the tax within two years of the adoption of the initiative or be terminated by November 15, 1988. California appellate court cases have overturned the provisions of Proposition 62 pertaining to the imposition of taxes for general government purposes. However, the California Supreme Court upheld Proposition 62 in its decision on August 28, 1995, in Fresno CoupU Transportation Authority v. Guarding. This decision reaffirmed the constitutionality of Proposition 62. Certain matters regarding Proposition 62 were not addressed in the Supreme Court's decision, such as what remedies exist for taxpayers subject to a tax not in compliance with Proposition 62, and whether the decision applies to charter cities. The City has not experienced any substantive adverse financial impact as a result of the passage of this initiative. Proposition IA Proposition IA, proposed by the Legislature in connection with the State's Fiscal Year 2004 -05 Budget, approved by the voters in November 2004 and generally effective in Fiscal Year 2006 -07, provides that the State may not reduce any local sales tax rate, limit existing local government authority to levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain exceptions. Proposition IA generally prohibits the State from shifting to schools or community colleges any share of property tax revenues allocated to local governments for any fiscal year, as set forth under the laws in effect as of November 3, 2004. Any change in the allocation of property tax revenues among local governments within a county must be approved by two- thirds of both houses of the Legislature. Proposition I provides, however, that beginning in fiscal year 2008 -09, the State may shift to schools and community colleges up to 8% of local government property tax revenues, which amount must be repaid, with interest, within three years, if the Governor proclaims that the shift is needed due to a severe state financial hardship, the shift is approved by two- thirds of both houses and certain other conditions are met. The State may also approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Proposition IA also provides that if the State reduces the motor vehicle license fee rate currently in effect, 0.65 percent of vehicle value, the State must provide local governments with equal replacement revenues. Further, Proposition IA requires the State, beginning July 1, 2005, to suspend State mandates affecting cities, counties and special districts, excepting mandates relating to employee rights, schools or community colleges, in any year that the,State does not fully reimburse local governments for their costs to comply with such mandates. ' Proposition lA may result in increased and more stable City revenues. The magnitude of such increase and stability is unknown and would depend on future actions by the State. However, Proposition 1 A could also 21 result in decreased resources being available for State programs. This reduction, in turn, could affect actions taken by the State to resolve budget difficulties. Such actions could include increasing State taxes, decreasing spending on other State programs or other action, some of which could be adverse to the City. Possible Future Initiatives Articles XIIIA, XIIIB, XIIIC and XIIID and Propositions 62, 111, 218 and IA were each adopted as measures that qualified for the ballot pursuant to the State's initiative process. From time to time other initiative measures could be adopted, further affecting revenues of the City or the City's ability to expend revenues. The nature and impact of these measures cannot be anticipated by the City. LEGAL MATTERS Approval of Legal Proceedings The legality of the sale, execution and delivery of the Bonds is subject to the approval of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, acting as Bond Counsel. A proposed form of such legal opinion is attached hereto as Appendix C. Best Best & Krieger LLP, Riverside, California, is acting as disclosure counsel to the City in connection with the issuance of the Bonds. Certain matters will be passed upon for the City by Best Best & Krieger LLP, as City Attorney. Payment of the fees and expenses of Stradling Yocca Carlson & Rauth, a Professional Corporation and of Best Best & Krieger LLP are contingent upon issuance of the Bonds. Absence of Material Litigation No litigation is pending or threatened concerning the validity of the Bonds, and a certificate to that effect will be furnished to the purchasers at the time of the original delivery of the Bonds. The City is not aware of any litigation pending or threatened questioning the political existence of the City or contesting the City's ability to receive ad valorem taxes or to collect other revenues or contesting the City's ability to issue and repay the Bonds. 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, interest on the 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 on the Bonds is exempt from State of California personal income tax. Bond Counsel notes that, with respect to corporations, interest on the 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. The difference between the issue price of a Bond (the first price at which a substantial amount of the 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 Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to the owner of the Bond before receipt of cash attributable to such excludable income (with respect to the Bonds). The amount of original issue discount deemed received by the owner of a Bond will increase the owner's basis in the Bond. In the opinion of Bond Counsel original issue discount that accrues to the owner of a 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 dhe federal alternative minimum tax imposed on individuals and corporations, and is exempt from State of California personal income tax. 22 Bond Counsel's opinion as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on the Bonds is based upon certain representations of fact and certifications made by the City and others and is subject to the condition that the City complies with all requirements of the Internal Revenue Code of 1986, as amended (the "Code "), that must be satisfied subsequent to issuance of the Bonds to assure that interest (and original issue discount) on the 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 Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The City has covenanted to comply with all such requirements applicable to each, respectively. The amount by which a Bond Owner's original basis for determining loss on sale or exchange in the applicable 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 Bond Owner's basis in the applicable Bond (and the amount of tax - exempt interest received with respect to the Bonds), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortizatid"f Bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable Bond premium. 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 Resolution and the Tax Certificate 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 for federal income tax purposes of interest (and original issue discount) due with respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation. 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 Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of similar securities). 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 Bonds to the extent that it adversely affects the exclusion from gross income of interest on the Bonds or their market value. It is possible that, subsequent to the issuance of the 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 Bonds or the market value of the Bonds. Recently, proposed legislative changes have been introduced in Congress, which, if enacted, could result in additional federal income or state tax being imposed on owners of tax- exempt state or local obligations, such as the Bonds. The introduction or enactment of any of such changes could adversely affect the market value or liquidity of the Bonds. No assurance can be given that, subsequent to the issuance of the Bonds, such changes (or other changes) will not be introduced or enacted or interpretations will not occur. Before purchasing any of the 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 Bonds. Although Bond Counsel has rendered an opinion that the interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes, provided that the City continues to comply with certain requirements of the Code, the ownership of the Bondg and the accrual or receipt of interest (and original issue discount) with respect to the Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any 23 of the Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences with respect to the Bonds. Should the interest (and original issue discount) on the Bonds become includable in gross income for federal income tax purposes, the Bonds are not subject to early redemption as a result of such occurrence and will remain outstanding until maturity or until otherwise redeemed in accordance with the Resolution. The form of Bond Counsel's proposed opinion with respect to the Bonds is attached hereto in Appendix C. BANK QUALIFIED The City has designated the Bonds "qualified tax exempt obligations" within the meaning of Section 265(b)(3) of the code, and, in the case of certain financial institutions (within the meaning of Section 265(b)(3) of the Code), a deduction is allowed for 80% of that portion of such financial institutions' interest expense allocable to interest on the Bonds. _- CONTINUING DISCLOSURE The City will covenant for the benefit of owners of the Bonds to provide certain financial information and operating data relating to the City by not later than nine months after the end of the City's fiscal year (which date would be the March 31 following the current end of the City's fiscal year on June 30), commencing March 31, 2013, with the report for the 2011 -12 fiscal year (the "Annual Report "), and to provide notices of the occurrence of certain enumerated events, if material. The specific nature of the information to be contained in the Annual Report or the notices of material events is summarized in APPENDIX D —FORM OF CONTINUING DISCLOSURE CERTIFICATE, attached to this Official Statement. These covenants have been made in order to assist the Underwriter (as defined below) in complying with Securities Exchange Commission Rule 15c2- 12(b)(5) (the "Rule "). While the City and the now dissolved Arcadia Redevelopment Agency have made all annual flings associated with previous disclosure obligations under the Rule, each has also fled composite continuing disclosure statements to correct or to supplement previously fled annual reports and to provide notice of municipal bond insurance downgrades that should have been made earlier. Such supplemental information included certain financial and operating data not previously contained in the earlier annual flings. As of the date of this Official Statement both the City and the Agency are in compliance with their respective obligations under the Rule. RATINGS Standard & Poor's Ratings Services, A Division of the McGraw -Hill Companies ( "Standard & Poor's "), has assigned its municipal bond rating of "AA + ", to the Bonds. Such rating reflects only the views of Standard & Poor's and an explanation of the significance of such rating may be obtained from Standard & Poor's. There is no assurance that such rating will continue for any given period of time or that such rating will not be revised downward or withdrawn entirely by such organization, if in its judgment circumstances so warrant. Any such downward revision or withdrawal of such rating may have an adverse effect on the market price of the Bonds. FINANCIAL ADVISOR The City has retained Fieldman, Rolapp & Associates, of Irvine, 'California, as financial advisor (the "Financial Advisor ") in connection with the issuance of the Bonds. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or assume responsibility for the accuracy, completeness, or fairness of the information contained in this Official Statement. 24 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. UNDERWRITING Under the terms of a competitive bid held on , 2012, . (the "Underwriter ") has agreed to purchase the Bonds at a price of $ (which is equal to the aggregate principal amount of the Bonds of $ , plus a net original issue premium of , less an Underwriter's discount of $ The Underwriter will purchase all of the Bonds if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in the "Official Notice of Sale," including the approval of certain legal matters by counsel and certain other conditions. The Underwriter intends to offer the Bonds to the public at the offering prices set forth on the cover page of this Official Statement. The Underwriter may offer and sell to certain dealers and others at a price lower than the offering prices stated on the cover page hereof. The offering price may be changed from time to time by the Underwriter. VERIFICATION Grant Thornton, Minneapolis, Minnesota, a firm of independent certified public accountants, will verify the accuracy of the mathematical computations of the adequacy of the amounts held under the Escrow Agreement by the Escrow Agent, together with investment earnings thereon, to provide for the refunding and defeasance of the Prior Bonds. EXECUTION The execution of this Official Statement and its delivery have been approved by the City Council. CITY OF ARCADIA am 25 City Manager APPENDIX A GENERAL DEMOGRAPHIC INFORMATION REGARDING THE CITY OF ARCADIA AND LOS ANGELES COUNTY Information contained in herein is presented as general background data. The Bonds are payable solely from the ad valorem taxes of the City of Arcadia. The County of Los Angeles and the State of California have no obligation to make any payments with respect to the Bonds. See "SECURITY FOR THE BONDS" herein for a description of the security for the Bonds. General The City is located approximately 20 miles northeast of Los Angeles and consists of approximately 11.2 square miles. Located in Los Angeles County, the City is a chartered city incorporated in 1903. The City provides police protection, -fire protection, emergency medical aid, building safety and inspection, street lighting, water and sewer service, refuse collection, land use planning, and zoning, recreational and community services, maintenance and improvement of streets and related structures, traffic safety maintenance and improvement and library and cultural programs for citizen participation. City Council The City is governed by a five- member City Council, all serving four -year terms. Each year the City Council elects from its membership a Mayor to serve as its presiding officer for a one year term. The City Council serves as the legislative and policy making body of the City. The City Council establishes policy; adopts all ordinances and resolutions of the City; reviews and adopts the annual operating budget and five- year capital improvement program; and maintains communications with citizens and other government agencies to provide and obtain information necessary for the operation of the City. Table A -1 CITY OF ARCADIA City Council Name Robert C. Harbicht Mickey Segal Peter Amundson Gary A. Kovacic John Wuo Source: City of Arcadia. City Manager and Administrative Personnel Position Mayor Mayor Pro Tern Council Member Council Member Council Member Term Exaires April 2014 April 2014 April 2014 April 2016 April 2016 The City Council employs a City Manager to carry out its policies, to serve as executive officer of the City and to supervise the work of other City administrators. The names and backgrounds of the City Manager and some senior administrative staff are set forth below. Dominic Lazzaretto Cijy Manager Dominic Lazzaretto has served as the Arcadia City Manager since March 2012. He has worked more than 18 years in local government. Mr. Lazzaretto's previous work experience includes over five years as the City Manager of the City of La Palma, before which he served as La Palma's Assistant City Manager and Community Development Director. While id La Palma, Mr. Lazzaretto was the Chair of the City Manager's Committee on the California Joint Powers Insurance Authority, and held a position on the Orange County Fire Authority's City Manager's Budget and Finance Committee. Mr. Lazzaretto has also A -1 worked for A.C. Lazzaretto & Associates, a consulting firm specializing in redevelopment, economic development and general municipal management. During his time with the firm, Mr. Lazzaretto worked with cities of all sizes throughout California on projects with values up to $150 million. His educational background includes a Masters Degree in Public Administration from Cal State Long Beach and a Bachelor of Science Degree from Penn State University. Jason Kruckeberg, AICP, Assistant City Manager/Development Services Director has been with the City since April 2006. Mr. Kruckeberg has over 15 years of experience in local government in Oregon and California, having served as Planning Director for the City of Canby, Oregon, Senior Planner for the City of Pasadena, California, and Community Development Administrator for Arcadia, prior to his current position. Mr. Kruckeberg has a Bachelor of Arts Degree from the University of California at Santa Cruz and a Masters Degree in Community and Regional Planning from the University of Oregon. Hue Ouach, Administrative Services Director has been with the City since July 2008. Mr. Quach has over 18 years of experience in local government, having served as Director of Finance for the City of Norwalk and Assistant Finance Director for the City - -ef Bellflower. Mr. Quach has a Bachelor of Science -Degree in Finance and a Masters Degree in Public Administration, both from California State University, Los Angeles. Employee Relations The City currently employs 291 full -time and approximately 14 (excluding seasonal) part-time employees. 250 of such employees are represented by five formal labor organizations as shown below. The City has 51 executive and managerial employees who are not represented by any formal bargaining unit. Table A -2 CITY OF ARCADIA Employee Relations Labor Organization Arcadia Police Officers Association Arcadia Police Civilian Employee Association Arcadia Firefighter's Association Arcadia Public Works Employees Association Confidential /Supervisory /Professional Arcadia City Employees Association Source: City of Arcadia. Long -Term Debt Number of Employees Contract Expiration Date 61 June 30, 2014 23 June 30, 2014 48 June 30, 2014 44 June 30, 2014 51 June 30, 2014 78 June 30, 2014 The following is a summary of long -term debt transactions of the governmental activities for the year ended June 30, 2011: A -2 Table A -3 CITY OF ARCADIA Long -Term Debt Transactions City of Arcadia Long -Term Debt Classification Balance Balance Due Within Due More July 1. 2010 Addition Deletion June 30, 2011 One Year Than One Year Bonds payable: 2001 A General Obligation Bonds` $6,900,000 ($175,000) $6,725,000 $185,000 $6,540,000 2011 General Obligation Bonds $8,000,000 8,000,000 - 8,000,000 Subtotal for Bonds Payable(') 22,015,000 27,830,000 (8,010,000) 41,835,000 1,445,000 40,390,000 Claims and judgments payable 6,300,339 3,009,703 (2,941,277) 6,368,765 2,321,777 4,046,988 Compensated absences 2,178,279 1,582,478 (1,546,829) 2,213,928 1,546,829 667,099 GASB 45 830,548 929,049 (523,345) 1,236,252 1,236.252 Total $31,324,166 $33,351,230 ($13,021,451) $51,653,945 $5,313,606 $46,340,339 `Being refunded with proceeds of the Bonds -- m Because of the dissolution of redevelopment agencies in California, tax allocation bonds of the former Arcadia Redevelopment Agency are not included in this table. Source: City of Arcadia Typically, the General Fund has been used to liquidate the liability for compensated absences and claims and judgments payable. In May 2011, the City issued Series 2011 General Obligation Bonds in the amount of $8,000,000. The bonds were authorized at an election of the registered voters of the City. The purpose of the bonds was to finance a portion of the cost of constructing, installing, acquiring and improving a grade separation at the intersection of Santa Anita Avenue and the proposed Foothill Extension of the Metropolitan Transit Authority Gold Line. The amount of bonds outstanding at June 30, 2011 totals $8,000,000. No Default The City has never defaulted in the payment of principal or interest on any of its loans, bonds, notes or other debt obligations or on any of its lease obligations. Pension Plan The City contributes to the California Public Employees' Retirement System (PERS), an agent multiple - employer public employee defined benefit pension plan. PERS provides retirement and disability benefits, annual cost -of- living adjustments, and death benefits to plan members and beneficiaries. PERS acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provisions and all other requirements are established by State statute and City ordinance. Copies of PERS' annual financial report may be obtained from its executive office at 400 "P" Street, Sacramento, California 95814. Participants are required to contribute 8% for miscellaneous employees and 9% for safety employees of their annual covered salary. The City is required to contribute at an actuarially determined rate; the current rate is 19.633% for miscellaneous employees, and 35.076% for safety employees, of annual covered payroll for year ended June 20, 2013. The contribution requirements of plan members and the City are established and may be amended by PERS. For the current fiscal year, the City's annual pension cost of $7,141,567 for PERS was equal to the City's required and actual contributions. The required contribution was determined as part of the June 30, 2010, actuarial valuation using the entry age normal actuarial cost method. The actuarial assumptions included (a) 7.75% investment rate of return (net of administrative expenses), (b) projected salary increases ranging from A -3 3.525% to 14.45% for miscellaneous employees and from 3.525% to 13.15% for safety employees depending on age, service, and type of employment, and (c) 3.25% per year cost -of- living adjustments. Both (a) and (b) included an inflation component of 3.00 %. The actuarial value of PERS assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a three -year period. PERS' unfunded actuarial accrued liability (or surplus) is being amortized as a level percentage of projected payroll on a closed basis. The average remaining amortization period at June 30, 2010, was 22 years for miscellaneous and 31 years for safety employees for prior and current service unfunded liability. Funding Status as of the Most Recent Actuarial Date The City contributes to the California Public Employees' Retirement System (Ca1PERS), as an agent multiple — employer public employee defined benefit pension plan. The amounts reflected herein represent the City's portion as reported by CalPERS. The following is the most recent information available. Safety Plan Miscellaneous Plan (A) (B) (C) (D) (E) (F) Unfunded Actuarial Unfunded Liability as Entry Age Actuarial Percentage of Actuarial Actuarial Actuarial Accrued Funded Covered Valuation Asset Accrued Liability Ratio Covered Payroll Date Value Liability (B-A) (A/B) payroll (M 6/30/10 $126,618,518 $164,546,720 $37,928,202 76.9% $12,347,110 307.2% Miscellaneous Plan Postemployment Health Care Benefits The City provides certain health insurance benefits, in accordance with the fringe benefits resolution, to retired employees. An eligible retiree is a Management or City employee who retires on a service retirement and has 125 days of accumulated sick leave at the date of retirement. Such payment shall cease by the employee's sixty -fifth (65) birthday. If the retired employee has other group medical coverage available to them, then this other group insurance shall be primary and the City's health insurance plan shall function as a secondary coinsurance. An employee who has fewer than 125 days of accumulated sick leave at the date of retirement may become eligible for coverage by paying the City an amount equal to the employee's daily pay rate at the time of retirement times the number of days needed to meet the 125 days of accumulated sick leave requirement with the following restrictions. The requirement varies slightly among different employee groups. A -4 (A) (B) (C) (D) (E) (F) Unfunded Actuarial Unfunded Liability as Entry Age Actuarial Percentage of Actuarial Actuarial Actuarial Accrued Funded Covered Valuation Asset Accrued Liability Ratio Covered Payroll Date Value Liability (B-A) LA/133) paroll_ (C/E) 6/30/10 $84,290,451 103,138,122 18,847,671 81.7% $12,245,019 153.9% Postemployment Health Care Benefits The City provides certain health insurance benefits, in accordance with the fringe benefits resolution, to retired employees. An eligible retiree is a Management or City employee who retires on a service retirement and has 125 days of accumulated sick leave at the date of retirement. Such payment shall cease by the employee's sixty -fifth (65) birthday. If the retired employee has other group medical coverage available to them, then this other group insurance shall be primary and the City's health insurance plan shall function as a secondary coinsurance. An employee who has fewer than 125 days of accumulated sick leave at the date of retirement may become eligible for coverage by paying the City an amount equal to the employee's daily pay rate at the time of retirement times the number of days needed to meet the 125 days of accumulated sick leave requirement with the following restrictions. The requirement varies slightly among different employee groups. A -4 and 1. The employee must have reached age 55; 2. The employee must have worked full -time continuously for the City for a minimum of 15 years; 3. The employee would be limited to purchasing a maximum of 60 days (480 hours) of sick leave. The City also provides a $10,000 group term life insurance plan to management employees who retire after July 1, 1979, but who were hired into a management classification prior to September 21, 1982, in accordance with the controlling provisions of the plan. The City recognizes the cost of providing these benefits by recording the insurance premiums when expenditures occur. The plans are advance funded. There are 18 active plan participants. Contributions of $0 were paid for fiscal year ended June 30, 2012. The plan does not apply to employees hired after 1982. The required contribution of the City is based on a pay -as- you -go financing requirement. For fiscal year 2012, the City contributed $610,995 to the pbn. The City anticipates that its contribution for fiscal -year 2012 will be $724,950. The City's annual Other Postemployment Benefit (OPEB) cost (expense) is calculated base on the Annual Required Contribution of the Employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excesses) over a period not to exceed thirty years. As of July 1, 2011, the most recent actuarial valuation date, the plan was zero percent funded. The Actuarial Accrued Liability for benefits was $10,220,703, and the actuarial value of assets was $0, resulting in an UAAL of $10,220,703. The covered payroll (annual payroll of active employees covered by the plan) was $34,805,991 and the ratio of UAAL to the covered payroll was 29 %. 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 future employment, mortality, and the healthcare cost trend. 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. Impact of State Budget The State of California is experiencing significant financial and budgetary stress. State budgets are affected by national and state economic conditions and other factors over which the City has no control. The State's financial condition and budget policies affect communities and local public agencies throughout California. To the extent that the State budget process results in reduced revenues to the City, the City will be required to make adjustments to its budget. The complete 2012 -13 State Budget is available from the California Department of Finance website at www.dof.ca.gov. An impartial analysis of the budget is posted by the Office of the Legislative Analyst at www.lao.ca.gov. The City can take no responsibility for the continued accuracy of these internet addresses or for the accuracy, completeness or timeliness of information posted there, and such information is not incorporated herein by such reference. The City cannot predict what actions will be taken in future years by the State Legislature and the Governor to address the State's current or future budget deficits. Future State budgets will be affected by national and state economic conditions and other factors over which the City has no control. To the extent that the State budget process results in reduced revenues to the City, the City will be required to make adjustments to its budget. A -5 Insurance The City retains a level of risk for both general liability and worker's compensation. The City is self - insured for the first $500,000 on each general liability claim against the City. The insurance coverage in excess of the self - insured amount is provided by California Insurance Pool Authority (CIPA), a public entity risk pool currently operating as a common risk management and insurance program for 12 California cities. Effective July 1, 2006, the City became a member of the CIPA. The City pays an annual premium to the pool for its excess general liability insurance coverage. The agreement for formation of the CIPA provides that the pool will be self- sustaining through member premiums. The City continues to use commercial companies for all other risks of loss, including property insurance, auto physical damage insurance and special events insurance. As a member of CIPA, any losses in excess of the City's self - insured amount up to $2,000,000 are shared by all participating members. Costs of covered claims above $2,000,000 to $40,000,000 per occurrence are currently paid by reinsurance acquired by-CIPA. The City has had a self - insured workers' compensation program for a number of years. For the 2009- 20 10 fiscal year, the self - insured retention was $750,000. Beginning July 1, 2006, the insurance in excess of the self - insured amount is provided by California Insurance Pool Authority (CIPA). As a member of CIPA, all participating members share any losses in excess of the City's self - insured amount up to $3,000,000. Costs covered claims above $3,000,000 to 50,000,000 per occurrence are currently paid by reinsurance acquired by CIPA. The City Investment Fund Pursuant to the City's Investment Policy (the "Investment Policy "), the City's Treasurer is responsible for investing the cash balances in all City Funds in accordance with the California Government Code, Sections 53600 et seq. and 53635 et seq. The Investment Policy does not include long term debt reserve funds and deferred compensation funds, which are exceptions covered by other more specific Government Code sections and the legal documents unique to each debt transaction. The City adopted its Investment Policy in order to establish the investment scope, objectives, delegation of authority, standards of prudence, reporting requirements, internal controls, eligible investments and transactions, diversification requirements, risk tolerance, and safekeeping and custodial procedures for the investment of the funds of the City. All City funds will be invested in accordance with this Investment Policy and with applicable sections of the California Government Code. The Investment Policy states that the principal investment objectives of the City are as follows: Preservation of capital and protection of investment principal. 2. Maintenance of sufficient liquidity to meet anticipated cash flows. Attainment of a market rate of return. 4. Diversification to avoid incurring unreasonable market risks. 5. Compliance with the City's Municipai Code and with all applicable City resolutions, California statutes and Federal regulations. Under the Investment Policy, the City Treasurer and other individuals assigned to manage the investment portfolio, acting within the intent and scope of the investment policy and other written procedures, and exercising due diligence, shall be relieved of personal responsibility and liability for an individual investment's credit risk or market price changes, provided material deviations from expectations are reported in a timely manner and appropriate action is taken to control any adverse developments. A -6 As of April 1, 2012, the City's investments were as follows: Table A-4 CITY OF ARCADIA Investment Report For the Month Ending March 31, 2012 Period Remaining to Maturity Amount Percent of Total Less than 1 Year $55,819,685.84 55% Between 1 and 2 Years 19,579,879.50 19% Between 2 and 5 Years 26,864245.01 26% Total Investments $102,263,810.35 100% Portfolio Comaosition Amount Percent of Total Federal Home Loan Bank $7,168,030.00 7% Federal Farm Credit Bank 4,998,455.00 5% Federal National Mortgage Association 21,958,502.50 21% Federal Home Loan Mortgage Corporation 17,125,030.00 17% Treasury 6,095,000.01 6% Municipal Bonds 1,800,000.00 2% Total Agencies $59,145,017.51 58% Certificates of Deposit $800,000.00 1% State Local Agency Investment Fund 34,161,873.55 33% Corporate Issues 5,064,939.96 5% Other Investment 3,091,979.33 3% Total Investments $102,263,810.35 100% (1) Table A -4 contains all of the City's cash investments, including moneys that are restricted for various purposes other than general operation. Community Service Facilities The City has a 30,000 square foot Community Center and patio area in active use by the entire community. The City has a five person staff specifically dedicated to the seniors in Arcadia in addition to the five full -time and numerous part-time Recreation and Community Services staff who operate numerous family, senior, youth group athletic programs and operate the City's twenty parks. Located in the Civic Center complex are the City Hall, which houses the City administrative, financial, legal and community development offices, the nearby Police Station, City Council Chambers, and Civic Center soccer field. The 36,000 square foot City Library houses over 130,000 books, as well as videos, books on tape and a children's section. The Library has a large community room for functions. There is an active Community Coordinating Council composed of all the civic, social, philanthropic, service, school, religious, welfare and community organizations. These activities are held in many of the same facilities as named above, as well as at the Women's Club, Assistance League building, Masonic Temple, and the Los Angeles County Arcadia Regional Park buildings. There are approximately 27 churches in Arcadia whose halls and assembly rooms are often used for community events. In addition to the regional Westfield Santa Anita Mall, the City has three other major community facilities. The privately owned world famous Santa Anita Race Track sponsors numerous civic and community events in its clubhouse and grandstand areas and in the adjacent parking lot. The Los Angeles County Arboretum also has numerous flower and horticulture events, as well as cultural and historical'presentations on its grounds. The Los Angeles County Park has community events in its open areas, playfields, buildings and event areas. A -7 Healthcare The 450 -bed and 640 medical staffed Arcadia Methodist Hospital is located immediately west of the City Hall on City -owned property, which is leased to them for $1 per year. The Hospital provides comprehensive acute care such as medical, surgical, prenatal, pediatrics, oncology, intensive, neonatal and adult care, and serves as the "anchor" for numerous physicians, surgeons, clinics, and healthcare service providers operating, in the Arcadia area. Methodist Hospital opened its new $140 million tower in September 2011. The tower has six floors, and 155,000 square feet, and was built to address the needs of emergency and critical care services. The tower includes the new state -of -the -art Hollfelder Emergency Care Center, with 26 beds on the first floor, along with an 18 bed observation unit for short stay patients. The upper floors include 140 beds, including 20 for critical care patients. The upper floors will serve patients with cardiac, respiratory, or neurological issues, and stroke recovery. Education The schools within the City are go -ymed by Arcadia Unified School District. There are eleven (11) schools - 6 elementary, 3 middle, 1 high and I alternative learning center The City is in the Pasadena City College District, but students also attend Citrus, Mount San Antonio and Rio Hondo Community Colleges. In the vicinity of Arcadia there are several nationally recognized universities - California Institute of Technology, Pasadena; the Claremont Colleges, Claremont; the University of California at Los Angeles; the University of Southern California, Los Angeles. Located within reasonable driving distance of the City are also California Polytechnic, Pomona; University of La Verne; and Occidental College. Utilities The City is served by: Water - City of Arcadia Public Works Services Department Sanitary Sewer - Los Angeles County Sanitation District Storm/Flood Drainage - Los Angeles Public Works Department Electric - Southern California Edison Gas - Southern California Gas Company Phone – SBC and Verizon Cable – Time Warner Cable Transportation Auto/Truck. The City is bisected east; west by the Interstate 210 (Foothill) Freeway which links autos and trucks to the Interstate 605 (San Gabriel) Freeway and then to the Interstate 10 (San Bernardino), California 71 (Chino Valley), and California 60 (Pomona) Freeways. To the west Interstate 210 links to the Interstate 5 (Golden State), US 101 (Hollywood), the California 134 (Ventura), and Interstate 405 (San Diego) Freeways. The City has three major north/south arterials — Santa Anita Avenue, Baldwin Avenue, and in the extreme southeast part of the City, Peck Road/Myrtle Avenue. A short distance to the west is Rosemead Boulevard, a major State Highway (Route 19). The City has five major east/west arterials - Foothill Boulevard, Colorado Boulevard, Huntington Drive, Duarte Road, and Live Oak Avenue (Arrow Highway)/Las Tunas Drive. Rail. The Gold Line Construction Authority is scheduled to construct the Gold Line from Pasadena's Sierra Madre Boulevard, immediately west of Arcadia to Azusa. The Gold Line Construction Authority is A -8 currently under construction on the extension, which will include a station in Arcadia at the Northwest corner of 1 st Avenue and Santa Clara. The City is actively planning for land use improvements around the station. Two Miles south of the southern border of the City on Santa Anita Avenue in El Monte, is the MTA Metrolink Rail Station, the commuter train linking downtown Los Angeles to the suburbs and ultimately to Amtrak and the rest of the country. Bus. The City is served by two major bus carriers — Foothill Transit and the MTA. Passengers can travel throughout the County on these carriers. The City has its own demand bus /van system, Arcadia Transit, which is one the most successful of its kind in the County. Air. The City is served by three international airports — Los Angeles International, 25 miles to the southwest; Ontario International, 25 miles to the east; and Orange County, 40 miles to the southeast. Two regional airports also service Arcadia — Burbank/Pasadena/Glendale 20 miles to the west, and Long Beach, 30 miles to the south. The El Monte Airport, 5 miles from downtown Arcadia south on Santa Anita Avenue, is a local airport for small planes and helicopters_– Shipping. Sea — The Ports of Los Angeles and Long Beach, collectively the third largest port in the world, and the largest in the United States, are 35 miles to the south. Shipping. Trucking — The industrial areas to the south and east of the City are major distribution and warehousing centers, including the cities of El Monte, Industry, Irwindale, Ontario, Fontana, Rancho Cucamonga. Climate and Topography The City enjoys a Mediterranean climate with temperatures ranging from an average low of 42 degrees Fahrenheit in the winter to an average high of 92 degrees Fahrenheit in the summer. The City receives an average of 16 inches of rain annually. The City slopes gradually upwards to the San Gabriel Mountains to the north with the extreme north end of the City and Wilderness Park area being semi - mountainous. There are two major flood channels bisecting the City in a north/south direction, the Arcadia Wash which runs through the Race Track, then through the center of the City into Temple City, and the Santa Anita Wash which drains the mountains to the north (Santa Anita Dam area) and runs through the downtown and along the eastern edge of the City into El Monte. Both drain into the Whittier Narrows area and then into the San Gabriel River. Earthquake Fault Zones The City is approximately 35 miles from the San Andreas Fault which runs southeast to northwest from the Palm Springs area, San Bernardino, and through Palmdale, directly north of Arcadia. The Sierra Madre Fault runs in an east/west direction across the northern semi - mountainous section of the City. The Raymond Hill Fault runs in a generally east/west direction from Monrovia through Foothill Middle School, the Santa Anita Race Track, and the Arboretum. Flood Areas The City has four inundation areas. A -9 Santa Anita Dam — This area includes the entire east part of the City east of the Arcadia Wash and into Monrovia. Sierra Madre Dam — This area includes the northern extreme of the City to the 210 Wash and overlaps the Santa Anita Dam area. Sawpit Dam — This area includes the extreme eastern edge of the City east of the Arcadia Wash south of Duarte Road and running south of Live Oak Avenue. Morris S. Jones Reservoir — This area includes the northwest area of the City extending from the 210 Freeway to the Santa Anita Race Track. Fire Hazard Area The northern extension of the City is semi - mountainous terrain. There is an extreme fire hazard zone north and east (Monrovia) of the City, a narrow high fire hazard zone along the northern edge of the City extension, and a low fire hazard zone south of the mountains and extending almost to Foothill Boulevard. No Default The City has never defaulted in the payment of principal or interest on any of its loans, bonds, notes or other debt obligations or on any of its lease obligations. Population The population of the City as of January 1, 2012, was 56,546 according to the State Department of Finance. A historical summary of the City's population is shown below. Table A -5 CITY OF ARCADIA Population Year Population 2003 55,420 2004 55,694 2005 55,923 2006 55,932 2007 56,015 2008 56,079 2009 56,337 2010 56,719 2011 56,548 2012 56,546 Note: Population data is dated as of January 1 for each respective year except for 2000 which is dated as of April 1. Source: California Department of Finance, Demographic Research Unit. Commerce The number of establishments selling merchandise subject to sales tax and the valuation of taxable transactions is presented in the following table. A -10 Table A -6 CITY OF ARCADIA Taxable Sale Taxable Transactions (in thousands of dollars) 2005 2006 2007 2008 2009 2010 Retail stores $ 700,257 $ 717,906 $ 736,693 $ 712,158 $ 665,894 $ 680,040 All other outlets 826,456 844,541 856,724 823,933 752,635 761,875 Total 526.713 $1,562,442 $1193.417 $.11 1 $1,418,522 1 441 915 Source: California State Board of Equalization. Employment and Industry The City is a part of the Los Angeles County Primary Statistical labor market area. The distribution of employment is this area is as follows: Civilian Labor Force Civilian Employment Civilian Unemployment Civilian Unemployment Rate Agriculture Mining and Logging Construction Manufacturing Transportation, Warehousing & Utilities Wholesale Trade Retail Trade Finance & Insurance Real Estate Government Total, All Industry Table A -7 LOS ANGELES COUNTY MSA Labor Force and Industry Employment (Data Not Adjusted for Seasonality) Annual Averages 2007 -2011 2007 2008 2009 2010 2011 4,872,500 4,934,800 4,904,300 4,910,500 4,924,400 4,625,600 4,565,500 4,335,200 4,291,400 4,318,900 246,900 369,300 569,000 619,100 605,500 5.1% 7.5% 11.6% 12.6% 12.3% 7,500 6,900 6,200 6,200 5,500 4,400 4,400 4,100 4,100 4,000 157,600 145,200 117,300 104,500 103,500 449,200 434,500 389,200 373,200 365,400 165,600 163,100 151,200 150,600 149,900 227,000 223,700 204,500 203,300 207,200 426,000 416,500 387,000 386,000 390,900 163,300 153,900 142,300 137,800 137,500 55,300 54,300 52,200 51,800 52,300 595,700 603,700 595,800 579.600 565,200 4,129,600 4,077,600 3,830,300 3,779,300 3,799,600 Note: Employment is reported by place of work: it does not include persons involved in labor - management disputes. Figures are rounded to the nearest hundred. Columns may not add to totals due to rounding. Source: California Employment Development Department. Employment The ten largest private employers in the City as of June 30, 2011 are, shown in the following table. A -11 Table A -8 CITY OF ARCADIA Major Private Employers Source: City of Arcadia Annual Comprehensive Financial Report for Fiscal Year 2010 -11. The following is a table of the twenty -five largest employers in the County of Los Angeles. Table A -9 COUNTY OF LOS ANGELES Major Employers Employer AHMC Healthcare Inc All Nations Church American Honda Motor Co Inc Calif Institute of Technology California State - Northridge Cedars -Sinai Medical Ctr Century Plaza Towers Contractor State License Ctr FX NETWORKS LLC Kaiser Foundation Hospital LAC & USC MEDICAL CTR Long Beach City Hall Long Beach Memorial Med Ctr Los Angeles County Sheriff Los Angeles Police Dept Nestle USA Pomona Valley Hospital Med Ctr Pro Parts Providence Health -San Fernando Providence Health- Southern Ca Santa Monica College Sony Pictures Entertainment UCLA UCLA Health System Walt Disney Co Description Hospitals Churches Automobile & Truck Brokers (Whls) Schools- Universities & Colleges Academic Schools - Universities & Colleges Academic Hospitals Office Buildings & Parks Schools- Business & Vocational Television -Cable & CATV Hospitals Hospitals City Government - Executive Offices Hospitals Sheriff Police Departments Food Products & Manufacturers Hospitals Automobile Parts & Supplies - Retail -New Health Services Health Services Schools- Universities & Colleges Academic Motion Picture Producers & Studios Schools- Universities & Colleges Academic Schools- Universities & Colleges Academic Motion Picture Producers & Studios Source: California Employment Development Department A -12 Percentage of Total City Emplover Employees Rank Employment Vons Companies Inc. 459 1 3.35% Emergency Groups Office 300 2 2.19% Macy's West 294 3 2.15% Worley Parsons Group, Inc. 277 4 2.02% Nordstrom Inc. 274 5 2.00% JC Penney Corp. Inc. 272 6 1.99% M W H Americas, Inc. 184 7 1.34% The Cheesecake Factory 168 8 1.23% 24 Hours Fitness #906 164 9 1.20% Healthcare Partners Medical -- " 161 10 1.18% Total 2,553 18.66% Source: City of Arcadia Annual Comprehensive Financial Report for Fiscal Year 2010 -11. The following is a table of the twenty -five largest employers in the County of Los Angeles. Table A -9 COUNTY OF LOS ANGELES Major Employers Employer AHMC Healthcare Inc All Nations Church American Honda Motor Co Inc Calif Institute of Technology California State - Northridge Cedars -Sinai Medical Ctr Century Plaza Towers Contractor State License Ctr FX NETWORKS LLC Kaiser Foundation Hospital LAC & USC MEDICAL CTR Long Beach City Hall Long Beach Memorial Med Ctr Los Angeles County Sheriff Los Angeles Police Dept Nestle USA Pomona Valley Hospital Med Ctr Pro Parts Providence Health -San Fernando Providence Health- Southern Ca Santa Monica College Sony Pictures Entertainment UCLA UCLA Health System Walt Disney Co Description Hospitals Churches Automobile & Truck Brokers (Whls) Schools- Universities & Colleges Academic Schools - Universities & Colleges Academic Hospitals Office Buildings & Parks Schools- Business & Vocational Television -Cable & CATV Hospitals Hospitals City Government - Executive Offices Hospitals Sheriff Police Departments Food Products & Manufacturers Hospitals Automobile Parts & Supplies - Retail -New Health Services Health Services Schools- Universities & Colleges Academic Motion Picture Producers & Studios Schools- Universities & Colleges Academic Schools- Universities & Colleges Academic Motion Picture Producers & Studios Source: California Employment Development Department A -12 The following table summarizes the labor force, employment and unemployment figures over the past five years for the City of Arcadia, the County of Los Angeles, the State of California, and the nation as a whole. Table A -10 CITY OF ARCADIA County of Los Angeles, State of California, and United States Average Annual Civilian Labor Force, Employment and Unemployment Unemployment Year and Area Labor Force Employment Unemployment (Z) Rate (3) 2007 Arcadia 28,400 27,600 800 2.8% Los Angeles County 4,827,508 4,625,600 246,900 5.1% California 17,970,800 17,011,000 959,800 5.3% United States 153,124,0000 146,047,000 7,078,000 4.6% 2008 Arcadia 28,400 27,200 1,200 4.2% Los Angeles County 4,934,800 4,565,500 369,300 7.5% California 18,251,600 16,938,300 1,313,200 7.2% United States 154,287,000 145,362,000 8,924,000 5.8% 2009 Arcadia 27,700 25,800 1,800 6.7% Los Angeles County 4,903,300 4,335,200 569,000 11.6% California 18,250,200 16,163,900 2,086,200 11.4% United States 154,142,000 139,877,000 14,265,000 9.3% 2010 Arcadia 27,600 25,600 2,000 7.3% Los Angeles County 4,910,500 4,291,400 619,100 12.6% California 18,316,400 16,051,500 2,264,900 12.4% United States N/A N/A N/A N/A 2011 Arcadia 27,700 25,700 2,000 7.1% Los Angeles County 4,924,400 4,318,900 605,600 12.3% California 18,384,900 16,226,600 2,158,300 11.7% United States N/A N/A N/A N/A (1) Includes persons involved in labor - management trade disputes. (2) Includes all persons without jobs who are actively seeking work. (3) The unemployment rate is computed from unrounded data: therefore, it may differ from rates computed from rounded figures in this table. Source: California Employment Development Department, based on March 2000 benchmark and U.S. Department of Labor, Bureau of Labor Statistics. Home Prices The following table shows the median home prices for select cities within Los Angeles County and throughout Los Angeles County in June 2011 and in June 2012, together with the percentage of increase or decrease with respect to such prices. A -13 Table A -11 CITY OF ARCADIA Homes Sold(') County /City /Area 2010 2011 % of Change Arcadia $720,500 $750,000 4.09% El Monte 305,000 280,500 -8.03% Monrovia 444,000 402,500 -9.35% Pasadena 505,000 500,000 -0.99% Sierra Madre 685,000 639,000 -6.72% Temple City 530,000 510,000 -3.77% Los Angeles County 335,000 315,000 -5.97% ") Reporting resale single family residences and condos as well as new homes. Source: DataQuick California Home Sale Price Medians by County and City, 2012. Construction Activity The following table is a five -year summary of the valuation of building permits issued by the City: Table A -12 CITY OF ARCADIA Building Permit Activity Summary: Units and Valuations Source: 2007 -2009 - Construction Industry Research Board; 2010 and 2011 — City of Arcadia, Development Services Department. A -14 2007 2008 2009 2010 2011 Residential Single- Family $45,976,979 $31,492,732 $33,670,778 $41,379,611 $66,008,261 Multifamily 960,499 14,432,685 1,726,624 2,580,150 10,159,175 Alt. & Additions 17,178,002 13,970,680 10,713,807 12,449,951 10,147,172 Total $64,115,480 $59,896,097 $46,111,009 $56,409,712 $86,314,608 Non - Residential New Commercial $5,576,128 $29,553,561 0 $2,086,981 $6,862,179 New Industrial 1,505,861 0 0 0 0 Other 3,315,702 2,259,710 1,834,576 2,689,597 3,753,407 Alt. & Additions 8,698,987 10,521,514 26,313,910 4,297,183 12,808,944 Total $19,096,678 $42,334,785 $28,148,486 $9,073,761 $23,424,530 Total All Building $83,212,158 $102,230,882 $74,259,495 $65,483,473 $109,739,138 Dwelling Units: Single family 78 51 48 49 58 Multiple family 6 82 7 17 9 Total 84 133 55 66 67 Source: 2007 -2009 - Construction Industry Research Board; 2010 and 2011 — City of Arcadia, Development Services Department. A -14 APPENDIX B CITY OF ARCADIA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2011 I: APPENDIX C PROPOSED FORM OF OPINION OF BOND COUNSEL November _, 2012 City Council City of Arcadia Arcadia, California Re, $ City of Arcadia General Obligation Refunding Bonds, Series 2012 (Police Station Project) Members of the City Council: We have acted as bond counsel for the City of Arcadia (the "City") in connection with the authorization and issuance of the above - referenced bonds (the "Bonds "). The Bonds are authorized pursuant to Chapter 4 (commencing with Section 43600) of Division 4 of Title 4 and Articles 9 and 11, Chapter 3, Part 1 of Division 2 of the Government Code of the State of California (collectively, the "Act ") and Resolution No. of the City adopted on September 18, 2012, together with that certain Supplement to Resolution No. dated as of November 1, 2012 executed in connection therewith (collectively, the "Resolution "). Capitalized terms used herein and not defined shall have the meanings given such terms in the Resolution. In such connection, we have examined originals or copies identified to our satisfaction as being true copies of the Resolution and certain other documents and records of the City. As to questions of fact material to our opinion, we have relied upon certifications of officers of the City, the initial purchasers of the Bonds and others which have been furnished to us, but we have not undertaken to verify the accuracy thereof through independent investigation. Based upon and subject to the foregoing, and in reliance thereon, we are of the following opinions: 1. The Bonds have been duly and validly authorized and constitute legal, valid and binding obligations of the City enforceable in accordance with their terms and the terms of the Resolution, except as the same may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights, by equitable principles, by the exercise of judicial discretion in appropriate cases and by limitations on legal remedies against public agencies in the State of California. The Bonds are obligations of the City but are not a debt of the City, the State of California or any other political subdivision thereof within the meaning of any constitutional or statutory limitation. 2. The Resolution has been duly adopted by the City Council of the City and constitutes a legal, valid and binding obligation of the City. The Resolution is enforceable in accordance with its terms except as the same may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights, by equitable principles, by the exercise of judicial discretion in appropriate cases and by limitations on legal remedies against public agencies in the State of California, provided, however, we express no opinion as to the enforceability of provisions of the Resolution as to indemnification, penalty, contribution, choice of law, choice of forum or waiver contained therein. 3. The Bonds are secured by the proceeds of ad valorem taxes levied upon all property subject to such taxes in the City which taxes are unlimited as to rate or amount (except as to certain personal property which is taxable at limited rates) for payment of the Bonds and the interest thereon. C -1 4. Under existing statutes, regulations, rulings and judicial decisions, interest on the 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; however, it should be noted that, with respect to corporations, such interest may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of corporations. Interest on the Bonds is exempt from State of California personal income tax. 6. The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Bonds constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bondowner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Bondowner will increase the Bondowner's basis in the applicable Bond. Original issue discount that accrues to the Bondowner 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 _gin individuals and corporations, and is exempt from State of California personal income tax. 7. The amount by which a Bond owner's original basis for determining loss on sale or exchange in the applicable 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 Bond owner's basis in the applicable 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 Bond premium may result in a Bond owner realizing a taxable gain when a Bond is sold by the owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the owner. Purchasers of the 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 for federal income tax purposes of interest on the Bonds is subject to the condition that the City complies with all requirements of the Internal Revenue Code of 1986, as amended (the "Code "), that must be satisfied subsequent to the issuance of the Bonds to assure that such interest will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The City has covenanted to comply with all such requirements. Except as expressly stated herein, we express no opinion as to any tax consequences related to the Bonds. Certain agreements, requirements and procedures contained or referred to in the Resolution and the Tax Certificate executed by the City with respect to the Bonds may be changed and certain actions may be taken or omitted, under the circumstances and subject to the terms and conditions set forth in such documents. We express no opinion as to the effect on the exclusion from gross income for federal income tax purposes of the interest on the Bonds if any such change occurs or action is taken or omitted upon advice or approval of bond counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation. We are admitted to the practice of law only in the State of California and 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 and express no opinion as to the enforceability of the choice of law provisions contained in the Resolution. The opinions expressed herein and the exclusion of interest on the Bonds from gross income for federal income tax purposes may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Our engagement as Bond Counsel terminates upon the issuance of the Bonds and we have not undertaken to determine, or to inform any person, whether any such actions or events are taken (or not taken) or do occur (or do not occur). C -2 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 express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement relating to the Bonds or other offering material relating to the Bonds and expressly disclaim any duty to advise the purchaser or owners of the Bonds with respect to matters contained in the Official Statement. Respectfully submitted, C -3 APPENDIX D FORM OF CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (the "Disclosure Certificate ") is executed and delivered by the City of Arcadia (the "City ") in connection with the issuance of City of Arcadia General Obligation Refunding Bonds, Series 2012 (Police Station Project) (Bank Qualified) (the "Bonds "). The Bonds are being issued pursuant to a Resolution of the City dated , 2012 (the "Resolution "). The City covenants and agrees as follows: SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2- 12(b)(5). SECTION 2. Definitions. In addition to the definitions set forth in the Resolution, 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" shall mean any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. "Beneficial Owner" shall mean 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. "Dissemination Agent" shall mean initially The Bank of New York Mellon Trust Company, N.A., or any successor Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation. "Holders" shall mean registered owners of the Bonds. "Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Certificate. "Participating Underwriter" shall mean or any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Repository" shall mean the Municipal Securities Rulemaking Board's Electronic Municipal Market Access System for municipal securities disclosures, maintained on the Internet at http: / /emma.msrb.orgl, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. "Rule" shall mean Rule 15c2- 12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "State" shall mean the State of California. SECTION 3. Provision of Annual Reports. (a) The City shall, or shall cause the Dissemination Agent to, not later than nine months after the end of the City's fiscal year (presently ending June 30), commencing with the report for the 2011 -12 Fiscal Year, provide to the Participating Underwriter and the Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross - reference other information as D -1 provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the City may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if they are not available by that date. If the City's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(f). (b) Not later than 30 days (nor more than 60 days) prior to said date the Dissemination Agent shall give notice to the City that the Annual Report shall be required to be filed in accordance with the terms of this Disclosure Certificate. Not later than 15 Business Days prior to said date, the City shall provide the Annual Report in a format suitable for reporting to the Repository to the Dissemination Agent (if other than the City). If the City is unable to provide to the Repository an Annual Report by the date required in subsection (a), the City shall send a notice to the Repository in substantially the form attached as Exhibit A with a copy to the Dissemination Agent. The Dissemination Agent shall not be required to file a Notice to the Repository of Failure to File an Annual Report. (c) Upon being provided with the Annual, Report, the Dissemination Agent shall file a report with the City stating it has filed the Annual Report in accordance with its obligations hereunder, stating the date it was provided and listing the Repository to which it was provided. SECTION 4. Content and Form of Annual Reports. (a) The City's Annual Report shall contain or include by reference the following: 1. The audited financial statements of the City 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 City's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. 2. Material financial information and operating data with respect to the City of the type included in the Official Statement in the following categories (to the extent not included in the City's audited financial statements): Summary financial information on revenues, expenditures and fund balances for the City's general fund reflecting adopted budget for the current fiscal year, annual assessed values, top taxpayers and overlapping debt. 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 City or related public entities, which have been submitted to the Repository or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The City shall clearly identify each such other document so included by reference. (b) The Annual Report shall be filed in an electronic format accompanied by identifying information prescribed by the Municipal Securities Rulemaking Board. SECTION 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, not more than ten (10) Business Days after the event: 1. principal and interest payment delinquencies; D -2 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 or the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701 -TEB) or other material notices or determinations with respect to the tax status of the Bonds; 6. defeasances; 7. tender offers; 8. bankruptcy, insolvency, receivership or similar proceedings; and 9. ratings changes. (b) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: mergers, consolidations, acquisitions, the sale of all or substantially all of the assets of the obligated persons or their termination; 2. appointment of a successor or additional trustee or the change of the name of a trustee; 3. non payment related defaults; 4. modifications to the rights of Bondholders; notices of prepayment; and 6. release, substitution or sale of property securing repayment of the Bonds. (c) Whenever the City obtains knowledge of the occurrence of a Listed Event the City shall as soon as possible determine if such event would be material under applicable federal securities laws. (c) If the City determines that knowledge of the occurrence of a Listed Event under Subsection (b) would be material under applicable federal securities laws, the City shall promptly file a notice of such occurrence with the Repository or provide notice of such reportable event to the Dissemination Agent in format suitable for filing with the Repository. The Dissemination Agent shall have no duty to independently prepare or file any report of Listed Events. The Dissemination Agent may conclusively rely on the City's determination of materiality pursuant to Section 5(c). SECTION 6. Termination of Reporting Obligation. The City'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 City shall give notice of such termination in the same manner as for a Listed Event under Section 5(a). SECTION 7. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign upon 15 days written notice to the City. Upon such resignation, the City shall act as its own Dissemination Agent until it appoints a successor. The Dissemination Agent shall not be D -3 responsible in any manner for the content of any notice or report prepared by the City pursuant to this Disclosure Certificate and shall not be responsible to verify the accuracy, completeness or materiality of any continuing disclosure information provided by the City. The fact that the Dissemination Agent or any affiliate thereof may have any fiduciary or banking relationship with the City shall not be construed to mean that the Dissemination Agent has actual knowledge of any event or condition except as may be provided by written notice from the City. The City shall compensate the Dissemination Agent for its fees and expenses hereunder as agreed by the parties. Any entity succeeding to all or substantially all of the Dissemination Agent's corporate trust business shall be the successor Dissemination Agent without the execution or filing of any paper or further act. SECTION 8. Amendment: Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied: (a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, 5(a) or 5(b), it may only be made in connection with a change -in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Bonds, or the type of business conducted; (b) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; (c) The amendment or waiver does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Holders or Beneficial Owners of the Bonds; and (d) No rights, protections or duties of the Dissemination Agent hereunder shall be amended without its written consent thereto. In the event of any amendment or waiver of a provision of this Disclosure Certificate, the City shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5(a), and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City 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 Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the City shall have no obligation under this Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. SECTION 10. Default. In the event of a failure of the City to comply with any provision of this Disclosure Certificate any Holder or Beneficial Owner 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 City 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 Resolution, and the sole remedy under this Disclosure Certificate in the D -4 event of any failure of the City to comply with this Disclosure Certificate shall be an action to compel performance. SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate. The Dissemination Agent acts hereunder solely for the benefit of the City; this Disclosure Certificate shall confer no duties on the Dissemination Agent to the Participating Underwriters, the Holders and the Beneficial Owners. The City agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees and expenses) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's gross negligence or willful misconduct. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. The Dissemination Agent shall have no liability for the failure to report any event or any financial information as to which the City has not provided an information report in format suitable for filing with the Repository. The Dissemination Agent shall not be required to monitor or enforce the City's duty to comply with its continuing disclosure requirements hereunder. The Dissemination Agent shall have the same rights and protections hereunder as afforded to it under the Paying Agent Agreement dated as of , 2012, between the City and the Dissemination Agent, as paying agent. SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Dissemination Agent, the Participating Underwriters and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. SECTION 13. Governing Law. This Disclosure Certificate shall be governed by the laws of the State of California. Dated: , 2012 CITY OF ARCADIA [APPROVED AS TO FORM: [City Attorney] [ACCEPTED: THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Dissemination Agent By: Its: Authorized Officer] D -5 By: Its: [City Manager] EXHIBIT A NOTICE TO REPOSITORY OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: City of Arcadia, California Name of Bond Issue: City of Arcadia General Obligation Bonds, Series 2012 (Police Station Project) (Bank Qualified) Date of Issuance: , 2012 NOTICE IS HEREBY GIVEN that the City has not provided an Annual Report with respect to the above -named Bonds as required by the Continuing Disclosure Certificate relating to the Bonds. The City anticipates that the Annual Report will be filed by Dated: CITY OF ARCADIA By [form only, no signature reguiredl D -6 APPENDIX E DTC AND THE BOOK -ENTRY ONLY SYSTEM The following description of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, redemption premium, if any, and interest with respect to the Bonds to DTC, its Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Bonds and other related transactions by and between DTC, its Participants and the Beneficial Owners is based solely on the understanding of the City of such procedures and record keeping from information provided by DTC. Accordingly, no representations can be made concerning these matters and neither DTC, its Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or its Participants, as the case may be. The City, the Paying Agent and the Underwriter understand that the current "Rules" applicable to DTC are on file with the Securities and Exchange Commission and that the current "Procedures" of DTC to be followed in dealing with Participants are on file with DTC. The Depository Trust Company ( "DTC "), New York, NY, will act as securities depository for the Bonds. The 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 Bond certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world's largest depository, is a limited - purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 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 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 has Standard & Poor's highest rating: AAA. 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 and www.dtc.org. Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond (`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 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 certificates representing their ownership interests in the Bonds, except in the event that use of the book -entry system for the Bonds is discontinued. E -1 To facilitate subsequent transfers, all 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 the 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 Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Trust Agreement. For example, Beneficial Owners of the Bonds may wish to ascertain that the nominee holding the 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 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 each issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the 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 Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments of principal of, premium, if any, and interest on the 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 City or the Paying Agent, 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 Paying Agent or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payments of principal of, premium, if any, and interest on the Bonds by Cede & Co (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Paying Agent, 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. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the City or the Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered. The City may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered. The foregoing information concerning DTC and DTC's book -entry system has been provided by DTC, and neither the City nor the Paying Agent takes any responsibility for the accuracy thereof. NEITHER THE CITY NOR THE PAYING AGENT WILL HAVE ANY RESPONSIBILITY OR OBLIGATION TO DTC PARTICIPANTS, INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS WITH E -2 RESPECT TO THE PAYMENTS OR THE PROVIDING OF NOTICE TO DTC PARTICIPANTS, INDIRECT PARTICIPANTS OR BENEFICIAL OWNERS OR THE SELECTION OF BONDS FOR REDEMPTION. Neither the City nor the Paying Agent can give any assurances that DTC, DTC Participants, Indirect Participants or others will distribute payments of principal of, premium, if any, and interest on the Bonds paid to DTC or its nominee, as the registered Owner, or any redemption or other notice, to the Beneficial Owners or that they will do so on a timely basis or that DTC will serve and act in a manner described in this Official Statement. In the event that the book -entry system is discontinued as described above, the requirements of the Resolution will apply. The City and the Paying Agent cannot and do not give any assurances that DTC, the Participants or others will distribute payments of principal, interest or premium, if any, evidenced by the Bonds paid to DTC or its nominee as the registered owner, or will distribute any redemption notices or other notices, to the Beneficial Owners, or that they will do so on a timely basis or will serve and act in the manner described in this Official Statement. Neither the City nor the Paying_Agent are responsible or liable for the failure of DTC or any Participant to make any payment or give any notice to a Beneficial Owner with respect to the Bonds or an error or delay relating thereto. E -3 ATTACHEMENT 2 ESCROW AGREEMENT RELATING TO THE DEFEASANCE OF CITY OF ARCADIA General Obligation Refunding Bonds, Series 2012 (Police Station Project) THIS ESCROW AGREEMENT, dated as of November 1, 2012, by and between the City of Arcadia (the "City"), and The Bank of New York Mellon Trust Company, N.A., acting in its capacity as escrow agent (the "Escrow Agent ") pursuant to this Escrow Agreement (the "Agreement "); WITNESSETH: WHEREAS, pursuant to the provisions of Resolution No. 6218 and that certain Supplement to Resolution No. 6218 dated as of June 1, 2001 (the "Refunded Bonds Resolution "), the City previously issued its $8,000,000 City of Arcadia_ Series A of 2001 General Obligation Bonds (Police Station Project) currently outstanding in the principal amount of $[6,350,000] (the "Refunded Bonds "). The Bank of New York Mellon Trust Company, N.A., is acting as Paying Agent for the Refunded Bonds (in this capacity, "Paying Agent "); WHEREAS, the City did, pursuant to a resolution adopted by the City Council of the City on September 18, 2012 (together with the Supplement thereto dated as of November 1, 2012 (collectively, the "Resolution "), determine that it is in the City's best interest to issue its General Obligation Refunding Bonds, Series 2012 (Police Station Project) (the "Bonds ") to provide proceeds to refund all of the outstanding Refunded Bonds; and WHEREAS, in order to accomplish such refinancing it is necessary and desirable for the City to secure payment of debt service on the Refunded Bonds to redeem and retire the Refunded Bonds; and WHEREAS, the City will provide funds necessary to secure payment of debt service on the Refunded Bonds through February 1, 2013 and redeem and retire the Refunded Bonds on such date by authorizing the preparation and issuance of the Bonds, to be issued on [Closing Date]; and WHEREAS, the City has determined that it is in its best interests and desirable for the Bonds to be issued and for a portion of the proceeds of the Bonds to be applied to the advance refunding of the Refunded Bonds in accordance with the terms of this Agreement; and NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the City and the Escrow Agent agree as follows: SECTION 1. Deposit of Moneys. (a) As used herein, the term "Investment Securities" means the Investment Securities set forth in Schedule A hereto. The City hereby deposits with the Escrow Agent $ (representing $ proceeds of the Bonds [and $ from tax receipts allocated to the City]), to be held in irrevocable escrow by the Escrow Agent separate and apart from other funds of the City and the Escrow Agent in a fund hereby created and established and to be known as the "Escrow Fund" and to be applied solely as provided in this Agreement. Such moneys are at least equal to an amount sufficient to purchase the principal amount of Investment Securities set forth in Schedule A hereto, which, together with all interest due DOCSOC/1575470v5/024217 -0005 or to become due on such Investment Securities, and $ to be held as cash, will be sufficient: (i) to pay the interest and principal due on the Refunded Bonds on each scheduled payment date through and including February 1, 2013, and (ii) to redeem the Refunded Bonds maturing on or after August 1, 2013 at a redemption price equal to the principal amount thereof, plus a premium of 1% of the principal amount thereof, on February 1, 2013, the first optional redemption date for such bonds. (b) The Escrow Agent hereby acknowledges receipt of the written opinion of Grant Thornton, certified public accountants, dated [Closing Date] relating to the Investment Securities (the "Verification Report"), and the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, dated [Closing Date], and relating to this Agreement. (c) Notwithstanding any provision in the legal documents pertaining to the Refunding Bonds, the City hereby directs the Escrow Agent to redeem the Refunded Bonds on February 1, 2013 at a redemption price equal to the principal amount to be redeemed, plus a premium of 1 %. SECTION 2. Use and Investment of Moneys. The Escrow Agent acknowledges receipt of the moneys described in Section 1 and agrees: (a) immediately to invest $ of the moneys described in Section 1(a) hereof in the Investment Securities set forth in Schedule A hereto and to deposit all of such Investment Securities in the Escrow Fund and to hold $ uninvested as cash; and (b) to make the payments required under Section 3(a) hereof at the times set forth in Section 3(a) hereof. SECTION 3. Payment of Refunded Bonds. (a) Payment. As the principal of the Investment Securities set forth in Schedule A hereof and the investment income and earnings thereon are paid, the Escrow Agent shall transfer from the Escrow Fund to the paying agent for the Refunded Bonds (the "Paying Agent ") amounts sufficient to pay interest and principal on the Refunded Bonds due on and prior to February 1, 2013, and to redeem on February 1, 2013 the outstanding principal of the remaining outstanding Refunded Bonds maturing on and after February 1, 2013, plus a premium of 1% of the principal amount thereof. Such transfers shall constitute the respective payments of the interest on the Refunded Bonds and redemption price due from the City. (b) Unclaimed Moneys. Any moneys which remain unclaimed for two years after the date such moneys have become due and payable hereunder shall be repaid by the Escrow Agent to the City and deposited by the City in the Debt Service Fund relating to the Bonds. Any moneys remaining in the Escrow Fund established hereunder after February 1, 2013 (aside from unclaimed monies of the Refunded Bonds) that are in excess of the amount needed to pay owners of the Refunded Bonds payments of principal and interest and redemption premium, if any, with respect to the Refunded Bonds or to pay any amounts owed to the Escrow Agent shall be immediately transferred by the Escrow Agent to the City and deposited by the City in the Debt Service Fund relating to the Bonds. 2 DOCSOC/1575470v5/024217 -0005 (c) Priority of PayMents. The holders of the Refunded Bonds shall have a first lien on the moneys and Investment Securities in the Escrow Fund which are allowable and sufficient to pay the Refunded Bonds until such moneys and Investment Securities are used and applied as provided in this Agreement, as verified by the Verification Report. Any cash or securities held in the Escrow Fund are irrevocably pledged only to the holders of the Refunded Bonds. (d) Termination of Obligation. Upon deposit of the moneys set forth in Section 1 hereof with the Escrow Agent pursuant to the provisions of Section 1 hereof and the simultaneous purchase of the Investment Securities as provided in Section 2 hereof, all obligations of the City with respect to the Refunded Bonds shall cease and terminate, except only the obligation to make payments therefor from the moneys provided for hereunder. SECTION 4. Performance of Duties. The Escrow Agent agrees to perform the duties set forth herein. SECTION 5. Reinvestment. Upon written direction of the City, the Escrow Agent may reinvest any uninvested amounts held as cash under this Agreement in noncallable nonprepayable obligations which are direct obligations issued by the United States Treasury or obligations which are unconditionally guaranteed as to full and timely payment by the United States of America provided (i) the amounts of and dates on which the anticipated transfers from the Escrow Fund to the Paying Agent for the payment of the principal of, redemption price of, and interest on the Refunded Bonds will not be diminished or postponed thereby, (ii) the Escrow Agent shall receive the unqualified opinion of nationally recognized municipal bond counsel to the effect that such reinvestment will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or the Refunded Bonds, (iii) the Escrow Agent shall receive from a firm of independent certified public accountants a certification that, immediately after such reinvestment, the principal of and interest on obligations in the Escrow Fund will, together with other cash on deposit in the Escrow Fund available for such purposes, be sufficient without reinvestment to pay, when due, the principal or redemption price of and interest on the Refunded Bonds; and (iv) the Escrow Agent shall receive an opinion of nationally recognized bond counsel that such reinvestment is permissible under this Agreement. SECTION 6. Indemni . The City 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 City 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 its Agreement, the establishment hereunder of the Escrow Fund, the acceptance of the funds and securities deposited therein, the purchase of the Investment Securities, the retention of the Investment Securities or 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 City shall not be required to indemnify the Escrow Agent against the Escrow Agent's own negligence or willful misconduct or the negligent or willful misconduct of the Escrow Agent's respective successors, assigns, agents and employees or the breach by the Escrow Agent 6f the terms of this Agreement. In no event shall the City or the Escrow Agent be liable to any person by reason of the transactions 3 DOCSOC/1575470v5/024217 -0005 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 7. Responsibilities of the Escrow Agent. The Escrow Agent and its respective successors, assigns, 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 purchase of the Investment Securities, the retention of the Investment Securities or the proceeds thereof, the sufficiency of the Investment Securities to accomplish the refunding and defeasance of the Refunded Bonds 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 City and the Escrow Agent assumes no responsibility for the correctness thereof. The Escrow Agent makes'-no representation as to the sufficiency of the Investment Securities to accomplish the refunding and defeasance of the Refunded Bonds or to the validity of this Agreement as to the City and, except as otherwise provided herein, the Escrow Agent shall incur no liability with respect thereto. 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 City, and in reliance upon the written opinion of such counsel shall have full and complete authorization and protection with respect to any action taken, suffered or omitted by it in good faith in accordance therewith. Whenever the Escrow Agent shall deem it necessary or desirable that a matter be proved or established prior to taking, suffering, or omitting any action under this Agreement, such matter may be deemed to be conclusively established by a certificate signed by an authorized officer of the City. SECTION 8. Substitution of Investment Securities. At the written request of the City and upon compliance with the conditions hereinafter set forth, the Escrow Agent shall have the power to sell, transfer, request the redemption or otherwise dispose of some or all of the Investment Securities in the Escrow Fund and to substitute noncallable nonprepayable obligations (the "Substitute Investment Securities ") constituting direct obligations issued by the United States Treasury or obligations which are unconditionally guaranteed as to full and timely payment by the United States of America. The foregoing may be effected only if. (i) the substitution of Substitute Investment Securities for the Investment Securities (or Substitute Investment Securities) occurs simultaneously; (ii) the amounts of and dates on which the anticipated transfers from the Escrow Fund to the Paying Agent for the payment of the principal of and/or redemption price of and/or interest on the Refunded Bonds will not be diminished or postponed thereby; (iii) the Escrow Agent shall receive the unqualified opinion of nationally recognized municipal bond counsel to the effect that such disposition and substitution would not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Refunded Bonds or the Bonds, and that the conditions of this Section 8 as to the disposition and substitution have been satisfied and that the substitution is permitted by this Agreement; and (iv) the Escrow Agent shall receive from a firm of independent certified public accountants a certification that, immediately after such transaction, the principal of and interest on the Substitute Investment Securities in the Escrow Fund will, together with other cash on deposit in the Escrow Fund available for such purpose, be sufficient without reinvestment to pay, when due, the principal or redemption price of and interest on the Refunded Bonds. Any cash from the sale of Investment Securities (including U.S. Treasury Securities) received from the disposition 4 DOCSOC/1575470v5/024217 -0005 and substitution of Substitute Investment Securities pursuant to this Section 8 to the extent such cash will not be required, in accordance with this Agreement, and as demonstrated in the certification described in (iv) above, at any time for the payment when due of the principal or redemption price of or interest on the Refunded Bonds shall be paid to the City as received by the Escrow Agent free and clear of any trust, lien, pledge or assignment securing such Bonds or otherwise existing under this Agreement. Any other substitution of securities in the Escrow Fund not described in the previous sentence must satisfy the requirements of this Section 8. In no event shall the Escrow Agent invest or reinvest moneys held under this Agreement in mutual funds or unit investment trusts. SECTION 9. Irrevocable Instructions as to Notice. The Escrow Agent hereby acknowledges that upon the funding of the Escrow Fund as provided in this Agreement, the receipt of the opinions described in Section 1(b) of this Agreement and the giving of irrevocable instructions to provide notice as provided in the Irrevocable Instructions and Request to Paying Agent and Escrow Agent attached hereto as Schedule B (constituting all of the conditions precedent to the defeasance of the Refunded Bonds), the Refunded -Bonds shall be paid in accordance with the terms of the Refunded Bonds and all obligations of the City with respect to the Refunded Bonds shall cease and terminate. SECTION 10. Amendments. This Agreement is made for the benefit of the City and the holders from time to time of the Refunded Bonds and it shall not be repealed, revoked, altered or amended without the written consent of all such holders, the Escrow Agent and the City; provided, however, but only after the receipt by the Escrow Agent of an opinion of nationally recognized bond counsel that the exclusion from gross income of interest on the Bonds and the Refunded Bonds will not be adversely affected for federal income tax purposes, that the City and the Escrow Agent may, without the consent of, or notice to, such holders, amend this Agreement or enter into such agreements supplemental to this Agreement as shall not adversely affect the rights of such holders and as shall not be inconsistent with the terms and provisions of this 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 holders of the Refunded Bonds any additional rights, remedies, powers or authority that may lawfully be granted to, or conferred upon, such holders or the Escrow Agent; and (iii) to include under this Agreement additional funds, securities or properties. The Escrow Agent shall be entitled to rely conclusively upon an unqualified opinion of nationally recognized municipal bond attorneys with respect to compliance with this Section 10, including the extent, if any, to which any change, modification, addition or elimination affects the rights of the holders of the Refunded Bonds or that any instrument executed hereunder complies with the conditions and provisions of this Section 10. In the event of any conflict with respect to the provisions of this Agreement, this Agreement shall prevail and be binding. SECTION 11. 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 Refunded Bonds 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 3(b) of this Agreement. SECTION 12. Compensation. The Escrow Agent shall receive its reasonable fees and expenses as previously agreed to; provided, however, that under no circumstances shall the Escrow Agent be entitled to any lien nor will it assert a lien whatsoever on any moneys or obligations in the Escrow Fund for the payment of fees and expenses for services rendered by the Escrow Agent under this Agreement. 5 DOCSOC/1575470v5/024217 -0005 SECTION 13. Resignation or Removal of Escrow Agent. (a) The Escrow Agent may resign by giving notice in writing to the City, a copy of which shall be sent to DTC. The Escrow Agent may be removed (1) by (i) filing with the City an instrument or instruments executed by the holders of at least 51 % in aggregate principal amount of the Refunded Bonds then remaining unpaid, (ii) sending notice at least 60 days prior to the effective date of said removal to DTC, and (iii) the delivery of a copy of the instruments filed with the City to the Escrow Agent or (2) by a court of competent jurisdiction for failure to act in accordance with the provisions of this Agreement upon application by the City or the holders of 5% in aggregate principal amount of the Refunded Bonds then remaining unpaid. (b) If the position of Escrow Agent becomes vacant due to resignation or removal of the Escrow Agent or any other reason, a successor Escrow Agent may be appointed by the City. The holders of a majority in principal amount of the Refunded Bonds then remaining unpaid may, by an instrument or instruments filed with the City, appoint a successor Escrow Agent who shall supersede any Escrow Agent theretofore appointed by the City. If no successor Escrow Agent is appointed by the City or the holders of such Refunded Bonds then remaining unpaid, within 45 days after any such resignation or removal, the holder of any such Refunded Bond or any retiring Escrow Agent may apply to a court of competent jurisdiction for the appointment of a successor Escrow Agent. The responsibilities of the Escrow Agent under this Escrow Agreement will not be discharged until a new Escrow Agent is appointed and until the cash and investments held under this Escrow Agreement are transferred to the new Escrow Agent. SECTION 14. Severabilitv. If any one or more of the covenants or agreements provided in this Agreement on the part of the City 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 herein contained and shall in no way affect the validity of the remaining provisions of this Agreement. SECTION 15. Counterparts. This Agreement may be executed in several counterparts, all or any of which shall be regarded for all purposes as one original and shall constitute and be but one and the same instrument. SECTION 16. Governing Law. This Agreement shall be construed under the laws of the State of California. SECTION 17. Holidays. If the date for making any payment or the last date for performance of any act or the exercising of any right, as provided in this Agreement, shall be a legal holiday or a day on which banking institutions in the city in which is located the principal office of the Escrow Agent are authorized by law to remain closed, such payment may be made or act performed or right exercised on the next succeeding day not a legal holiday or a day on which such banking institutions are authorized by law to remain closed, with the same force and effect as if done on the nominal date provided in this Agreement, and no interest shall accrue for the period after such nominal date. SECTION 18. AssiLmment. This Agreement shall not be assigned by the Escrow Agent or any successor thereto without the prior written consent of the City. SECTION 19. Standard & Poor's. Fitch and Moody's. The City agrees to provide Fitch, Inc., One State Street Plaza, New York, New York 10004, Moody's Investors Service, 7 World 6 DOCSOC/1575470v5/024217 -0005 Trade Center at 250 Greenwich Street, New York, New York 10007, and Standard & Poor's Ratings Services, 55 Water Street, New York, New York 10041 prior notice of each amendment entered into pursuant to Section 10 hereof and a copy of such proposed amendment, and to forward a copy (as soon as possible) of (i) each amendment hereto entered into pursuant to Section 10 hereof, and (ii) any action relating to severability or contemplated by Section 14 hereof. SECTION 20. Reorganization of Escrow Agent. Notwithstanding anything to the contrary contained in this Agreement, any company into which the Escrow Agent may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which the Escrow Agent is a party, or any company to which the Escrow Agent may sell or transfer all or substantially all of its corporate trust business shall be the successor to the Escrow Agent without execution or filing of any paper or any paper or further act, if such company is eligible to serve as Escrow Agent. [REMAINDER OF PAGE INTENTIONALLYLEFT BLANK.J 7 DOCSOC/1575470v5/024217 -0005 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the day and year first above written. APPROVED AS TO FORM: City Attorney CITY OF ARCADIA City Manager THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Escrow Agent Authorized Officer S -1 DOCSOC/1575470v5/024217 -0005 SCHEDULE A INVESTMENT SECURITIES Type of Investment Principal Coupon Rate Maturity Date SLGS A -1 DOC SOC/ 15 75470v5/024217 -0005 02/01/13 SCHEDULE B IRREVOCABLE INSTRUCTIONS AND REQUEST TO ESCROW AGENT [Closing Date] The Bank ofNew York Mellon Trust Company, N.A. 400 South Hope Street, Suite 400 Los Angeles, CA 90071 $8,000,000 CITY OF ARCADIA Series A of 2001 General Obligation Bonds (Police Station Project) Ladies and Gentlemen: As Escrow Agent and Paying Agent with respect to the Refunded Bonds as defined in that certain Escrow Agreement, dated as of November 1, 2012, between the City of Arcadia and The Bank of New York Mellon Trust Company, N.A. (the "Escrow Agreement"), you are hereby notified of the irrevocable election of the City of Arcadia: to pay the interest and principal on such Refunded Bonds due on and prior to February 1, 2013, and to redeem on February 1, 2013 the outstanding principal of such Refunded Bonds maturing on or after August 1, 2013 at a price of the principal amount thereof to be so redeemed, together with a premium of one percent (1 %) of the principal amount thereof. You are hereby irrevocably instructed to provide, as provided in the Supplement to Resolution No. 6218 dated as of June 1, 2001, notice of redemption of such principal amounts of said Refunded Bonds as are scheduled to be redeemed prior to maturity to the extent such Refunded Bonds have not been otherwise redeemed or purchased by the Escrow Agent prior to said dates. Such notice shall be in the form annexed hereto as Exhibit X. You are also hereby irrevocably instructed to file a notice of defeasance of the Refunded Bonds with the Nationally Recognized Municipal Securities Information Repositories ( "NRMSIR ") that are listed by the U.S. Securities and Exchange Commission. NRMSIR is located at www.see.gov /info /municipal /nrmsir. B -1 DOCSOC/ 1575470v5/024217-0005 You are hereby further irrevocably instructed to provide, as soon as practicable, notice to the holders of such Refunded Bonds (in the form annexed hereto as Exhibit Y) that the deposit of investment securities and moneys has been made with you as such Escrow Agent and that you have received a verification report verifying that the projected withdrawals from such escrow have been calculated to be adequate to pay the principal or redemption price of and the interest on said Refunded Bonds outstanding as such become due or are subject to redemption. CITY OF ARCADIA By: City Manager Receipt acknowledged and consented to: THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Escrow Agent an Authorized Signatory B -2 DOCSOC/ 1575470v5/024217 -0005 EXHIBIT X NOTICE OF REDEMPTION OF $8,000,000 CITY OF ARCADIA Series A of 2001 General Obligation Bonds (Police Station Project) Year Au st 1 Principal Amount 2013 $200,000 2014 210,000 2015 225,000 2016 235;000 2017 245,000 2018 260,000 2019 275,000 2020 290,000 2021 305,000 2022 320,000 2023 335,000 2024 355,000 2025 375,000 2026 395,000 2027 415,000 2028 440,000 2029 465,000 2030 490,000 2031 515,000 Interest Rate CUSIP 4.625% 4.700 4.850 5.000 5.000 5.000 5.000 5.000 5.100 5.100 5.125 5.125 5.125 5.125 5.125 5.125 5.125 5.125 5.125 Notice is hereby given to the holders of the outstanding $8,000,000 City of Arcadia Series A of 2001 General Obligation Bonds (Police Station Project) maturing on and after August 1, 2013 (the "Refunded Bonds "), that such Refunded Bonds have been called for redemption prior to maturity on February 1, 2013 in accordance with their terms at a redemption price equal to the principal amount thereof, plus a premium of 1% of the principal amount thereof, together with accrued interest evidenced thereby to February 1, 2013. The source of the funds to be used for such redemption is the principal of and interest on investment securities heretofore deposited with The Bank of New York Mellon Trust Company, N.A., as Escrow Agent, together with moneys, if any, heretofore deposited with the Escrow Agent. Interest on the Refunded Bonds and the redemption price shall become due and payable on February 1, 2013 and after February 1, 2013 interest on such Refunded Bonds shall cease to accrue and be payable. X -1 DOCS00 l 575470v5/024217 -0005 Owners of the Refunded Bonds will receive payment of the redemption price and accrued interest to which they are entitled upon presentation and surrender thereof at the principal corporate trust office of The Bank of New York Mellon Trust Company, N.A., Los Angeles, California. Dated this _ day of 2012. CITY OF ARCADIA THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Escrow Agent X -2 DOCSOC/1575470v5/024217 -0005 W.4l11•71�i� NOTICE OF REFUNDING OF $8,000,000 CITY OF ARCADIA Series A of 2001 General Obligation Bonds (Police Station Project) CUSIP Notice is hereby given to the holders of the outstanding bonds maturing on and after February 1, 2013 designated City of Arcadia, Series A of 2001 General Obligation Bonds (Police Station Project) (the "Refunded Bonds ") (i) that there has been deposited with The Bank of New York Mellon Trust Company, N.A., as Escrow Agent, moneys and investment securities as permitted by the Escrow Agreement, dated as of November 1, 2012, between City of Arcadia and The Bank of New York Mellon Trust Company, N.A., as Escrow Agent (the "Agreement "), the principal of and the interest on which when due will provide moneys which, together with such other moneys deposited with the Escrow Agent, shall be sufficient and available (a) to pay on and prior to February 1, 2013 the interest with respect to the Refunded Bonds scheduled to be paid on and prior to February 1, 2013 and (b) to redeem on February 1, 2013 the Refunded Bonds maturing on or after August 1, 2013 at a redemption price (expressed as a percentage of the principal amount of the Refunded Bonds to be prepaid) equal to 101 %; (ii) that the Escrow Agent has been irrevocably instructed to prepay on February 1, 2013 such Refunded Bonds; and (iii) that the Refunded Bonds are deemed to be paid in accordance with Section 16 of the Agreement. Dated this day _ of, 2012. CITY OF ARCADIA THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Escrow Agent Y -1 DOCSOC/ 1575470v5/024217 -0005 ATTACHEMENT 3 PAYING AGENCY AGREEMENT This Paying Agency Agreement (the "Agreement'), entered into as of the day of November, 2012 by and between City of Arcadia (the "Issuer ") and The Bank of New York Mellon Trust Company, N.A., a national banking association with its corporate trust office on Los Angeles, California (the "Paying Agent'), KY7VESSETH.- WHEREAS, by a Supplement to Resolution No. dated as of November 1, 2012 (the "Authorization ") the Issuer authorized the issuance of its Bonds as described in Exhibit A attached hereto (the "Bonds" ) and WHEREAS, said Authorization authorized the Issuer to enter into an agreement of appointment with a Bond Registrar/Transfer Agent and Paying Agent to service such Bonds. NOW, THEREFORE, the Issuer and the Paying Agent agree as follows: Section 1. Appointment and Acceptance. The Issuer hereby appoints The Bank of New York Mellon Trust Company, N.A. as Bond Registrar/Transfer Agent and Paying Agent for the Bonds pursuant to the Authorization and the Paying Agent accepts such appointment, acknowledging the duties, obligations and responsibilities of the Paying Agent as set forth pursuant to the Authorization. Section 2. Documents to be Filed with the Paying Agent. The following documents shall be filed with the Paying Agent in connection with its appointment: (i) a copy of the Authorization; (ii) if not printed on the Bonds, an Opinion of Bond Counsel stating that (a) the Bonds are valid and legally binding obligations of the Issuer, payable in accordance with their terms and (b) the interest on such Bonds is not included in gross income for federal income tax purposes; (iii) a specimen certificate in the form approved by the Issuer; and (iv) such other instruments and certificates as the Paying Agent may reasonably request. Section 3. Registration, Authentication and Delivery of Initial Bonds. If the Bonds are to be newly issued, the Issuer will, or will cause its underwriter to: (i) deliver to the Paying Agent, not later than five (5) business days prior to the required delivery date, written notice setting forth the maturity date, principal amount and interest rate borne by the Bonds; and (ii) notify the Paying Agent, not later than three (3) business days prior to the required delivery date, of the name(s) in which Bonds are to be registered, the mailing addresses of the respective registered holders and their respective taxpayer identification numbers, and the quantity, denominations, interest rates, maturity dates and CUSIP numbers of the certificates to be issued to each registered holder. DOCSOC /1575501 v5 /024217 -0005 The Paying Agent shall inscribe the Bonds as directed in Section 3(ii) above, authenticate the initial Bonds and deliver same in accordance with the written directions of the Issuer or its underwriter. If delivered before the Closing, such initial Bonds shall remain subject to the control of the Paying Agent, as agent for the Issuer, until released by the Paying Agent. Section 4. Transfer or Exchange of Certificates. The Paying Agent is authorized, empowered and directed to inscribe, to countersign or authenticate as registrar, and to record and deliver new certificates for Bonds of the Issuer pursuant to requests for transfer and cancellation of other certificates theretofore outstanding, or to replace lost, destroyed, stolen or mutilated certificates, as provided in Section 6 hereof. If the transfer and/or exchange of the Bond certificate shall have been documented in the manner authorized or required by law, and if the rules and regulations of the Issuer and of the Paying Agent, governing the transfer and registration of the Bonds shall have been met, then the Paying Agent shall cancel such certificate` being transferred and/or exchanged and shall inscribe, authenticate, record and deliver a new certificate for the Bonds so transferred or exchanged. In the transfer of Bond certificates, the Paying Agent may require a guarantee of signature by an eligible guarantor institution participating in a Securities Transfer Association recognized signature guarantee program. The Paying Agent shall incur no liability for the refusal in good faith to make transfers which it, in its judgment, deems improper or unauthorized. The Paying Agent may, in effecting transfers, rely upon the Uniform Commercial Code of the State of California and/or the rules of the Stock Transfer Association, Section 5. Bond Certificates. The Issuer will furnish to the Paying Agent a sufficient supply of blank Bond certificate and, from time to time, will replenish such supply upon request of the Paying Agent. Such blank Bond certificates shall be signed by officers of the Issuer, authorized by the Issuer to sign Bond certificate, and shall bear the seal of the Issuer or shall bear, to the extent permitted by law, the facsimile signature of each such officer and a facsimiles of the seal. If an officer of the Issuer, whose signature appears on any Bond certificate, ceases to be an officer of the Issuer before delivery of said Bond certificate, such signature nevertheless shall be valid and sufficient for all purposes, the same as if such officer of the Issuer had remained in office until such delivery and the Paying Agent may inscribe, authenticate, and deliver such certificate as being that of the Issuer whose signature properly shall have been inscribed on such Bond certificate prior to its issuance. Section 6. Records of Certificates; Lost or Destroyed Certificates. The Paying Agent may open and keep such books and other records, including a Bond Register, as shall be required for, or convenient in, the performance of its duties. Upon receiving instructions from the Issuer and indemnity satisfactory to the Paying Agent and the Issuer, the Paying Agent may inscribe, authenticate and deliver, to the persons entitled thereto, new certificates in place of certificates represented to have been lost, stolen or destroyed and likewise may issue a new certificate in exchange for, and upon surrender of, an identifiable mutilated certificate. Section 7. Payments of Interest and Principal. The,Paying Agent shall act as Paying Agent for the Bonds and in such capacity it shall: 2 DOCSOC /1575501 v5/024217 -0005 (i) with funds provided by Issuer, pay the interest upon the Bonds by mailing checks to the persons entitled to receive such interest, as determined by the registry of the Issuer maintained by the Paying Agent, provided that Issuer shall have deposited with the Paying Agent, on or before the day upon which interest checks are to be mailed, sufficient funds to cover payment of such interest; (ii) with funds provided by Issuer, pay the principal amount (including premium, if any) of the Bonds to the registered holders of such Bonds, upon the maturity date or earlier redemption date upon which the principal is to become payable and upon delivery to the Paying Agent of a Bond certificate with respect to which such principal payment shall have become payable, provided that the Issuer shall have deposited with the Paying Agent, on or before the payment date, sufficient funds to pay the aggregate principal amount (including premium, if any) due on all Bonds so payable; (iii) if a Bondholder shall report to the Paying Agent that any check so mailed for the payment of interest or principal has been lost and that the proceeds thereof, have not been received and if the check has not been paid` then, upon execution of an indemnity agreement, in form satisfactory to the Paying Agent and the Issuer, stop payment upon such check, and issue and deliver to such Bondholder a new check for like amount; provided, however, that it may, at its discretion, defer the issuance of the new check for a reasonable period of time; (iv) record the fact of payment and cancel Bonds surrendered to it for payment, coincident with such payment being made to the person thereto entitled; and (v) have no liability for interest on any funds received by it; any unclaimed funds remaining in the possession of the Paying Agent for payment of the Bonds will be escheated in accordance with applicable law and the Paying Agent's policies and procedures. The Paying Agent shall hold funds in accounts to be established by the Paying Agent under the Authorization. The Paying Agent shall have no obligation to invest and reinvest any cash held by it hereunder in the absence of timely and specific written investment direction from the Issuer. In no event shall the Paying Agent be liable for the selection of investments or for investment losses incurred thereon. The Paying Agent may purchase or sell to itself or any affiliate, as principal or agent, investments authorized by the Issuer in writing. The Paying Agent may rely on the investment directions of the Issuer as to both the suitability and legality of the directed investments. The Issuer acknowledges that regulations of the Comptroller of the Currency grant the Issuer the right to receive brokerage confirmations of the security transactions as they occur, at no additional cost. To the extent permitted by law, the Issuer specifically waives compliance with 12 C.F.R. 12 and hereby notifies the Paying Agent that no brokerage confirmations need be sent relating to the security transactions as they occur. Section 8. Redemption Prior to Stated Maturity. If the Bonds are subject to redemption prior to their stated maturity date(s), the Paying Agent shall be governed by the redemption provisions set forth in the Authorization or as stated in the provisions as set forth on the bond form. The Paying Agent shall not be required to transfer any Bond, or portion thereof, that has been called fur redemption. Payment of the principal amount (including premium, if any) of any Bond, or portion thereof, called for redemption shall be made by check payable to the registered owner, only upon presentation of the Bond, at the designated corporate trust office of the Paying Agent on or after the redemption date. Where the entire principal amount of the Bond has not been called for redemption, a new Bond of the same series, maturity and interest rate in the amount of the unredeemed portion will be issued to the registered holder or its assignee. Whether or not promptly 3 DOCSOC/1575501 v5/024217 -0005 submitted for redemption, interest on any Bond, or portion thereof, called for redemption shall cease to accrue on and after the redemption date provided that sufficient moneys therefor are on deposit with the Paying Agent. Section 9. Compensation; Indemnification. The Issuer agrees to pay the Paying Agent fees as set forth in Exhibit B attached hereto and made a part hereof, and, if applicable, to reimburse Paying Agent for its out -of- pocket expenses (including without limitation attorneys'; fees and expenses). The Issuer assumes full responsibility and, to the extent permitted by law, will indemnify the Paying Agent and its officers, directors, agents and employees and save it and them harmless from and against any and all actions or suits, whether groundless or otherwise, and from and against any and all losses, liabilities, costs and expenses (including attorneys' fees and expenses) arising out of the agency relationship created by this Agreement, unless such losses, liabilities, costs and expenses shall have been finally adjudicated to have resulted from the bad faith or gross negligence of the Paying Agent, and such indemnification shall survive the Paying Agent's resignation or removal, or the termination of this Agreement. Section 10. Instructions From the Issuer and Opinion From Counsel. At any time the Paying Agent may apply to any duly authorized representative of the Issuer for instructions, and shall have the right, but not the obligation, to consult with counsel of choice at the reasonable expense of the Issuer and shall not be liable for action taken or omitted to be taken either in accordance with such instruction or such advice of counsel, or in accordance with any opinion of counsel to the Issuer addressed to the Paying Agent. Section 11. Concerning the Paying Agent. The Paying Agent shall have only those duties as are specifically provided herein, which shall be deemed purely ministerial in nature, and shall have the right to perform any of its duties hereunder through agents, attorneys, custodians or nominees. The Paying Agent shall not be answerable for other than its gross negligence or willful misconduct. The Paying Agent shall have no responsibility for the form of inscription of ownership upon any Bond certificate which has been made in accordance with directions of the Issuer, the Issuer's underwriter, a broker or a holder of a Bond. The Paying Agent shall be protected in acting upon any paper or document believed by it to be genuine and to have been signed by the proper person or persons and shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Issuer. The Paying Agent shall also be protected in recognizing Bond certificates which it reasonably believes to bear the proper manual or facsimile signatures on behalf of the Issuer. The Paying Agent shall have the right, but not the obligation, to consult with counsel of choice and shall not be liable for action taken or omitted to be taken by Paying Agent either in accordance with the advice of such counsel or in accordance with any opinion of counsel to the Issuer addressed and delivered to the Paying Agent. The Paying Agent shall not be under any obligation to prosecute any action or suit in respect of the agency relationship which, in its sole judgment, may involve it in expense or liability. In any action or suit the Issuer shall, as often as requested, reimburse the Paying Agent for any expense or liability growing out of such action or suit by or against the Paying Agent in its agency capacity; provided, however, that no such reimbursement shall be made for any expense or liability arising as a result of Paying Agent's gross negligence or willful misconduct. No provision of this Agreement shall require the Paying Agent to risk or expend its own funds. The Paying Agent shall not be responsible or liable for any failure or delay in the performance of its obligation under this Agreement arising out of cif caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of God; earthquakes; 4 DOCSOC /1575501 v5/024217 -0005 fire; flood; wars; terrorism; military disturbances; sabotage; epidemic; riots; interruptions; loss or malfunctions of utilities, computer (hardware or software) or communications services; accidents; labor disputes; acts of civil or military authority or governmental action; it being understood that Paying Agent shall use commercially reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as reasonably practicable under the circumstances. Anything in this Agreement to the contrary notwithstanding, in no event shall the Paying Agent be liable for special, punitive, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Paying Agent has been advised of the likelihood of such loss or damage and regardless of the form of action. The Paying Agent agrees to accept and act upon instructions or directions pursuant to this Agreement sent by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods, provided, however, that the Issuer shall provide to the Paying Agent an incumbency certificate listing designated persons authorized to provide such instructions, which incumbency certificate shall be amended whenever a person is to be added or deleted from the listing. If the Issuer elects to give the Paying Agent e-mail or facsimile instructions (or instructions by a similar electronic method) and the Paying Agent in its discretion elects to act upon such instructions, the Paying Agent's understanding of such instructions shall be deemed controlling. The Paying Agent shall not be liable for any losses, costs or expenses arising directly or indirectly from the Paying Agent's reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The Issuer agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Paying Agent, including without limitation the risk of the Paying Agent acting on unauthorized instructions, and the risk or interception and misuse by third parties. Any banking association or corporation into which the Paying Agent may be merged, converted or with which the Paying Agent may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Paying Agent shall be a party, or any banking association or corporation to which all or substantially all of the corporate trust business of the Paying Agent shall be transferred, shall succeed to all the Paying Agent's rights, obligations and immunities hereunder without the execution or filing of any paper or any further act on the part of the parties hereto, anything herein to the contrary notwithstanding. Section 12. Notices. Until changed by notice in writing, communications between the parties shall be delivered to: If to Issuer: City of Arcadia 240 West Huntington Drive Arcadia, CA 91066 Attn: Administrative Services Director If to the Paying Agent: The Bank of New York Mehun Trust Company, N.A. 400 South Hope Street, Suite 400 Los Angeles, CA 90071 Attn: Corporate Trust DOCSOC/ 1575501 v5 /024217 -0005 Section 13. Destruction of Instruments, Records and Papers. The Paying Agent may retain in its files records, instruments, and papers maintained by it in relation to its agency as long as the Paying Agent shall consider that such retention is necessary. The Paying Agent shall destroy or dispose of canceled Bonds in accordance with its customary procedures, unless contrary instructions are received from the Issuer. Section 14. Resignation or Removal of Paying Agent. Any time, other than on a day during the forty-five (45) day period preceding any periodic payment date for Issuer's Bonds, the Paying Agent may resign by giving at least forty-five (45) days' prior written notice to Issuer; and the Paying Agent's agency shall be terminated and its duties shall cease upon expiration of such forty-five (45) days or such lesser period of time as shall be mutually agreeable to Paying Agent and Issuer. At any time, following at least forty-five (45) days' prior notice (or such lesser period of time as shall be mutually agreeable to the Paying Agent and the Issuer) the Paying Agent may be removed from its agency. Such notice shall be in the form of a certified copy of a resolution adopted by the Issuer and evidencing its resolve to "so remove; such removal shall become effective upon the expiration of the forty -five (45) day or agreed lesser time period, and upon payment to the Paying Agent of all amounts payable to it in connection with its agency. In such event, the Paying Agent shall deliver to the Issuer, or to the Issuer's designated representative, all Bonds and cash belonging to the Issuer and, at the Issuer's expense, shall furnish to the Issuer, or to the Issuer's designated representative, reasonably detailed information regarding the status of the Issuer's outstanding Bonds and copies of other pertinent records then in the Paying Agent's possession, reasonably requested by the Issuer. Section 15. Effectiveness and Term. If the Bonds already are outstanding as of the date of the execution and delivery of this Agreement, this Agreement is effective as of the date hereof and shall continue until terminated. If the Bonds are to be newly issued, then this Agreement shall become effective as of the date that the Bonds are delivered to the original purchaser(s) thereof, and shall continue until terminated. If said Bonds are not delivered to original purchaser(s), this Agreement shall be null, void and of no effect. This Agreement shall remain in effect and the agency established by the Agreement shall continue until (i) terminated by mutual agreement of Issuer and Paying Agent, (ii) the resignation or removal of Paying Agent pursuant to Section 14 hereof, or (iii) after all Bonds have been retired by payment or otherwise, or funds have been deposited for their retirement, and any remaining funds have either been returned to the Issuer or escheated to the State. Section 16. Conflicts Between Documents. In the event of any conflict between any provision of this Agreement and the Authorization, the terms of the Authorization shall govern. Section 17. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. 6 DOCSOC /1575501 v5/024217 -0005 IN WITNESS WHEREOF, the parties hereto have caused these presents to be signed by their duly authorized officers as of the date first above written. CITY OF ARCADIA LIM City Manager THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. DOCSOC /1575501 v5 /024217 -0005 Authorized Officer r: 5_ DESCRIPTION OF BONDS $[Bond Amount] CITY OF ARCADIA GENERAL OBLIGATION REFUNDING BONDS SERIES 2012 (POLICE STATION PROJECT) A -1 DOCS OC/ 1575501 v5 /024217 -0005 EXHIBIT B FEE SCHEDULE Registrar, Transfer Agent and Paying Agent For Fully Registered Tax Exempt Bond B -1 DOCSOC/1 57550 1 v5/024217 -0005 ATTACHEMENT 4 RESOLUTION NO. 6848 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARCADIA, CALIFORNIA, PROVIDING FOR THE ISSUANCE OF ITS GENERAL OBLIGATION REFUNDING BONDS, SERIES 2012 (POLICE STATION PROJECT) IN THE PRINCIPAL AMOUNT NOT TO EXCEED SEVEN MILLION DOLLARS ($7,000,000) WHEREAS, pursuant to the provisions of Chapter 4 of Division 4 of Title 4 of the California Government Code (Sections 43600 et se q.), as amended (the "Law "), and pursuant to Ordinance No. 2111 adopted by the City Council of the City of Arcadia on August 3, 1999 (the "Ordinance ") and Resolution No. 6131 adopted by the City Council of the City on August 3, 1999, a special election was duly and regularly held on the 2nd day of November, 1999, in that territory included within the boundaries of the City (the "Election ") at which Election there was submitted to the qualified voters of said City the following: and; PROPOSITION: Shall the City of Arcadia incur a bonded indebtedness in the principal amount of $8,000,000 for the construction and completion of the following municipal improvement, to wit: police station in the Arcadia Civic Center, including facilities for emergency operations, police dispatch and 911 emergency communications, detective - bureau, records, police laboratory, jail facility, evidence storage and other works, property or structures for efficient, effective law enforcement necessary for said City Police Station? WHEREAS, two- thirds or more of the votes cast at the Election were in favor of and assented to the incurring of such indebtedness, and all the requirements of the Constitution and laws of the State of California have been complied with in the holding of the Election; and WHEREAS, the City previously issued pursuant to the authorization of the Election and the Law $8,000,000 original principal and denominational amount of City of Arcadia Series A of 2001 General Obligation Bonds (Police Station Project) (the "Prior Bonds ") payable from the levy of an ad valorem tax against the taxable property in the City; and WHEREAS, pursuant to Section 53550 of the Government Code of the State of California, the City is authorized to issue refunding bonds to refund all or a portion of the Prior Bonds (the `Refunded Bonds "); and WHEREAS, in accordance with the Election, the Ordinance, the Law and Articles 9 and 11, Chapter 3, Part 1 of Division 2 of the California Government Code (commencing with Sections 53550 and 53580, respectively) (the "Bond Law "), the City now desires to issue approximately $7,000,000 in refunding bonds to refinance the Refunded Bonds; and WHEREAS, it is found and determined by this City Council that the best interests of the City would be served by proceeding according to the provisions of the Law and the Bond Law to issue the General Obligation Refunding Bonds, Series 2012 (Police Station Project) (the "Bonds ") to refund the Refunded Bonds; and WHEREAS, the City Council has determined that The Bank of New York Mellon Trust Company, N.A. (the "Paying Agent ") shall act as the initial paying agent and registrar for the Bonds subsequent to the adoption of this Resolution; and WHEREAS, in order to effect the issuance of the Bonds, the City Council desires to approve the form of a preliminary official statement for the Bonds and to approve the form of and authorize the execution and delivery of a Continuing Disclosure Certificate 2 with respect to the Bonds, the forms of which are on file with the City Clerk and presented at this meeting; and WHEREAS, in order to provide for the prepayment and defeasance of the Refunded Bonds, the City Council desires to approve the form of and authorize the execution and delivery of an Escrow Agreement by and between the Paying Agent, acting as escrow agent with respect to the Refunded Bonds, the form of which is on file with the City Clerk and presented at this meeting; and WHEREAS, this City Council deems it proper and necessary that the Bonds shall be sold only following competitive bid therefor, and that bids be invited for the Bonds in the amount of not to exceed $7,000,000, and that if bids are satisfactory, said Bonds be sold in the manner and at the time and place hereinafter set forth. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF ARCADIA, CALIFORNIA, DOES HEREBY FIND, DETERMINE AND RESOLVES AS FOLLOWS: SECTION 1. Each of the above recitals is true and correct. SECTION 2. The issuance of the Bonds in a principal amount not to exceed $7,000,000 is hereby approved and such Bonds shall mature on the dates and pay interest at the rates set forth in and all other provisions of the Bonds shall be governed by the terms and conditions of a Supplement to this Resolution to be executed by the Mayor of the City, the City Manager, the Administrative Services Director, or their written designee (each an "Authorized Officer" and collectively, the "Authorized Officers "), which Supplement to Resolution is hereby approved in substantially the form attached hereto as Exhibit "A" (the "Supplement to Resolution "), together with such additions thereto and changes therein as Bond Counsel and the Authorized Officers 3 deem necessary. Approval of such changes shall be conclusively evidenced by the execution and delivery of the Supplement to Resolution by an Authorized Officer. The covenants set forth in the Supplement to Resolution are hereby approved, shall be deemed covenants of the City Council and shall be complied with by the City and its officers. The Supplement to Resolution shall constitute a contract between the City and the Owners of the Bonds. SECTION 3. The preliminary official statement (the "Preliminary Official Statement ") presented to this City Council is approved in substantially the form presented. The City Manager is authorized to make such changes in and additions to the Preliminary Official Statement prior to mailing as may be approved by the City Manager or the Administrative Services Director, or their written designees; and each of the City Manager, the Administrative Services Director and their written designees is hereby authorized and directed to deem such form, as modified, 'final," except for information relating to the offering prices, interest rates, selling compensation, rating and other terms of the Bonds depending on such matters. The execution of the official statement by the Mayor or the City Manager and the printing and distribution thereof (in both preliminary and final forms) in connection with the sale of the Bonds, with such changes as are approved or required as set forth above, are hereby authorized and approved. SECTION 4. The form of the Continuing Disclosure Certificate to be executed by the City (the "Continuing Disclosure Certificate "), presented to this City Council is approved in substantially the form presented. Each of the Authorized Officers is hereby authorized and directed, for and in the name and on behalf of the City, to execute the 4 Continuing Disclosure Certificate in substantially said form, with such changes therein as such Authorized Officers executing such document may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 5. Bids for the purchase of the Bonds in the amount of not to exceed $7,000,000 shall be received by electronic means, through Parity, administered by i- Deal LLC or other Internet -based providers, up to the hour of 10:00 a.m. on Tuesday, October 23, 2012, or such other date and time as is selected by the City Manager, or his written designee, and, if determined to be in the best interests of the City by the City Manager, or his written designee, at such later date as specified pursuant to the Notice Inviting Proposal for Purchase of Bonds (together with attached, the "Notice Inviting Bids ") Bid Form presented to this meeting and on file with the City Clerk, thereafter until a bid is accepted. The City Clerk is hereby authorized and directed to cause to be published a notice of intention to sell Bonds in the form presented to this meeting and on file with the City Clerk (the "Notice of Intention ") in the Arcadia Weekly and in The Bond Buyer, each of which is a newspaper of general circulation, circulated within the State, said publication to be at least fifteen (15) days prior to the date of opening bids stated in the Notice of Bond Sale. The City Clerk or Fieldman Rolapp & Associates is hereby authorized and directed to cause to be furnished to prospective bidders copies of the Notice Inviting Bids, and the Preliminary Official Statement; but the failure, ir whole or in part, to comply with this paragraph shall not in any manner affect the validity of the sale of the E Bonds. The Notice Inviting Bids shall be substantially in the form presented to this City Council. On any date on which bids are duly received, the City Manager or the Administrative Services Director is hereby authorized and directed to award the Bonds to the best bidder at a price of par or better, provided the true interest cost to the City shall not exceed five percent (5.00 %); provided she or he may, in her or his discretion, reject all bids. SECTION 6. The form of the Escrow Agreement to be executed by the City presented to this City Council is approved in substantially the form presented. Each of the Authorized Officers is hereby authorized and directed, for and in the name and on behalf of the City, to execute the Escrow Agreement in substantially said form, with such changes therein as such Authorized Officers executing such document may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 7. The City hereby determines that the Bonds are qualified tax- exempt obligations pursuant to Section 265(b) of the Code and finds that the reasonably anticipated amount of qualified tax - exempt obligations which will be issued by the City and all of its subordinate entities during the 2012 calendar year will not exceed $10,000,000. SECTION 8. The Authorized Officers are each hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents which each may deem necessary or advisable in order to consummate the sale, execution and delivery of the Bonds and the refinanpi,ng of the Refunded Bonds 6 and otherwise to carry out, give effect to and comply with the terms and intent of this Resolution and the Supplement to Resolution thereto, the Bonds, the Continuing Disclosure Certificate, the Escrow Agreement, the Notice Inviting Bids, the Preliminary Official Statement, and the Official Statement. Such actions heretofore taken by such officers or designees are hereby ratified, confirmed and approved. SECTION 9. The City Clerk shall certify to the adoption of this Resolution. Passed, approved and adopted this day of , 2012. ATTEST: City Clerk APPROVED AS TO FORM: f Stephen P. Deitsch City Attorney 7 Mayor of the City of Arcadia EXHIBIT "A" FORM OF SUPPLEMENT TO RESOLUTION A -1 SUPPLEMENT TO RESOLUTION NO. GOVERNING TERMS OF THE $[Bond Amount] CITY OF ARCADIA GENERAL OBLIGATION REFUNDING BONDS,. SERIES 2012 (POLICE STATION PROJECT) DATED AS OF NOVEMBER 1, 2012 DOCSOC/ 1575510v5/024217 -0005 SUPPLEMENT TO RESOLUTION NO. THIS SUPPLEMENT TO RESOLUTION NO. executed as of this 151 day of November, 2012 governs the terms of the City of Arcadia General Obligation Refunding Bonds, Series 2012 (Police Station Project). RECITALS. WHEREAS, pursuant to the provisions of the City Charter of the City and Chapter 4 of Division 4 of Title 4 of the California Government Code (Sections 43600 et seq.), as amended (the "Law "), and pursuant to Ordinance No. 2111 adopted by the City Council of the City of Arcadia on August 3, 1999 (the "Ordinance ") and Resolution No. 6131 adopted by the City Council of the City on August 3, 1999, a special election was duly and regularly held on the 2nd day of November 1999, in that territory included within the boundaries of the City (the `Election ") at which Election there was submitted to the qualified voters of said city the following: PROPOSITION: Shall the City of Arcadia incur a bonded indebtedness in the principal amount of $8,000,000 for the construction and completion of the following municipal improvement, to wit: police station in the Arcadia Civic Center, including facilities for emergency operations, police dispatch and 911 emergency communications, detective bureau, records, police laboratory, jail facility, evidence storage and other works, property or structures for efficient, effective law enforcement necessary for said City Police Station? ;and WHEREAS, two- thirds or more of the votes cast at the Election were in favor of and assented to the incurring of such indebtedness for the stated purpose (the "Project "), and all the requirements of the Constitution and laws of the State of California have been complied with in the holding of the Election; and DOCSOC/ 1575510v5/024217 -0005 WHEREAS, the City previously issued pursuant to the authorization of the Election and the Law $8,000,000 original principal and denominational amount of City of Arcadia Series A of 2001 General Obligation Bonds (Police Station Project) (the "Prior Bonds ") payable from the levy of an ad valorem tax against the taxable property in the City; and WHEREAS, pursuant to Section 53550 of the Government Code of the State of California, the City is authorized to issue refunding bonds to refund all or a portion of the Prior Bonds (the "Refunded Bonds "); and WHEREAS, in accordance with the Election, the Ordinance, the Law and Articles 9 and 11, Chapter 3, Part 1 of Division 2 of the California Government Code (commencing with Sections 53550 and 53580, respectively) (the "Bond Law "), the City now desires to issue $[Bond Amount] in refunding bonds to refinance the Refunded Bonds; and WHEREAS, it is found and determined by this City Council that the best interests of the City would be served by proceeding according to the provisions of the Law and the Bond Law to issue the General Obligation Refunding Bonds, Series 2012 (Police Station Project) (the "Bonds ") to refund the Refunded Bonds; and WHEREAS, the City Council has determined that The Bank of New York Mellon Trust Company, N.A. (the "Paying Agent ") shall act as the initial paying agent and registrar for the Bonds subsequent to the adoption of this Resolution; and WHEREAS, it is found and determined by this City Council that the best interests of the City would be served by proceeding with the authorization of the issuance of General Obligation Refunding Bonds of the City according to the provisions of the Bond Law for the purpose of refinancing the construction and acquisition of the Project approved by the voters; 2 DOCS OC/ 1575510v5/024217 -0005 NOW, THEREFORE, in order to establish the terms and conditions upon and subject to which the General Obligation Refunding Bonds, Series 2012 (Police Station Project) (the "Series 2012 Bonds" or the `Bonds ") are to be issued, the City Council does hereby covenant and agree, for the benefit of the Owners of the Series 2012 Bonds, as follows: SECTION 1. Definitions. Unless the context clearly otherwise requires the following terms or as defined in the recitals hereof shall have the respective meanings ascribed to them in this Section 1: Administrative Services Director. The term "Administrative Services Director" means the person responsible for the financial affairs of the City, appointed by the City Manager from time to time; as of the date of this Resolution, such person is the Administrative Services Director of the City. Auditor. The term "Auditor" means the County Auditor - Controller of the County of Los Angeles, California, being the Auditor - Controller of such County. Authorized Investments. The term "Authorized Investments" means-any investment permitted by law to be made with any moneys belonging to or in the custody of the City and by any policy guidelines promulgated by the City; including: 1. Generally approved qualifying investment instruments: a. Obligations of the U.S. Government, its agencies, and instrumentalities. b. Certificates of deposit with banks and savings and loans doing business in the State of California. C. Prime Banker's Acceptances. 3 DOCSOC/ 1575510v5/024217 -0005 d. Prime Commercial Paper. e. Repurchase Agreements and Money Market Funds whose underlying collateral consists of the foregoing. f. Los Angeles County's Investment Pool for local agencies, which includes the purchase of Reverse Repurchase Agreements. g. Pools and other investment structures incorporating investments listed in a through e. 2. Generally approved qualifying investment instruments for City funds, as further limited by the investment policy: a. United States Treasury Bills, Bonds, and Notes, or those for which the full faith and credit of the United States are pledged for payment of principal and interest. b. Obligations issued by the United States Government Agencies such as the Government National Mortgage Association (GNMA), Federal Farm Credit Bank System (FFCB), the Federal Home Loan Bank Board (FHLB), the Federal Home Loan Mortgage Corporation (FHLMC), the Federal National Mortgage Association (FNMA), and the Student Loan Marketing Association (SLMA). C. Bills of exchange or time drafts drawn on and accepted by a commercial bank otherwise known as banker's acceptances. 4 DOCSOC/ 1575510v5/024217 -0005 Purchases of banker's acceptances may not exceed 180 days to maturity. d. Commercial paper ranked P1 by Moody's Investor Services and Al by Standard and Poor's, and issued by a domestic corporation having assets in excess of $500 million and having an A or better rating on its long -term debentures as provided by Moody's or Standard and Poor's. e. Local Agency Investment Fund. The City may invest in the Local Agency Investment Fund (LAIF) established by the State Treasurer for the benefit of local agencies up to the maximum amount permitted by State law. f. Money market funds rated in the highest category of Moody's or Standard and Poor's, or administered by a domestic bank with long- term debt rated in one of the top two categories of Moody's or Standard and Poor's. Authorized Representative of the City. The term "Authorized Representative of the City" means the Mayor, the City Manager, the Administrative Services Director or any other person or persons designated by any of them in a written certificate or by the City Council of the City and authorized to act on behalf of the City by a written certificate signed on behalf of the City by the Mayor of the City and containing the specimen signature of each such person. Bond Counsel. The term "Bond Counsel" means an attorney or firm of attorneys of whose opinions are nationally accepted in matters pertaining to the tax- exempt status of interest on bonds issued by states and their political subdivisions. 5 DOCSOC/ 1575510v5/024217 -0005 Bonds or Series 2012 Bonds. The term "Bonds" or "Series 2012 Bonds" means the $[Bond Amount] City of Arcadia General Obligation Refunding Bonds, Series 2012 (Police Station Project). Closing Date. The term "Closing Date" is the date the bonds are delivered to the initial purchaser thereof. Code. The term "Code" means the Internal Revenue Code of 1986, as amended, and any regulations, rulings, judicial decisions, and notices, announcements, and other releases of the United States Treasury Department or Internal Revenue Service interpreting and construing it. Computation Year. The term "Computation Year" means, with respect to the Bonds, the period beginning on the Delivery Date and ending on August 1, 2013 and each 12 -month period ending on August 1 thereafter until there are no longer any Bonds outstanding, or such other computation year as may be established pursuant to the Tax Certificate. Costs of Issuance. The term "Costs of Issuance" means all of the costs authorized to be paid from the proceeds of the Refunding Bonds set forth in Section 53550(e) and (f) and Section 53587 of the Government Code, including, but not limited to, all printing and document preparation expenses in connection with this Resolution, the Bonds and the Official Statement pertaining to the Bonds and any and all other agreements, instruments, certificates or other documents prepared in connection therewith; financial advisory fees; bond counsel fees; underwriter's fees; rating agency fees; auditor's fees; CUSIP service bureau charges; legal fees and expenses of counsel with respect to the financing; the initial fees and expenses of the Paying Agent; other fees for professional consulting services, fees for credit enhancement relating to the Bonds, if any; and other fees and expenses incurred in connection with the issuance of the Bonds, to the extent such fees and expenses are approved by the City. Costs of Issuance Fund. The term "Costs of Issuance Fund" means the fund of that name established under the Bond Law and Section 11 hereof. 6 DOCSOC/ 1575510v5/024217 -0005 Debt Service Fund. The term "Debt Service Fund" means the fund of that name established under the Law and Section 13 hereof. Depository. The term "Depository" means (a) initially, DTC, and (b) any other Securities Depository acting as Depository under this Indenture. Depository System Participant. The term "Depository System Participant" means any participant in the Depository's book -entry system. DTC. The term "DTC" means The Depository Trust Company, New York, New York, and its successors and assigns. Escrow Agreement. The term "Escrow Agreement" means the Escrow Agreement relating to the Refunded Bonds by and between the City and The Bank of New York Mellon Trust Company, N.A., or any other successor thereto, as escrow agent. Federal Securities. Means direct or indirect noncallable obligations of, or noncallable, nonrepayable obligations unconditionally guaranteed as to full and timely payment of principal and interest by, the United States of America, but excluding investments in mutual funds or unit investment trusts. Interest Payment Date. The term "Interest Payment Date" means each August 1 and February 1, commencing February 1, 2013. Owner. The term "Owners" or "Bond Owner" or any similar term, when used with respect to the Bonds, means any person in whose name a Bond is registered in the books of registration maintained by the Paying Agent. Participants. The term "Participants" means those broker - dealers, banks and other financial institutions from time to time for which DTC holds Bonds as securities depository. Paying Agent. The term "Paying Agent" means that entity so designated from time to time by the City Council of the City to serve as, paying agent, transfer agent and registrar for the Bonds. The initial Paying Agent shall be The Bank of New York Mellon Trust Company, N.A. 7 DOCSOC/ 157551 Ov5/024217 -0005 Rebate Regulations. The term "Rebate Regulations" means the Treasury Regulations issued under Section 148(f) of the Code. Record Date. The term "Record Date" shall mean the fifteenth day of the month preceding an Interest Payment Date. Resolution. The term "this Resolution" shall mean, collectively, Resolution No. of the City Council, together with this Supplement to Resolution. Tax Certificate. The term "Tax Certificate" shall mean that certain certificate of such name executed by the City on the Closing Date to establish certain facts and expectations and which contains certain covenants relevant to compliance with the Code. Treasurer. The term "Treasurer" means the City Treasurer of the City. SECTION 2. Authorization to Issue. Bonds of the City in the sum of $[Bond Amount] shall be issued for the purpose of refunding the Refunded Bonds, which were issued for the purpose stated in the proposition set out in the recitals hereof. Said Bonds are further issued pursuant to the provisions of the Law and the Bond Law. Said Bonds shall be designated the "City of Arcadia General Obligation Refunding Bonds, Series 2012 (Police Station Project)." The Series 2012 Bonds shall be issued in the form of fully registered bonds in the denomination of $5,000 each or any whole multiple thereof and shall mature on the dates and in the amounts, and shall bear interest at the rates, per annum, for each of the years as follows: 8 DOCSOC/ 1575510v5/024217 -0005 Year (August 1 Principal Amount Interest Rate 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 - 2025 2026 2027 2028 2029 2030 2031 The Bonds shall bear interest at the rates set forth above, from the Closing Date, payable on February 1, 2013 and thereafter semiannually on each August 1 and February 1. Each Bond shall bear interest until its principal sum has been paid; provided, however, that if funds are available for the payment thereof on such Bond's applicable maturity date in full accordance with the terms of this Resolution, such Bond shall then cease to bear interest. Interest on the Bonds shall be calculated on the basis of a 360 -day year comprised of twelve 30 -day months. The Bonds shall be numbered No. 1 and sequentially upwards and shall be dated the Closing Date, except that Bonds issued upon exchanges and transfers of other Bonds shall be dated so that no gain or loss of interest shall result from the exchange or transfer. Interest on each Bond shall be paid by the Paying Agent by check mailed by first class mail, postage prepaid, on the Interest Payment Date to the Owner as his/her name and address appear on the register kept by the Paying Agent at the close of business on the applicable Record Date. At the request of any owner of at least $1,000,000 in aggregate principal amount of Bonds, interest on the Bonds 'will be paid by wire transfer in 9 DOCSOC/ 1575510v5/024217 -0005 immediately available funds if such request is made at least fifteen days before the Record Date for such payment, any such designation to remain in effect until withdrawn. Each Bond shall bear interest from the Interest Payment Date next preceding the date of authentication with respect to which interest has been paid or provided for (unless (i) the date of authentication is prior to the first Record Date, in which event from the Closing Date, (ii) the date of authentication is after a Record Date and before the following Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (iii) it is authenticated as of an Interest Payment Date, in which event it shall bear interest from such date) until the principal hereof shall have been paid. 0 of proceeds of the Bonds (comprising $[Bond Amount]-00 aggregate principal amount, plus /minus $ in net original issue premium/discount, less $ of underwriter's discount) shall be disbursed, as follows: to the Costs of Issuance Fund to be applied to pay Costs of Issuance in accordance with Section 11 to the Escrow Fund established pursuant to the Escrow Agreement for the defeasance and prepayment of the Refunded Bonds TOTAL The amount designated above for transfer to the Escrow Fund is hereby.determined to be that amount necessary to purchase the Federal Securities sufficient to refund the Refunded Bonds. SECTION 3. Place of Payment. The Bonds shall be payable in lawful money of the United States of America and principal of the Bonds shall be payable upon surrender thereof at the principal corporate trust office of the Paying Agent in Los Angeles, California. SECTION 4. Paying Agent. The initial Paying Agent for the Bonds shall be The Bank of New York Mellon Trust Company, N.A. The Paying Agent 'may at any time resign and be 10 DOCSOC/ 1575510v5/024217 -0005 discharged of the duties and obligations created by this Resolution by giving at least 60 days' written notice to the City. The Paying Agent may be removed at any time by an instrument filed with such Paying Agent and signed by the City. A successor Paying Agent shall be appointed by the City and shall be a bank or trust company organized under the laws of any state of the United States, a national banking association or any other financial institution, having capital stock and surplus aggregating at least $75,000,000 and doing business in the State and willing and able to accept the office on reasonable and customary terms and authorized by law to perform all the duties imposed upon it by this Resolution. Such Paying Agent shall signify the acceptance of its duties and obligations hereunder by executing and delivering to the City a written acceptance thereof. Resignation or removal of the Paying Agent shall be effective upon appointment and acceptance of a successor Paying Agent. In the event of the resignation or removal of the Paying Agent, such Paying Agent shall pay over, assign and deliver any moneys held by it as Paying Agent to its successor, or, if there is no successor, to the Administrative Services Director. In the event that for any reason there shall be a vacancy in the office of the Paying Agent, the Administrative Services Director shall act as such Paying Agent. The City shall cause the new Paying Agent appointed to replace any resigned or removed Paying Agent to mail notice of its appointment and the address of its principal office to all registered Owners. SECTION 5. Form of Bonds. The Bonds shall be substantially in the form attached hereto as Exhibit "A." Such form is hereby approved and adopted as the form of the Bonds and of the redemption, exchange, registration and assignment provisions pertaining to them, with necessary or appropriate variations, omissions, and insertions, as permitted or required by this Resolution. Any Bonds issued pursuant to this Resolution may be initially issued in temporary form exchangeable for definitive Bonds when the same are ready for delivery. The temporary Bonds may 11 DOCSOC/ 1575510v5/024217 -0005 be printed, lithographed or typewritten, shall be of such denominations as may be determined by the City, shall be in fully registered form and may contain references to any of the provisions of this Resolution as may be appropriate. Every temporary Bond shall be executed by the City and be authenticated by the Paying Agent upon the same conditions and in substantially the same form and manner as the definitive fully registered bonds. If the City issues temporary Bonds, it will execute and furnish definitive Bonds without delay, and, thereupon, the temporary Bonds shall be surrendered for cancellation at the principal office of the Paying Agent in Los Angeles, California, or at such other place in California as the City may approve. The Paying Agent shall deliver in exchange for the surrendered temporary Bonds an equal aggregate principal amount of definitive Bonds of authorized denominations of this same issue. Until exchanged, the temporary Bonds shall be entitled to the same benefits under this Resolution as definitive Bonds of this same issue. SECTION 6. Execution and Authentication of the Bonds. The Bonds shall be signed on behalf of the City by its Mayor and by its Treasurer by facsimile signatures and by its City Clerk, or authorized Deputy City Clerk, by facsimile signature. The foregoing officers are hereby authorized and directed to sign the Bonds in accordance with this Section 6. If any City officer whose facsimile signature appears on the Bonds ceases to be an officer before delivery of the Bonds, his or her signature is as effective as if he or she had remained in office. The Paying Agent shall authenticate the Bonds on registration and/or exchange to effectuate the registration and exchange provisions set forth in Section 7 below; and only those Bonds that have endorsed on them a certificate of authentication, substantially in the form set forth in the form of Bond, duly executed by the Paying Agent, shall be entitled to any rights, benefits or security under this Resolution. No Bond shall be valid or obligatory for any purpose unless and until the certificate of authentication thereon has been duly executed by the Paying Agent. The certificate of the Paying Agent upon any Bond shall be conclusive and the only evidence required that the Bond has been duly authenticated and delivered under this Resolution. The Paying Agent's certificate of authentication 12 DOCSOC/ 1575510v5/024217 -0005 on any Bond shall be deemed to have been duly executed if signed by an authorized officer of the Paying Agent, but it shall not be necessary that the same officer sign the certificate of authentication on all of the Bonds that may be issued hereunder. SECTION 7. Registration, Transfers and Exchanges. Any Bond may, in accordance with its terms, be transferred, upon the registration books required to be kept by the Paying Agent, by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such fully registered Bond for cancellation, 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 Paying Agent shall authenticate and deliver a new Bond or Bonds of the same series and maturity, for the like aggregate principal amount of Bond or Bonds surrendered. Bonds may be exchanged at the principal corporate trust office of the Paying Agent in Los Angeles, California, for a like aggregate principal amount of Bonds of other authorized denominations of the same series and maturity. The person, firm or corporation requesting the transfer or exchange shall. pay any costs or charges in connection with the transfer or exchange as are established by the Paying Agent, in addition to paying any tax or governmental charge that may be imposed in connection with the transfer or exchange. The Paying Agent shall not be required, however, to register a transfer or make an exchange of any Bond (i) during the 15 days before the selection of Bonds for redemption, or (ii) if such Bond has been called for redemption in whole or in part. SECTION 8. Registration Books. The Paying Agent will keep at its principal corporate trust office in Los Angeles, California, or at such other place as the City may approve, sufficient books for the registration and transfer of the Bonds. The books shall at all times be open to inspection by the City; and, upon presentation for such purpose, the Paying Agent shall under such 13 DOCSOC/ 1575510v5/024217 -0005 reasonable regulations as it may prescribe, register or transfer, or cause to be registered or transferred, on the register, the Bonds as hereinbefore provided. SECTION 9. Book -Entry Only System. DTC shall act as the initial Depository for the Bonds. One Bond for each maturity of the Bonds shall be initially executed, authenticated, and delivered as set forth herein with a separate fully registered certificate (in print or typewritten form). Upon initial execution, authentication, and delivery, the ownership of the Bonds shall be registered in the Bond Register kept by the Paying Agent for the Bonds in the name of Cede & Co., as nominee of DTC or such nominee as DTC shall appoint in writing. The representatives of the City and the Paying Agent are hereby authorized to take any and all actions as may be necessary and not inconsistent with this Resolution to qualify the Bonds for the Depository's book -entry system, including the execution of the Depository's required representation letter. With respect to Bonds registered in the Bond Register in the name of Cede & Co., as nominee of DTC, neither the City nor the Paying Agent shall have any responsibility or obligation to any broker - dealer, bank, or other financial institution for which DTC holds Bonds as Depository from time to time (the "DTC Participants ") or to any person for which a DTC Participant acquires an interest in the Bonds (the `Beneficial Owners "). Without limiting the immediately preceding sentence, neither the City nor the Paying Agent shall have any responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co., or any DTC Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any DTC Participant, any Beneficial Owner, or any other person, other than DTC, of any notice with respect to the Bonds, including any notice of redemption, (iii) the selection by the Depository of the beneficial interests in the Bonds to be redeemed in the event the City elects to redeem the Bonds in part, (iv) the payment to any DTC Participant, any Beneficial Owner, or any other person, other than DTC, of any amount with respect to the principal of or interest on the Bonds, or (v) any consent given or other action taken by the 14 DOCSOC/ 1575510v5/024217 -0005 Depository as Owner of the Bonds; except that so long as any Bond is registered in the name of Cede & Co., as nominee of DTC, anyone representing themselves to be the Beneficial Owner of $1,000,000 or more in aggregate principal amount of Bonds who has filed a written request with the Paying Agent to receive notices, containing such Beneficial Owner's name and address, shall be provided with all notices relating to such Bonds by the Paying Agent. Except as set forth above, the Paying Agent may treat as and deem DTC to be the absolute Owner of each Bond for which DTC is acting as Depository for the purpose of payment of the principal of and interest on such Bonds, for the purpose of giving notices of prepayment and other matters with respect to such Bonds, for the purpose of registering transfers with respect to such Bonds, and for all purposes whatsoever. The Paying Agent shall pay all principal of and interest on the Bonds only to or upon the order of the Owners as shown on the Bond Register, and all such payments shall be valid and effective to fully satisfy and discharge all obligations with respect to the principal of and interest on the Bonds to the extent of the sums or sums so paid. Upon delivery by DTC to the Paying Agent of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the transfer provisions hereof, references to "Cede & Co." in this Section 9 shall refer to such new nominee of DTC. DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving written notice to the Paying Agent during any time that the Bonds are Outstanding, and discharging its responsibilities with respect thereto under applicable law. The City may terminate the services of DTC with respect to the Bonds if it determines that DTC is unable to discharge its responsibilities with respect to the Bonds or that continuation of the system of book - entry transfers through DTC is not in the best interest of the Beneficial Owners, and the City shall mail notice of such termination to the Paying Agent. Upon the termination of the services of DTC, as provided in, the previous paragraph, and if no substitute Depository willing to undertake the functions hereunder can be found which is willing and 15 DOCSOC/ 1575510v5/024217 -0005 able to undertake such functions upon reasonable or customary terms, or if the City determines that it is in the best interest of the Beneficial Owners of the Bonds that they be able to obtain certificated Bonds, the Bonds shall no longer be restricted to being registered in the Bond Register of the Paying Agent in the name of Cede & Co., as nominee of DTC, but may be registered in whatever name or names the Owners shall designate at that time, in accordance with Section 7. SECTION 10. Redemption. (a) Optional Redemption. The Bonds maturing on or after August 1, are subject, at the option of the City, to redemption prior to their stated maturities in whole or in part on any date commencing August 1, , selected among maturities, if in part as nearly as practicable on a pro -rata basis, and by lot within a maturity, at a redemption price equal to the principal amount thereof, together with accrued interest to the date fixed for redemption, without premium. (b) Mandatory Sinking Fund Redemption. (1) The Bonds maturing on August 1, are subject to mandatory sinking fund redemption, in part by lot, prior to their stated maturity, on each August 1 on and after August 1, , at a redemption price equal to 100% of the principal amount thereof called for redemption, without premium, plus accrued interest thereon to the date of redemption in the aggregate respective principal amounts set forth in the following table: Principal Amount Redemption Date of Bonds to be (August 1) Redeemed (maturity) (2) The Bonds maturing on August 1, , are subject to mandatory sinking fund redemption, in part by lot, prior to their stated maturity, on each August 1 on and after August 1, at a redemption price equal to 100% of the principal amount thereof called for redemption, 16 DOCSOC/ 1575510v5/024217 -0005 without premium, plus accrued interest thereon to the date of redemption in the aggregate respective principal amounts set forth in the following table: Principal Amount Redemption Date of 20 Bonds to be (August l) Redeemed (maturity) (c) Selection of Bonds for Redemption. If less than all of the Bonds outstanding are to be redeemed, the portion of any Bond of a denomination of more than $5,000 to be redeemed shall be in the principal amount of $5,000 or an integral multiple thereof, and, in selecting portions of such Bond for redemption, the Paying Agent shall treat each such Bond as representing that number of Bonds of $5,000 denominations which is obtained by dividing the principal amount of such Bond to be redeemed in part by $5,000. The Paying Agent shall promptly notify the City in writing of the Bonds, or portions thereof, selected for redemption. (d) Notice of Redemption. The Paying Agent shall further provide written notice to Bond Owners of all Bonds to be redeemed pursuant to this section by first class mail within sixty (60) days, but in no event later than thirty (30) days prior to the date of such redemption. The date on which the Bonds which are called for redemption are to be presented for redemption is herein sometimes called the "redemption date." The notice of redemption shall (a) state the redemption date; (b) state the redemption price; (c) state the dates of maturity of the Bonds and, if less than all of any such maturity is called for redemption the distinctive numbers of the Bonds of such maturity to be redeemed, and in the case of Bonds redeemed in part only, the respective portions of the principal amount thereof, to be redeemed; (d) state the CUSIP number, if any, of each Bond to be redeemed; (e) subject to subsection (e) give notice that further interest on such Bonds will not accrue after the designated redemption date; and (f) any other descriptive information regarding the Bonds needed to identify accurately the Bonds being redeemed. The actual receipt by the Owner of notice of such 17 DOCSOC/ 1575510v5/024217 -0005 redemption shall not be a condition precedent to redemption, and failure to receive such notice shall not affect the validity of the proceedings for the redemption of such Bonds or the cessation of interest on the date fixed for redemption. At least twenty -five (25) days before the redemption date, notice shall also be given by (i) registered or certified mail, postage prepaid, (ii) confirmed facsimile transmission or (iii) overnight delivery service, to The Depository Trust Company, 711 Stewart Avenue, Garden City, New York 11530, Facsimile transmission: (516) 227-4039,(516) 227 -4190 and in accordance with then current guidelines of the Securities and Exchange Commission, to any other firm or service regularly providing information with respect to the redemption of Bonds designated to the Paying Agent by the City. (e) Conditional Notice of Optional Redemption of Bonds. With respect to the optional redemption of Bonds pursuant to the foregoing subsection (a), at the direction of the City filed with the Paying Agent, the notice of such redemption shall state that such redemption is conditioned upon the receipt by the Paying Agent on or before the date fixed for such redemption of sufficient funds for such purpose from any issue of refunding bonds. In the event that sufficient funds shall not have been deposited with the Paying Agent on or before the date fixed for redemption, the Paying Agent shall promptly notify the Owners of the Bonds by telephone, facsimile transmission or other form of telecommunication, promptly confirmed in writing; and thereupon such redemption and the notice thereof shall be deemed to be canceled and rescinded. (f) Effect of Redemption. When notice of redemption has been given, substantially as provided for herein, and when the amount necessary for the redemption of the Bonds called for redemption (principal and premium, if any) is set aside for that purpose in the Debt Service Fund, as provided for herein, the Bonds designated for redemption shall become due and payable on the date fixed for redemption thereof, and upon presentation and surrender of said Bonds at the place 18 DOCSOC/ 1575510v5/024217 -0005 specified in the notice of redemption, such Bonds shall be redeemed and paid at said redemption price out of said Debt Service Fund, and no interest will accrue on such Bonds called for redemption after the redemption date specified in such notice and the owners of the Bonds so called for redemption after such redemption date shall look only to the funds held for such purpose in the Debt Service Fund (or held for such specific purpose in the Bond Fund held by the Paying Agent). All Bonds redeemed shall be cancelled forthwith by the Paying Agent and shall not be reissued. The City shall establish a separate account in the Debt Service Fund to hold funds available for payment of called bonds after the redemption date. (g) mandatory sinking fund redemption prior to maturity. SECTION 11. Costs of Issuance Fund. The proceeds of the sale of the Bonds identified in Section 2 for deposit into the Costs of Issuance Fund shall be deposited with the Paying Agent to the credit of; and the Paying Agent shall establish a fund designated the "City of Arcadia Series 2012 General Obligation Refunding Bonds Costs of Issuance Fund," (the "Costs of Issuance Fund "), and the moneys in said fund shall be applied exclusively to pay Costs of Issuance in accordance with the Bond Law, except as otherwise provided in the provisions of the Bond Law. If, upon completion of the payment of all Costs of Issuance from the Costs of Issuance Fund as designated in a written certificate signed by an Authorized Representative from the City, amounts remain therein, the Paying Agent shall transfer such amounts to the Debt Service Fund. At such time that no amounts remain on deposit in the Costs of Issuance Fund, the Paying Agent shall close the Costs of Issuance Fund. SECTION 12. Rebate Fund. The City shall establish the Series 2012 General Obligation Refunding Bonds (Police Station Project) Rebate Fund (the "Rebate Fund "). All money at any time deposited in the Rebate Fund shall be held by the City in trust for payment to the United States Treasury. All amounts on deposit in the Rebate Fund shall be governed by this Section and the Tax Certificate, unless the City obtains an opinion of Bond Counsel that the exclusion from gross income 19 DOCSOC/ 1575510v5/024217 -0005 of interest on the Bonds shall not be adversely affected for federal income tax purposes if such requirements are not satisfied. (a) Annual Computation. Within 55 days of the end of each Computation Year with respect to the Bonds, the City shall calculate or cause to be calculated the amount of rebatable arbitrage, in accordance with Section 148(f)(2) of the Code and Section 1.148 -3 of the Rebate 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 (C) of the Code), and taking into account whether the 1 -1/2% Penalty has been elected), for this purpose treating the last day of the applicable Computation Year as a computation date, within the meaning of Section 1.148 -1(b) of the Rebate Regulations (the "Rebatable Arbitrage "). The City shall obtain expert advice as to the amount of the Rebatable Arbitrage to comply with this Section. (b) Annual Transfer. Within 55 days of the end of each applicable Computation Year with respect to the Bonds, an amount shall be transferred by the City to be deposited to the Rebate Fund from any legally available funds, including the other funds and accounts established herein, 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, the Administrative Services Director shall withdraw the excess from the Rebate Fund and then credit the excess to the Debt Service Fund. (c) Payment to the Treasury. The City shall pay to the United States Treasury, out of amounts in the Rebate Fund: 20 DOCSOC/ 1575510v5/024217 -0005 (1) Not later than 60 days after the end of (A) the fifth Computation Year with respect to the Bonds, and (B) each applicable fifth Computation Year thereafter, an amount equal to at least 90% of the Rebatable Arbitrage calculated as of the end of such Computation Year; and (2) Not later than 60 days after the payment of all the Bonds, an amount equal to 100% of the Rebatable Arbitrage calculated as of the end of such applicable Computation Year, and any income attributable to the Rebatable Arbitrage, computed in accordance with Section 148(f) of the Code. 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 City shall calculate or cause to be calculated the amount of such deficiency and deposit an amount received from any legally available source, including the other funds and accounts established herein, equal to such deficiency in the Rebate Fund prior to the time such payment is due. Each payment required to be made pursuant to this Subsection (1) 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 City, or shall be made in such other manner as provided under the Code. (d) Disposition of Unexpended Funds. Any funds remaining in the Rebate Fund after redemption and payment of the Bonds and the payments described in Subsection (1), may be utilized in any lawful manner by the City. (e) Survival of Defeasance. Notwithstanding anything in this Section or the Resolution to the contrary, the obligation to comply with the requirements of this Section shall survive the defeasance of the Bonds. 21 DOCSOC/ 1575510v5/024217 -0005 SECTION 13. Security /Debt Service Fund. The City Council, so far as is practicable, shall fix such rate or rates for a tax to be levied in the City as will result in revenues which will pay the interest on the Bonds, and provide a sinking or other fund for the payment of the principal of the Bonds as such principal may become due. The City Council shall determine the fiscal year for all of the amounts above set forth, and shall fix the rate or rate of tax to be levied which will raise the amounts of money required by the City for such purposes, and as required by the provisions of the Law, the City Council shall certify to the County Auditor- Controller of the County of Los Angeles (the "Auditor ") the rate or rates so fixed and shall furnish to the Auditor a statement in writing containing the following: (a) an estimate of the minimum amount of money required to be raised by taxation during the fiscal year for the payment of the principal of and interest on the Bonds, as will become due before the proceeds of a tax levied at the next general tax levy will *be available; (b) an estimate of the minimum amount of money required to be raised by taxation during the fiscal year for all other purposes of the City; and (c) any other items required by the provisions of the Law. The Auditor shall compute and enter in the county assessment roll the respective sums to be paid as a City tax on the property within the City using the rate or rates of levy as fixed by the City Council and the assessed value as found on the assessment roll for the property subject to the tax. It shall be the duty of all county officers charged with the duty of collecting taxes to collect such tax in time, form and manner as county taxes are collected and when collected to pay the same to the City. All such taxes for the payment of principal and interest on the Bonds shall be established, levied and collected as provided in the provisions of the Law. All moneys derived from such taxes and all other moneys allocated and designated for payment of said Bonds and the interest thereon shall be placed in a fund of the City and designated "City of Arcadia Series 2012 General Obligation Refunding Bonds (Police Station Project) Debt Service Fund" (the "Debt Service Fund "), (and accounts therein to the extent created pursuant to 22 DOCSOC/ 1575510v5/024217 -0005 Section 10 or 16 hereof) shall be kept separate and apart from all other funds of the City (and are hereby irrevocably pledged for the payment of the Bonds in accordance with the purpose and intent of this Resolution), and until all of said Bonds and all interest thereon have been fully paid (or defeased) the moneys in said fund shall be used for no other purpose than the payment of said Bonds and the interest thereon; provided, however, that when all of the principal and interest on all of the Bonds have been paid, any balance of money then remaining in said funds shall be transferred to the general fund of the City. Interest earned on the investment of monies in the Debt Service Fund shall be retained in the Debt Service Fund and used by the City to pay principal and interest on the Bonds when due. The Administrative Services Director shall transfer available monies from the Debt Service Fund to the Paying Agent in amounts sufficient and at such time as are necessary to promptly pay principal (including mandatory sinking fund payments), interest and redemption premium, if any, on the Bonds as such shall become due; and the Paying Agent shall establish a fund designated the "City of Arcadia Series 2012 General Obligation Refunding Bonds (Police Station Project) Bond Fund" (the "Bond Fund ") for such purpose and shall make payments to the Bond Owners of principal (including mandatory sinking fund payments), interest and redemption premium, if any, on the Bonds as such shall become due; provided that, in the event of any deficiencies, moneys on deposit in the Bond Fund shall be applied first to the payment of interest and then to the payment of principal and, in all such cases, ratably and without preference among all maturities. SECTION 14. Investments. (a) Moneys in the Costs of Issuance Fund shall be invested in Authorized Investments which will by their terms mature, or in the case of an investment agreement are available without penalty, as close as practicable to the date the City estimates the moneys represented by the particular investment will be needed for withdrawal from the Costs of Issuance Fund. Earnings on 23 DOCSOC/ 1575510v5/024217 -0005 investments of monies in the Costs of Issuance Fund shall be retained therein and applied in accordance with authorized uses thereof and applicable law. (b) Moneys in the Debt Service Fund and the Bond Fund shall be invested only in Authorized Investments which will by their terms mature, or in the case of an investment agreement are available for withdrawal without penalty, on such dates so as to ensure the payment of principal of, premium, if any, and interest on the Bonds as the same become due. The Paying Agent shall be under no obligation to invest moneys in the Bond Fund except on the written instruction of the Administrative Services Director. Investment earnings, if any, in the Bond Fund in excess of amounts held for the benefit of Owners shall be returned to the City for deposit in the Debt Service Fund. In the event that an Authorized Representative of the City does not so direct the Paying Agent, the Paying Agent shall invest moneys in the Bond Fund in the Authorized Investments described in paragraph 2(f) of the definition contained herein and as set forth in the letter of authorization and directions executed by the City and delivered to the Paying Agent. If no investment directions are provided, such amount shall be held in cash, uninvested. The City and the Paying Agent, at the direction of the City, shall sell at the best price obtainable, or present for redemption, any obligations so purchased whenever it may be necessary to do so in order to provide moneys to meet any payment or transfer to such funds and accounts or from such funds and accounts. For the purpose of determining at any given time the balance in any such funds, any such investments constituting a part of such funds and accounts shall be valued at their market value. Notwithstanding anything herein to the contrary, the Paying Agent shall not be responsible for any loss from investments, sales or transfers undertaken in accordance with the provisions of this Resolution. SECTION 15. Tax Covenants. The City hereby covenant$ and agrees with the owners of the Bonds to take no action or refrain from taking any action which, in the opinion of Bond Counsel, 24 DOC SOC/ 1575510v5/024217 -0005 would result in the interest received by the Owners being includable in gross income for federal income tax purposes. In order to preserve the exclusion from gross income of interest on the Bonds for federal income tax purpose, the City covenants to comply with all applicable requirements of the Code, and any Regulations which are necessary to preserve such exclusion from gross income and specifically covenants, without limiting the generality of the foregoing, that: (a) Private Activity. The City will take no action or refrain from taking any action or make any use of the proceeds of the Bonds issued on a tax- exempt basis or of any other monies or property which would cause the Bonds issued on a tax- exempt basis to be "private activity bonds" within the meaning of Section 141 of the Code; (b) Arbitrage. The City will make no use of the proceeds of the Bonds issued on a tax- exempt basis 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 Bonds issued on a tax- exempt basis to be "arbitrage bonds" within the meaning of Section 148 of the Code; (c) Federal Guaranty. The City will make no use of the proceeds of the Bonds issued on a tax - exempt basis or take or omit to take any action that would cause -the Bonds issued on a tax- exempt basis to be "federally guaranteed" within the meaning of Section 149(b) of the Code; (d) Information Reporting. The City will take or cause to be taken all necessary action to comply with the informational reporting requirement of Section 149(e) of the Code; (e) Hedge Bonds. The City will make no use of the proceeds of the Bonds issued on a tax- exempt basis or any other amounts or property, regardless of the source, or take any action or refrain from taking any action that would cause the Bonds issued on a tax - exempt basis to be considered "hedge bonds" within the meaning of Section 14 9(g) 2.f the Code unless the City 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 Bonds, issued on a tax- exempt basis for federal income tax purposes; 25 DOCSOC/ 1575510v5/024217 -0005 (fl Miscellaneous. The City will take no action or refrain from taking any action inconsistent with its expectations stated in that certain Tax Certificate executed by the City in connection with each issuance of Bonds issued on a tax - exempt basis and will comply with the covenants and requirements stated therein and incorporated by reference herein; (g) Small Issuer Exemption From Bank Nondeductability Restriction. The City hereby designates the Bonds for purposes of paragraph (3) of Section 265(b) of the Code and represents that not more than $10,000,000 aggregate principal amount of obligations the interest on which is excludable (under Section 103(a) of the Code) from gross income for federal income tax purposes (excluding (i) private activity bonds, as defined in Section 141 of the Code, except qualified 501(c)(3) bonds as defined in Section 145 of the Code and (ii) current refunding obligations to the extent the amount of the refunding obligation does not exceed the outstanding amount of the refunded obligation), including the Bonds, has been or will be issued by the City, including all subordinate entities of the City, during the calendar year 2012. (h) Subsequent Opinions. If the City obtains a subsequent opinion of Bond Counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation ( "SYCR" ), where such opinion is required in connection with a change or amendment to this Resolution or the procedures set forth in the Tax Certificate, it will obtain an opinion substantially to the effect originally delivered by SYCR that interest on the Bonds is excluded from gross income for federal income tax purposes. SECTION 16. Defeasance. The Bonds may be defeased in whole or in part prior to maturity by irrevocably depositing with the City in a separate account of the Debt Service Fund to be held separate and apart from all other funds of the City, and which is irrevocably pledged to the Bonds so defeased (or an entity designated by the Administrative Services Director to act as escrow agent with respect thereto): 26 DOCSOC/ 1575510v5/024217 -0005 (a) An amount of cash which together with amounts then on deposit in the Debt Service Fund, is sufficient, without reinvestment, to pay and discharge all or part of the Bonds outstanding (including all principal, interest and premium, if any) at or before their stated maturity date; or (b) Federal Securities not subject to call, together with cash, if required, in such amount as will, without reinvestment, in the opinion of an independent certified public accountant, together with interest to accrue thereon and moneys then on deposit in the Debt Service Fund together with the interest to accrue thereon, be fully sufficient to pay and discharge all of the corresponding Bonds (including all principal and interest and premium, if any) to be defeased at or before their stated maturity date. In such event, notwithstanding that any of the Bonds shall not have been surrendered for payment, all obligations of the City with respect to all said outstanding Bonds shall cease and terminate, except only the obligation of the City to pay or cause to be paid from funds deposited pursuant to paragraphs (a) or (b) of this Section, to the owners of said Bonds not so surrendered and paid all sums due with respect thereto; provided that the City shall have received an opinion of bond counsel for said Bonds, that said Bonds have been defeased. SECTION 17. Supplemental Resolutions. (a) This Resolution, and the rights and obligations of the City and of the Owners of the Bonds issued hereunder, may be modified or amended at any time by a supplemental resolution adopted by the City with the written consent of Owners owning at least 60% in aggregate principal amount of the outstanding Bonds, exclusive of Bonds, if any, owned by the City; provided, however, that no such modification or amendment shall, without the express consent of the Owner of each Bond affected, reduce the principal amount of any Bond, }educe the interest rate payable thereon, advance the earliest redemption date thereof, extend its maturity or the times for paying 27 DOCSOC/ 1575510v5/024217 -0005 interest thereon or change the monetary medium in which principal and interest is payable, nor shall any modification or amendment reduce the percentage of consents required for amendment or modification. No such supplemental resolution shall change or modify any of the rights or obligations of any Paying Agent without its written assent thereto. Notwithstanding anything herein to the contrary, no such consent shall be required if the Owners are not directly and adversely affected by such amendment or modification. (b) This Resolution, and the rights and obligations of the City and of the Owners of the Bonds issued hereunder, may be modified or amended at any time by a supplemental resolution adopted by the City without the written consent of the Owners; (i) To add to the covenants and agreements of the City in this Resolution, other covenants and agreements to be observed by the City which are not contrary to or inconsistent with this Resolution as theretofore in effect; (ii) To add to the limitations and restrictions in this Resolution, other limitations and restrictions to be observed by the City which are not contrary to or inconsistent with this Resolution as theretofore in effect; (iii) To confirm as further assurance any pledge under, and the subjection to any lien or pledge created or to be created by, this Resolution, of any moneys, securities or funds, or to establish any additional funds or accounts to be held under this Resolution; (iv) To cure any ambiguity, supply any omission, or cure or correct any defect or inconsistent provision in this Resolution; or (v) To amend or supplement this Resolution in any other respect, provided such supplemental resolution does not adversely affect the interests of the Owners. (c) Any act done pursuant to a modification or amendment so consented to shall be binding upon the Owners of all the Bonds and shall not be deemed an infringement of any of the provisions of this Resolution, whatever the character of such act may be, and may be done and 28 DOCSOC/ 1575510v5/024217 -0005 performed as fully and freely as if expressly permitted by the terms of this Resolution, and after consent relating to such specified matters has been given, no Owner shall have any right or interest to object to such action or in any manner to question the propriety thereof or to enjoin or restrain the City or any officer or agent of the City from taking any action pursuant thereto. SECTION 18. Resolution to Constitute Contract. In consideration of the purchase and acceptance of any and all of the Bonds authorized to be issued hereunder by those who shall own the same from time to time, this Resolution shall be deemed to be and shall constitute a contract by and between the City and the Owners from time to time of the Bonds; and the pledge made in this Resolution shall be for the equal benefit, protection and security of the Owners of any and all of the Bonds, all of which, regardless of the time or times of their issuance or maturity, shall be of equal rank without preference, priority or distinction of any of the Bonds over any other thereof. SECTION 19. Continuing Disclosure. The City hereby covenants and agrees that it will comply with and carry out all of its obligations under its Continuing Disclosure Certificate to be executed and delivered by the City in connection with the issuance of the Bonds. Notwithstanding any other provision of this Resolution, failure of the City to comply with the Continuing Disclosure Certificate shall not be considered an event of default under this Resolution; 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 City to comply with its obligations under this Section 19. 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 Bonds (including persons holding Bonds through nominees, depositories or other intermediaries). 29 DOCSOC/ 1575510v5/024217 -0005 SIGNED AND APPROVED as of November 1, 2012. [SEAL] ATTEST: City Clerk APPROVED AS TO FORM: CITY OF ARCADIA By: Its: Mayor City Attorney S -1 DOCSOC/ 157551 Ov5/024217 -0005 II: UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AS DEFINED IN THE SUPPLEMENT TO RESOLUTION NO -J TO THE PAYING AGENT 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 VAL UE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREW. UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF LOS ANGELES CITY OF ARCADIA GENERAL OBLIGATION REFUNDING BONDS SERIES 2012 (POLICE STATION PROJECT) INTEREST RATE MATURITY DATE DATED DATE CUSIP NO. % August 1, REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: AND NO /100 DOLLARS THE CITY OF ARCADIA, a charter city situated in the County of Los Angeles, State of California (the "City"), duly organized and existing under and by virtue of the Constitution and laws of the State of California, hereby acknowledges its indebtedness and promises to pay to the registered owner named above or registered assigns (the "Registered Owner "), the Principal Amount stated above on the Maturity Date stated above, and to pay such registered owner by check mailed by first class mail, postage prepaid, thereto at its address as it appears on the register kept by the Paying Agent at the close of business on the fifteenth day of the month preceding the Interest Payment Date (as hereinafter defined) (the "Record Date "), or, at the request of an owner of in'excess of $1,000,000 aggregate principal amount of bonds, by wire transfer, interest on such principal amount on each August 1 and February 1, commencing February 1, 2013 (each, an "Interest Payment Date ") next preceding the date of authentication (unless (i) the date of authentication is prior to the first Record Date in which event from the Dated Date shown above, (ii) the date of authentication is after a Record Date and before the following Interest Payment Date in which event it shall bear interest from such Interest Payment Date, or (iii) it is authenticated as of an Interest Payment Date, in which event it shall bear interest from such date until the Principal Amoupt hereof shall have been paid or provided for in accordance with Resolution No. adopted by the City Council of the City on September 18, 2012, as supplemented by Supplement to Resolution No. , dated A -1 DOC S OC/ 15 75 51 Ov5/024217 -0005 as of November 1, 2012, executed in connection therewith (as supplemented, the "Resolution"), at the interest rate stated above, payable on each Interest Payment Date. Principal and any premium upon the redemption prior to the maturity of all or part hereof are payable at the principal corporate trust office of The Bank of New York Mellon Trust Company, N.A., Paying Agent for the Bonds (the "Paying Agent "), in Los Angeles, California. All such amounts are payable in lawful money of the United States of America. Capitalized terms used herein and not defined shall have the meanings given such terms in the Resolution. The principal of and interest on the Bonds shall be paid from taxes levied for the payment thereof as set forth in the Resolution, which taxes shall be levied exclusively upon the taxable property in the City. This Bond is issued in fully - registered form. It may be exchanged for a like aggregate principal amount of bonds of other authorized denominations of the same series and maturity, all as more fully set forth in the Resolution. This Bond is transferable by the Registered Owner hereof, in person or by its attorney duly authorized in writing, at the designated corporate trust office of the Paying Agent, but only in the manner, subject to the limitations and upon payment of the charges provided in the Resolution, upon surrender and cancellation of this Bond. Upon such transfer a new registered Bond of authorized denomination or denominations for the same aggregate principal amount of the same series and maturity will be issued to the transferee in exchange therefor. Bonds maturing on or after August 1, are subject, at the option of the City, to redemption prior to their stated maturities in whole or in part on any date commencing August 1, selected among maturities, if in part, as nearly as practicable on a pro -rata basis, and by lot within a maturity, at redemption price, equal to the principal amount thereof, together with accrued interest to the date fixed for redemption, without premium. In addition, the Bonds maturing on August 1, and August 1, are subject to mandatory sinking fund redemption prior to maturity commencing on August 1, and August 1, respectively, and each August 1 thereafter prior to maturity from sinking fund payments in the amounts set forth in the Resolution at a redemption price equal to 100% of the principal amount thereof called for redemption, without premium, plus accrued interest thereon to the date of redemption. Notice of redemption with respect to the Bonds to be redeemed shall be mailed to the Registered Owners thereof not less than 30 nor more than 60 days prior to the redemption date by first class mail, postage prepaid, to the addresses set forth in the registration books. Neither a failure of the Registered Owner hereof to receive such notice nor any defect therein will affect the validity of the proceedings for redemption. All Bonds or portions thereof so called for redemption will cease to accrue interest on the specified redemption date; provided that funds for the redemption are on deposit with the Paying Agent on the redemption date. Thereafter, the Registered Owners of such Bonds shall have no rights except to receive payment of the redemption price upon the surrender of the Bonds. The City and the Paying Agent may treat the Registered Owner hereof as the absolute owner hereof for all purposes, and the City and the Paying Agent shall riot be affected by any notice to the contrary. A -2 DOCSOC/1575510v5/024217 -0005 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 hereon endorsed shall have been signed by the Paying Agent. The rights and obligations of the City and of the registered owners of the Bonds may be amended at any time, and in certain cases without notice to or consent of the registered owners, to the extent and upon the terms provided in the Resolution. It is hereby recited, certified and declared that the total amount of indebtedness of the City, including the amount of this Bond, is within the limit provided by law and that any and all acts, conditions and things required to exist, to happen and to be performed precedent to and in the issuance of this Bond exist, have happened and have been performed in due time, form and manner as required by the Constitution and laws of the State of California. IN WITNESS WHEREOF, THE CITY OF ARCADIA has caused this Bond to be signed by the Mayor and the City Treasurer of said City, and countersigned by the City Clerk of said City, by their facsimile signatures. CITY OF ARCADIA By: Its: Mayor By: Its: City Treasurer COUNTERSIGNED: City Clerk of the City of Arcadia [FORM OF CERTIFICATE OF AUTHENTICATION] This is one of the fully registered Bonds described in the within - mentioned Resolution. A -3 DOCSOC/ 1575510v5/024217 -0005 Date of Authentication: THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Paying Agent By: Its: A -4 DOC S OC/ 157551 O v5 /024217 -0005 Authorized Signatory [FORM OF LEGAL OPINION] The following is a true copy of the opinion rendered by Stradling Yocca Carlson & Rauth, a Professional Corporation, in connection with the issuance of, and dated as of the date of the original delivery of, the Bonds. A signed copy is on file in my office. City Clerk of the City of Arcadia [FORM OF ASSIGNMENT] For value received, the undersigned do(es) hereby sell, assign and transfer unto (Name, Address and Tax Identification or Social Security Number of Assignee) the within Bond and do(es) hereby irrevocably constitute(s) and appoint(s) attorney, to transfer the same on the registration books of the Paying Agent with full power of substitution in the premises. Dated: Signature Guarantee: Notice: Signature(s) must be guaranteed by a Notice: The signature on this assignment must qualified guarantor. 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. A -5 DOCSOC/ 15 75510v5/024217 -0005