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Home My WebLink About1987-06-23; City Council; 9060; HOSP GROVE SHORT TERM FINANCING3 * a a, a 2 (d (I] (d hl m l-4 a (I] 2 a a, a 0 cd 4 .r( c) 3 0 V h 03 I rg I e u a el 07 nl .. z + 0 2 a 6 z 3 0 0 CI1)OF CARLSBAD - AGENIqBlLL . DEPT. CITY A AB# ?&dB TITLE: MTG. 6/23/87 HOSP GROVE SHORT TERM FINANCING DEPT. F1N CITY I\r RECOMMEN DEiD ACTION: Adopt Resolution No. 7/3U providing for the borrowing funds for the Hosp Grove Acquisition and the issuance oJ 1987 notes. ITEM EXPLANATION: In March, Council directed staff to begin a three-step process to finance the acquisition of Hosp Grove. These steps are: 1. Short term bank loan 2. Short term Bond Anticipation Note - BAN (or Tax and Revenue Anticipation Note - TRAN 3. Long Term Debt - General Obligation Bonds or Certificates of Participation - COP'S On June 1, 1987, the City entered into the short term IC with the San Diego Trust and Savings Bank. This note wi will issue short term notes in the form of TRANS. Staff recommending that the TRAN be left in effect until June 1988, due to the very favorable interest rate availaable the City. This will maximize the use of low interest fu and provide a window of April 2, 1988 to June 30, 1988 t issue GO Bonds or COP+s. If the City Council decides not to issue the TRAN at thi time, the alternative is to make approximately $6.5 mill available on July 16, 1987 through a series of interfund loans, as described to the Council in March 1987. The e makeup of these loans will have changed somewhat from th initial plan. Various Council actions since March have obligated a portion of funds that could have otherwise k used for the purchase of Hosp Grove. The following funds could be used on a short term basis cover repayment of the bank loan. be in effect until July 15, 1987. At that time the City Sewer Construction Funds $3.5 million Sewer Operating Funds 2.0 million General Capital Construction Fund 1.0 million $6.6 million - 0 0 , Page 2 AB # ?&do The effective cost of the two approaches to funding this interim period is as follows: One Year Borrowing Period Short Term Inter Fund Loan TRAN Principal Amount $6,516,000 1 $6,516,000 Effective Interest Rate 5.62% 7.46% Interest Costs 312,100 486,100 Total Cost $ 366,100 $ 486,100 The amount necessary to pay the bank loan including interest through July 16, 1987. Stated Interest Rate 4.75% 2 7.46% 3 Issue Costs 4 54,000 -- 1 * The market rate for short term TRANS as of this dal was about 4.75% or less. 3 The average interest rate earned on the City's portfolio and the cost of interfund borrowing. 4 The cost of issuing a one-year TRAN including all services. The cost to the General Fund for a one-year borrowing is about $120,000 lower using a TRAN than Interfund loans. Staff therefore recommends proceeding with the TRAN issi using a one-year note due on June 30, 1988. This maxim; the City's fiscal advantage and allows the Council sufficient time following a November election to issue General Obligation Bonds or COP'S whichever is selected the appropriate vehicle. FISCAL IMPACT: As described above, the cost of borrowing using a TRAN : about $120,000 less than using the concept of Interfund loans. The optimum period for using the TRAN will be ont year. This maximizes the use of low cost funds to the C: and provides adequate time following a November election structure a debt issue and go to market when rates are bt The TRAN and all related costs will be folded into the f: long term debt issue. There will be no out of pocket eo: to the City in 1987-88. 0 0 -. Page 3 AB ?# 9UdD EXHIBITS : 1. Preliminary Official Statement 2. Resolution No. 7/32 Providing for the borrowing ( 3. Contract of Purchase between Rauscher Pierce Refsnes, Inc. anc funds for Hosp Grove. the City of Carlsbad. 0 0 .I 5- PRELIMINARY OFFICIAL STATEMENT DATED JUNE -, 1987 NEW ISSUE: RATING: Moody ' s : In the opinion of Jones Hall Hill & White, A Professiona Law Corporation, San Francisco, California, Bond Counsel subject, however to certain qualifications described herein under existing law, interest on the notes is excluded fro gross income for federal income tax purposes and such interes is not an item of tax preference for purposes of the federa individual and corporate alternative minimum taxes, although i is included in adjusted net book income and current earnings i computing the alternative minimum tax imposed on certai corporations. In the further opinion of Bond Counsel, SUC interest is exempt from California personal income taxes. Se "TAX EXEMPTION" herein. $6,570,000* CITY OF CARLSBAD COUNTY OF SAN DIEGO STATE OF CALIFORNIA 1987 NOTES Dated: July 16, 1987 Due: June 30, 1988 The Notes will be issued in the denominations of $5,000 o any integral multiple thereof. Principal and interest on th Notes will be payable upon maturity in Los Angeles, California at the Corporate Trust Department of Security Pacific Nationa Bank, the paying agent of the City of Carlsbad (the "City") The Notes are not subject to redemption prior to maturity. Tk Notes will be negotiable and not subject to registration. The Notes are by statute general obligations of the Cit and are payable from the proceeds of general obligation bonc or certificates of participation issued to finance the Projec on a long term basis', defined below, or if such obligations ar not issued prior to the maturity of the Notes, from taxez income, revenues, cash receipts and other moneys of the cit attributable to the fiscal year 1987/88 and legally availabl for payment thereof (the "Unrestricted Moneys"). The proceeds of the Notes are being used to retire a not of the City in the principal amount of $6,459,384 plus intere: accrued thereon to the order of San Diego Trust and Savinc Bank (the "Original Note") and to pay costs of issuanc incurred in connection with the issuance of the Notes. 73 0 0 proceeds of the Original Note were used by the City to acquir on June 1, 1987 52 acres of land to be maintained by the Cit - ___ ---__-_ as open space (the "Project"). __ The Notes are direct obligations of the City extent -set forth - herein? are- legal investments for commercia banks in - Ca.1-ifornia and- are eligible to secure deposits o public moneys in California, Interest Rate Yield % % The Notes are offered when, as and if issued and receive by the Underwriter, subject to approval of leqality 5y Jon€ Hall Hill & White, a Professional Law Corporation, Sa Francisco, California, Bond Counsel. Certain leqal matter will be passed on for the Underwriter by Brown SI Wood, Sa Francisco, California. It is anticipated that the Notes i definitive form will be available for delivery in Sa Francisco, California, on or about July 16, 1987. RAUSCHER PIERCE REFSNES, INC. June -, 1987 "Preliminary, subject to change. 0 e 0- 0 c-u Id h5 b y L .c 5E= h7 33 ;n+ cx UOId c1= EU7 aJ2 O 52 0 5:: L *U 0 cu- 3 00 .c ucaJ nu * aJ 0; c -- €6 04L u .r 0 U .C 0, = 40 4 3m U :: .r ,242 -g u I- 3 &: 2G .. 2 VI0 VI 7 mmL. wc ou- 0 Cc)%..r .r 0 3 w L u La) ' aJL5.S 0 * .E m:,< c3': "4.2 h m2Z:, 5 a,.- 3 0 5: c 'Q .:$:!; 5% 2-z Cb.2 2 u :5 c L" .- a, Id: L 5.: L a u - 3: u m.:; 2 Wz * c -2 w.2 m *& .C m," 2 -4y.., % 0-0; 2.I:. E w ,"c ;z 2 Id.: 2222 Sa,$ s- 3 .,l \=c 3 QId-S-7 cu .C 4 0 .r mc gsKm u 0% .- .r 0 3 u- c) .C v, 'r) .r a, U .r m 3 uu -0 -- mu- OaJ 4 .r u .r .C -c L c -22 s C 0 .- ,A a,a u u) u I..- X.-= aJ kU4L .-~arn 0 0 No dealer, broker, salesperson or other person has beer authorized by the City to qive any information or to make an] representations other than those contained herein and, if qivei or made, such other information or representation must not bi relied upon as havinq been authorized by the City. Thi< Official Statement does not constitute an offer to sell or thc solicitation of an offer to buy nor shall there be any sale o the Notes by a person in any j urisdiction in which it i unlawful for such person to make such an offer, solicitation o sale. This Official Statement is not to be construed as St at ement contract with the purchasers of the Notes. contained in this Official Statement which involve estimates forecasts or matters of opinion, whether or not expressly s described herein, are intended solely as such ana are not to b construed as a representation of facts. The information set forth herein has been obtained fro sources which are believed to be reliable but it is no guaranteed as to accuracy or comPleteness, and is not to S construed as a reDresentation by the Underwriter. Th information and expression of opinions herein are subject t chanqe without notice and neither delivery of this Officia Statement nor any sale made hereunder shall, under an circumstances, create any implication that there has been r chanqe in the affairs of the City since the date hereof. * e TABLE OF CONTENTS Paqc 1 INTRODUCTORY STATEMENT .................................... THE NOTES 1 Authority for Issuance .................................. Purpose of the Issue .................................... 2 2 Description of the Notes ................................ 2 Security for the Notes ...... . ..... . . . .... . ..... ... ... . .. 2 Available Sources of Paynent ..... ..... . . . . ...... . ...... . REVENUES Article XIIIA ........................................... 3 5 Article XIIIB ........................................... 5 Ad Valorem Property Taxation ............................ 6 Assessed Valuations ..................................... Tax Levies, Collections and Delinquencies .....,......... 6 8 Budget Process .......................................... 8 Comparative Financial Statements ........................ Financial and Accounting Information .................... 10 City Debt Structure ..................................... 12 Direct and Overlapping Debt ...,..................,...... 12 14 Introduction ............................................ Labor Relations ......................................... 14 Retirement Programs ........ . ..... ....................... 15 General Description ..................................... 15 Employment .............................................. 15 Largest Employers ....................................... 16 Commercial Activity . . . . . ... .. .... . . . . ...... .... . . .... ... 19 Construction Activity . . ..... . . . . . . ...................... 20 Transportation .......................................... 20 Education ............................................... 21 Community Facilities and Recreation ..................... 21 TAX EXEMPTION ............................................. 21 LEGAL MATTERS ............................................. 2; LEGALITY FOR INVESTMENT IN CALIFORNIA . .................... 2: LITIGATION ................................................ 2: RATING .................................................... 2: UNDERWRITING .............................................. 2: ADDITIONAL INFORMATION ........ . . ...... ..o.. ....,....,..,., 21 CONSTITUTIONAL AND STATUTORY LIMITS AFFECTING CITY CITY FINANCIAL INFORMATION GENERAL CITY INFORMATION ECONOMIC PROFILE APPENDIX A-EXCERPTED 1985/86 AUDITED FINANCIAL STATEMENTS , A-: e 0 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MA OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAI THE MARKET PRICE OF THE NOTES AT A LEVEL ABOVE THAT WHICH MIGH OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, I .COmNCED,T-- MAY 33IZDISCONTINUED AT ANY TIME. THE UNIIEIIWRITE BANKS AND BANKS ACTING AS AGENT AT PRICES LOWER THAN THE PUBLI OFFERING PRICE-STATED ON THE COVER PAGE HEREOF AND SAID PUBLI OFFERING PRICE MAY BE CHANGED FROM TIME TO TIm BY Tf- UNDERWRITER. MAY OFFER A.ND SELL THE NOTES TO CERTAIN DEALERS AND DEALE 0 e OFFICIAL STATEMENT $6,570,000* CITY OF CARLSBAD 1987 NOTES INTRODUCTORY STATEMENT This Official Statement, including this Introductor Statement and the Appendix, provides information in connectio with the sale by the City of Carlsbad (the "City") of its 198 Notes (the "Notes") in the aggregate principal amount c $6,570,000*. The Notes will be issued in full conformity wit the Constitution and laws of the State of California (tl "State"), including Article 7.6, Chapter 4, Par,: 1, Division 2 Title 5 (commencing with Section 53850) of the Californj Government Code (the "Act"). Under the Act and Resolutior defined below, the Notes are general obligations of the Cit payable from the proceeds of general obligation bonds ( certificates of participation issued to finance the Project c a long term basis, defined below, or if such obligations ai not issued prior to the maturity of the Notes, from tho: taxes, income, revenues, cash receipts and other moneys of tl City attributable to the fiscal year 1987/88 ana legal available therefor (the "Unrestricted Moneys") The Notes a: authorized by Resolution No. adopted by the Ci- Council on June 23, 1987 (the "Resolution"). Eroceeds from tl sale of the Notes will be used to retire a note of the City the principal amount of $6,459,384 plus interest accru thereon to the order of San Diego Trust and Savings Bank (t "Original Note"). The proceeds of the Original Note were us by the City to acquire the Project on June 1, 1987. THE NOTES Authority for Issuance pursuant to the Resolution. The Notes are issued under the authority of the Act i * Preliminary, subject to change. 1 0 0 - Purpose of the Issue Proceeds of the Notes will be used to retire the Original Note and to pay certain costs of issuance incurred in the issuance of the Notes. Description of the Notes The Notes will be issued in the aggregate principal amounl of $6,570,000*. The Notes are not subject to registration, an( will be in bearer form, without coupons, and shall be ii denominations of $5,000 or any integral multiple thereof. Thc Notes will be dated July 16, 1987 and will mature June 30 1988. Principal and interest on the Notes will be payable a. the Corporate Trust Department of Security Pacific Nationa Bank, the Paying Agent in Los Angeles, California. Security for the Notes The principal amount of the Notes, together with th interest thereon, shall be payable from form the proceeds c general obligation bonds or certificates of participatic issued to finance the Project, defined below, or if SUC obligations are not issued prior to the maturity of the Notes Unrestricted Moneys, including taxes, revenues and other mone3 which are received by the City for the general fund of the Cit during fiscal year 1987/88 and which are generally availabl for the payment of current expenses and other obligations c the City. No specific revenues are pledged to the repayment c the Notes. Available Sources of Repayment The Notes, in accordance with State law, are gener obligations of the City and, if not paid from the proceeds another bond or certificate of participation issue, will payable only out of. the taxes, income, revenue, cash receip and other moneys of the City attributable to fiscal ye 1987/88 and legally available for payment therefor. The Ci may, under existing law, issue the Notes only Lf the princip of and interest on its issue of the Notes will not exceed percent of the estimated amount of the then-uncollect Unrestricted Moneys which will be legally available for t payment of principal of and interest on said Not;es. * Preliminary, subject to change. 2 e 0 The amount of estimated Unrestricted Moneys available tc repay the Motes and the interest thereon for the City i2 approximately $25,000,000* including carry-over balances. Thc amount of Unrestricted Moneys needed to pay principal of an( interest on the Notes is $ *, providing a Note coveragf ratio of *. The City estimates that the money: available, if necessary, for repayment are as follows: CITY OF CARLSBAD ESTIMATED UNRESTRICTED MONEYS AVAILABLE FOR NOTE REPAYMENT* SOURCES AXOUNT Cash Balance-July 1, 1987 ..................... $ 458,301 Property Tax 7 , 835, ooo Other Taxes ................................... 10,083,000 Licenses, Permits & Fees ...................... 1,459,000 Fines, Forfeitures b Penalties ................ 446,200 .................................. -- Use of Money €X Property ....................... Revenues From Other Agencies .................. Other ......................................... 2,971,811 -- Service Charges ................................ I, 915,540 Transfers In ................................... 1,241,749 TOTAL UNRESTRICTED MONEYS ................... $24,610,601 TOTAL PRINCIPAL PLUS INTEREST(1) .............. NOTE COVERAGE RATIO ........................... (1) Assumes interest rate at 4%. Source: City of Carlsbad - 1987/88 Adopted Budget CONSTITUTIONAL AND STATUTORY LIMITS AFFECTING CITY REVENUES Article XIIIA Article XIIIA of the State Constitution limits the amou of ad valorem taxes on real property to l% of "full cash valu as determined by the County Assessor. Article XIIIA defip "full cash value" to mean "the County's Assessor's valuation c * Preliminary, subject to change. 3 0 0 real property as shown on the 1975/76 tax roll under 'full cask value' I -or thereafter, _the _appraised value of real properti when pur*sed, hewly constructed--or a- change in ownership has amur-red :after=tk ;l975 assessment period subject to exemption: reconstruction. 'I The "full cash value" is subject to annual adjustment to reflect increases, not to exceed 2% per year, OE decreases in the consumer price index or comparable loca: data,or to reflect reductions in property value caused b] damage, destruction or other factors. Article XIIIA requires a vote of two-thirds of thf qualified electorate to impose special taxes, while totall] precluding the imposition of any additional ad valorem, sale: or transaction tax on real property. As recently amended Article XIIIA exempts from the 1% tax limitation any taxe above that level required to pay debt service on voter-approve{ general obligation bonds for real property or Improvement thereon. In addition, Article XIIIA requires the approval c two-thirds of all members of the State Legislature to ckang any State laws resulting in increased tax revenues. In addition a statutory initiative was adopted by th voters at the November 4, 1986 General Election whic (i) requires that any tax for general governmental purpose imposed by local governmental entities such as the City b approved by resolution or ordinance adopted by a two-third vote of the governmental entity's legislative body and by majority vote of the electorate of the governmental entity (ii) requires that any special tax (defined as taxes levied fo other than general governmental purposes) imposed by a loca governmental entity be approved by a two-thirds vote of th voters within that jurisdiction, (iii) restricts the use o revenues from a special tax to the purposes or for the servic for which the special tax was imposed, (iv) prohibits th imposition of ad valorem taxes on real property by loca governmental entities except as permitted by Article XIIIP (v) prohibits the imposition of transaction taxes and sal€ taxes on the sale of real property by local government; entities, and (vi)-requires that any tax imposed by a loc~ governmental entity on or after August 1, 1985 be ratified by majority vote of the electorate within two years of tk adoption of the initiative or be terminated by November 1: 1988. The City does not anticipate any potential adver: financial impact as a result of the passage of this amendir initiative. in - eertain- circumstances of property transfer 01 4 0 0 Article XIIIB Article XIIIB of the State Constitution limits the annual appropriations of the State and of any city, county, school district, authority or other political subdivision of the Statc to the level of appropriations of the particular governmenta: entity for the prior fiscal year, as adjusted for changes ir the cost of living, population and services rendered by thc governmental entity. The "base year" for establishing suci appropriation limit is the 1978/79 fiscal year and the limit i: to be adjusted annually to reflect changes in population consumer prices and certain increases in the cost of service: provided by these public agencies. Appropriations subject to Article XIIIB generally includ the proceeds of taxes levied by the State or other entity o local gover:nment, exclusive of certain State subventions refunds of taxes, benefit payments from retirement unemployment insurance and disability insurance funds "Proceeds of taxes" include, but are not limited to, all ta revenues and the proceeds to an entity of government fro (i) regulatory licenses, user charges, and user fees (but on1 to the extent such proceeds exceed the cost of 2roviding th service or regulation), and (ii) the investment of ta revenues. Article XIIIB includes a requirement that if s. entity's revenues in any year exceed the amounts permitted t be spent, the excess would have to be returned by revising ta rates or fee schedules over the subsequent two years. CITY FINANCIAL INFORXATION Ad Valorem Property Taxation City property taxes are assessed and collected by tl County of San Diego (the "County"), at the same time and on tl same rolls a.s the County and special district property taxes. The valuation of secured property is established as ( March 1 and is subsequently equalized in August, and is payab' in two installments of taxes due November 1 and February respectively. Taxes become delinquent on December 10 ai April 10 fox each respective installment. Taxes on unsecuri property (personal property and leasehold) are due on August of each year based on the preceding fiscal year's secured t rate. owner-occupied dwelling, but this exemption does not result State law exempts $7,000 of the full cash value of 5 L 0 0 any loss of revenue to local agencies, since the Stat€ reimburses local agencies for the value of the exemptions. Assessed Valuations The State Board of Equalization assesses all property usinc 100% of value as defined by Article XIIIA of the Statc Constitution. State law provides exemptions from ad valorer property taxation for certain classes of property such a: churches, colleges, non-profit hospitals, and charitablc institutions. The following table sets forth the five-year history o assessed valuations for the City: - -- - - __ -- _-- - __ . .-. - _-__ -_ - - -- - -_- -- - - -- -_ - _. - CITY OF CARLSBAD ASSESSED VALUATIONS Fiscal Before Redevelopment After Redevelopment Year Adjustment Adjustment ~m/a3 $2,064,175,069 $2,057,172,577 iga3/a4 2,252,921,234 2,242,525,629 iga4/a5 2,548,132,552 2,534,352,353 igas/a6 2,951 , 163 , 070 2,917,119,901 iga6/87 3,517,751,761 3,458,390,377 Source: County of San Diego Property Tax Services. Tax Levies, Collections and Delinquencies Taxes are levied for each fiscal year on taxable real a1 personal property which is situated in the City as of tl preceding March 1. A supplemental roll is developed whc property changes hands which produces additional revenue. Fc assessment and collection purposes, property is classified < either "secured" or "unsecured" and is listed accordingly ( separate parts of the assessment roll. The "secured roll" that part of the assessment roll containing State-assess property and real property having a tax lien which sufficient, in the opinion of the assessor, to secure payme of the taxes. Unsecured property comprises all property n attached to land such as personal property or busine property. Boats and airplanes are examples of unsecur property. Unsecured property is assessed on the "unsecur roll. " 6 5 e e A ten percent penalty attaches to any delinquent paymenl for secured roll taxes. In addition, property on the secure( roll with icespect to which taxes are delinquent become: tax-defaulted. Such property may thereafter be redeemed b: payment of the delinquent taxes and the delinquency penalty plus a redemption penalty to the time of redemption. If taxe: are unpaid for a period of five years or more, the property i: subject to auction sale by the County Tax Collector. In the case of unsecured property taxes, a 10% penalt7 attaches to delinquent taxes on property on the unsecured roll and an additional penalty of 1.5% per month begins to accrul beginning November 1st of the fiscal year and a lien i recorded against the assessee. The taxing authority has fou ways of collecting unsecured personal property taxes: (1) civil action against the taxpayer; (2) filing a certificate i the office of the County Clerk specifying certain facts i order to obtain a judgment lien on specific property of th taxpayer; (3) filing a certificate of delinquency for record i the County Recorder's Office in order to obtain a lien o specified property of the taxpayer; and (4) seizure and sale o personal property, improvements or possessory interest belonging or assessed to the assessee. Each county levies (except for levies to support prio voter-approved indebtedness) and collects all property taxe for property falling within that county's taxing boundaries The secured tax levy and year-end delinquencies for 1982/8 through 1986/87 are shown on the following table: CITY OF CARLSBAD SECURED TAX CHARGES AND DELINQUENCIES Secured Tax Amount Delinquent % Del. Charqe June 30 June 30 1982/83 $3,824 , 695 $189,331 5.0% 1983/84 4 , 129 , 204 I58 , 975 3.9 1984/85 4 , 720,080 183,873 3.9 i985/a6 5,589 , 465 218 , 447 3.9 1986/87(1) 6,680,868 267,235 4.0 (1) Estimate. Source: County of San Diego Property Tax Services. 7 e e Budqet Process Development: of an annual budget typically begins threc months-prior to the fiscal-year under-consideration. Budgetin( is a continuing process involving the presentation of budgea estimates by all departments, review of requests by the Cit: Manager and. referral of a preliminary budget to the Cit- Council for- consideration. After the City Council review an public hearing on the proposed budget, approval of the budge for the forthcoming year is enacted by resolution of the Cit Counc i 1 . Comparative Financial Statements The following table reflects the City's general fun financial statements for the fiscal year 1985/86 actua revenuesl expenditures and fund balance, the estimated actua for 1986/87 and the 1987/88 budget: 8 0 e CITY OF CARLSBAD GENERAL FUND REVENUES, EXPENDITURES AND FUND BALANCE 1985/86 ACTUAL, 1986/87 ESTIMATED ACTUAL AND 1987/88 BUDGET Estimated Actual Actuai Budget 1985/86(1) 1986/87(2) 1987/88 REXENZJES Taxes $14,851,803 $16,152,000 $17,918,0 License and Permits 3,996,864 2,230,000 1,459,O 446 , 2 Fines and Forfeitures 288,055 388 , 381 Use of Money and Property 1,066,441 700 , 000 700,O Revenue from Current Svcs. 2,870,965 2 , 640 , 686 1,915,5 Transfers In 708,754 573,841 I, 241 , 7 Miscellaneous 1,234,824 2,333,933 2,271,8 TOTAL REVENUES $25,017,706 $25,018,841 $25,952,3 EXPENDITURES: General Government $ 4,120,270 $ 4,630,651 $ 5,416,: Public Safety 7,851,268 9,429,494 9,513,E Public Works 5 , 734 , 750 6,800 , 325 6,623,: Cultural and Recreation 3 , 539,015 4,610 , 639 4,857,C Transfers Out 3 , 727,322 -- TOTAL EXPENDITURES $24,972,625 $25,471,109 $26,41O,f REVENUES OVER (UNDER) EXPENDITURES $ 44,081 $ (452,268) $ (458,: FUND EQUITY JUNE 30 $ 910,569 $ 458,3 01 $ -0- Source: (1) Excerpted from the City of Carlsbad 1985/86 Auditc Financial Report. (2) City of Carlsbad. 9 *" w e * Financial and Accountinq Information The accounts of the city - are organized cn the basis of funds and account groups, each of which is considered i separate accounting entity. The operations of each fund arc accounted for with a separate set of self-balancing account: that comprise its assets, liabilities, fund equity, revenues and expenditures, or expenses, as appropriate. Governmeni resources are allocated to and accounted for in individua funds based upon the purposes for which they are to be spen- and the means by which spending activities are controlled. Th! various funds are grouped into eight generic fund types an( three broad fund categories as follows: Government Funds: General Fund - The general fund is the genera operating fund of the City. It is used to account fo all financial resources except those required to S accounted for in another fur,d. Special Revenue Funds - Special revenue funds are use to account for the proceeds of specific revenu sources (other than special assessinents, expendabl trusts, or major capital projects) that are legall restricted to expenditures for specified purposes. Debt Service Funds - Debt service funds are used t account for the accumulation of resources for, and tl- payment of, the principal of and interest on generz long-term debt, and related costs. Capital Projects Fund - Capital projects funds ai used to account for financiai resources to be used fc the acquisition or construction of major capit; facilities (other than those financed by proprietal funds, special assessment funds, and trust funds). Special Assessment Funds - Special assessment fun1 are used .to account for the financing of pub1 improvements or services deemed to benefit t: properties against which special assessments a levied. Proprietary Funds: Enterprise Funds - Enterprise funds are used account for operations (a> that are financed a operated in a manner similar to private enterpris where the intent of the governing body is that t 10 c, ?I a I costs (expenses, including depreciation) of provir goods or services to the general public on continuing basis be financed or recovered primari: through user charges; or (b) where the governing bo( has decided that periodic determination of revenuc earned, expenses incurred, and/or net income : appropriate for capital maintenance, public polic! management control, accountability, or other purposes Internal Service Funds - Internal service funds ai used to accounr: for the financing of goods or servicc provided by one department or agency to othc departments or agencies of the City, or to othc governments, on a cost-reimbursement basis. Fiduciary Funds: Trust and Aqency Funds - Trust and agency funds a used to account for assets held by tn City in trustee capacity or as an agent for individual private organizations, other governments and/or othl funds. For the year ended June 30, 1985, the City w holding only agency funds due, for the most Fart, other funds and other agencies. Agency funds a custodial in nacure (assets equal liabilities) and I not involve measurement of results of operations. All government funds are accounted for using che modifi accrued basis of accounting. Their revenues are recogniz when they become measurable and available as net curre assets. Taxpayer-assessed income, gross receipts, and 0th taxes are considered "measurable" when in the hands intermediary collecting governments and are recognized revenue at that time. Anticipated refunds of such taxes a recorded as liabilities and reductions of revenue when they a measurable and their validity seems certain. Expenditures are generally recognized under the modif i accrual basis of accounting when the related fund liability incurred, Exceptions to this general rule includ (1) accumulated unpaid vacation, sick pay, and other employ amounts which are not accrued; and (2) principal and intere on general long-term debt which is recognized when due. All proprietary funds are accounted for using the accru basis of accounting. Their revenues are recognized when th are earned, and their expenses are recognized when they a incurred . 11 x w 0 City Debt Structure Short-Term :-Other :than the Or-iginal Note, the City has nc outstanding: shtrrt--t:ermc-indebtedness, nor - had the City prior t the Original Note -incurred any short-term indebtedness. Lonq-Term - The City has never defaulted on the payment c principal or interest on any of its indebtedness. [The Cit currently has not outstanding long-term indebtedness. I __ - __ -. -. - .. . __ - - - Lease Obliqations - [To Come1 Direct and Overlappinq Debt Contained within the City are numerous overlapping loc; agencies providing public services. These local agencies hay outstanding bonds issued in the form of general obligatior lease revenue and special assessment bonds. The direct ar overlapping debt of the City is shown on the following Page: 12 v e CITY OF CARLSBAD STATEMENT OF DIRECT AND OVERLAPPING DEBT [TO COME1 13 7 0 GENERAL CITY INFORMATION ._ Introduction 1 -- The City was incorporated July 16, 1952. It is a genera law city with a council/manager form of government. The Cit- encompasses 35.6 square miles and is located in approximate1 35 miles north of the City of San Diego. CITY OF CARLSBAD COUNTY OF SAN DIEGO POPULATION ESTIKATES Year City County 1970 14,944 1,357,854 1975 19,200 1 , 560 , 700 1980 35,490 1,861,846 1981 35 , 600 1,895,200 1983 39 , 200 1,988 , 600 1984 40,650 2,041,400 1986 48,850 2,165,500 1987 55,300 2,240,700 1982 37,650 1,944,000 1985 44 , 950 2,102,500 Sources: 1970 and 1980: U.S. Census. 1975, 1981-1987: State of California Departnent c Finance. Labor Relations The City has 429 full-time permanent employees and fiT representation units, as follows: CITY OF CARLSBAD LABOR RELATIONS No. of Contract Expiratic Representati-on Unit Emp 1 oyees Date Carlsbad Police Officers' Carlsbad Fireman's Assoc. 52 Carlsbad City Employees' Assoc. 228 Carlsbad Police Management 7 City Xanagement 69 Assoc. 73 June 15, 1988 Source: City of Carlsbad. 14 v 4 Retirement Proqr ams All permanent employees of the city are covered under tl Public Employees' Retirement System (PERS) of the State, defined benefit plan. Pension costs are funded by month contributions from the City and covered employee Contributions by the City during 1986/87 are estimated to : $2,628,353 and are expected to be $2,608,545 for 1987/8 Contribution rates are determined by PERS and are calculated include unfunded prior service costs amortized through the ye 2000. The Public Employees Retirement System actuary estimat the plan's unfunded liability as of June 30, 1987 to be $16,60 The City contributes to FICA only for Medicare benefits f employees hired after April 1, 1986. The amount for 1986/87 estimated to be $19,954 and $39,508 is expected to contributed in 1987/88. ECONOMIC PROFILZ General Description The California Employment Development Department forecas that San Diego County's economy will experience growth duri 1987 and 1988. Unemployment is expected to continue i downward trend in 1987. Employment As of 1, 1987 the civilian labor force for t City was , of which were employed. T 1, 1986 ra [decreased] to percent from the of - percent. unadjusted unemployment rate as of 1, 19 15 w e Larqest Employers Car lsbad : The foflowing table sets forth the largest employers i CITY OF CARLSBAD SCHEDULE OF PRINCIPAL EMPLOYERS - 1986-87 Number of - Firm Product/Service Employees Manufacturing: Hughes Aircraft Company Electronic Components 1,500 Beckman Instruments Xicrobics Operation 340 Watkins Planufacturing Corp. Portable Spas 185 Sierracin-Nangnedyne, Inc. Electronic Xotors 162 Sargent Industries Industrial Seals 150 Non-Nanufacturing Tri-City Medical Center District Hospital 1,450 Eaton-Leonard Corporation Vending Nachines 275 Dyndled Incorporated Pledical Products 180 Plaza Camino Real Shopping Center 1,000 La Costa Hotel and Spa Hotel/Health Spa 1,000 City of Carlsbad Government 435 Pea Soup Andersen's Restaurant/Hotel 200 Daniel's Cablevision Cable TV 90 Car Country Carlsbad Car Dealership 500 (est.) Carlsbad Unified School District Education 4 25 San Diego Gas b Electric Electricity and Gas 414 Source: City of Carlsbad Chamber of Commerce. 16 e w The following table presents the annual average wage an salary figures by industry classification for San Dieqo Count for the years 1982 through 1986. SAN DIEGO COUNTY WAGE AND SALARY BY INDUSTRY ANNUAL AVERAGES (In Thousands) 1982 1983 1984 1985 1986 Agriculture 13.9 13.6 12.3 11.9 11.6 Mining 0.6 0.5 0.6 0.8 0.8 Construction 29.0 31.6 41.4 47.5 52.0 Manufacturing 108.4 106.9 116.0 121.6 122.0 Transportation, Public Utilities 29.7 29.8 30.5 31.6 32.1 Wholesale Trade 27.5 28.3 31.0 33.6 34.8 Retail Trade 126.7 131.6 142.4 153.3 162.7 Finance, Insurance, Real Estate 42.6 45.8 48.5 52.0 56.2 Services 158.6 163.5 181.3 197.9 211.1 Government 139.6 139.5 141.8 145.7 150.0 TOTAL 676.4 691.0 705.8 795.7 833.4 (1) Totals may not add due to independent rounding. Source: State Department of Employment Development. The following table presents annual labor force an employment data for San Dieqo County, the State of Californi and the United States for the years 1980 through 1986. A shown in the table, unemployment rates in San Dieqo County hav been lower than those in California and the nation as a whole. 17 e 0 COUNTY OF SAN DIEGO - -- - -1 Labor Force, Employment and Unemployment Yearly Average for Years 1980 through 1986 Ci vi 1 i an Year and Area Labor Force Employment Unempl oyment Rate 1980 San Diego County ........ 774,500 723,300 52,700 6.8% California .............. 11,581,000 10,791,100 789,900 6.8 United States ........... 106,940,000 99,303,000 7,637,000 7.1 San Diego County ........ 797,300 740,500 55,000 6.9 California .............. 11,799,900 10,907,800 872, i 00 7.r United States ........... 108,670,000 100,397,000 a, 273,000 7.6 San Diego County ........ 834, ooo 756,800 77,200 9.3 California .............. 12,189,000 10,978,000 1,211,000 9.9 United States ........... 110,204,000 99,526,000 10,678,000 9.7 San Diego County ........ 877,100 ~05,100 72,000 8.2 .............. 9.7 California 12,281,000 11,095,000 1,187,000 United States ........... 111,551,000 100,834,000 10,717,000 9 . 5 San Diego County ........ 915,300 860,800 54,500 6.0 1981 1982 1983 1984 California .............. 12,619,000 11,638,000 981,000 7.8 United States ........... 113,544,000 105,005,000 a, 539, ooo 7.5 San Diego County ........ 967,200 915,900 51,300 5.3 Cal i fornia .............. 12,937,000 12,007,000 931,000 7.2 United States ........... 115,462,000 107,150,000 8,312,000 7.1 San Diego County ........ 1,017,600 966,900 50,700 5.0 California .............. 13,365,000 12,473,000 892, ooo 6.7 United States ........... 117,834,000 109,597,000 8,237,000 7.0 1985 1986 Source: California Employment Development Department. 18 0 0 Commercial Activity Taxable sales in the City have increased at an annual ratc five-year history of taxable sales is shown in the followinc table: of 13% during the five-year period 1981 through 1985. 1 CITY OF CARLSBAD TAXABLE TRANSACTIONS (in Thousands of Dollars) Retail Stores Total All Outlets No. of Taxable No. of Taxable Year Permits Transactions Permits Transactions 1980 432 $263,362 1,075 $289,909 1981 427 308,632 1 , 123 337 , 472 1982 422 327 , 179 1 ,121 359 , 774 1983 436 369,888 1,169 407,933 1984 468 439 , 885 1,304 482,963 1985 470 483,798 1,417 542 , 677 1986( 1) 522 368,894 1,612 422 , 027 Source: California State Board of Equalization. (1) As of third quarter. 19 0 0 Construction Activity The-following table shows construction. activity in the City for the past five years. CITY OF CARLSBAD BUILDING PERMIT VALUATION (In Thousands of Dollars) Residential 1982 p8J 1984 1985 198t New single housing $17,596 $ 63,870 $ 86,482 $122,340 $185,43: New multi-dwelling 15,245 36,767 44,152 77,129 96,80 Additions, alterations 2,183 2,231 2,670 3,261 3,80' Total Residential $35,024 $102,868 $133,304 $202,730 $286,04' Non-Residential New commercial $10,760 $ 5,921 $ 22,243 $ 31,921 $ 33,932 Other 1,128 2,794 6,522 17,072 5,44d Additions, alterations 4,311 7,736 7,140 18,994 12,281 Total non-residential $22,957 $ 24,858 $ 37,386 $ 68,732 $ S4,i6 To tal Valuation $57,981 $127,726 $170,690 $271,462 $340,21 Number of new New industrlal 6,758 8,407 1,481 745 2,so dwelling units Single dwelling 161 782 933 1,267 1,77 Multi-dwelling 25 1 817 90 7 1,528 1,33 Total Units 412 1,599 1,840 2,795 3,11 Source: Security Pacific Bank, California Construction Trends. Transport at ion Excellent land, sea and air transportation facilities SerT the City. Major road service is provided by Interstate (north/south) and State Highway 78 (east/west). Mainline service of AMTRAK and the Santa Fe Railway : available to the City. More than 100 trucking ar movinq/storage firms serve North San Dieqo County, wil overnight delivery service to Arizona, Los Anqeles, San Diegc 20 0 0 San Francisco and intermediate points. Local bus service i provided by North County Transit District; interurban an regional bus service is provided by Greyhound and Trailways. McClellan-Palomar Airport is located in the City and ca accommodate private and light commercial aircraft. Oceansid Municipal Airport is located 8 miles north in Oceanside California. Lindbergh Field (San Diego International Airport is 30 miles south, and John Wayne Airport in Irvine, Californi is 45 miles to the north. Deepwater general cargo and bulk service is provided by th Port of San Diego, located 37 miles to the south. Education Community Facilities and Recreation TAX EXEMPTION In the opinion of Jones Hall Hill EC White, A Profession? Law Corporation, San Francisco, California, Bond Counsel subject, however, to the qualifications set forth below, undc existing law, interest on the Notes is excluded from qros income for federal income tax purposes and such interest is nc an item of tax preference for purposes of the federc alternative minimum tax imposed on individuals ar corporations, provided, however, that, for the purpose c computing the alternative minimum tax imposed on suc corporations (as defined for federal income tax purposes), suc interest is taken into account in determining adjusted net boc income (adjusted current earnings for taxable years beginnir after December 31, 1989). 21 0 * 9, The opinions set forth in the preceding sentences ar subject to the condition that the City comply with a1 requirements of the Internal Revenue Code of 1986 (the "Code" that must be satisfied subsequent to the delivery of the Note in ordkr-that: such- interest be, or continue- to be, exclude from -gross- income for federal income tax purposes. The Cit has covenanted to comply with each such requirement. Failur to comply with certain of such requirements may cause th inclusion of such interest in gross income for federal incom tax purposes to be retroactive to the date of delivery of th Notes. Bond Counsel expresses no opinion regarding othe federal tax consequences arising with respect to the Notes. Prospective purchasers of the Notes should be aware tha (i) section 265 of the Code denies a deduction for interest o indebtedness incurred or continued to purchase or carry th Notes or, in the case of a financial institution, that portio of the Noteholders' interest expense allocated to interes (ii) with respect to insurance companies subject to the ta imposed by section 831 of the Code, for taxable years beginnin after December 31, 1986, section 832(b)(5)(B)(i) reduces th deduction for loss reserves by 15 percent of the sun of certai items, including interest on the Notes, (iii) for taxable year beginning after December 31, 1986 and before January 1, 1992 interest on the Notes earned by some corporations could b subject to the environmental tax imposed by section 59.4 of th Code, (iv) for taxable years beginning after December 31, 1986 interest on the Notes earned by certain foreign corporation doing business in the United States could be subject to branch profits tax imposed by section 884 of the Code, an (v) passive investment income, including interest on the Notes may be subject to federal income taxation under section 1375 o the Code for subchapter S corporations that have subchapter earnings and profits at the close of the taxable Year i greater than 25% of the gross receipts of such subchapter corporation is passive investment income and (vi) section 86 o the Code requires recipients of certain Social Security an certain Railroad Retirement benefits to take into account, i determining gross income, receipts or accruals of interest o the Notes. In the further opinion of Bond Counsel, such interest i exempt from California personal income taxes. LEGAL MATTERS Jones Hill Hall & White, a Professional Law Corporation San Francisco, California, Bond Counsel, will render an opinio as to the validity of the Notes. Certain legal matters will b 22 ., e e passed on for the Underwriter by Brown & Wood, San Francisco California. LEGALITY FOR INVESTMENT IN CALIFORNIA Under the provisions of the California Financial Code, th Notes are legal investments for commercial banks in the State. LITIGATION No litigation is pending or threatened against the Cit concerning the validity of the Notes. The City is not aware o any litigation pending or threatened questioning its politica existence or contesting its ability to levy and collect a valorem taxes or to collect or receive other Pledged Revenue or contesting the City's ability to issue the Notes or it ability to pay the principal of and interest on the Notes o impeding the City's abilicy to issue general obligation bond or Certificates of Participation to retire the Notes. RATING Moody's Investors Service has assigned a rating of ___ t the Notes. Certain information was supplied by the City t said rating agency to be considered in evaluating the Notes The rating issued reflects only the views of such ratinc agency, and any explanation of the significance of such ratinc should be obtained from the rating agency. There is nc assurance that the rating will be retained for any given perior of time or that the same will not be revised downward o withdrawn entirely by such rating agency if, in its judgment circumstances so warrant. The City undertakes nl responsibility either to bring to the attention of the holder of the Notes any downward revision or withdrawal of any ratinc obtained or to oppose any such revision or withdrawal. An such downward revision or withdrawal of the rating obtained ma: have an adverse effect on the market price of the Notes. UNDERWRITING The Notes are being purchased by Rauscher Pierce Refsnes Inc. (the "Underwriter" ) . The Underwriter has agreed tc purchase the Notes pursuant to a contract of purchase by an( among the City and the Underwriter (the "Contract of Purchase" at the purchase price of $6,545,000. 23 -, 0 e The Contract of Purchase provides that the Underwriter will purchase all of the Notes if any are purchased. The obligatior to make such purchase is subject to certain terms anc conditions set forth in the Contract of Purchase. Thc Underwriter mayIoffer and sell- the Notes to .certain dealers anc others at prices lower than the public offering price stated or the cover page hereof. The offering price may be changed fron time to time by the Underwriter. ADDITIONAL INFORMATION The purpose of this Official Statement is to suppl! information to purchasers of the Notes. Quotations from anc summaries and explanations of the Notes, the resolutio1 authorizing the Notes and the statutes and documents containec herein do not purport to be complete, and reference is hereb; made to said resolution, statutes and documents for full anc complete statements of their provisions. All data contained herein have been taken or constructec from the City's records and other sources. The appropriatt City official, acting in such person's official capacity, ha: reviewed this Official Statement and has determined that as 0: the date hereof the information contained herein is, to tht best of such official's knowledge and belief, true and correci in all material respects and does not contain an untru( statement of a material fact or omit to state a naterial fac- necessary in order to make the statements made, in light of thc circumstances under which they were made, not misleading. Thc appropriate City official will execute a certificate to thi; effect upon delivery of the Notes. This Official Statement ani its distribution have been duly authorized and approved by thl City Council. CITY OF CARLSBAD, CALIFORNIA By: Acting City Manager DATED: June -, 1987 24 -1 ' 0 0 CITY OF CARLSBAD, CALIFORNIA $6,570,000 1987 Notes CONTRACT OF PURCHASE June -, 1987 Director of Finance City of Carlsbad 1200 Elm Avenue Carlsbad, California 92008 into this agreement with the City of Carlsbad, California (the "City") which, upon the City's acceptance hereof, will be binding upon the City and upon the Underwriter. This offer is made subject to the written acceptance of this Contract of Purchase by the City and the delivery of such acceptance to the Underwriter at or prior to 4:OO o'clock P.M. California time, on the date hereof. The undersigned (the "Underwriter") offers to enter 1. Upon the terms and conditions and upon the basis of the representations and warranties hereinafter set forth, the Underwriter hereby purchases from the City for reoffering to the public, and the City hereby sells to the Underwriter for such purpose, all (but not less than all) of $6,570,000 (or such lesser amount as shall actually be issued in accordance with the provisions of the resolution as hereinafter defined), principal amount of City of Carlsbad 1987 Temporary Notes dated July 16, 1987 and due June 30, 1988 (the "Notes") bearing per centum ( %) interest at the rate of per annum, at a purchase price of $6,545,000, plus accrued interest, if any, from July 16, 1987, to the date of the Closing.(as hereinafter defined).'. 2. The Notes shall be as described in the Resolution adopted by the City Council of the City on June 23, 1987, authorizing the issuance of the Notes (the "Resolution"), and shall be issued under the provisions of the Constitution and laws of the State of California (the "State"). At the time of or before the City's acceptance hereof, the City shall deliver to the Underwriter an Official Statement of the City, dated , 1987, relating to the Notes (which, together with all appendices thereto and with such changes therein and supplements thereto which are consented to 3. 1 NUMATTER/ 12 5 e 0 in writing by the Underwriter, is herein called the "Official Statement"), in a form satisfactory to the Underwriter and duly executed by the City. reproduction of the Official Statement in connection with the offering and sale of the Notes by the Underwriter. The City also has approved of the use and reproduction by the Underwriter prior to the date of the Official Statement of a Preliminary Official Statement of the City relating to the Notes (which, together with all appendices thereto, is herein called the "Preliminary Official Statement") in connection with the offering of the Notes. offering of all the Notes at the initial public offering price as set forth on the cover page of the Official Statement. Subsequent to such initial public offering, the Underwriter reserves the right to change the public offering price as may deem necessary in connection with the marketing of the Notes. The City has authorized the use and 4. The Underwriter agrees to make a bona fide public it 5. At 1O:OO o'clock A.M., California time, on July 16, 1987, or at such other time or on such later business day as shall have been mutually agreed upon by the City and the Underwriter (the "Closing"), the City will deliver to the Underwriter at the offices of Jones Hall Hill & White, Four Embarcadero Center, San Francisco, California, or at such other place as the City and the Underwriter may mutually agree upon, the Notes in definitive form duly executed, together with the other documents hereinafter mentioned; and the Underwriter will accept such delivery and pay the purchase price as set forth in paragraph 1 hereof by check or wire in "Federal Reserve Funds" (same day funds) to the order of the City. The Notes will be made available in San Francisco, California for checking and packaging and will be delivered to the Underwriter in escrow at least one business day prior to the Closing. that: . 6. The City represents and warrants to the Underwriter The City is validly existing under the laws of the State, including the State Constitution, with the right and power to sell the Notes as of the date hereof and to hereafter issue the Notes and to execute, deliver and perform its obligations under this Contract of Purchase and the Resolution. (A) (B) (i) At or prior to the Closing, the City will have taken all action required to be taken by it to authorize the issuance and delivery of the Notes and the performance of its obligations under the Resolution, (ii) 2 NUMATTER/125 0 0 the City has, and at the date of the Closing will continue to have, full legal right, power and authority to enter into this Contract of Purchase and, at the date of the Closing, w~ll-haue-full-lega1 right, power and authority to - -issue-and deliver the Notes to the Underwriter and to perform its obligations as provided in the Resolution and this Contract of Purchase; at or prior to the Closing, the execution. and-delivery of, and the performance by the City of its obligations contained in this Contract of Purchase shall have been duly authorized; (iii) this Contract of Purchase has been duly executed and delivered and constitutes a valid and legally binding obligation of the City; and (iv) the City has duly authorized the consummation by it of all transactions contemplated by this Contract of Purchase. (C) The Notes shall be secured as to the payment of principal and interest from the revenues and in the manner as described in the Resolution and the Official Statement. All of the Notes shall be general obligations of the City, and, to the extent not paid from the sale of general obligation bonds or certificates of participation, they shall be paid from any other moneys of the City lawfully available therefor as described in the Resolutions. (D) The City reasonably anticipates that the City will issue bonds or certificates of particiation the proceeds of which will be in an amount and be available to pay principal of and interest on the Notes on the date indicated. in the Resolution, or, in the alternative, that the revenues anticipated to be received or accrued in the City's 1987-88 fiscal year, pledged to the payment of the Notes, will be received in cash in the amounts and by the date of payment of the principal of and interest on the Notes indicated in the Resolution. As of the Closing, the City will have taken all action to be taken by the City by such date required by law, regulation or administrative order or directive, or in the.City's judgment necessary and feasible, in order for the City to qualify for and to receive in cash such anticipated revenues in such amounts and by such dates, and the City will use its best efforts to cause such revenues to be received in cash at the times indicated. The City agrees that it will not issue any additional notes for the City payable out of the revenues available to pay the Notes. (E) There are no present conditions or determinations of which the City is aware which will prevent the issuance of bonds or certificates of participation by the City the proceeds of which will be in an amount and available to pay 3 NUMATTER/ 12 5 0 0 the principal of and interest on the Notes, or, which will prevent the receipt of and application by the City or the City of the revenues available to pay the Notes. (F) The issuance of the Notes, the execution, delivery and performance of this Contract of Purchase, the performance of the City's obligations under the Resolution and compliance with the provisions hereof and thereof by the City, do not and will not conflict with or constitute on the part of the City a breach of, or a default under, any existing law, ordinance, regulation, decree, order or resolution, or (to the best knowledge of the City, after due investigation) any agreement, indenture, mortgage, lease or other instrument, to which the City is subject or by which it is bound. (G) All authorizations, consents or approvals of, or filings or registrations, if any, with any Governmental Authority or court necessary for the valid issuance by the City of, and performance by the City of its obligations under, the Notes will have been duly obtained'or made prior to the issuance of the Notes (and disclosed to the Underwriter). As used herein, the term "Governmental Authority" refers to any legislative body or governmental official, department, commission, board, bureau, agency, instrumentality, body or public benefit corporation. Closing, no action, suit, proceeding or investigation is pending or (to the best knowledge of the City) threatened against the City or (to the best knowledge of the City, no independent investigation having been made) any other person in any court or before any Governmental Authority seeking to restrain or enjoin the issuance or delivery of any of the Notes or in any way contesting or affecting the validity of the Resolution, the Notes, this Contract of Purchase, or the receipt or application of the revenues pledged to pay the Notes or the payment of principal of and interest on the Notes, or contesting the powers of the City to issue the Notes. (H) As of the time of acceptance hereof and as of the (I) Any certificate signed by any official or other representative of the City and delivered to the Underwriter pursuant to this Contract of Purchase shall be deemed a representation and warranty by the City to the Underwriter as to the statements therein made. (J) A copy of the Resolution has been delivered to the Underwriter and such Resolution will not be amended without the consent of the Underwriter which consent will not be unreasonably withheld. 4 NUMATTER/ 12 5 e 0 7.- Theunderwriter has entered into this Contract of Purchase in reliance upon the representations and warranties of the City contained herein, the Resolution, and the performance by the City of its obligations hereunder, as of the date hereof and as of the date of the Closing, obligations under this Contract of Purchase are and shall be subject to the following further conditions as of the Closing: contained herein shall not be materially inaccurate at the date hereof and at and as of the Closing, as if made at and as of the Closing, and the statements made in all certificates and other documents delivered to the Underwriter at the Closing pursuant hereto shall not be materially inaccurate at the Closing; and the City shall be in compliance with each of the agreements made by it in this Contract of Purchase (unless such agreements are waived by the Underwriter). (B) At the time of the Closing this Contract of Purchase shall be in full force and effect; the Resolution and this Contract of Purchase shall not have been amended, modified or supplemented except as may have been agreed to in writing by the Underwriter; all actions which, in the opinion of Jones Hall Hill & White, a Professional Corporation (Bond Counsel) and in the opinion of Brown & Wood (Underwriter's Counsel), shall be necessary in connection with the transactions contemplated hereby shall have been duly taken and shall be in full force and effect; and the City shall perform or have performed all of its obligations required under or specified in the Resolution or this Contract of Purchase to be performed at or prior to the Closing. (C) The provisions of law governing the issuance of bonds or certificates of participation by the City, or, in the.alternative, the payment of the revenues pledged to pay the Notes shall be in full force and effect and shall not have been amended in any respect that would materially adversely affect the prospects that such revenues will be received in-the amounts and by the date of payment of the principal of and interest on the Notes as indicated in the Resolution and the Official Statement. decision, ruling or finding shall have been entered by any court or Governmental Authority since the date of this Contract of Purchase (and not reversed on appeal or The Underwriter's (A) The representations and warranties of the City (D) Except as disclosed in the Official Statement, EO 5 NUMATTER/ 12 5 e 0 otherwise set aside) (i) which has any of the effects described in Section 6(H), or (ii) which declares this Contract of Purchase to be invalid or unenforceable in whole or in material part. Underwriter to effect a successful public offering of the Notes, and in view of the potential adverse impact of any of the following events on a public offering, the underwriter shall have the right to cancel its obligations to acquire the Notes, by written notice from the Underwriter to the City, if between the date hereof and the Closing: (i) the Official Statement shall have been amended, modified or supplemented without the consent in writing of the Underwriter, unless such consent was unreasonably withheld or (ii) any event shall occur which, in the reasonable professional judgment of the Underwriter, makes untrue any statement of a material fact set forth in the Official Statement or results in an omission to state a material fact necessary to make the statements therein, in the light of the circumstances under which they are made, not misleading; or (iii) the market for the Notes or the ability of the Underwriter to enforce contracts for the sale of the Notes shall have been materially and adversely affected, in the reasonable professional judgment of the Underwriter, by (a) legislation enacted by the Congress of the United States, or passed by either House of the Congress, or recommended to the Congress for passage by the President of the United States, or favorably reported for passage to either House of the Congress by a committee of such House to which such legislation has been referred for consideration, or a decision rendered by a court of the United States or by the United States Tax Court, or a ruling, order, official statement, or regulation (final, temporary or proposed) made by the Treasury Department of the United States or the Internal Revenue Service, with respect to Federal taxation upon interest received on obligations of thh general character of the Notes or which would have the effect of changing, directly or indirectly, the Federal income tax consequences of interest on obligations of the general character of the Notes in the hands of the holders thereof, or (b) any new outbreak of hostilities or other national or international calamity or crisis or an event of fiscal default by a city, municipality, City or authority located in the State, the effect of such outbreak, calamity, crisis or default being such as would cause a major disruption in the municipal bond market, or (c) a general suspension of trading on the New York Stock Exchange, or fixing of minimum or maximum prices for trading or maximum ranges for prices for (E) In recognition of the desire of the City and the 6 NUMATTER/ 12 5 e 0 securities on the New York Stock Exchange, whether by virtue of a determination by that Exchange or by order of the-Securities and Exchange Commission or any other governmental authority having jurisdiction, or (d) a general banking moratorium declared by either Federal or State authorities having jurisdiction, or (e) any action, suit, proceeding or investigation described in Section 6(H) hereof or any decision-described in Section 7(D) hereof, or (f) any default by the City or the City which would affect the ability of the City to meet its obligations under the Resolution, or of the City to meet its obligations under the resolution of the Board of Trustees of the City authorizing the issuance of the Notes (the "City Resolution"), (F) At or prior to the Closing, the Underwriter shall receive the following documents each dated on and as of the date of the Closing: (1) Approving opinion of Bond Counsel, as to the validity and tax-exempt status of the Notes, substantially in the form attached hereto as Exhibit A (2) A certificate of the City, executed on its beha.lf by its City Manager, substantially in the form attached hereto as Exhibit B. (3) An opinion of the City Attorney, (4) An arbitrage certificate, satisfactory in (5) Customary Signature and No Litigation substantially in the form attached hereto as Exhibit C form and substance to Bond Counsel. Certificates executed by applicable officers of the City. (6) Evidence that any rating on the Notes heretofore obtained has not been changed or withdrawn. (7) Such additional legal opinions, certificates, proceedings, instruments and other documents as the Underwriter, Underwriter's Counsel or Bond Counsel may reasonably request to evidence compliance by the City with legal requirements, the accuracy, as of the time of Closing, of the City's representations herein contained and the due performance or satisfaction by the City at or prior to such time of all agreements then to be performed and all conditions then to be satisfied by the City. 7 "MATTER/ 12 5 e 0 If the City shall be unable to satisfy the conditions to the Underwriter's obligations contained in this Contract of Purchase or if the Underwriter's obligations shall be terminated for any reason permitted by this Contract of Purchase, this Contract of Purchase shall terminate and neither the City nor the Underwriter shall not have any further obligation hereunder, except that the obligations of the Underwriter and the City, to pay certain expenses as provided in Section 9 herein shall continue in full force and effect. 8. The performance by the City of its obligations is conditioned upon (i) the performance by the Underwriter of its obligations hereunder; and (ii) receipt by the City and the Underwriter of opinions and certificates required to be delivered at the Closing. 9. (a) Whether or not the Notes are issued as contemplated by this Contract of Purchase, the Underwriter shall not be under any obligation to pay, and the City shall pay, all expenses incident to the performance of the City's obligations, including, but not limited to (i) the fees and disbursements of the accountants, financial advisers and any other experts, consultants or advisers to the City and retained on such basis by the City; (ii) the fees and disbursements of Bond Counsel; (iii) the fees of the Paying Agent and any rating agencies rating the Notes; (iv) fees and disbursements of underwriter's counsel retained by it; (v) the cost of preparation and reproduction of this Contract of Purchase, the preliminary Official Statement and the final Official Statement, and the cost of printing the Notes; and (vi) any other expenses and costs of the City incident to the performance of their obligations in connection with the authorization, issuance and sale of the Notes to the Underwriter. 10. Any notice or other communication to be given to the City under this Contract of Purchase may be given by delivering the same in writing to the City Finance Director, or to such other person as he may designate in writing, and any notice or other communication to be given to the Underwriter under this Contract of Purchase (other than the acceptance hereof as specified in the first paragraph hereof) may be given by delivering the same in writing to Rauscher Pierce Refsnes, Inc., One California Street, San Francisco, California 94111, Attention: Virginia Hosler. writing as heretofore specified shall constitute the entire agreement between the City and the Underwriter and is made 11. This Contract of Purchase when accepted by the City in 8 NUMATTER/ 12 5 - e 0 i- solely for the benefit of the City and the Underwriter (including th\e successors or assigns of the Underwriter). other person shall acquire or have any right hereunder or by virtue hereof. This Contract of Purchase may be executed simultaneously in several counterparts each of which shall be an original and all of which shall constitute but one and the same instrument. No 12. 13. This Contract shall be construed and enforceable in accordance with the laws of the State of California. Very truly yours, RAUSCHER PIERCE REFSNES, INC. BY Accepted: CITY OF CARLSBAD BY 9 NUMATTER/ 12 5 e e - EXHIBIT B to the Contract of Purchase CERTIFICATE OF THE ACTING CITY MANAGER OF THE CITY OF CARLSBAD I, Ray Patchett, Acting City Manager of the City of Carlsbad, California (the "City"), hereby certify on behalf of the City as follows: responsibility for the management of the City. Contract of Purchase between the City and Rauscher Pierce Refsnes, Inc., the Underwriter, for Notes of the City, dated , 1987 (the "Contract of Purchase"), are true and correct on and as of the date hereof as if made on and as of the date hereof, and the City has complied with and performed all of its covenants and agreements in the Contract of Purchase. 1. I am the official of the City having overall 2. The representations and warranties of the City in the 3. Each of the conditions in Section 7 of the Contract of Purchase to be satisfied by the City has been satisfied by the City on the date hereof and the City is not aware of any other condition of the Contract of Purchase that has not been satisfied on the date hereof. 4, The Notes being delivered on the date hereof to the Underwriter under the Contract of Purchase and the sources of payment thereof conform to the descriptions thereof contained in the City's Resolution, as defined in the Contract of Purchase. 5. . There has be&n no rnateri'al adverse change in the financial condition or results of operations of the City from the date of the Contract of Purchase to the date hereof. IN WITNESS WHEREOF, I have hereunto set my hand this 16th day of July, 1987. CITY OF CARLSBAD By: Acting City Manager NUMATTER/ 12 5 .I 0 0 r EXHIBIT C to the Contract of Purchase (Letterhead of City Attorney) July 16, 1987 City Council City of Carlsbad Carlsbad, California Rauscher Pierce Refsnes, Inc. One California Street San Francisco, California 94111 $5,670,000 1987 NOTES CITY OF CARLSBAD, CALIFORNIA ' Dear Ladies and Gentlemen: Reference is made to a Contract of Purchase dated , 1987 ("Contract of Purchase"), between the City of Carlsbad, California (the "City") and Rauscher Pierce Refsnes, Inc., for Temporary Notes (the "Notes") of the City of Carlsbad, in connection with which you have requested my opinion as to the matters set forth below. A11 terms used herein have the definitions set forth in the Contract of Purchase. I have examined such portions of the Constitution of the United States of America, the Constitution and Statutes of the State of California (the "State") and such applicable court decisions as I deemed necessary or relevant for purposes of the opinions set forth below, and made such further inquiries and investigations as I deemed necessary or appropriate for purposes of such opinions. Based on the foregoing, I advise you that in my opinion: 1. The City is a political subdivision duly organized, validly existing, and in good standing under the Constitution and the laws of the State of California. 2. The Resolution was duly adopted at meetings of the governing body of the City which were called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout. NUMATTER/ 12 5 I I. e e r 3. There is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body, pending or, to the best of my knowledge, threatened against or affecting the City, which would adversely impact the City's ability to complete the transactions described in and contemplated by the Contract of Purchase, or in any way contesting or affecting the validity of the Contract of Purchase, Resolution or Notes or the transactions described Fn and contemplated by the Contract of Purchase wherein an unfavorable decision, ruling or finding would adversely affect the validity and enforceability of the Contract of Purchase, Resolution or Notes or in which a final adverse decision could materially affect the operations of the City. Purchase, and compliance with the provisions thereof, and the execution, authentication, issuance and delivery of che Notes under the circumstances contemplated thereby, do not and will not in any material respect conflict with or constitute on the part of the City a breach of or default under any agreement,,or other instrument to which the City is a party or by which it is bound or any existing law, regulation, court order or consent decree to which the City is subject. 5. The Contract of Purchase has been duly authorized, executed and delivered by the City, and, assuming due authorization, execution and delivery by the other parties thereto, as applicable, shall constitute a legal, valid and binding agreement of the City enforceable in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights generally. As stated in the Official Statement, the Notes are general obligations of the City payable from subsequent borrowings or from taxes, income, revenues, cash receipts and other moneys of the City attributable to the fiscal year 1987/88 and legally. available theref or. 4. The execution and delivery of the Contract of 6. No authorization, approval, consent, or other order of the State of California or any other governmental authority or agency within the State of California is required for the valid authorization, execution and delivery of the Contract of Purchase, the authorization, execution, authentication and delivery of the Notes. Very truly yours, NUMATTER/ 12 5 0 0 r JUNE 23, 1987 TO : CITY COUNCIL ACTING CITY MANAGER FROM : Finance Director HOSP GROVE - SHORT TERM FINANCING Attached is the replacement resolution from Jones Hall Hill & white, Bond Counsel. Item #8 on tonight's agenda (A.B. #9060, Resolution #9132), should be pulled from the Consent Calendar for discussion. / (tw L- JrM ELLIOTT i mmt attach. m a - 13061.02 June 22, 1987 M5619 [Form of Final Opinion of Bond Counsel] July 16, 1987 City Council City of Carlsbad 1200 Elm Avenue Carlsbad, CA 92008 OPINION: $6,570,000 City of Carlsbad 1987 Notes Members of the City Council: We have acted as bond counsel in connection with the issuance by the City c Carlsbad, California (the "City") of $6,570,000 City of Carlsbad 1987 Notes, dated July 1E 1987 (the "Notes"), pursuant to Article 7.6, commencing with Section 53850, of Chapter L Part 1, Division 2, Title 5 of the California Government Code (the "Act"), and Resolutio No. of the City adopted on June 23, 1987. We have examined the law and suc certified proceedings and other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representatior of the City contained in the Resolution and in the certified proceedings and otht certifications furnished to us, without undertaking to verify such facts by independei investigation. Based upon our examination, we are of the opinion, under existing law, as follows: 1. The City is a duly created and validly existing municipal corporation with tf power to adopt the Resolution, perform the agreements on its part contained therein ar to issue the Notes. 2. The Resolution has been duly adopted by the City and constitutes a valid ar binding obligation of the City enforceable upon the City. 3. Pursuant to the Act, the Resolution creates a valid lien on funds pledged by t Resolution for the security of the Notes, subject to no prior lien granted under the Act. I m (I) ~ .v City of Carlsbad July 16, 1987 Page 2 4. The Notes have been duly authorized, executed and delivered by the City and are valid and binding general obligations of the City. 5. The interest on the Notes is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; it should be noted, however, that, for the purpose of computing the alternative minimum tax imposed on such corporations (as defined for federal income tax purposes), such interest is taken into account in determining adjusted net book income (adjusted current earnings for taxable years beginning after December 31, 1989). The opinions set forth in the preceding sentence are subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986 that must be satisfied subsequent to the issuance of the Notes in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The City has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of interest on the Notes in gross income for federal income tax purposes to be retroactive to the date of issuance of the Notes. We express no opinion regarding other federal tax consequences arising with respect to the Notes. 6. The interest on the Notes is exempt from personal income taxation imposed by the State of California. The rights of the holders of the Notes and the enforceability of the Notes and the Resolution may be subject to bankruptcy, insolvency, reorganization, moratorium anc other similar laws affecting creditors’ rights heretofore or hereafter enacted and may alsc be subject to the exercise of judicial discretion in appropriate cases. Respectfu Ily submitted, A Professional Law Corporation M55 e HW WHM skd 06122'8 7 0 13061 -02 b RESOLUTION NO. 9132 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD PROVIDING FOR THE BORROWING OF FUNDS FOR THE HOSP GROVE ACQUISITION AND THE ISSUANCE AND SALE OF 1987 NOTES THEREFOR WHEREAS, this City Council (the "Council") has heretofore taken certain actions acquire for the City of Carlsbad (the "City") and its residents, certain real proper consisting of an approximately 52 acre eucalyptus grove commonly known as "Ho: Grove" (the "Property"), to be used for the preservation of open space; and WHEREAS, in connection therewith, the Council did, on May 19, 1987, authorize tl execution of a note (the "Temporary Note") in the principal amount of $6,459,384, to t delivered to San Diego Trust and Savings Bank (the "Bank") in order to acquire tt Property on June 1, 1987; and WHEREAS, the City has acquired the Property; and WHEREAS, the Council has determined to finance the Property on a long term ba! through the issuance of general obligation bonds or certificates of participation; and WHEREAS, the Temporary Note matures on July 16, 1987; and WHEREAS, the Council has determined that there is a need to issue notes unc Sections 53850 et seq. of the Government Code of the State of California to pay the Bai the principal of and interest on the Temporary Note at maturity; and WHEREAS, the Council has determined to submit to the voters of the City proposition which, if approved by two-thirds of the voters of the City, would authorize tt issuance of general obligation bonds to finance the Property on a long term basis; and NOW, THEREFORE, the City Council of the City of Carlsbad hereby fin( determines, declares and resolves as follows: Section 7. Recitals True and Correct; Definitions. All of the recitals herein s forth are true and correct, and the Council so finds and determines. All capitalized tern used herein and not defined herein shall have the meanings attributable to such terms ( the attached Exhibit B. Section 2. lssuance and Terms of Notes. Solely for the purpose of payii principal of and interest on the Temporary Note at maturity, the City hereby determines and shall borrow the principal amount of Six Million Five Hundred Seventy Thousar Dollars ($6,570,000) by the issuance of temporary notes under Sections 53850 et seq. the Government Code of the State of California, designated "City of Carlsbad (San Die! County, California) 1987 Notes" (the "Notes"). The Notes shall be numbered from consecutively upward in order of issuance, shall be dated July 16, 1987, shall mature ( [June 30, 19881 and shall bear interest, payable at maturity and computed on a 30-di a 0 month/360-day year basis, at the rate determined in accordance with a Purchas Contract to be presented by Rauscher, Pierce, Refsnes, Inc. pursuant to Section 1 hereof. Both the principal of and interest on the Notes shall be payable, only up0 surrender thereof, in lawful money of the United States of America, at the corporat agency division of Security Pacific National Bank (the "Paying Agent") in California. Section 3. Form of Notes. The Notes shall be issued in bearer form withoi coupons in the denomination of $5,000 or any integral multiple thereof, and shall b substantially in the form and substance set forth in Exhibit A attached hereto and b reference incorporated herein, the blanks in said form to be filled in with appropriat words and figures. Section 4. Use of Proceeds. The moneys so borrowed shall be used to pay th Bank the principal of the Temporary Note at maturity. Section 5. Security. The principal amount of the Notes, together with the interel thereon, shall be payable from the proceeds of general obligation bonds or certificates ( participation issued to finance the Property on a long term basis, or, if such obligation are not issued prior to the maturity of the Notes, from taxes, revenue and otk "unrestricted moneys" (as hereinafter defined), which are held or received by the City fc the general fund of the City for fiscal year 1987-1988. The term "unrestricted moneys shall mean taxes, income, revenue, cash receipts, and other moneys intended as receipt for the general fund of the City for fiscal year 1987-1 988 and which are generally availabl for the payment of current expenses and other obligations of the City, as well as all othe funds held by the City during fiscal year 1987-1988 which may legally be used to pay th principal of and interest on the Notes. At least 30 d avs nrior to the maturitv date of th Notes, t he City shall. take one of the following actions: la) issue ae neral obliaation bonds in an amount at least eau al to princinal of an interest o n the Notes at maturitv and reserve the oroceeds t hereof for the navment of th principal of and interest o n the Notes at maturik /bl co mnlete a Certificate of Particination financing which will oroduce availabl proceeds in an amount at least eau al to D rincinal of and interest o n the Notes at maturil and reserve the nroceeds t hereof for the pavment of the principal of and interest o n th Notes at maturitv; IC) reserve an amoun t equ at to princinal of and interest o nh t e N otes. us in a Construction Fund. the Ge neral Canital Construction Fund. the Public Facilities Fee Fun and the Planned Local Drainaae Fund. combination of advances from the City's funds. includina but not limited to, t he Se We Section 6. Paying Agent. Security Pacific National Bank in Los Angele: California, is hereby appointed to act as the Paying Agent of the City for the purpose ( paying to the Noteholders upon presentation thereof, at its corporate trust department i Los Angeles, California, both the principal of and interest on the Notes at maturity and t perform such other duties and powers of the Paying Agent as are prescribed in thi Resolution. -2- a 0 Section 7. Execution of Notes. The City Treasurer of the City is here authorized to execute the Notes by the manual or facsimile signature, and the City Clerk the City is hereby authorized to countersign the same by the manual or facsimile signatu and to affix the seal of the City thereto by facsimile impression thereof, and said office are hereby authorized to cause the blank spaces thereof to be filled in as may I appropriate. Section 8. Covenants and Warranties. It is hereby covenanted and warranted the City that all representations and recitals contained in this Resolution are true ai correct, and that the City and its appropriate officials have duly taken all proceedinl necessary to be taken by them, and will take any additional proceedings necessary to 1 taken by them, for the prompt collection and enforcement of the taxes, revenue, ca: receipts and other moneys securing the Notes to be issued hereunder in accordance wi law and for carrying out the provisions of this Resolution. Section 9. No Arbitrage. The City shall not take, nor permit nor suffer to be takl by the Paying Agent or otherwise, any action with respect to the Gross Proceeds of tt Notes which, if such action had been reasonably expected to have been taken, or h; been deliberately and intentionally taken, on the date of the issuance of the Notes wou have caused the Notes to be "arbitrage bonds" within the meaning of section 148(a) of ti Code and Regulations. Section 70. Rebate of Excess lnvestment Earnings to United States. The City shall be obligated to rebate Excess Investment Earnings to the Unit( States in accordance with the provisions of A through F below. (A) Definition of Excess Investment Earninas. The City shall calcula Excess Investment Earnings in accordance with subsection (6) and shall assui payment of an amount equal to Excess Investment Earnings to the United States accordance with subsection (C). The term "Excess Investment Earnings" mear an amount equal to the sum of: (1) the excess of (a) the aggregate amount earned from the date of delivery of the Notes on all Nonpurpose Obligations in which Gross Proceeds of the Notes are invested (other than amounts attributable to an excess described in this paragraph (l), over (b) the amount that would have been earned if the Yield on such Nonpurpose Obligations (other than amounts attributable to an excess described in this paragraph (1) had been equal to the Yield on the Notes, plus (2) any income attributable to the excess described in paragraph (1). -3- 0 0 \ . (B) Calculation of Excess Investment Earninas. On the last day of the Year, the City shall calculate the Excess Investment Earnings referencl paragraphs (1) and (2) of subsection (A). Said calculations shall be mal caused to be made by the City in accordance with the following: (1) Except as provided in (2) below, in determining the amount descrit paragraph (l)(a) of subsection (A), the aggregate amount earne Nonpurpose Obligations shall include (a) all income realized unde federal income tax accounting principles (whether or not the person ea such income is subject to federal income tax) with respect to Nonpurpose Obligations and with respect to the reinvestment of invesi receipts from such Nonpurpose Obligations (without regard to transaction costs incurred in acquiring, carrying, selling or redeeming Nonpurpose Obligations), including, but not limited to, gain or loss re; on the disposition of such nonpurpose Obligations (without regard to such gains are taken into account under Section 1272 of the Code (re to original issue discount) and (b) any unrealized gain or loss as of the of retirement of the Notes in the event that any Nonpurpose Obligati retained after such date. (2) In determining the amount described in paragraph (1) of subsectioi Investment Property shall be treated as acquired for its fair market val the time it becomes a Nonpurpose Obligation, so that gain or loss o disposition of such Investment Property shall be computed with referen such fair market value as its adjusted basis. (3) In determining the amount described in paragraph (l)(b) of subse (A), the Yield on the Notes shall be determined based on the actual Yic the Notes during the period between the date of issuance of the Notes the date the computation is made (with adjustments for discour premium). (4) In determining the amount described in paragraph (2) of subsectior all income attributable to the excess described in paragraph (1 subsection (A) must be taken into account, whether or not that inc exceeds the Yield on the Notes, and no amount may be treated as "neg arbitrage". (5) In determining the amount described in subsection (A), there sha excluded any amount earned on any fund or account which is used prim to achieve a proper matching of revenues and Debt Service within I Note Year and which is depleted at least once a year except f reasonable carryover amount not in excess of the greater of one yt earnings on such fund or account or one-twelfth of annual Debt Servicd well as amounts earned on said earnings if the gross earnings on all : funds and accounts for the Note Year is less than $100,000. (C) Pavment to United States. The City shall pay an amount equi Excess Investment Earnings to the United States within 60 days of the maturity of the Notes. The City shall remit payments to the United States at the add -4- a e I prescribed by the Regulations as the same may be in time to time in effect such reports and statements as may be prescribed by such Regulations. (B) Further Obliaation of City. The City shall assure that Excess Invest1 Earnings are not paid or disbursed except as required in this Section. To that the City shall assure that investment transactions are on an arm's length basi( the event that Nonpurpose Obligations consist of certificates of depos investment contracts, investment in such Nonpurpose Obligations shall be ma accordance with the procedures described in applicable Regulations as from to time in effect. (E) Maintenance of Records. The City shall keep, and retain for a peri six (6) years following the retirement of the Notes, records of the determine made pursuant to this Section 10. (F) Independent Consultants. In order to provide for the administrati this Section 10 hereof, the City may provide for the employment of indepe attorneys, accountants and consultants compensated on such reasonable ba: the City may deem appropriate. Section 77. Federal Guarantee Prohibition. The City shall take no actio permit nor suffer any action to be taken if the result of the same would be to caus Notes to be "federally guaranteed" within the meaning of Section 149(b) of the Code. Section 72. Sale of Notes. The Notes are hereby authorized to be s( Rauscher, Pierce, Refsnes, Inc. as underwriter (the "Underwriter") pursuant to 2 accordance with the Contract of Purchase, by and between the City and the Under in substantially the form on file with the City Clerk, so long as the interest rates ( Notes does not exceed 5% and so long as the discount on the Notes does not e $25,000. Said form of Contract of Purchase is hereby approved, and the Finance Di and the City Clerk of the City are hereby authorized and directed to execute the Cc of Purchase for and in the name and on behalf of the City. Section 73. Official Statement. The City Council hereby approves the ( Statement in preliminary form describing the Notes, in substantially the form submit the Underwriter and on file with the City Clerk, together with any changes ther additions thereto deemed advisable by the Finance Director or the City Ma Distribution by the Underwriter of said preliminary Official Statement to pros6 purchasers of the Notes is hereby approved, ratified and confirmed. The Finance D and the City Manager are hereby separately authorized and directed to approt changes in or additions to a final form of said Official Statement deemed advisable Finance Director or City Manager. The City Manager of the City is hereby authorizf directed to execute and deliver the final Official Statement for and in the name i behalf of the City. Section 74. Preparation of Notes; Official Action. Jones Hall Hill & W Professional Law Corporation, as bond counsel to the City, is directed to cause s Notes to be prepared showing on their face that the same bear interest at tk specified in the executed Contract of Purchase, and to cause the blank spaces the be filled in to comply with the provisions of this Resolution, and to procure their ex( -5- e 0 by the proper officers, and to cause the Notes to be delivered when so executed to tt- purchaser or purchasers thereof upon the receipt of the purchase price by the Financ Director, in accordance with the Contract of Purchase. The Mayor, City Manager, Finance Director and City Clerk, or any of them, ar further authorized and directed to make, execute and deliver to the purchaser of the Note (a) a certificate in the form customarily required by the purchaser of bonds of pub11 corporations generally, certifying to the genuineness and due execution of the Notes, (b) receipt in similar form evidencing the payment of the purchase price of the Notes, whic receipt shall be conclusive evidence that said purchase price of the Notes has been pal and has been received by the City, and (c) a certificate attesting to the use of tt- proceeds of the Notes, the investment thereof, and any other matters relating to the t: exemption of the Notes pursuant to Section 103 of the Internal Revenue Code of 1986, i amended. Any purchaser or subsequent taker or holder of the Notes is hereby authorize to rely upon and shall be justified in relying upon any such certificate or receipt wi respect to the Notes. Such officers and any other officers of the City are heret authorized to execute any and all other documents required to consummate the sale ar delivery of the Notes. I certify that the foregoing resolution was adopted by the Council of the City Carlsbad at a regular meeting held June 23, 1987, by the following vote: AYES: Council Members Lewis, Kulchin, Pettine, Mamaux and Pettine N 0 E S : ABSENT: None None [SEAL] Attest. l2&%7b?A City Clerk -6- 0 e U EXHIBIT A CITY OF CARLSBAD (San Diego County, California) 1987 Notes No. $- Date: July 16, 191 FOR VALUE RECEIVED, the City of Carlsbad (the "City"), State of Californi acknowledges itself indebted to and promises to pay to the bearer hereof, at the corpora trust department of Security Pacific National Bank in Los Angeles, California, the princir sum of Dollars ($ ) lawful money of the Unit( States of America, on June 30, 1988, together with interest thereon at the rate percent ( Oh) per annum in like lawful money from the date hereof un payment in full of said principal sum. Both the principal of and interest on this Note sh: be payable only upon surrender of this Note as the same shall fall due; provided, howeve no interest shall be payable for any period after maturity during which the holder here fails properly to present this Note for payment. It is hereby certified, recited and declared that this Note is one of an authorized issue Nates in the aggregate principal amount of Six Million Five Hundred Seventy Thousar Dollars ($6,570,000), all of like tenor, issued pursuant to the provisions of Resolution N of the City Council of the City duly passed and adopted on June 23, 1987, an pursuant to Article 7.6 (commencing with Section 53850) of Chapter 4, Part 1, Division : Tittle 5, of the California Government Code, and that all things, conditions and acl required to exist, happen and be performed, exist, have happened and been performed i regular and due time, form and manner as required by law, and that this Note, togetht with all other indebtedness and obligations of the City, does not exceed any lim prescribed by the Constitution or statutes of the State of California. The principal amount of the Notes, together with the interest thereon, shall be payabl from the proceeds of general obligation bonds or certificates of participation issued t finance on a long term basis the cost of acquiring an approximately 52 acre eucalyptu grove commonly known as "Hosp Grove" for the preservation of open space, or if SUC securities are not issued, from taxes, revenue and other "unrestricted moneys" which arl held or received by the City for the fiscal year 1987-1988. As used herein, the terr "unrestricted moneys" means the taxes, income, revenue, cash receipts, and othe moneys, intended as receipts for the General Fund of the City for Fiscal Year 1987-198 and which are generally available for the payment of current expenses and othe obligations of the City, as well as all other funds held by the City during fiscal year 1987 1988 which may legally be used to pay the principal of and interest on the Notes. -7- e 0 U IN WITNESS WHEREOF, the City of Carlsbad has caused this Note to be executed by th City Treasurer of the City and countersigned by the City Clerk of the City, and caused it official seal to be affixed hereto all as of this 16th day of July, 1987. CITY OF CARLSBAD By: City Treasurer [SEAL] Countersigned: City Clerk -8- c 0 0 L EXHIBIT B DEFINITIONS Code. The term "Code" means the Internal Revenue Code of 1986, as amended. Debt Service. The term "Debt Service" means the scheduled amount of intere: and principal payable on the Notes during the period of computation. Excess Investment Earninas. meaning ascribed to it in Section 10 hereof. The term "Excess Investment Earnings" has th Gross Proceeds. The term "Gross Proceeds" means the sum of the foilowin amounts: (i) original proceeds, namely, net amounts (after payment of all expenses ( issuing the Notes) received by or for the City as a result of the sale of the Note: excluding original proceeds which become transferred proceeds (determined i accordance with applicable Regulations) of obligations issued to refund in whole o in part the Notes; (ii) investment proceeds, namely, amounts received at any time by or fo the City, such as interest and dividends, resulting from the investment of an original proceeds (as referenced in clause (i) above) or investment proceeds (a3 referenced in this clause (ii)) in Nonpurpose Obligations, increased by any profit and decreased (if necessary, below zero) by any losses on such investments: (iii) sinking fund proceeds, namely, amounts, other than original proceeds investment proceeds, which are held in the Repayment Fund and any other fund tc the extent that the City reasonably expects to use such other fund to pay Dek Service on the Notes; (iv) Investment Property pledged as security for payment of Debt Service or the Notes by an ultimate obligor or a related person or by the City; (vi) amounts, other than as specified in this definition, used to pay Deb Service on the Notes; and (vii) amounts received as a result of investing amounts described in thi: definition. Investment Propee. The term "investment property" means any security (as saic term is defined in section 165(g)(2)(A) or (6) of the Code), obligation, annuity or investment-type property, excluding, however, obligations the interest on which is exempl from income tax under section 103 of the Code. Nonpurpose Obliaation. The term "Nonpurpose Obligation" means any Investmenl Property which is acquired with the Gross Proceeds of the Notes and is not acquired in order to carry out the governmental purpose of the Notes. -9- & * 0 E Note Year. The term "Note Year" means the period beginning on July 16, 1% and ending on June 30, 1988. Purchase Price. The term "Purchase Price," for the purpose of computation of tl- Yield of the Notes, has the same meaning as the term "issue price" in sections 1273(1 and 1274 of the Code, and, in general, means the initial offering price to the public (nl including bond houses and brokers, or similar persons or organizations acting in tt capacity of underwriters or wholesalers) at which price a substantial amount of the Notc are sold or, if the Notes are privately placed, the price paid by the first buyer of the Notc or the acquisition cost of the first buyer. The term "Purchase Price," for the purpose computation of the Yield of Nonpurpose Obligations, means the fair market value of tl Nonpurpose Obligations on the date of use of Gross Proceeds of the Notes for acquisitic thereof, or if later, on the date that Investment Property constituting a Nonpurpoi Obligation becomes a Nonpurpose Obligation of the Notes. Reaulations. The term "Regulations" means temporary and permanent regulatio promulgated under section 148 of the Code. Yield. The term "Yield" means that yield which, when used in computing t present worth of all payments of principal and interest (or other payments in the case Nonpurpose Obligations which require payments in a form not characterized as princil and interest) on a Nonpurpose Obligation or on the Notes produces an amount equal the Purchase Price of such Nonpurpose Obligation or the Notes, all computed prescribed in applicable Regulations. -1 0- 13061-02 JHHW WHM KL 07/16/87 KL2311 $6,555,000 CITY OF CARLSBAD (SAN DIEGO COUNTY, CALIFORNIA) 1987 NOTES 0 SCHEDULE OF TRANSCRIPT DOCUMENTS 1. Resolution No. 9132, "Resolution of the City Council of the City of Carlsbad Providing for the Borrowing of Funds for the Hosp Grove Acquisition and the Issuance and Sale of 1987 Notes Therefor", adopted by the City Council of the City of Carlsbad (the "City") on June 23, 1987, as amended by Resolution No. 9160, adopted by the City Council of the City on July 14, 1987. 2. Preliminary Official Statement, dated June 25, 1987. 3. Certificate of Mailing Report of Proposed Debt Issuance and Report of Final Sale to California Debt Advisory Commission, together with copies of Reports. 4. Contract of Purchase, dated July 8, 1987, by and between Rauscher Pierce Refsnes, lnc. (the "Underwriter") and the City. 5. Final Official Statement, July 7, 1987. 6. Incumbency and Signature Certificate. 7. Certificate as to Arbitrage pursuant to Section 7(F)(4) of Contract of Purchase. 8. Certificate of Acting City Manager pursuant to Section 7(F)(2) of the Contract of e Purchase. 9. Disclosure Certificate of the Finance Director . 10. Certificate of Mailing Form 8038-G to the Internal Revenue Service, together with copy of Form 8038-G. 11. Opinion of City Attorney pursuant to Section 7(F)(3) of Contract of Purchase. 12. Rating letter of Moody's Investors Service pursuant to Section 7(F)(6) Of Contract of Purchase. 13. Paying Agent's Acceptance of Duties. 14. Receipt for Proceeds of Notes. 15. Custodial Receipt for Notes. e 16. Receipt for Notes. &. 17. Specimen Note. 18. Certificate Regarding Sale of Notes. 19. Opinion of Brown & Wood, Underwriter’s Counsel. 20. Final Approving Legal Opinion of Jones Hall Hill & White, A Professional Law Corporation, pursuant to Section 7(F)(1) of Contract of Purchase. 21. Reliance Letter of Special Counsel to Underwriter. e -a -2- 25 22 0' us a6' vL sn *cM 5kd RESOLUTION NO. 9132 B-- d RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD PROVIDING FOR THE BORROWING OF FUNDS FOR THE HOSP GROVE ~~~~~~~~~~~ AND THE ISSUANCE AND SALE OF 1987 NOTES THEREFOR *. WHEREAS, this City Council (the "Council") has heretofore taken certain actions acquire for the City of Carlsbad (the "City") and its residents. certain real proper consisting of an approximately 52 acre eucalyptus grove commonly known as "Ho5 Grove" (the "Property"), to be used for the preservation of open space: and WHEREAS, in connection therewith, the Council did, on May 19, 1987, authorize tl execution of a note (the "Temporary Note") in the principal amount of $6,459,384, to b delivered to San Dtego Trust and Savings Bank (the "Bank") in order to acquire th Propedy on June 1, 1987; and WHEREAS, the City has acquired the Property: and WHEREAS, the Council has determined to finance the Property on a long term bas WHEREAS, the Temporary Note matures on July 16, 1987; and WHEREAS, the Council has determined that there is a need to issue notes undt Sections 53850 et seq. of the Government Code of the State of California to pay the Ban the principal of and interest on the Temporary Note at maturity: and through the issuance of general obligation bonds or certificates of participation; and ". WHEREAS, the Council has determined to submit to the voters of the City proposition which, if approved by two-thirds of the voters of the City, would authorize thc issuance of general obligation bonds to finance the Property on a long term basis: and NOW, THEREFORE, the City Council of the City of Carlsbad hereby find: Section 7. Recitals True and Correct; Definitions. All of the recitals herein SE forth are true and correct, and the Council so finds and determines. All capitalized term! used herein and not defined herein shall have the meanings attributable to such terms or the attached Exhibit 6. Section 2. Issuance and Terms of Notes. Solely for the purpose of payins principal of and interest on the Temporary Note at maturity, the City hereby determines tc and shall borrow the principal amount of Six Million Five Hundred Seventy Thousanc Dollars ($6,570,000) by the issuance of temporary notes under Sections 53850 et seq. o the Government Code of the State of California, designated "City of Carlsbad (San Diegc County, California) 1987 Notes" (the "Notes"). The Notes shall be numbered from 1 consecutively upward in order of issuance, shall be dated July 16, 1987, shall mature or. [June 30, 19881 and shall bear interest, payable at maturity and computed on a 30-day determines, declares and resolves as follows: i0 e' A' month1'360-day year basis. at the rate determined in accordance with a Purch Contract to be presented by Rauscher. Pierce, Refsnes, Inc. pursuant to Section hereof. Both the principal of and interest on the Notes shall be payable, only U! surrender thereof, in lawful money of the United States of America, at the corpor agency division of Security Pacific National Bank (the "Paying Agent") in California. Section 3. Form of Notes. The Motes shall be issued in bearer form witk coupons in the denomination of $5,000 or any integral multiple thereof, and shall substantially in the form and substance set forth in Exhibit A attached hereto and reference incorporated herein, the blanks in said farm to be filled in with appropri, words and figures. Section 4. Use of Proceeds. The moneys so borrowed shall be used to pay Section 5. Security. The principal amount of the Notes, together with the inter1 thereon, shall be payable from the proceeds of general obligation bonds or certificates participation issued to finance the Property on a long term basis. or, if such obligatio are not issued prior to the maturity of the Notes, from taxes, revenue and ott "unrestricted moneys" (as hereinafter defined), which are held or received by the City the general fund of the City for fiscal year 1987-1988. The term "unrestricted monej shall mean taxes, income, revenue, cash receipts, and other moneys intended as receil for the general fund of the City for fiscal year 1987-1988 and which are generally availat for the payment of current expenses and other obligations of the City, as well as all 0th funds held by the City during fiscal year 1987-1988 which may legally be used to pay tl p N otes. the Citv shall take one of the followingactions: *. Bank the principal of the Temporary Note at maturity. principal of and interest on the Notes. jt least 30 d avs prior to the maturitv date o fU e 4a) issue ae neral obligation bonds in an amount at least eau at to orincioal of ai ~ inter est on the Notes a t m atu ri tv an d sserve the oroceeds t hereof for the Bav ment of tl- glinciDa1 of and interest o n the NoteLat maw &) co mI oete a Certificate of Particioation financina which will oroduce a vaila b groceeds in an amount at least eau al to DrinciDal of and interest o n the Notes at maturi g nd reserve the goceeds r thereof for the rrav m e n t o f t h e Q rincioal of and interest o n tt v m ri * Lreserve an amount eaua I to o rincioal of and interest o n the Notes. us ina gombination odvances from the Citv's funds. includina but not limited- to. t he Se Wt Construction Fund. the Ge neral Caoital Construction Fund, the Public Facilities Fee Fuq -the Planned Loca I Drainaw Section 6. Paying Agent. Security Pacific National Bank in Los Angele! California, is hereby appointed to act as the Paying Agent of the City for the purpose c paying to the Noteholders upon presentation thereof, at its corporate trust department i Los Angeles. California, both the principal of and interest on the Notes at maturity and t perform such other duties and powers of the Paying Agent as are prescribed in thi Resolution. 0 -2- i Section 7. Execution of Notes. The City Treasurer of the City is her€ authorized to execute the Notes by the manual or facsimile signature. and the City Clerk the City is hereby authorized to countersign the same by the manual or facsimile signati and to affix the seal of the City thereto by facsimile impression thereof, and said offict are hereby authorized to cause the blank spaces thereof to be filled in as may appropriate. 'e Section 8. Covenants and Warranties. It is hereby covenanted and warranted the City that all representations and recitals contained in this Resolution are true T correct, and that the City and its appropriate officiats have duly taken all proceedi necessary to be taken by them, and will take any additional proceedings necessary to taken by them, for the prompt collection and enforcement of the taxes, revenue, c receipts and other moneys securing the Notes to be issued hereunder in accordance t law and for carrying out the provisions of this Resolution. Section 9. No Arbitrage. The City shall not take, nor permit nor suffer to be t: by the Paying Agent or otherwise, any action with respect to the Gross Proceeds of Notes which, if such action had been reasonably expected to have been taken, or been deliberately and intentionally taken, on the date of the issuance of the Notes w have caused the Notes to be "arbitrage bonds" within the meaning of section 148(a) o Code and Regulations. Section 10. Rebate of Excess Investment Earnings to United States. The City shall be obligated to rebate Excess Investment Earnings to the U (A) Dq. The City shall calc Excess Investment Earnings in accordance with subsection (B) and shall a! payment of an amount equal to Excess Investment Earnings to the United Stal accordance with subsection (C). The term "Excess Investment Earnings" n an amount equal to the sum of: (1) the excess of (a) the aggregate amount earned from the date of delivery of the Notes on all Nonpurpose Obligations in which Gross Proceeds of the Notes are invested (other than amounts attributable to an excess described in this paragraph (l), over (b) the amount that would have been earned if the Yield on such Nonpurpose Obligations (other than amounts attributable to an excess described in this paragraph (1) had been equal to the Yield on the Notes, plus 0 States in accordance with the provisions of A through F below. (2) any income attributable to the excess described in paragraph (1). 0 -3- 1 (B) Calculation of Excess Investment Earninas. On the last day of the Year, the City shall calculate the Excess Investment Earnings referenc paragraphs (1) and (2) of subsection (A). Said calculations shall be ma caused to be made by the City in accordance with the following: 'e (I) Except as provided in (2) below, in determining the amount descril paragraph (l)(af of subsection (A), the aggregate amount earn€ Nonpurpose Obligations shall include (a) ail income realized und federal income tax accounting principles (whether or not the person e( such income is subject to federal income tax) with respect to Nonpurpose Obligations and with respect to the reinvestment of inves receipts from such Nonpurpose Obligations (without regard tc transaction costs incurred in acquiring, carrying, selling or redeeming Nonpurpose Obligations), including, but not limited to, gain or loss re on the disposition of such nonpurpose Obligations (without regard to such gains are taken into account under Section 1272 of the Code (rc to original issue discount) and (b) any unrealized gain or loss as of thl of retirement of the Notes in the event that any Nonpurpose Obliga! retained after such date. (2) In determining the amount described in paragraph (1) of subsectic Investment Property shall be treated as acquired for its fair market vi the time it becomes a Nonpurpose Obligation, so that gain or loss I disposition of such Investment Property shall be computed with referei such fair market value as its adjusted basis. (3) In determining the amount described in paragraph (l)(b) of subs (A), the Yield on the Notes shall be determined based on the actual Y the Notes during the period between the date of issuance of the Note the .date the computation is made (with adjustments for disco1 premium). (4) In determining the amount described in paragraph (2) of subsectic all income attributable to the excess described in paragraph subsection (A) must be taken into account, whether or not that ir exceeds the Yield on the Notes, and no amount may be treated as "ne arbitrage". (5) In determining the amount described in subsection (A), there st- excluded any amount earned on any fund or account which is used pri to achieve a proper matching of revenues and Debt Service within Note Year and which is depleted at least once a year except reasonable carryover amount not in excess of the greater of one earnings on such fund or account or one-twelfth of annual Debt Serv well as amounts earned on said earnings if the gross earnings on al funds and accounts for the Note Year is less than $100,000. (C) Pavment to U nited St ateg. The City shall pay an amount eq Excess Investment Earnings to the United States within 60 days of the maturit of the Notes. The City shall remit payments to the United States at the ac e 0 -4- prescribed by the Regulations as the same may be in time to time in effeci such reports and statements as may be prescribed by such Regulations. b* (D) Further Obliaation of City. The City shall assure that Excess Invest Earnings are not paid or disbursed except as required in this Section. To tha the City shall assure that investment transactions are on an arm's length basi the event that NOnpUFpOSe Obtigations consist of certificates of depos investment contracts, investment in such Nonpurpose Obligations shall be ma accordance with the procedures described in applicable Regulations as from to time in effect. (E) Maintenance of Records. The City shall keep. and retain for a peri six (6) years following the retirement of the Notes, records of the determina made pursuant to this Section 10. (F) Independent Consultants. In order to provide for the administrati this Section 10 hereof, the City may provide for the employment of indepei attorneys, accountants and consultants compensated on such reasonable bas the City may deem appropriate. Section 77. Federal Guarantee Prohibition. The City shall take no actio permit nor suffer any action to be taken if the result of the same would be to caus Notes to be "federally guaranteed" within the meaning of Section 149(b) of the Code. Section 12. Sale of Notes. The Notes are hereby authorized to be sc Rauscher, Pierce, Refsnes, Inc. as underwriter (the "Underwriter") pursuant to a accordance with the Contract of Purchase, by and between the City and the Underv in substantially the form on file with the City Clerk, so long as the interest rates o Notes does not exceed 5% and so long as the discount on the Notes does not ex $25,000. Said form of Contract of Purchase is hereby approved, and the Finance Dir and the City Clerk of the City are hereby authorized and directed to execute the Coi of Purchase for and in the name and on behalf of the City. 0 Section 13. Official Statement. The City Council hereby approves the C Statement in preliminary form describing the Notes, in substantially the form submitti the Underwriter and on file with the City Clerk, together with any changes there additions thereto deemed advisable by the Finance Director or the City Man Distribution by the Underwriter of said preliminary Official Statement to prospc purchasers of the Notes is hereby approved, ratified and confirmed. The Finance Dir and the City Manager are hereby separately authorized and directed to approvc changes in or additions to a final form of said Official Statement deemed advisable t Finance Director or City Manager. The City Manager of the City is hereby authorize1 directed to execute and deliver the final Official Statement for and in the name ar behalf of the City. Section 74. Preparation of Notes; Official Action. Jones Hall Hill & Wh Professional Law Corporation, as bond counsel to the City, is directed to cause su Notes to be prepared showing on their face that the same bear interest at the specified in the executed Contract of Purchase, and to cause the blank spaces ther be filled in to comply with the provisions of this Resolution, and to procure their exec 0 -5- B by the proper officers, and to cause the Notes to be delivered when so executed to ' purchaser or purchasers thereof upon the receipt of the purchase price by the Finan Director. in accordance with the Contract of Purchase. "0 The Mayor, City Manager, Finance Director and City Clerk, or any of them. i further authorized and directed to make, execute and deliver to the purchaser of the No (a) a certificate in the form customarily required by the purchaser of bonds of put: corporations generally, certifying to the genuineness and due execution of the Notes, (b receipt in similar form evidencing the payment of the purchase price of the Notes, whi receipt shall be conclusive evidence that said purchase price of the Notes has been pi and has been received by the City, and (c) a certificate attesting to the use of t proceeds of the Notes, the investment thereof, and any other matters relating to the 1 exemption of the Notes pursuant to Section 103 of the Internal Revenue Code of 1986, amended. Any purchaser or subsequent taker or holder of the Notes is hereby authoriz to rely upon and shall be justified in relying upon any such certificate or receipt w respect to the Notes. Such officers and any other officers of the City are here authorized to execute any and all other documents required to consummate the sale a delivery of the Notes. I certify that the foregoing resolution was adopted by the Council of the City Carlsbad at a regular meeting held June 23, 1987, by the following vote: AYES: Council Members Lewis, Kulchin, Pettine, Mamaux and Pettine NOES: None ABSENT: None 0 [SEAL] Attest: AJ=fLL City Clerk 0 -6- I * ' EXHIBIT A CITY OF CARLSBAD (San Diego County, California) 1987 Notes '0 No. $.-.-- Date: July 16. 19 FOR VALUE RECEIVED, the City of Cartsbaci (the "City"), State of Californ acknowledges itself indebted to and promises to pay to the bearer hereof, at the corpor; trust department of Security Pacific National Bank in Los Angeles, California, the princil sum of Dollars ($ ) lawful money of the Unif States of America, on June 30, 1988, together with interest thereon at the rate percent ( "/o) per annum in like lawful money from the date hereof u payment in fufi of said principal sum. Both the principal of and interest on this Note st be payable only upon surrender of this Note as the same shall fall due: provided, howev no interest shall be payable for any period after maturity during which the holder her1 fails properly to present this Note for payment. It is hereby certified, recited and declared that this Note is one of an authorized issue Notes in the aggregate principal amount of Six Million Five Hundred Seventy Thousa Dollars ($6,570,000). all of like tenor, issued pursuant to the provisions of Resolution 1 of the City Council of the City duly passed and adopted on June 23, 1987, a pursuant to Article 7.6 (commencing with Section 53850) of Chapter 4, Part 1, Division Tittle 5, of the California Government Code, and that all things, conditions and a1 required to exist, happen and be performed, exist, have happened and been performed regular and due time, form and manner as required by law, and that this Note, togett with all other indebtedness and obligations of the City, does not exceed any lii prescribed by the Constitution or statutes of the State of California. The principal amount of the Notes, together with the interest thereon, shall be payal from the proceeds of general obligation bonds or certificates of participation issued finance on a long term basis the cost of acquiring an approximately 52 acre eucalyp grove commonly known as "Hosp Grove" for the preservation of open space, or if SL securities are not issued, from taxes, revenue and other "unrestricted moneys" which i held or received by the City for the fiscal year 1987-1988. As used herein, the te "unrestricted moneys" means the taxes, income, revenue, cash receipts, and otl moneys, intended as receipts for the General Fund of the City for Fiscal Year 1987-1s and which are generally available for the payment of current expenses and otl obligations of the City, as well as all other funds held by the City during fiscal year 19; 1988 which may legally be used to pay the principal of and interest on the Notes. 0 0 -7- b IN WITNESS WHEREOF, the City of Carlsbad has caused this Note to be executed by th City Treasurer of the City and countersigned by the City Clerk of the City, and caused ii official seal to be affixed hereto all as of this 16th day of July, 1987. ‘0 CITY OF CARLSBAD By: City Treasurer [SEAL] Countersigned: City Clerk e 0 -a- $ EXHIBIT B DEFINITIONS ';. -- Code. The term "Code" means the Internal Revenue Code of 1986, as amended Debt Service. The term "Debt Service" means the scheduled amount of intere: and principal payable on the Notes during the period of computation. Excess Investment Earnings. The term "Excess Investment Earnings" has th meaning ascribed to it in Section 10 hereof. Gross Proceeds. The term "Gross Proceeds" means the sum of the followin amounts: (i) original proceeds, namely, net amounts (after payment of all expenses c issuing the Notes) received by or for the City as a result of the sale of the Note: excluding original proceeds which become transferred proceeds (determined i accordance with applicable Regulations) of obligations issued to refund in whole c in part the Notes; (ii) investment proceeds, namely, amounts received at any time by or fc the City, such as interest and dividends, resulting from the investment of an original proceeds (as referenced in clause (i) above) or investment proceeds (a referenced in this clause (ii)) in Nonpurpose Obligations, increased by any profit and decreased (if necessary, below zero) by any losses on such investments; (iii) sinking fund proceeds, namely, amounts, other than original proceed: investment proceeds, which are held in the Repayment Fund and any other fund t the extent that the City reasonably expects to use such other fund to pay Det Service on the Notes; (iv) Investment Property pledged as security for payment of Debt Service o 0 the Notes by an ultimate obligor or a related person or by the City; Service on the Notes; and (vi) amounts, other than as specified in this definition, used to pay Deb (vii) amounts received as a result of investing amounts described in thii definition. Investment Property . The term "investment property" means any security (as saic term is defined in section 165(g)(2)(A) or (6) of the Code), obligation, annuity o investment-type property, excluding, however, obligations the interest on which is exemF from income tax under section 103 of the Code. Nonpurpo liaation. The term "Nonpurpose Obligation" means any lnvestmer Property which i:eacOqbuired with the Gross Proceeds of the Notes and is not acquired ii order to carry out the governmental purpose of the Notes. 0 -9- .t Note Year. The term "Note Year" means the period beginning on July 16, 1% 40 and ending on June 30, 1988. Purchase Price The term "Purchase Price," for the purpose of computation of tt Yield of the Notes, has the same meaning as the term "issue price" in sections 1273( and 1274 of the Code. and, in general, means the initial offering price to the public (n including bond houses and brokers, or similar persons or organizations acting in tt capacity of underwriters or wholesafers) af which price a substantial amount of the Note are sold or, if the Notes are privately placed, the price paid by the first buyer of the Note or the acquisition cost of the first buyer. The term "Purchase Price." for the purpose l computation of the Yield of Nonpurpose Obligations, means the fair market value of tF Nonpurpose Obligations on the date of use of Gross Proceeds of the Notes for acquisitic thereof, or if later, on the date that Investment Property constituting a Nonpurpos Obligation becomes a Nonpurpose Obligation of the Notes. Reaulations. The term "Reguiations" means temporary and permanent regulatior promulgated under section 148 of the Code. Yield. The term "Yield" means that yield which, when used in computing tt present worth of all payments of principal and interest (or other payments in the case ( Nonpurpose Obligations which require payments in a form not characterized as princip; and interest) on a Nonpurpose Obligation or on the Notes produces an amount equal t the Purchase Price of such Nonpurpose Obligation or the Notes, all computed a prescribed in applicable Regulations. 0 e -1 0- . '0 0 STATE OF CALIFORNIA, ) COUNTY OF SAN DIEGO ) ss. KAREN R. KUNDTZ, Deputy I. 1 . (:it!. (:lerk of tliv (:it\.. of (::irlsl):iti, (Ioiiiit!. of Suii I)ic.go. Stat(. of (:;iliforii' I)c~c4)?. c*c*rtif>. tliat I Iiavc c-oiiijxirtd tlw forclgoilig copy witli tlicb origitiiil . .Resolution#?l3? psscy1 :I aclopt~~(I I)!. saicl <:it>. <:oiiiic.i~. at ....a,. regular. .... . ...... riirc+iig tlicwwt, ;it t~ie tiirw ;o,t~ 1)y tIw votv t~iw st:ttc%rI. wIiicIi orifiiii:il . ResOlut??~ ...... __.__ is now on fi~v ili it)!' 0tfic.c.: tIiat t~w s;iiiiv contailis ii fl111. tr iiid c.orrcbc.t trai~sc~i1)t tiicwh-oiii ;iiitl of ttw \v?iolt. tlrc.reot'. \\'itiicxs iii!. ~iaiic~ atit1 tlrc, sc.a~ of saiti <:ity of (;wlslxi~I, tliis . 2nd c~ny of . ..... July .... . ..? _..___ 1987 ......................... e ( Sl<.Il, ! . . . y . . . -. 5J-*.... . . .. ..* .. ,. , D uty " C CCITT G3;H ; 7-15-87 5:18f'M ; 24070j SENT BY:R RESOLUTION NO. ,=, RESOLUTlON OF THE CITY CoUNClt OF THE CSN OF CARLgBAt) AMENblNQ RESOLUTION NO, 9132, ENTITLED "REWLUTIQN OF THE CITY COUNCIL OF THE GtTY OF CARLSBAD PROVlDlNQ FOR THE BORROWNQ OF FUND$ FOR THE HOSP GROVE ACQUISITION AND THE ISSUANGE ANI) SAL€ OF l08t NOTES THEREFOR" m WHEREAS, hlr City Councll (the Tounoiln) ha@ heretolore taken certaln actlons to acquire for the Clty or Carlsbrd (the 'G(tyn) md it8 ratldents, oert4ln res1 property oondrtlng of an approxlmatoly 52 acto eucnlyptus grove oommonly known as "Hosp Qrovs" (the "Property"), to be used lot the prsservatlan of open spaoe: and WHEREAS, In uonnsction thetewltn, the Councfi dld, on May 10, 1887, authorize the exscutlon of a note (thr "?omporary Note") In ths prlnclpal #mount of $8,459,384, to be dellwed 10 8an Dlago Trust and Savings Bonk (the ''Oenk") In order to requlre the Propatty on June 1,l OW; and WHEREA8, the City har r 3gulred the Property; and WHEREAS, tho Council ha8 Qeterrnfned to Itnance the Praperty on o long term WHEREAS, the Temporary Note mature6 on July 16, 1887; and WHEREAS, VIIS Councll did, on June 23, 1887, rdopt Resblutlon No. 8132, entltted "Re8olutlm of the Clty Gounoll of the City of Carisbad provldhg for the Borrowing of Funds for Hosp Qrove Acqulsltlon and the Ir8uanc~ and Sale of 1987 Note8 Therefor," putsuan 19 which the Clty dotsrmlned to fseue notes In the pflnclpal umount of 86,670,000 (the WHEREAS, Rausoher Blerce Refrnrr, lnc. (the YM"rtter") marketed the Natec at a pnmlum In an amount equal to $~8,000, and thereby reduced the amount of Qtacolrn t8 be paid to @e Undsrwtltar, whloh in turn reduoed the prfnolpal amount 01 tho Nota8 tc $S,665,oO@ and WHEREAS, It Is neoessary to amend Ri8oIutlrrn No, 9132 to reflect the reduce1 prlnclpal amount of the Notes; NOW, THEREFORE, the Glty Counott of the clly of Carlsbad hereby fin& determines, d61Cl8refk and rssolver a8 fOllQws; 8soHon 1, Weaolutfon No, 9132 ir hereby amended by ohanglng the prlncipr amount of the Notea, a$ referenced In Section 2. of Resolution No, P132 and In Exhlblt lo R@SO!UtlOn Ne. 4132 to SIX Mllllon Five Hundred FiW Thoulrrnd Dollar6 (S8,SS~bOOO] 1 place of SIX Million Flve Hundred Seventy Thousand Dollar8 ($6,870,000). bash through the lsauanm of general obllgatton bonds or oedlficatss of portlclpation; and 0 "nOt8P"); 0 SENT BY:n ; 7-15-87 5: 18PM ; 24070+ CCITT G3;li 8ection 2. Thh Resolwtlon shall take effect upon adopUon h@fmf, 1 cedlfy that the forsgolng resolution wai adopted by th@ Counoll of the CIty of 0 Carlebad at a regular meetlng held July 14, 1087, by the following vote; AYES; Council Members Lcwia, gulchin, Pettine, Mamaux and Laroon NOE9; Nona AB8ENT: None / P& /4[.k# Mayor .c _I .[SEAL1 mat: e 0 -2-. OS r e $5 NEW ISSUE RATING: Moody’ OE !Sj (See “Rating’ e om In the opinion of Jones Hall Hill d White, A Professional Law Coqoration, San Francisco, Calgornia, Bon, 25 .- c UIS subject, hmmer to certain qualijcations describedherein, under existing law, interest on the Notes is excludedfro E$ income for federal income tax puqoses andsuch interest is not an item oftax preference forpuqoses of thejk cc sm individual and corporate altmative minimum taxes, although it is included in adjzcsted net book incon; o .- and cuvent earnings in computing the alternative minimum tax imposed on certain coqorations. in the futzher opinion of Bond Counsel, such interest is exemp from California penonal income $2s ‘“6 taxes. See “TAX EXEMPTION” herein. PRELIMINARY OFFHCIAL STATEMENT DATED JUNE 25,1987 c SF Z$ m ’I ‘ij Q .- $6,570,000* CITY OF CARLSBAD COUNTY OF SAN DIEGO STATE OF CALIFORNIA 1987 NOTES 2s CUK ss .- .E - d 2 g 23 2s r-m *5 IC 22 5% e? G& gs LZ $2 5,“ io CE Ez 0 .E gc E .2 L aG .- 6 .2 $i 8 .E “Unrestricted Moneys”). cr 2 .g $5 28 ma KS 2Q urn =z .- .“F ce Rate - Yield .-B 2 m= s % % E2 0 .g e= c e 0 $ -=.E c. -2 zzz ,” 2 s sz; E% f E >.+ Bm* as0 zzg .- Egg ”,e L.2 f 5 25 $ .E o zsz June , 1987 zs&. z z 5 a3 IC - 00 VI ‘ij C ‘G Dated: July 16, 1987 Due: June The Notes will be issued in the denominations of $5,000 or any integral multiple thereof. Princi interest on the Notes will be payable upon maturity in Los hngeles, California, at the Corporate Tru! ment of Security Pacific National Bank, the paying agent of the City of Carlsbad (the “City”). The Noi subject to redemption prior to maturity. The Notes will be negotiable and not subject to registration The Notes are by statute general obligations of the City and are payable from the proceeds t obligation bonds or certificates of participation issued to finance the Project defined below, on a long I or if such obligations are not issued prior to the maturity of the Notes, from taxes, income, revenue, cas and other moneys intended as receipts for the general fund of the City attributable to the fiscal year 15 which are generally available for the payment of current expenses and other obligations of the City, other funds held by the City during fiscal year 1987/1988 which may be legally available for payment th The proceeds of the Notes are being used to retire a note of the City in the principal amount of $ plus interest accrued thereon to the order of San Diego Trust and Savings Bank (the “Temporary Not pay costs of issuance incurred in connection with the issuance of the Notes. The proceeds of the Temp( were used by the City to acquire on June 1, 1987 approximately 52 acres of land to be maintained by t open space (the “Project”). The Notes are direct obligations of the Cig and, to the extent set forth herein, are legal investments for comme in California and are eligible to secure deposits of public moneys in California. 00 g .% I=- 3; UJ .- - 00 mm co OB 0 - Interest - -* .- 0 .a The Notes are ofered when, as and if issued and received by the Underwriter, subject to approval of legality by Hill €8 White, a Professional Law Corporation, San Francisco, California, Bond Counsel. Certain legal mal be passed on for the Underwriter by Brown €6’ Wood, San Francisco, California. It is antikpated that the i in definitive form will be available for delivery in San Francisco, California, on or abozit July 26, 298 0 c- Rauscher Pierce Refsnes, Inc. .- lo v) * Preliminary, subject to change. No dealer, broker, salesperson or other person has bc authorized by the City to give any information or to make E representations other than those contained herein and, if qiL or made, such other information or representation must not relied upon as havinq been authorized by the City. Tk Official Statement does not constitute an offer to sell or t solicitation of an offer to buy nor shall there be any sale the Notes by a person in any J 'urisdiction in which it unlawful for such person to make such an offer, solicitation sale. This Official Statement is not to be construed as contract with the purchasers of the Notes. St at emer contained in this Official Statement which involve estimate forecasts or matters of opinion, whether or not expressly described herein, are intended solely as such and are not to construed as a representation of facts. The information set forth herein has been obtained fr sources which are believed to be reliable but it is r guaranteed as to accuracy or completeness, and is not to information and expression of opinions herein are subject chanqe without notice and neither delivery of this Offici Statement nor any sale made hereunder shall, under i circumstances, create any implication that there has been change in the affairs of the City since the date hereof. construed as a representation by the Underwriter. '1 TABLE OF CONTENTS Pac - INTRODUCTORY STATEMENT .................................... THE NOTES Authority for Issuance .................................. Description of the Notes ................................ Security for the Notes .................................. Purpose of the Issue .................................... Available Sources of Repayment .......................... REVENUES Article XIIIA ........................................... Article XIIIB ........................................... Ad Valorem Property Taxation ............................ Assessed Valuations ..................................... I Tax Levies, Collections and Delinquencies ............... Comparative Financial Statements ........................ Financial and Accounting Information .................... City Debt Structure ..................................... 1 Direct and Overlapping Debt ............................. 1 Introduction ............................................ 1 Labor Relations ......................................... 1 Retirement Programs ..................................... 1 General Description ..................................... 1 Employment .............................................. 1 Largest Employers ....................................... 1 Commercial Activity ..................................... 1 Construction Activity .................................... 1 Transportation .......................................... 1 TAX EXEMPTION ............................................. 2 LEGAL MATTERS ............................................. 2 LEGALITY FOR INVESTMENT IN CALIFORNIA ..................... 2 LITIGATION ................................................ 2 RATING .................................................... 2 UNDERWRITING .............................................. 2 ADDITIONAL INFORMATION .................................... 2 APPENDIX A-EXCERPTED 1985/86 AUDITED FINANCIAL STATEMENTS . A- CONSTITUTIONAL AND STATUTORY LIMITS AFFECTING CITY CITY FINANCIAL INFORMATION Budget Process .......................................... GENERAL CITY INFORMATION ECONOMIC PROFILE IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER I OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTI THE MARKET PRICE OF THE NOTES AT A LEVEL ABOVE THAT WHICH MI( OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRI' MAY OFFER AND SELL THE NOTES TO CERTAIN DEALERS AND DEA BANKS AND BANKS ACTING AS AGENT AT PRICES LOWER THAN THE PUB OFFERING PRICE STATED ON THE COVER PAGE HEREOF AND SAID PUB OFFERING PRICE MAY BE CHANGED FROM TIME TO TIME BY ' UNDERWRITER. OFFICIAL STATEMENT $6,570,000" CITY OF CARLSBAD COUNTY OF SAN DIEGO STATE OF CALIFORNIA 1987 NOTES INTRODUCTORY STATEMENT This Official Statement, including this Introductor: Statement and the Appendix, provides information in connectior with the sale by the City of Carlsbad (the "City") of its 198' Notes (the "Notes") in the aggregate principal amount ol $6,570,000*. The Notes will be issued in full conformity wit1 the Constitution and laws of the State of California (tht "State"), including Article 7.6, Chapter 4, Part 1, Division 2, Title 5 (commencing with Section 53850) of the Californii Government Code (the "Act"). Under the Act and Resolution defined below, the Notes are general obligations of the Citj payable from the proceeds of general obligation bonds oz certificates of participation issued to finance the Project or a long term basis, defined below, or if such obligations arE not issued prior to the maturity of the Notes, from taxes, income, revenue, cash receipts and other moneys intended as receipts for the general fund of the City attributable to thE fiscal year 1987/88 and which are generally available for the payment of current expenses and other obligations of the City, as well as all other funds held by the City during fiscal year 1987/1988 which may be legally available therefor (the "Unrestricted Moneys"). The Notes are authorized by Resolution No. 9132 adopted by the City Council on June 23, 1987 (the "Resolution"). Proceeds from the sale of the Notes will be used to retire a note of the City in the principal amount of $6,459,384 plus interest accrued thereon to the order of San Diego Trust and Savings Bank (the "Temporary Note"). The proceeds of the Temporary Note were used by the City to acquire the Project on June 1, 1987. THE NOTES Authority for Issuance The Notes are issued under the authority of the Act and pursuant to the Resolution. * Preliminary, subject to change. 1 Purpose of the Issue Proceeds of the Notes will be used to retire the Temporal Note and to pay certain costs of issuance incurred in tl issuance of the Notes. Description of the Notes The Notes will be issued in the aggregate principal amoui of $6,570,000*. The Notes are not subject to registration, ax will be in bearer form, without coupons, and shall be : denominations of $5,000 or any integral multiple thereof. TI Notes will be dated July 16, 1987 and will mature June 3( 1988. Principal and interest on the Notes will be payable i the Corporate Trust Department of Security Pacific Nation; Bank, the Paying Agent in Los Angeles, California. Security for the Notes The principal amount of the Notes, together with t interest thereon, shall be payable from the proceeds of gener obligation bonds or certificates of participation issued finance the Project, defined below, or if such obligations a not issued prior to the maturity of the Notes, Unrestrict Moneys, which include taxes, income, revenue, cash receip and other moneys intended as receipts for the general fund the City during fiscal year 1987/88 and which are general available for the payment of current expenses and 0th obligations of the City, as well as all other funds held by t City during fiscal year 1987/1988 which may be legally used pay such amounts. No specific revenues are pledged to t repayment of the Notes. Available Sources of Repayment The Notes, in accordance with State law, are gener obligations of the City and, if not paid from the proceeds of general obligation bond or certificate of participation issu will be payable only out of Unrestricted Moneys. The City ma under existing law, issue the Notes only if the principal and interest on its issue of the Notes will not exceed percent of the estimated amount of the then-uncollect - Unrestricted Moneys which will be legally available for t payment of principal of and interest on said Notes. * Preliminary, subject to change. 2 The amount of estimated Unrestricted Moneys available tc repay the Notes and the interest thereon for the City i: approximately $41,000,000* including carry-over balances. Thc amount of Unrestricted Moneys needed to pay principal of an( interest on the Notes is $6,832,800*, providing a Note coveragc ratio of 6.0". The City estimates that the moneys available if necessary, for repayment are as follows: CITY OF CARLSBAD ESTIMATED UNRESTRICTED MONEYS AVAILABLE FOR NOTE REPAYMENT* SOURCES AMOUNT Cash Balance-July 1, 1987 ..................... $ 458,301 Property Tax .................................. 7,835,000 Other Taxes ................................... 10,083,000 Licenses, Permits & Fees ...................... 1,459,000 Fines, Forfeitures SC Penalties ................ 446,200 -- Use of Money & Property Revenues From Other Agencies .................. Service Charges ............................... 1,915,540 Public Facilities Fees ........................ 3,562,127 Planned Local Drainage Fees ................... 1,960,650 TOTAL UNRESTRICTED MONEYS ................... $40,924,142 NOTE COVERAGE RATIO ........................... 6.0* ....................... -- General Capital Construction Fund ............. 1,821,396 Sewer Construction Fund ....................... 7,169,368 Other ......................................... 2,971,811 Transfers In .................................. 1,241,749 TOTAL PRINCIPAL PLUS INTEREST(1) .............. $ 6,832,800* (1) Assumes interest rate at 4%. Source: City of Carlsbad - 1987/88 Adopted Budget CONSTITUTIONAL AND STATUTORY LIMITS AFFECTING CITY REVEN[JES Article XIIIA Article XIIIA of the State Constitution limits the amount of ad valorem taxes on real property to 1% of "full cash value" as determined by the County Assessor. Article XIIIA defines "full cash value" to mean "the County's Assessor's valuation of * Preliminary, subject to change. 3 real property as shown on the 1975/76 tax roll under 'full caz value', or thereafter, the appraised value of real propert when purchased, newly constructed or a change in ownership hz occurred after the 1975 assessment period subject to exemptior in certain reconstruction." The "full cash value" is subject to annui adjustment to reflect increases, not to exceed 2% per year, c decreases in the consumer price index or comparable loc2 data,or to reflect reductions in property value caused 1 damage, destruction or other factors. Article XIIIA requires a vote of two-thirds of tl qualified electorate to impose special taxes, while total: precluding the imposition of any additional ad valorem, salt or transaction tax on real property. As recently amendec Article XIIIA exempts from the 1% tax limitation any taxt above that level required to pay debt service on voter-approvt general obligation bonds for real property or improvemend thereon. In addition, Article XIIIA requires the approval ,( two-thirds of all members of the State Legislature to cham any State laws resulting in increased tax revenues, In addition a statutory initiative was adopted by t! voters at the November 4, 1986 General Election whil (i) requires that any tax for general governmental purposi imposed by local governmental entities such as the City approved by resolution or ordinance adopted by a two-thirl vote of the governmental entity's legislative body and by majority vote of the electorate of the governmental entit (ii) requires that any special tax (defined as taxes levied f other than general governmental purposes) imposed by a loc governmental entity be approved by a two-thirds vote of $ voters within that jurisdiction, (iii) restricts the use revenues from a special tax to the purposes or for the servi for which the special tax was imposed, (iv) prohibits t imposition of ad valorem taxes on real property by loc governmental entities except as permitted by Article XI11 (v) prohibits the imposition of transaction taxes and sal taxes on the sale of real property by local government entities, and (vi) requires that any tax imposed by a loc governmental entity on or after August 1, 1985 be ratified by majority vote of the electorate within two years of t adoption of the initiative or be terminated by November 1 1988. The City does not anticipate any potential adver financial impact as a result of the passage of this amendi initiative. c i r cumst ances of property transfer C 4 Article XIIIB Article XIIIB of the State Constitution limits the annual appropriations of the State and of any city, county, school district, authority or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living, population and services rendered by the governmental entity. The "base year" for establishing such appropriation limit is the 1978/79 fiscal year and the limit is to be adjusted annually to reflect changes in population, consumer prices and certain increases in the cost of services provided by these public agencies. Appropriations subject to Article XIIIB generally include the proceeds of taxes levied by the State or other entity of local government, exclusive of certain State subventions, refunds of taxes, benefit payments from retirement, unemployment insurance and disability insurance funds. "Proceeds of taxes" include, but are not limited to, all tax revenues and the proceeds to an entity of government from (i) regulatory licenses, user charges, and user fees (but only to the extent such proceeds exceed the cost of providing the service or regulation), and (ii) the investment of tax revenues. Article XIIIB includes a requirement that if an entity's revenues in any year exceed the amounts permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years. CITY FINANCIAL INFORMATION Ad Valorem Property Taxation City property taxes are assessed and collected by the County of San Diego (the "County"), at the same time and on the same rolls as the County and special district property taxes. The valuation of secured property is established as of March 1 and is subsequently equalized in August, and is payable in two installments of taxes due November 1 and February 1, respectively. Taxes become delinquent on December 10 and April 10 for each respective installment. Taxes on unsecured property (personal property and leasehold) are due on August 31 of each year based on the preceding fiscal year's secured tax rate. State law exempts $7,000 of the full cash value of an owner-occupied dwelling, but this exemption does not result in 5 any loss of revenue to local agencies, since the Sta- reimburses local agencies for the value of the exemptions. Assessed Valuations The State Board of Equalization assesses all property usi 100% of value as defined by Article XIIIA of the Sta Constitution. State law provides exemptions from ad valor property taxation for certain classes of property such churches, colleges, non-profit hospitals, and charitab institutions. assessed valuations for the City: The following table sets forth the five-year history CITY OF CARLSBAD ASSESSED VALUATIONS Fiscal Before Redevelopment After Redevelopmen Year Adjustment Adjustment 1982/83 $2,064,175,069 $2,057,172,577 1983/84 2,252,921,234 2,242,525,629 1984/85 2,548,132,552 2,534,352,353 1985/86 2,951,163,070 2,917,119,901 1986/87 3,517,751,761 3,458,390,377 Source: Tax Levies, Collections and Delinquencies a personal property which is situated in the City as of t preceding March 1. A supplemental roll is developed wh property changes hands which produces additional revenue, F assessment and collection purposes, property is classified either "secured" or "unsecured" and is listed accordingly separate parts of the assessment roll. The "secured roll" that part of the assessment roll containing State-assess property and real property having a tax lien which sufficient, in the opinion of the assessor, to secure payme of the taxes. Unsecured property comprises all property r attached to land such as personal property or busin€ property. Boats and airplanes are examples of unsecur property. Unsecured property is assessed on the "unsecur roll. " County of San Diego Property Tax Services. Taxes are levied for each fiscal year on taxable real 6 I A ten percent penalty attaches to any delinquent payment for secured roll taxes. In addition, property on the secured roll with respect to which taxes are delinquent becomes tax-defaulted. Such property may thereafter be redeemed by payment of the delinquent taxes and the delinquency penalty, plus a redemption penalty to the time of redemption. If taxes are unpaid for a period of five years or more, the property is subject to auction sale by the County Tax Collector. In the case of unsecured property taxes, a 10% penalty attaches to delinquent taxes on property on the unsecured roll, and an additional penalty of 1.5% per month begins to accrue beginning November 1st of the fiscal year and a lien is recorded against the assessee. 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 specific 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 specified property of the taxpayer; and (4) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the assessee. Each county levies (except for levies to support prior voter-approved indebtedness) and collects all property taxes for property falling within that county's taxing boundaries. The secured tax levy and year-end delinquencies for 1982/83 through 1986/87 are shown on the following table: CITY OF CARLSBAD SECURED TAX CHARGES AND DELINQUENCIES Secured Tax Amount Delinquent % Del. Charqe June 30 June 30 1982/83 $3,824,695 $189,331 5.0% 1983/84 4,129,204 158 , 975 3.9 1984/85 4 , 720,080 183 , 873 3.9 1985/86 5,589 , 465 218 , 447 3.9 1986/87(1) 6,680,868 267,235 4.0 (1) Estimate. Source: County of San Diego Property Tax Services. 7 Budget Process Development of an annual budget typically begins threc months prior to the fiscal year under consideration. Budgetkc is a continuing process involving the presentation of budgel estimates by all departments, review of requests by the Cit] Manager and referral of a preliminary budget to the Cit] Council for consideration. After the City Council review an public hearing on the proposed budget, approval of the budge for the forthcoming year is enacted by resolution of the Cit Counc i 1 . Comparative Financial Statements The following table reflects the City's general fun financial statements for the fiscal year 1985/86 actua revenues, expenditures and fund balance, the estimated actua for 1986/87 and the 1987/88 budget: CITY OF CARLSBAD GENERAL FUND REVENUES, EXPENDITURES AND FUND BALANCE 1985/86 ACTUAL, 1986/87 ESTIMATED ACTUAL AND 1987/88 BUDGET Estimated Actual Actual Budget 1985/86(1) 1986/87(2) 1987/8E Taxes $14,851,803 $16,152,000 $17,918,( License and Permits 3,996,864 2,230,000 1,459 ,( Fines and Forfeitures 288,055 388,381 446,: Use of Money and Property 1,066,441 700 , 000 700, ( 2,640,686 1,915 ,! Revenue from Current Svcs. 2,870,965 Transfers In 708,754 573,841 1,241,' 1,234,824 2,333,933 2,271,1 Miscellaneous TOTAL REVENUES $25,017,706 $25,018,841 $25,952,: REVENUES : EXPENDITURES: General Government $ 4,120,270 $ 4,630,651 $ 5,416, Public Safety 7,851,268 9,429,494 9,513, Public Works 5,734,750 6,800,325 6,623, Cultural and Recreation 3,539,015 4,610,639 4,857, Transfers Out 3,727,322 TOTAL EXPENDITURES $24,972,625 $25,471,109 $26,410, -- REVENUES OVER (UNDER) EXPEND I TURES $ 44,081 $ (452,268) $ (458, FUND EQUITY JUNE 30 $ 910,569 $ 458.3 01 $ -0 (1) Figures excerpted from the City of Carlsbad 1985/86 Audit (2) Figures provided by the City of Carlsbad. Financial Report. 8 Financial and Accounting Information The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures, or expenses, as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. Thc various funds are grouped into eight generic fund types anc three broad fund categories as follows: Government Funds: General Fund - The general fund is the genera operating fund of the City. It is used to account fo: all financial resources except those required to bc accounted for in another fund. Special Revenue Funds - Special revenue funds are usel to account for the proceeds of specific revenu sources (other than special assessments, expendabl trusts, or major capital projects) that are legall restricted to expenditures for specified purposes. Debt Service Funds - Debt service funds are used t account for the accumulation of resources for, and th payment of, the principal of and interest on genera long-term debt, and related costs. Capital Projects Fund - Capital projects funds ar used to account for financial resources to be used fo the acquisition or construction of major capita facilities (other than those financed by proprietar funds, special assessment funds, and trust funds). Special Assessment Funds - Special assessment fund are used to account for the financing of publi improvements or services deemed to benefit tk properties against which special assessments ar levied. Proprietary Funds: Enterprise Funds - Enterprise funds are used t account for operations (a) that are financed ax operated in a manner similar to private enterprisc where the intent of the governing body is that tl 9 costs (expenses, including depreciation) of provir goods or services to the general public on continuing basis be financed or recovered primaril through user charges; or (b) where the governing bod has decided that periodic determination of revenuE earned, expenses incurred, and/or net income i appropriate for capital maintenance, public policy management control, accountability, or other purposes. Internal Service Funds - Internal service funds ar used to account for the financing of goods or service provided by one department or agency to othe departments or agencies of the City, or to othe governments, on a cost-reimbursement basis. Fiduciary Funds: Trust and Agency Funds - Trust and agency funds ar used to account for assets held by th City in trustee capacity or as an agent for individuals private organizations, other governments and/or othe funds. For the year ended June 30, 1985, the City wa holding only agency funds due, for the most part, t other funds and other agencies. Agency funds ar custodial in nature (assets equal liabilities) and d not involve measurement of results of operations. All government funds are accounted for using the modifiec accrued basis of accounting. Their revenues are recognize( when they become measurable and available as net curren assets. Taxpayer-assessed income, gross receipts, and othe. taxes are considered "measurable" when in the hands 0' intermediary collecting governments and are recognized a: revenue at that time. Anticipated refunds of such taxes arc recorded as liabilities and reductions of revenue when they art measurable and their validity seems certain. Expenditures are generally recognized under the modifiec accrual basis of accounting when the related fund liability i: incurred . Exceptions to this general rule include: (1) accumulated unpaid vacation, sick pay, and other employe€ amounts which are not accrued; and (2) principal and interest on general long-term debt which is recognized when due. All proprietary funds are accounted for using the accrual basis of accounting. Their revenues are recognized when the1 are earned, and their expenses are recognized when they are incurred. I 10 City Debt Structure Short-Term - Other than the Temporary Note, the City ha: not outstanding short-term indebtedness, nor had the City prioi to the Temporary Note incurred any short-term indebtedness. Lonq-Term - The City has never defaulted on the payment 0: principal or interest on any of its indebtedness. As of June 30, 1986, the City had outstanding $3,310,000 principal amount of bonds serviced by the City's Debt Service Fund, of which amount $785,000 principal amount represented genera: obligation bonds of the City and $2,525,000 principal amount represented revenue bond obligations of the City's Parkinc Authority and Building Authority. See "Appendix A - Excerpted 1985/86 Audited Financial Statements" attached hereto. Lease Obligations - In 1981, the City entered into ar agreement with the City of Oceanside to lease the public parking area surrounding a regional shopping area. Under the terms of the Agreement, the City has agreed to pay an aggregate amount of $700,040 including interest of 10%. The annual principal and interest payments are to be $70,000 through 1991 and $1 annually for each of the remaining years of the fifty year lease. In May, 1986, the City entered into a lease for a building to be used as the City's Community Development Center. The City's departments of engineering, planning and development services have moved into this building. The term of the lease is four years with an option to extend the lease for up to six additional years. The following is a summary of future annual minimum lease payments to be paid from the City's General Fund under existing leases as of June 30, 1986: Year Ending Annual Minimum June 30 Lease Payments 1987 $315,544 1988 304 , 864 1989 304 , 864 1990 265 , 720 1991 70,000 Thereafter 40 Direct and Overlappinq Debt Contained within the City are numerous overlapping local agencies providing public services. These local agencies have 11 outstanding bonds issued in the form of general obligation, lease revenue and special assessment bonds. The direct and overlapping debt of the City is shown in the following table: CITY OF CARLSBAD STATEMENT OF DIRECT AND OVERLAPPING DEBT 1986-87 Assesse d Valuation: $3,458,390,377 (after deducting $59,561,384 redevelopment tax allocation increment) DrRECT AND OVERLAPPING BONDED DEBT: San Diego County Building Authorities 4.245% $ 8,818,563 San Diego County Water Authority 4.407 1,425,444 San Diego County Water Authority Certi f i cates of Participation 4.407 4,407,000 Metropolitan Water District 0.731 3,930,068 Carlsbad Unified School District Carlsbad Unified School District Authority 95.770 6,775,728 San Marcos Unified School District 22.481 547,166 San Dieguito Union High School District 9.182 348,916 Encinitas Union School District 23.989 353,837 Enci ni tar Union School Di stri ct Authori ty 23.989 31 1,857 Other School Districts Various 8,644 Tri-City Hospital District 33.952 746,944 Pal ornar Pomerado Hospital District & Authority 0.711 116,746 Leucadia County Water District and 1.0. #l San Marcos County Water Costa Real Municipal Water District Certificates of Participation 98.785 12,150,555 Costa Real (Carlsbad) Municipal Water District, Improvement k ADD^ i cab1 e Debt 7/1/87 (Various issues) 95.801-95.807 644,326 49.069 & 5.045 347,909 and 1.0.'~ #1, 2, 6 6.517-9.698 161,697 District #1, 2, 3, 4 97.592-98.778 978,320 01 i venhai n Muni ci pal Water District 1.0. #1 30.219 472,927 Ci ty of Carl sbad 100. 565,000(1) City of Carlsbad Building Authorities 100. 2,375,000 City of Carlsbad 1915 Act Bonds 100. 9.570.000 $55,056,647 (1) Excludes notes to be sold. TOTAL DIRECT AND OVERLAPPING BONDED DEBT Rat1 os to Assessed Valuation: Direct Debt (9 2.940.000) 0.09% Total Debt 1.59% SHARE OF AUTHORIZED AND UNSOLD BONDS: Metropolitan Water District ................................ $1,937,150 Costa Real Municipal Water District, 1.0. #l ............... $ 98,035 Costa Real Municipal Water District, 1.0. #3 ............... $ 195,184 STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/86: YN: ($4~10) ................................................. g 314,760 Source: California Municipal Statistics, Inc. 12 GENERAL CITY INFO~TION Introduction It is a general law city with a council/manager form of government. The City encompasses 35.6 square miles and is located approximately 35 miles north of the City of San Diego. CITY OF CARLSBAD COUNTY OF SAN DIEGO POPULATION ESTIMATES The City was incorporated July 16, 1952. County Year City 1970 14 , 944 1,357,854 1975 19,200 1,560 , 700 1980 35 , 490 1 I 861 , 846 1981 35 , 600 1,895,200 1982 37 , 650 1,944,000 1983 39,200 1 , 988 , 600 1984 40 , 650 2 , 041 I 400 1985 44,950 2,102,500 1986 48 , 850 2 , 165,500 1987 55,300 2 I 240 , 700 Sources: 1970 and 1980: U.S. Census. 1975, 1981-1987: State of California Department o Finance. Labor Relations representation units, as follows: The City has 429 full-time permanent employees and fiv CITY OF CARLSBAD LABOR RELATIONS No. of Contract Expirat ic Representation Unit Employees Date Carlsbad Police Officers' Assoc. 73 June 15, 1988 Carlsbad Fireman's Assoc. 52 July 1, 1987 Carlsbad City Employees' Assoc. 228 June 30, 1987 Carlsbad Police Management 7 (1) City Management 69 (1) (1) Source: City of Carlsbad. Ongoing contracts without expiration dates. 13 I Retirement Proqrams All permanent employees of the City are covered under tk Public Employees' Retirement System (PERS) of the State, defined benefit plan. Pension costs are funded by month1 contributions from the City and covered employee: Contributions by the City during 1986/87 are estimated to I: $2,628,353 and are expected to be $2,608,545 for 1987/Fj€ Contribution rates are determined by PERS and are calculated t include unfunded prior service costs amortized through the yea 2000. The Public Employees Retirement System actuary estimatle the plan's unfunded liability as of June 30, 1987 to be $16,606 The City contributes to FICA only for Medicare benefits fo employees hired after April 1, 1986. The amount for 1986/87 i estimated to be $19,954 and $39,508 is expected to b contributed in 1987/88. ECONOMIC PROFILE General Description The California Employment Development Department forecasts that San Diego County's economy will experience growth durinc 1987 and 1988. Unemployment is expected to continue its downward trend in 1987. Employment As of May 1, 1987 the civilian labor force for the City was 22,580, of which 21,826 were employed. The unadjusted unemployment rate as of May 1, 1987 decreased to 3.3 percent from the May 1, 1986 rate of 4.0 percent. Largest Employers I The following table sets forth the largest employers in Carlsbad: 14 CITY OF CARLSBAD SCHEDULE OF PRINCIPAL EMPLOYERS 19 8 6-87 Number of Firm ProductIService Emp 1 oyee s Manufacturing: Hughes Aircraft Company Electronic Components 1,500 Eaton-Leonard Corporation Vending Machines 275 Beckman Instruments Microbics Operation 240 Watkins Manufacturing Corp. Portable Spas 185 DynaMed Incorporated Medical Products 180 Sierracin-Mangnedyne, Inc. Electronic Motors 162 Sargent Industries Industrial Seals 150 Non-Manufacturing: Tri-City Medical Center District Hospital 1,450 Plaza Camino Real Shopping Center 1,000 La Costa Hotel and Spa HotelIHealth Spa 1,000 City of Carlsbad Government 435 Car Country Carlsbad Car Dealership 500 (est.) Carlsbad Unified School District Education 425 San Diego Gas & Electric Electricity and Gas 414 Pea Soup Andersen's RestaurantIHotel 200 Daniel's Cablevision Cable TV 90 Source: City of Carlsbad Chamber of Commerce. 15 The following table presents the annual average wage an salary figures by industry classification for San Diego Count for the years 1982 through 1986. SAN DIEGO COUNTY WAGE AND SALARY BY INDUSTRY ANNUAL AVERAGES (In Thousands) I 1982 1983 1984 1985 1986 Agriculture 13.9 13.6 12.3 11.9 11.6 Mining 0.6 0.5 0.6 0.8 0.8 I Construction 29.0 31.6 41.4 47,5 52.0 Manufacturing 108.4 106.9 116.0 121.6 122.0 Transportat ion, Public Utilities 29.7 29.8 30.5 31.6 32.1 Wholesale Trade 27.5 28.3 31.0 33.6 34.8 I Retail Trade 126.7 131.6 142.4 153.3 162.7 Finance, Insurance, Real Estate 42.6 45.8 48.5 52.0 56.2 Services 158.6 163.5 181.3 197.9 211.1 Government 139.6 139.5 141.8 145.7 150.0 TOTAL 676.4 691.0 745.8 795.7 833.4 (1) Totals may not add due to independent rounding. Source: State Department of Employment Development. The following table presents annual labor force an employment data for San Diego County, the State of Californi and the United States for the years 1980 through 1986. A shown in the table, unemployment rates in San Diego County hav been lower than those in California and the nation as a whole. I 16 COUNTY OF SAN DIEGO Labor Force, Employment and Unemployment Yearly Average for Years 1980 through 1986 Civilian Year and Area Labor Force Employment Unemployment Rate 1980 San Diego County ........ 774,500 723,300 52,700 6.8% California .............. 11,581,000 10,791,100 789,900 6.8 United States ........... 106,940,000 99,303,000 7,637,000 7.1 1981 San Diego County ........ 797,300 740,500 55,000 6.9 .............. 7.4 California 11,799,900 10,907,800 872,100 United States ........... 108,670,000 100,397,000 8,273,000 7.6 1982 San Diego County ........ 834,000 756,800 77,200 9.3 California .............. 12,189,000 10,978,000 1,211,000 9.9 United States ........... 110,204,000 99,526,000 10,678,000 9.7 San Diego County ........ 877,100 805,100 72,000 8.2 California .............. 12,281,000 11,095,000 1,187,000 9.7 United States ........... 111,551,000 100,834,000 10,717,000 9.5 San Diego County ........ 915,300 860,800 54,500 6.0 .............. 7.8 California 12,619,000 11,638,000 981,000 United States ........... 113,544,000 105,005,000 8,539,000 7.5 San Diego County ........ 967,200 915,900 51 ,300 5.3 1983 1984 1985 California .............. 12,937,000 12,007,000 931,000 7.2 United States ........... 115,462,000 107,150,000 8,312,000 7.1 1986 San Diego County ........ 1,017,600 966,900 50,700 5.0 United States ........... 117,834,000 109,597,000 8,237,000 7.0 Cal i fornia .............. 13,365,000 12,473,000 892,000 6.7 Source: California Employment Development Department. 17 Commercial Activity Taxable sales in the City have increased at an annual rat of 13% during the five-year period 1981 through 1985. five-year history of taxable sales is shown in the followir table: CITY OF CARLSBAD TAXABLE TRANSACTIONS (in Thousands of Dollars) Retail Stores Total All Outlets No. of Taxab 1 e No. of Taxable Year Permits Transactions Permits Transactions 1982 422 327 , 179 1,121 359 , 774 1983 436 369 , 888 1 , 169 407 , 933 1984 468 439 , 885 1,304 482,963 1985 470 483 , 798 1 , 417 542 , 677 1986 522 503 , 109 1 , 612 571 , 855 Source: California State Board of Equalization. 18 Construction Activity for the past five years. The following table shows construction activity in the C CITY OF CARLSBAD BUILDING PERMIT VALUATION (In Thousands of Dollars) 1 New single housing $17,596 $ 63,870 $ 86,482 $122,340 $185, Residential 1982 1983 1984 1985 - New multi-dwelling 15,245 36,767 44,152 77,129 96 , Additions, alterations 2,183 2,231 2,670 3,261 3, Total Residential $35,024 $102,868 $133,304 $202,730 $286, Non-Residential New commercial $10,760 $ 5,921 $ 22,243 $ 31,921 $ 33, New industrial 6,758 8,407 1,481 745 2, Other 1,128 2,794 6,522 17,072 5, Additions, alterations 4,311 7,736 7,140 18,994 12, Total non-residential $22,957 $ 24,858 $ 37,386 $ 68,732 $ 54, Total Valuation $57,981 $127,726 $170,690 $271,462 $340, Number of new dwelling units Single dwelling 16 1 782 933 1,267 1, Multi-dwelling 25 1 817 90 7 1,528 L Total Units 41 2 1,599 1,840 2,795 3, Source: Security Pacific Bank, California Construction Trends. Transportation Excellent land, sea and air transportation facilities SE the City. Major road service is provided by Interstatc (north/south) and State Highway 78 (east/west). Mainline service of AMTRAK and the Santa Fe Railway available to the City. More than 100 trucking moving/storage firms serve North San Diego County, t overnight delivery service to Arizona, Los Angeles, San Die 19 San Francisco and intermediate points. Local bus service provided by North County Transit District; interurban ai regional bus service is provided by Greyhound and Trailways. 1 McClellan-Palomar Airport is located in the City and c accommodate private and light commercial aircraft. Oceansir Municipal Airport is located 8 miles north in Oceansidi California. Lindbergh Field (San Diego International Airpor is 30 miles south, and John Wayne Airport in Irvine, Californ is 45 miles to the north. Deepwater general cargo and bulk service is provided by t. Port of San Diego, located 37 miles to the south. TAX EXEMPTION In the opinion of Jones Hall Hill & White, A Profession’ Law Corporation, San Francisco, California, Bond Counse subject, however, to the qualifications set forth below, undl existing law, interest on the Notes is excluded from grog income for federal income tax purposes and such interest is nl an item of tax preference for purposes of the feder alternative minimum tax imposed on individuals aj corporations, provided, however, that, for the purpose I computing the alternative minimum tax imposed on sut corporations (as defined for federal income tax purposes), SUI interest is taken into account in determining adjusted net bor income (adjusted current earnings for taxable years beginnii after December 31, 1989). The opinions set forth in the preceding sentences a. subject to the condition that the City comply with a requirements of the Internal Revenue Code of 1986 (the “Code that must be satisfied subsequent to the delivery of the Notc in order that such interest be, or continue to be, excludc from gross income for federal income tax purposes. The Cif has covenanted to comply with each such requirement. Failui to comply with certain of such requirements may cause tl inclusion of such interest in gross income for federal incor tax purposes to be retroactive to the date of delivery of tl: Notes. Bond Counsel expresses no opinion regarding othi federal tax consequences arising with respect to the Notes. Prospective purchasers of the Notes should be aware thi (i) section 265 of the Code denies a deduction for interest ( indebtedness incurred or continued to purchase or carry tl Notes or, in the case of a financial institution, that portic of the Noteholders’ interest expense allocated to interet (ii) with respect to insurance companies subject to the ti 20 imposed by section 831 of the Code, for taxable years begin: after December 31, 1986, section 832(b)(S)(B)(i) reduces deduction for loss reserves by 15 percent of the sum of cer items, including interest on the Notes, (iii) for taxable y beginning after December 31, 1986 and before January 1, 1 interest on the Notes earned by some corporations could subject to the environmental tax imposed by section 59A of Code, (iv) for taxable years beginning after December 31, 1 interest on the Notes earned by certain foreign corporat doing business in the United States could be subject t branch profits tax imposed by section 884 of the Code, (v) passive investment income, including interest on the No may be subject to federal income taxation under section 137 the Code for subchapter S corporations that have subchapti earnings and profits at the close of the taxable year greater than 25% of the gross receipts of such subchaptf corporation is passive investment income and (vi) section 8 the Code requires recipients of certain Social Security certain Railroad Retirement benefits to take into account determining gross income, receipts or accruals of interes, the Notes. In the further opinion of Bond Counsel, such interes exempt from California personal income taxes. LEGAL MATTERS Jones Hill Hall & White, a Professional Law Corporat San Francisco, California, Bond Counsel, will render an opi as to the validity of the Notes. Certain legal matters wil passed on for the Underwriter by Brown & Wood, San Franci California. LEGALITY FOR INVESTMENT IN CALIFORNIA Under the provisions of the California Financial Code, Notes are legal investments for commercial banks in the Stat LITIGATION No litigation is pending or threatened against the concerning the validity of the Notes. The City is not awar any litigation pending or threatened questioning its polit existence or contesting its ability to levy and collec. valorem taxes or to collect or receive other Pledged Rev€ or contesting the City's ability to issue the Notes or ability to pay the principal of and interest on the Note 21 impeding the City's ability to issue general obligation bonr or Certificates of Participation to retire the Notes. RATING Moody's Investors Service has assigned a rating of MIG-I the Notes. Certain information was supplied by the City said rating agency to be considered in evaluating the Note The rating issued reflects only the views of such rati agency, and any explanation of the significance of such rati should be obtained from the rating agency. There is assurance that the rating will be retained for any given peril of time or that the same will not be revised downward 1 withdrawn entirely by such rating agency if, in its judgmen responsibility either to bring to the attention of the holde of the Notes any downward revision or withdrawal of any ratii obtained or to oppose any such revision or withdrawal, AI such downward revision or withdrawal of the rating obtained ml have an adverse effect on the market price of the Notes. circumstances so warrant. The City undertakes 1 UNDERWRITING The Notes are being purchased by Rauscher Pierce Refsner Inc. (the "Underwriter"). The Underwriter has agreed purchase the Notes pursuant to a contract of purchase by ai among the City and the Underwriter (the "Contract of Purchase at the purchase price of $ The Contract of Purchase provides that the Underwriter wi purchase all of the Notes if any are purchased. The obligati( to make such purchase is subject to certain terms ai conditions set forth in the Contract of Purchase. T1 Underwriter may offer and sell the Notes to certain dealers ai others at prices lower than the public offering price stated ( the cover page hereof. The offering price may be changed frc time to time by the Underwriter. ADDITIONAL INFORMATION The purpose of this Official Statement is to supp information to purchasers of the Notes. Quotations from ar summaries and explanations of the Notes, the resoluti( authorizing the Notes and the statutes and documents contain( herein do not purport to be complete, and reference is herei made to said resolution, statutes and documents for full a1 complete statements of their provisions. 22 All data contained herein have been taken or constr from the City's records and other sources. The approp city official, acting in such person's official capacity, reviewed this Official Statement and has determined that the date hereof the information contained herein is, tc best of such official's knowledge and belief, true and co in all material respects and does not contain an u statement of a material fact or omit to state a material necessary in order to make the statements made, in light o circumstances under which they were made, not misleading. appropriate City official will execute a certificate to effect upon delivery of the Notes. This Official Statemen its distribution have been duly authorized and approved b City Council. CITY OF CARLSBAD, CALIFORNIA By: Acting City Manager DATED: June -, 1987 23 APPENDIX A 1985 - 1986 AUDITED FINANCIAL STATEMENTS AU 0110 RS' 0 P1 N IO N Honorable City Council City of Carisbad. California: We have examtned the combined linancial statements of the City of Carisbad as of June 30. 1986 theyear then ended. as listed in the foreCoing tableof contents. Our gxaminatron was made in accc with generally accepted auditing standabds and, accordingly, included such tests of the accounting and such other auditing ptOCedUreS as we considered necessary In the circumstances. In our optnron, the abovementioned combined financial statements present fairly the financial go: the City of Carfsbad at June 30.1986 and the results of its operations and the changes rn financial 1 of its proprietary fund types for the year then ended, in conformity with generally accepted acc principles applied on a basis consistent with that of the preceding year. Our examination also comprehended the supplemental combining and account group financial stal as of and tor the year ended June30.1986 as listed in the foregoing table of contents. In our opinic supplementat combining and account group financial statements. when considered in relation to tt combined financial statements. present fairly in all material respects the information shown ther n&& /&R &d&/ SAN OIEGO. CALIFORNIA October 3. 1986 \ 17 -. --.!LJCJMU CCMBINE3 SAUNCE SilEE? ALL F'JNO NPES AND ACC3UNT GROUPS JUNE 20,1986 WITH COMPARATIVE SGURES FOR JUNE 30.1985 I Governmental Fund Types C.3 Notes General Revenue Servrce Pro Special Debt - - ASSFTS Receivables: Cash and investments 3 ~1.494.284 ~~743.048 s1,~,7?8 922.7 - Loan - 11,663 657,010 - Taxes Accounts 37,027 7,301 Accrued interest 1 10,364 37,769 24 073 . 12 23,615 - Due from other funds Due from other governments - 66.156 71 1,369.618 - Advances to other funds 14C69 4 Inventorj, at cost Restricted assets: 1 a55 - E - 2.09 - - - t - Prepaid expenses 79.500 87.223 - - - Cash and investments Accrued interest - Procerty, plant and equipment, net 4 - general long-term debt 4 - - - - - Investment in sewage treatment facility Amount available in Debt Service funds Amount to be provrded for retirement of TOTAL ASSETS tl A 81 LlTl ES Accounts payable Accrued wages payable 1,076.CO 1 Advances from other funds - - - - - - - rU.T79.481 $3.953.160 S? 569.546 525.523. S 397,925 S 350,536 S - 5 1 C81.E - 13.61 67.1 11 - - - 3.467.L 14,826 Oue to other funds '2 1 1,299 ? 7,446 6.200 Advances from other governments - 97 382 Oepostts payabIB - Deferred compensation payable 7 - - - - - - - - - - - Estimated claims payable Payable from restricted assets: - ~ccrued interest payable - - 14.63a - - - - Current ponfon of revenue bonds payable Revenue bonds payable, net of unamonited Deferred revenue Other payables - - - General obligation bonds payable 10 - discount of 54,936 in 1986 (96,170 in 1985) 10 - Obligations under caprtal lease a - - - - - - - - - - - - - - - TOTAL LlAE1 LlTiES I ~5.~5 ~ao.7~0 20.938 1 630.131 FUNO EQUIN Contributed caDitai investment In general fixed assets Retained earntngs 2.14 Fund balances TOTAL LIABILITIES AND FUNO EOUlN See accomuanvrng nozes io !inanoat staternenis. - - - - - - - 15 - 14 - - - - 2.294 256 3,472,460 i 5~a.708 20.391 6.13 TOTAL FUNO Eaum 2.294 256 3.~2.460 1 54a.7oa 20.~13.643 33.779.481 93,953.160 Sf 569.6a6 925 C23.784 c - IS Totals Propnetary Fund Types Fiduciary (Memorandum Only Enterprise Service 51 7,565,014 S2.973.650 913,164,862 S - s -- S 57,220,264 3dO.CC3. - - - - -- 11.563 J - - P 658.865 512. 1,291,181 248 - - -- 1,329.751 7,236. Account Groups - Internal Fund Type General General Long. Agency Fixed Assets Term Oebt 1986 1985 - - - 90.679 24.233 82.801 - - 486.126 :a5 71,435 2,165 9,878 - - 174,395 168. - - - - 66,156 231 - - 3.467,445 2.362. 149.892 - - - - 163.961 137 - - - - - 173,373 f 21 552,931 - - - - 552.931 51 2 10,509,324 821.403 -. 27,136,537 - 38.~67.2~ :o;E~ - - - - 2.076.731 2,076,731 2.408 - - - - - - - - -,d- 4 Fa0 4,590 7 6 I 44,927 e e - - 16,440.927 :6.XB - - - - t ,548,708 1.548.708 1.531 540.675.973 S3.827,699 S13.257,541 927,136.537 S3.625.439 5122.343.260 59636 s 1.2n.m s 55.381 o 356,989 s -s - S 3,520.159 S 1.3C9 34.781 16,798 - - - 7,156.020 964 71,774 153 - - - 1743% : 68 3.467,4A5 2.362 - - - - - 97.882 C8 40,822 *- - 12.228.843 - - 12,269,665 2.524 - - 671,709 - - 67 1,709 449 - 9?0,597 - - - 910,597 508 - - - - - 21.265 - - - - 35203 41 140.000 - - - - 140,000 130 - - - - 3.310.000 3,310,000 3.575 627,064 - - e e 627,C64 765 2,308,777 - - - - 2.308.7?7 2,JS - - - - 275,783 275.783 332 - - - - 39.656 39.656 7E 4.522.142 982.929 13,257.541 - 3.625.439 23.C05.015 15.76: 22.256,433 2.190.977 - - - 24.447.410 24.31: - - - 27,136,537 - 27,136.537 18.8% 13.897,398 647.793 - - - 14,545191 '10.14: - - - - - 27.709.C67 27.18: - 93.338.20s 80.53 27.126.537 36.153.831 2.838.770 S40.675.973 ~3,821.699 S13.257.541 527.1 36.537 S3.525.439 St 22.Z43.260 S96.3Ct - - 19 CITY OF CARLSBAD COMBINED STATEMENT OF REVENUES, EXPENDITURES. AND CHANGES IN FUNO BAU ALL GOVERNMENTAL FUNO NPES FOR THE YEAR ENCED JUNE 30,1986 WITH COMPARATIVE FIGURES FOR THE YEAR ENOEO JUNE 30,3985 REVENUES General Taxes si 4.85 1.803 Licenses and permits 3,996.864 Intergovernmental revenues - CtioigaS foi SF<~XS 2.a70.965 Fines and forfeits 288,055 Interest income 1,066,U? Miscellaneous revenues i .m.a24 TOTAL REVENUES 24.308.952 MPEN DlTU RES Current: Gerr era t government 4120.270 Public works 5,734,750 Welfare - Culture and recreation 3,539,015 Capital outlay - Pnncipai retirement . - Interest and fiscal charges - Miscellaneous e TOTAL D(PEN0INRES 21,245.303 EXCESS (DEFICIENCY) OF RNENU€S OVER EXPENOITUAES 3.063.649 OTHER FlNANClNG SOURCES (USEg Operaring rtansfe-s in 653.372 Operating transfers out 13.667.322) TOTAL OTHER FINANCING SOURCES (USES) (3.014.010) EXCESS (DEFICIENCY) OF REVENUES AN0 PwSlic safery 7 a51,xa Debt selvrce: OTHER FlNANClNG SOURCES OVER EXPENDITURES AND OTHER FINANCING USES 49,639 FUN0 BALANCES AT BEGINNING OF YEAR 2,250.1 75 RESIDUAL EQUITY TRANSFERS IN 54,442 RESIDUAL muin TRANSFERS OUT (60.000) FUNO BALANCES AT END OF YEAR S 2.294.256 See accompanying nates ro tmancral stdtemenrs. 20 Totals (Memorandum On”!) 198s 914,096,168 3,470.656 2,060.542 8,541.600 345,750 2.638.536 f 19.492 31.272.744 Capital 1986 Projects - - Secvtcs $16,364,319 3,996,864 $ 301,947 f 128,252 - - - 2,924,892 - 9,406,829 208,055 4 2857,221 1,240,056 - 8,034,352 - Debt - I 6,477,m 1,254,962 1 16,977 4 245.229 - - - - - 37,078.236 - 4 - 3.008.056 7.020.1C5 2,974,480 860.556 3.278.290 4,619.242 230,000 289,COO 454,687 - 22.279.729 - 36,206.852 - 8,993.01 5 871 384 - 7a8.000 (7a8.000) - (285,000) - - 4,124,793 4.523 - 7,851,268 - - 6.41 2.310 - - 1,052,394 - - 3,710.505 - 265,ocW - 12333,087 8,879.8s 4 236,255 2.888 - 265.000 - 21 8,352 - a7375 - - - 9,116,121 - - (1,081,769) - (242.6461 - 3,901,611 - (4,186,611) - 3,038,299 (1 56,000) 210.000 210.000 - I - - 2.882299 - - 8,993.01 5 586,384 1 8.189.66E 3,678,7@ 1,800,530 27,182,683 1,581,354 - 54.402 (3.678.74 - $27.182.68: - ~27,709,067 18,645,671 (32.646) (1 14,442) - (52558) SI ,5a,7oa - - ’- S20.393.643 - - - 21 I CIN CF CARLSBAO COMBINED STATEMENT OF REVENUES AND EXPENDITURES BUDGET AND ACTUAL(6UOCRARY BASIS) ALLGOVERNMENTAL FUN0 NPES FORTHEYEAR ENOEDJUNE30,1986 General Fund Special Revenue f Actual on Variance Actual on Budgetary Favorable Budgetary REVENUES Budget Basis (Unfavorable) Budget Basis Taxes ~i3,ai9.000 $14,asi,803 s 1,032803 s 1,03s,419 s 1,082.317 Licenses and permits 3,160,oCO 3,996,864 a6.w - - I ntergovernmen tal revenues e - - 8,172,064 2,924 a92 Fines and forfeits Po5,OOO 288,055 (1 16.945) - - Interest income 775,OOo 1,066,441 291,441 i 25,000 41 8,841 Miscellaneous revenues 1,112,963 1,234.824 121,861 f ,600 5.232 TOTAL REVENUES 21,531 ,w 24.308.952 2.m989 9,379.oa 4.4a9.703 General government 4,993,738 4,525.735 468.003 - - Public safety 8,467,259 7,a93,787 573,472 - - Culture and recreation 3,700,481 3,608,976 91,505 398,813 182,889 Principal retirement - - - - - Interest and fiscal charges - - - - - Charges for services 2,260.000 2,870,965 610,965 45.000 58,421 OPEN OITURES Pu bt ic works 6,138,483 6,029,974 108,509 1,973,967 604.247 Welfare e - - 1,056,079 1,052394 Capital outlay - - - 10,161,511 5,175,441 Debt service: Miscellaneous - - - - 2.888 TOTAL EXPENOITURES 23,299.961 22,058.472 1.241.489 13.590.370 7 097 859 EXCESS (OEFICIENCY) OF REVENUES OVER EXPENDITURES (1,767,998) 2,250,480 4,018.478 (4.27 i ,207 12.608. 156) OTHER FINANCING SOURCES (USES) Operating transfers in (out) 163,419 (3.01 4.070) (3,177,429) (718.419) (363.289) TOTAL OTHER FINANCING SOURCES (USES) 163.419 (3.oi4,oio) (3,in,429) (718.419) (363.289) EXCESS (DEFICIENCY) OF REVENUES AND OTHER FINANCING SOURCES OVER EXPENDITURES AND AND OTHER FINANCING USES S (1,604,579) .$ 33,530) f 841 049 $(4,929,706) 32.971 4d5) See accompanytng notes to frnanoai statements. 22 Capital Prolect Funds Actual on Variance Actual on Vzr'ancs Budgetaw Favorable Favuable Basis (Unfavorab $ (138.05 BudgetarY Budget (Unfavorabie) Debt Servlce Funds - - S 301,947 - t Mo.000 - $(l2748) - g 141,000 s 1287252 - 5,485,000 - Basis Budget - d - - 6,477,443 992.4 1,056.9 - 1911 3 4 - - - - d 4 e 198,000 1 ,254,962 - 4 - - (3,926) - 1 16.977 4 - - - 120,903 - 6,123,000 8.034.352 - - - - - (1 6,674 - 245,229 261,903 - - - - - - 4 - 4,523 - - - 4.523 - - 4 1 Y - - - - Y - 15,833,647 4 C68 - - 19,901,757 - - - - - - - - (236 3.831 265,000 265,000 220,344 489.867 - 236.255 - - 1,992 - 21 8,352 - - - - - - 19,901,757 i 6,064,402 - (8,035550) - 5.74 - - - - 1,992 - 487.875 - - (14,682) (1 3,778,357) (227,964) - (242,646) - - i 3s 2882.299 - 2,488.161 - 2382.2% - - - - 210.000 - 21 0.000 - 3' 2488,161 - - - - 21 o.oO0 - 21 0,000 - S6 s ~(11 298.596) g-' - S( 14 682) f (17.964) s .-L--c_ (32*646) __L_ - 23 I CITY OF CARLSBAO COMBINED STATEMENT OF RR/ENUES, EXPENSES. AND CHANGES IN RETAINED EA8NINGS- ALL PRCPRIETARY FUND NPES FOR THE YEAR ENDED JUNE 30.7986 WITH COMPARATIVE F~GUAES FOR THE YEAR ENDED JUNE 30.1985 Internal Totals (Memorandum c 1985 3 930,107 S 816 2,544,325 - 2,544,325 7 971. Reimbursed expenses 8,380 1,082,899 1,091.279 496. Miscellaneous revenue (expense) TOTAL OPERATING REVENUES OPERATING EXPENSES - 1986 - OPERATING REVENUES Enterprise Servlce Metered water sales $ 930.107 $ Sewer connect~on fees Other charges for servlces 336,238 744.075 1,080,313 t om - Sewer service charges 1,607,828 - 7 307.828 1 437 (88) 46 (42) 2.5 5.426.790 1,827.020 7,253.81 0 5~08.; Office expenses 66,256 10.942 77,198 EmI 336.055 56.852 392.907 7C8.7E Reparrs and maintenance 878.56 838,325 Professional servlces 823,192 15,133 9.9: insurance 17.850 - I i .a50 4.090 3.5 1 4,090 - Purchased water - 360,391 - Loss on disposal of property Ead debt expense (7 0,878) - (1 0,878) 19.52 388.96i Oepreciatlon and arnortrzatlon 265,097 14O.040 405,137 190,77€ 185,697 185.697 Fuel Supplies and parts - 85,608 85,608 aim 971,790 971,790 404 028 Claims expense e TOTAL OPERATlNG €XPENSES 2.734.626 1,706,216 4.440.842 3.699 724 OPERATING INCOME 2,692.164 120,804 2.81 2.968 2.708.524 NO N-OPERAT1 NG REVENUES (EXPENSES) 1,164.1 8p 378 735 Interest income 953,635 210,549 Interest expense and fiscal agent fees (4233 1 ) (42.531) 150.138) - 26,926 26.926 20,787 Sale of property TOTAL NON-OPERATING REVENUES 911,104 237,475 1,148.579 949 384 Operating transfer in - 285.000 TOTAL OTHER FINANCING SOURCES - Personnel servtces 878.573 240,154 1,178,727 946.8< 360,391 - - OTHER FINANCING SOURCES - 2a5.000 - 285,000 285.000 NET INCOME 3,603,268 643,279 4.246.547 3.057 9% Retained earnings, at begrnntng of year 10,139,192 4,514 70.143.706 7.303.298 Prior period adjustment (Note 2) Retamed earnings, at beginning of year, Retained earnings, at end of year (Note 11) 913.897.398 S 647.793 914.545.191 S10.143.706 7.54 938 (21 7 500) as adjusted 10,294,130 4.514 10,298.644 7 085.79~1 154,938 - See accomoanyrng notes io frnanciat statements 24 CITY OF CARLSaAD COMBINED STATEMENT OF CHANGES IN FINANCIAL POSITION ALL PROPRIETARY FUND NPES FOR THE YEAR ENDED JUNE 30.1986 WITH COMPAPATIVE FIGURES FOR THE YEAR ENDED JUNE 30.1985 lntemal Totals (Memorandur SOURCES OF WORKING CAPITAL Enterprise Service 1986 1 - - Operations: Net income S 3,603,268 $ 643,279 S 4,246.547 53.C Items not requiring working capital: Depreciation and amortization 265,097 140,040 405.137 Gain on sale of property - (26,926) (26.926) Loss on disposal of property 360,391 - 360.39 1 - Working capital provided by operations 4,zam 756,393 4,985,149 3.. Proceeds from sale of property - - - - Contributions from other funds - 60,000 60.000 TOTAL SOURCES OF WORKING CAPITAL 4 228,756 816.393 USES OF WORKING CAPITAL Acquisition of property, plant and equipment 623,157 172,922 796.079 L Decrease rn long-term revenue bonds payable 140,ooo - 140,000 Reduction of deferred revenue 146,001 - 146.001 Net decrease (increase) in other restricted assets and related liabilities 39,734 - 39.734 5045,149 3 - - 1 i t - - TOTAL USES IN WORKING CAPITAL 948.892 172.922 1 121 814 NET INCREASE IN WORKING CAPITAL ELEMENTS OF N€T INCREASE (DECREASq IN UNRESTRICTED WORKiNG CAPITAL Cash and investments $4,134,833 $1.031.451 55,166.284 52. Accounts receivable 78.808 2.246 81 054 Accrued interest receivable 90,679 24,233 114,912 Inventory 24,675 - 24.675 Prepaid expenses (5,320) - (5,320) Due from other funds 8,419 - 8.419 Estimated claims payable e (401,642) (401,642) Accounts payable (1,054,205) (1 1,146) (7,065,351) Accrued wages payable (9,073) (1,518) (10,591) Deposits payabte 19,806 - 19.806 Due to other funds (8.758) (1 53) 18.91 21 NET INCREASE IN WORKING CAPITAL See accompanying notes to !inancia/ statements s 3,279,864 3 643,471 s 3,923.335 52.' - -- _. - S 3,279,864 $ 643.471 S 3.923.335 52. - - 25 CITY OF CARLSBAO Notes to Combined Financial Statements June 30,1986 (7) Summary of Significant Accounting Policies The accounting policies of the City of Carisbad, California conform to generally accepted accou principles for governmental units. The following is a summary of the more significant policies (a) Description and Scope of the Reporting Entity The City conforms to the provisions of National Council on Governmental Accounting (N Statement No. 3 regarding the definition of the "Reponing Entity." Accordingly, the ge purpose financial statements include the activities of the various funds and account SI for which the City Council has effective oversight responsibility. This responsibiltv Inc!i but is not limited to, the authority to govern, manage, approve budgets, and assilrne i accountability. The financial statements of the City of Carlsbad include the financial activities of the Cit? Housing Authority of the City of Carlsbad, the Parking and Building Authorities of the C Carlsbad and the Catfsbad Redevelopment Agency. Their financial operations are closely re and the City Council has a continuing oversight responsibility over the entities. The over responsibility is determined on the basis of budget adoption, taxing authority, fundin{ appointment of the governing board. The City has an interest of approximately 25% in a joint sewer system known as the Encina b Pollution Control Facility. The major owner is San Oiego Gas and Electric Company, wno incl the facility in their financial statements. Since the City does not have significant influence the management or the operation of the facility, the City accounts for its investment on an e basis and excludes the financial statements for the facility. (b) Fund Accounting The accounts of the City are organized on the basis of funds or account groups, each of v is Considefed to be a separate accounting entity. The operations of each fund or dCCOUnt 5 are accounted for by providing a separate set of self-balancing accounts that Comprise its as liabilities, reserves, fund balancelretained earnings, revenues, expenditures or expenses various funds and account groups are summarized by type in the financial Statements. types and account groups used by the City are as follows: GOVERNMENTAL FUNDS: General Fund The General Fund is the general operating fund of the City. All general tax revenues and I receipts that are not allocated by law or contractual agreement to some other fund are aCCoi for in this fund. The fund is used to account for payments made for general operating exFe and capital improvement costs that are not paid through other funds. 35 CITY OF CARLSBAD Notes to Combined Financial Statements, Continued Special Revenue Funds The Special Revenue Funds are used to account for revenues derived from specific sources mat are restricted by law or administrative regulation to expenditures for specified purposes. Oebt Service Funds Oebt Service Funds are used to account for the accumulation of resources for, and the payment of, general long-term debt principal, interest and related costs. 1 Capital Project Funds Capital Project Funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds). i PROPRIETARY FUNDS: Enterprise Funds The Water Utility Fund and the Sewer Fund are used to account for operations that are financed and operated in a manner similar 10 a private business enterprise where the intent of the City Council is that the costs (expenses, including depreciation) of providing goods and Sewices to the general public on a continuing basis be financed or recovered primarily through user charges. Internal Service Funds Internal Sewice Funds are used to finance and account for activities involved in rendering services to departments within the City. Costs of services are accumulated in these funds and charged to user depmments as such costs are incurred. FIDUCIARY FUN 0: Agency Funds The Agency Funds are used to account for assets held by the City in an agency capacity for in. dividuals and private businesses. 27 , , , GIN OF CARtS8AD , I Notes to Combined Financial Statements, Continued ACCOUNT GROUPS: General Fixed Assets Account Grouo General Fixed Assets have been acquired for general governmental purposed. Assets purchased are recorded as expenditures in the governmental fund types and capitalized at cost in this group of accounts. In the case of gifts or contributions, such assets are recorded in general fixed assets at fair market value at the time received. Fixed assets consisting of certain improvements other than buildings, inctuding roads. bridges, curbs and gutters, streets and sidewalks. and drainage systems. have not been capitalized. Such assets normaily are immovable and of value only to the City; therefore, stewardship for capital expenditures is satisfied without recording of these assets. No depreciation has been provided on general fixed assets. General Long Term Debt Account Group This group of accounts is used to account for General Long Term Debt (backed by the full faith and credit of rhe City) inctuding the City's obligations under capital leases. (c) Measurement Focus and Basis of Accounting The proprietary {enterprise and internal service) fund types are accounted for on an "income de termination" or "cost of services" measurement focus. Accordingly, all assets and liabilities are included on the balance sheet, and the reported fund equity provides an indication of the eco- nomic net worth of the fund. Operating statements for proprietary fund types repon increases (revenues) and decreases (expenses) in total economic net worth. Governmental (general, special revenue, debt service and capital projects) fund types are ac- counted for on a "spending" measurement focus. Accordingly, only current assets and current liabilities are included on their balance sheets, and the repofled fund balance provides an indi- cation of available, spendable resources. Operating statements for governmental fund types report increases (revenues) and decreases (expenditures) in avaiiable spendable resources. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. Governmental and fiduciary fund types use the modified accrual basis of accounting. Revenues are recognized when susceptible to accrual, i.e., both measureable and available. Available means colleclible within the current period or Soon enough thereafter to be used to pay liabili- ties of the current period. In applying the susceptible to accrual concept to intergovernmental revenues, the legal and contractual requirements of the individual programs are used as guidance. 28 ClTY OF CARLSBAO Notes to Combined Financial Statements, Continued Revenues that are accrued include r?al and personal property taxes, sales tax, interest. and state and federal grants and subventions. Real property taxes are levied on October 15 against owners of record at March 1. The taxes are due in two installments on November 1 and February 1 and becomedelinquent after December 10 and April 10 respectively. Under the provisions of NCGA Interpretation 3. property tax revenue is recognized in the fiscal year for which the taxes have been levied, provided it is collected within 60 days of the end of the fiscal year. Governmental and fiduciary fund expenditures generally are recognized when the related fund liability is incurred. Exceptions to this general rule include: (1) principal and interest on long-term debt, which is recognized when due: (2) prepaid expenses, which are reported as current period expenditures rather than allocated: and (3) accumulated unpaid vacation, sick leave. and othei employee benefits, which are reported in the period due and payable rather than In the perm earned by employees. Proprietary Funds use the accrual basis of accounting, i.e., revenues are recognized in the Cerioc earned and expenses are recognized in the period incurred. 1 (d) Budgetary Oata The City allows these procedures in establishing the budgetary data reflected in the financia statements: 1. During May or June, the City Manager submits to the City Council a proposed operatin< budget for all funds of the City for the fiscal year commencing the following July 1. Thc budget includes proposed expenditures and estimated revenues on a line item basis. Public hearings areconducted at City Council meetings to obtain cjtitens' comments durn5 June. A Citizens' Budget Review Committee facilitates this process. Prior to July 1, the budget is legally enacted through passageof an appropriation resolution The City Manager is authorized to make transfers of appropriated amounts within a funr and function for up to S10,OOO. Revisions that alter the total appropriations of any fund 0 function must be approved by the City Council. A mid-year budget review is conducted eacl year. Any malor changes to the adopted budget are approved by the City Council at tha time, Monthly budget control reports are generated to assist the Finance Department and othf departmental heads in controlling the budget. Budgets for all governmental type funds are adopted on the modified accrual basis. exceF that encumbrances are treated as budgeted expenditures in the year of incurrence C commitment to purchase. Expenditures may not exceed budgeted approwations at the department level. Unencurr bered appropriations lapse at year end. 2. 3. 4. 5. 6. 7. 29 , c1T/ OF CARLS8AD Notes to Combined Financial Statements, Continued , , 8. On June 30. at the direction of the City Council in the annual budget resolutron. the differ. ence between revenue and expelditures in the General Fund is transferred to the General Capital Construction Fund (a capital project fund). This operating transfer provides funds for various capital projects. For purposes of a budgetary presentation, actual generally accepted accounting princioal expenditures have been adjusted to include encumbrances outstanding at year end. The following encumbrance amounts existed at year end and therefore were included in the Statements of Revenues and Expenditures-Budget and Actual (Budgetary Basis) in order to provide a meaningful comparison of the actual results of operations with the budget: 9. Encumbrances General Fund S 813,169 Specla; Revenue Funds 1,740,305 Capital Projects Funds 6,953,781 (e) Investments Investments are stated at cost, which approximates market. (f) inventories Inventories within thevarious fund types consist of materials and supplies that are valued at the lower ot average cost or market and are recorded as expenses when consumed. !g) Compensated Absences Vacation pay, which is included in accrued wages payable, is payable to employees at the time used or upon termination of employment. Vacation days are cumulative up to a maximum of 29 days in any one year for miscellaneous employees and safety employees, and 40 days in any one year for management employees. Sick leave accrued but unused is cumulative from year to year. For employees within the merit system, sick leave may not be taken as vacation or compensated in cash. Permanent miscellaneous employees (as defined) accumulating and maintaining 100 hours of sick leave can convert up to 12 days of sick leave to vacation at a ratio of three sick leave days to one vacation day. Upon retirement, such employees may also convert accrued and unused sick leave to extend service time at the rate of 25 sick days to one month of service time. (h) Self-insurance The City is self-insured for general liability and workers' compensation claims UP to SloO.000 and $1 00,OOO per occurrence, respectively. The City purchased outside insurance coverage for workers' compensation between S100,oOO and $1 0 million per occurrence. The City contracts with Eieriy and Associates to manage workers' cornpensation ChmS and 'with Carl Warren and Company to manage general liability claims. These companies determine the amounts that must be accrued at year-end for estimated claims payable. 30 CITY OF CARLSBAO Notes to Combined Financial Statements, Continued (i) Memorandum-Only Totals Columns in the accompanying financial statements captioned "Totals (Memorandum Only)" 31 presented as additional analytical data and do not present financial statements in accordanc with generally accepted accounting principles. cj) Encumbrances Encumbrances accounting, under which purchase orders, contracts and other commitments ic the expenditureof monies are recorded in order to reseme that portion of the applicab(e apcrool ation. is employed as an extension of formal budgetary control in the governmental funds. E: cumbrances outstanding at year end do not constitute expenditures or liabilities, but are repone as reservations of fund balance for subsequent-year expenditures. (k) Unbilled Service Receivables Unbilled service receivables in proprietary funds are reflected in accounts receivable at year 8- with a corresponding increase in revenues. 1 (I) Investment in Sewer Facility The City has an ownership of approximately 25% in a joint Sewer system known as the Encir Water Pollution Control Facility (the Facility). The City accounts for such investment on an equi basis. The Facility charges the City usage fees on an e~~~ity basis; such cnarges totaled S795.& and are classified within professional sefvices expense. (m) Fixed Assets - Proprietary Funds Fixed assets owned by proprietary funds are capitalized at historical cost or fair market value i of date of contribution. Depreciation is charged to operations using a straignt-line method bas6 on the estimated useful life of the asset. The estimated useful lives of the assets are as follow 10-25 years Buildings Structures and improvements 50 years Sewer, sewer lines and wells 40 years Equipment 4-10 years Wells, reservoirs and dams 10- 100 years Transmission and distribution lines 40-70 years Filters and pumps 10-50 years Fire hydrants 50 years in) Deferred Revenue The deferred revenue balances of the Enterprise Fund relate to deposits or in-kind prepaymer for services to be rendered (e.g., sewer installation. etc.). 31 , , CITY OF CARLS8AO Notes to Combined Financial Statements, Continued (0) Comparative Oata/Totals Only Comparativedata for the prior year has been presented in cenain of the accompanylng financ: statements in order to provide an understanding of changes in the City's financial position a! operations. Also, cenain of the prior year amounts have been reclassified to conform wh the CI rent year financial statement presentations. (2) Prior Period Adjustments Water Utility Fund In the prior year, the City overstated repair and maintenance expense and accounts pav %'34,938. This overstatement was corrected during the current year by an adjustment to 7 earnings at beginning of year. (3) Cash and Investments A summary of cash and investments as of June 30.1986 follows: Interest Rates ( Cash 0- 6.35% S Certificates of Deposit 7.05 - 9.50% 31, - Federal Agency Notes 7.27 - 8.69% 7. Treasury Coupons 7.49 - a.z% 3.8 15. s57. - Miscellaneous Investments 4.00 - 11.50% - - (4) Propeny Rant and Equipment Summary of Changes in General Fixed Assets Balance ea1 July 1, 1985 Additions Deletions June: Land $ 5,656,682 $ 4,321,247 S - s 9.' 5. Improvements 7,974,627 207,770 7,131,259 7. Equipment 1,741,537 473,388 313.883 1. 4 Buildings 3,523.a~ 2.238.928 Other Furniture and Construction ' in Progress - a. ~3.678 e 8. TOTAL 918,896,668 s15,sami S7.4d5.142 527. 32 ClN OF CAALSBAO Notes to Combined financial Statements, Continued A summary of proprietary fund prooany, plant and equipment at June 30. 1986. follows: Total Internal Enterprise Service Prcorietary Funds Funds Funds 5 459.2Cf 37.1 ai 37,94 1,289.15, 5090,441 4.68 j.75 2.637.91 Construction in progress 2,657,916 TOTAL 1 4,30438 1 1,626,199 15.931 .CE TOTAL ' $1 0,5O9,324 S 821.403 $1 1.330.7; 4 S Land. water rights, rights-of-way $ 459,206 Structures and improvements 37,948 - Buildings 37,188 Wells, reservoirs and dams 1,289,152 Transmission and distribution lines 4,068,674 Sewer, sewer lines and wells 5,090,U Purification, pumps and booster stations 4,684 - - 4.c6a.67 - - - Equipment and vehicles 653,908 1,626,199 2.250.10 Fire protection services 5,759 - J Less accumulated depreciation (3,795,557) (804,796) (4.600.35 - (5) Joint Venture - Encina Water Pollution Control Facility The Encina Water Pollution Control Facility (the Facility) is a sewer system owned jointly by the Cities of Carisbad and Vista. the Leucadia Water Distnct, the Eluena Vista Sanitary Distrrct. the San Marcos County Water District and the Encinitas Sanitary Oistrict. The Leucadia County WatE District is the operator and administrator of the facility and is responsible for the management, maintenance and operations of the joint system. Ownership percentages were determtned by jotr agreement at the time the assets were acquired. The following is a summary of the facility's financial information as of June 30, 1985. the date of the most recent audited financial statements. Operating revenue S 176.000 Operating expenses 2.916.000 Operating loss S (2.740.000) Contribution from participants S 3.021.000 Total assets 966.579.000 Total liabilities S 1,064,000 Total equity 565.5 15.000 City of Carisbad's investment interest $1 6.440.927 33 CITY OF CARLSBAO Notes to Combined Financial Statements. Continued (6) Retirement Plan The City’s permanent employees are ccvered by the Public Employees Retirement System [PEAS) o the State of California in which the City participates. The total pension expense of the City for the cur rent year was approximately $2,387,000 for current and past service costs. Pension costs are recorded as expenditures when paid and are funded by monthly contributions iron the City and employees to PERS. Contributions are based on rates set by PERS based on certaif actuarial assumptions, such as length of employment, estimated salary rates. mortality rates projected retirement benefits and other factors. The actuarial cost method used is entry age norma cost. At June 30, 1986, the plan net assets attributed to the City for benefits totaled $16,128.413, and tht present value of the City’s unfunded obligation for prior service costs totaied S20.632 which will bt funded through the year 2000 from established contribution fates. The excess. if any, of the actuari ally computed value of vested benefits to City employees over amounts availaDle in the PERS pensior fund is not determinable under the PERS system of accounting. (7 Deferred Compensation Plan The City has established a deferred compensation plan whereby City employees may elect to defe portions of their compensation in return for retirement, disability and death benefits. Amounts deferrec may not exceed the lesser of $7,500 or 25% of a participant’s “includable cornpensation,” as definec in the participation agreement. The City makes no contribution to the plan. The City does not manage the deferred compensation plan. Instead, employees may choose betweec three financial institutions !hat offer ten different deferred compensation plans. These financial institutions invest plan assets in a combination of deferred compensation options in cluding short-term certificates of deposit. bond funds, stock funds, and government securities. At Junc 30. 1986, the amount of thedeferred compensation investments(and the resulting deposits recorcec in the Agency Fund) was $671,709. The City does not indemnify employees against losses incurred in the deferred compensation Plans Distributions are made upon the occurrence of the participant’s termination. retirement. death or tota disability, and in a manner in accordance with the election made by the participant. All City employee: are eligible for plan participation. (8) Obligations Under Capital Leases In 1981 the City entered into an agreement with the City of Oceanside to lease the public parking area surrounding a regional shopping area. Under the terms of the agreement. the City of Carlsbad agreed to pay an aggregate amount of $700,040 including interest of 10%. The annual principle and interest payments are to be $70,000 through 1991 and $1 annually for each of the remaining years of a fifty year lease. The City’s leasehold interest of $430,152 has been recorded in the City’s general fixed assets. In 1978 the City participated with the City of Oceanside for purchase of an automated CirCUlatlOn system for their respective tibraries. The City’s leasehold interest of $102.025 is recorded in general fixed assets. The lease purchase requires annual payments of principal of $1 1,722 through August. 1986 with interest at 5% per annum. 34 CITY OF CAACSBAO Notes to Combined Financial Statements, Continued The following is a summary by years of future minimum lease payments under caoital leases (paid frcr the General Fund) and the present valcr f of minimum lease payments at June 30, 1986: Year Ending June 30 Annual Minimum Lease Payments 1987 $ 80.680 1988 70,000 1989 70,000 1990 70,000 1991 70,000 Thereafter 40 Total minimum lease payments 360,720 Less amount representing interest 84,937 Present value of minimum lease payments s27s.783 (9) Lease on Community Development Building In May, 1986, the City entered into a lease for the building at 2075las Palmas Drive. The building is be used as the City’s Camrnunity Oevelopment Center. The departments of engineerlng, planning ar development services have moved into the Community Oevelopment Center. The term of the lease is four years with an option to extend the lease for up to six additional year: J The following is a summary by years of future minimum lease payments under the lease (paid frl General Fund) at June 30,1986: Year Ending June 30 Annual Minimum Lease Payments 1987 3234.864 1989 234,864 1990 195.720 9900.31 2 1988 234,864 Total minimum lease payments 35 I I I 1 I CIN OF CARLS8AD Notes to Combined financial Statements, Continued (10) Long-Term Debt (a) Revenue bonds A summary of changes in Revenue Bonds Payable-Proprietary (Water Utility) Fund IS strowr Balance Balance July 1, 1985 Payments June 30. 15 1958 Waterworks Revenue Bonds. prin- cipal due in amounts ranging from W,OOO to $47,000 on July 1 of each year through 1988 (Interest is payable on January 1 and July 1 of each year at 4.10%) 31 77,000 3 40,000 S13f.C 1960 Waterworks Revenue Bonds, prin- c.pal due In amounts ranging from S1O.OOO to 565,000 on July 1 of each year through 1990 (Interest is payable on January 1 and July 1 of each year at varying rates from 3.875% to 4.25%) 175,000 10,000 165.C 1970 Waterwotks Revenue Bonds, prin- cipal due in amounts ranging from W,ooO to $10O,oCO on July 1 of each year through 1990 (Interest is payable on January 1 and July 1 of each year at 47c.c - varying rates from 6.00°/0 to 6.90°/0) 550.000 8O.COO TOTAL Revenue Eonds Payable 3902.000 S130,OOO s772.c Less unamortized discount ( 4.5 Less current portion i140.C S627.C - TOTAL Debt service requirements to maturity are as follows: Schedule of 1958 Water Revenue Bonds Debt Service to Maturity Fiscal Interest Interest Total Principal Total Anni Year Due July 1 Due January 1 Interest Due July 1 Debt Semi 198687 S 2.809 $ 1.886 S 4,695 $ 45.000 S 49.695 1987-88 1,886 964 2.850 45.000 47.85~ 1988-89 964 0 964 47.000 47.964 TOTAL S 5,659 5 2.850 s 8.509 S 1 37.000 9145.505 - 36 CITY OF CAALSBAD Notes to Combined Financral Statements, Continued Schedule of 7960 Water Revenue Bonds Oebt Service to Maturity Fiscal Interest In !erest Total Principal Total Annual Year Due July 1 Due January 1 Interest Due July 1 0 eb t Sew i c e 1986-87 $ 3,272 s 3,059 k 6,331 $ 10,000 S 16.331 1988-89 2.759 2.459 521 8 15.000 20.2: 8 1,259 0 1.259 65,000 66.259 1 990-9 1 1987-88 3,059 2.759 5.818 15,000 20.a1a 198990 2.459 1,259 3.718 60,000 63.71 a TOTAL 512.808 S 9.536 $22.344 $1 65.000 si 87.344 - - Schedule of 1970 Water Revenue Bonds Oebt Service to Maturity Fiscal Interest Interest Total Principal Total Annual Year Due July 1 Due January 1 Interest Due July 1 Oebt Service 1986-87 $15,185 st 2.338 $27,523 $ 85,000 $1 12,523 1987-88 1 2,338 9,278 21,616 90,000 111 616 1988-89 9,278 6,000 15,278 95,000 1 10,278 1989.90 6,000 3.000 9,000 100.000 109,000 1990-91 3,000 0 3,000 100.000 103,000 TOTAL $45,801 $30,616 576.41 7 Sd70.000 9546.41 7 (b) General Obligation Bonds A summary of changes in general obligation bonds payable (serviced by the City's Oebt Service Fund) is as follows: Balance Balance July 1, 1985 Payments June 30. 1986 1962 Series A General Obligation Sewer Bonds, principal due in amounts ranging from 540,OOO to 550.000 on July 1 of each year through 1988 (In- terest is payable on January 1 and July 1 at 3.5% per annum) 81 70.000 $ 40,000 $1 30.000 1962 Series 8 General Obligation Sewer Bonds, principal due in amounts ranging from $40.000 to $100,000 on July 1 of each year througn 1991 (Interest IS payable on January 1 and July 1 at rates varying from 3.5% to 3.6'/0) 440.000 40,000 4co.cco 37 CITY OF CARLSBAO Notes to Combined Financial Statements, Continued ealance Balance July 1, 1985 Payments June 30, '9Bc 1962 Series C General Obligation Sewer Bonds, princrpal due in amounts ranging from 520.000 to 925,000 on July 7 of each year through 1991 (In- terest IS payable on January 1 and July 1 at rates varying from 3.7% to 3.75 '/a) 165,000 20,000 145,COO 1966 Lbrary General Obligation Bonds, principal due In amounts rangmg from 515,000 to 925.000 on January 1 of each year through 1992 (Interest IS payable on Janua!y 1 and July 1 at 1967 Cartsbad Building Authority Revenue Bonds. principal due in amounts ranging from $25,000 to $35,000 on December 15 of each year through 1992 (Interest is payable on December 15 and June IS at 6.0% per annum) 220,000 25.000 795.0CO 4.5% per annum) 125,000 15,000 110.000 1969 Carlsbad Parktng Authority Revenue Bonds, principal due In amounts ranging from $75.000 to 5125,000 on October 1 of each year througn 1995 (Interest is payable on October 1 and April 1 at rates vqmg from 6.3% to 6.4%) $1,025,000 5 75,000 S 950.000 1981 Carlsbad Parking Authority Revenue Eonds. pnncipal due In amounts ranging from $4O,ooO to $150.000 on February 1 of each year through 2001 (Interest IS payable on August 1 and February 1 at 8% per annum) 1 ,430,000 50.000 1.380.000 TOTAL S3.575.000 5265.000 93.3 1 0.000 38 CITY OF CARLSBAO Notes to Combined Financial Statements, Continued Debt semice requirements to pa urity are as follows: Schedule of 1962 General Obligation Sewer Bonds, Series A, Debt Service to Maturity fiscal Interest Interest Total Prrnctpal Total Ann! Year Due July 1 Oue January 1 Interest Due July 1 Debt Semi 1986-87 S 2.275 $ 1,575 s 3.850 $ 40,000 s 43,m 198788 1,575 875 260 40,000 42.4% 875 -0- 875 50,000 50.87: 198849 TOTAL $ 4,725 s 2,450 $ 7,775 S130.000 9137.175 - Schedule of 1962 General Obligation Sewer Bonds, Series 8, Debt Service to Maturity Fiscal Interest Interest Total Principal Total Ann1 Due July 1 Debt Semi Year Due July 1 Due January I Interest 1986-87 $ 7,180 $ 6,480 S13.660 s 40,000 S 53,66C 1987-88 6.480 5,760 12,240 40,000 52.24C 198SW 5,040 3,420 8,460 90.000 98.46C 198&89 5,760 5,040 10,800 40,000 50.8OC 1990-91 3,420 1,800 5,220 90.000 95.22c 1991 -92 1,800 -0- 1.800 iao,ooo 101 aoc TOTAL $29.680 s22.500 352.180 $400.000 sa i ac - - Schedule of 1962 General Obligation Sewer Bonds, Series C, Debt Service to Maturtty Fiscal Interest Interest Total Principal Total Anm Year Due July 1 Due January 1 Interest Due July 1 Debt Sewit 198647 S 2.707 s 2338 S 5.045 s 20.000 f 25,045 1987-88 2.338 1,875 4,213 25,000 29.21 3 1988-89 1,875 1,406 3.281 25,000 28.281 198990 1,406 938 2,344 25,000 27,344 1990.91 937 469 1,406 25,000 26,406 0 469 25,000 25.466 1991 -92 TOTAL $ 9.732 S 7,026 $16.758 $1 45.000 S161,75E - 469 - 39 CITY OF CARLSBAO Notes to Combined Financial Statements, Continued Sctredule of 1966 General Obligation Librzr, Bonds, Debt Servrce to Maturity Fiscal Interest Interest Total Principal Total Ann Year Due July 1 Due January 1 Interest Due January 1 Debt Sen 1986-87 s 2475 $ 2,475 $ 4,950 s 15,000 s 19.95 1987-88 2.138 2.138 4,276 15.000 79,271 198889 1,800 1,aw 3.600 15,000 18.60r 1989-40 1,462 1,462 2,924 20.000 22.921 1990-91 1,013 1,013 2.026 20,000 22.02f 1991-92 562 562 1,124 25.000 26.121 TOTAL s 9,450 S 9,450 $18,900 s110.000 S 1 28.90( Schedule of 1367 Aeverue Bonds Carisbad Building Authority, Debt Servrce to Maturity Fiscal Interest Due Interest Due Total Princrpal Due Total Ann June 15 Interest December 15 Oebt Sew Year December 15 198647 $ 5,850 s 5,100 $10,950 3 25,000 3 3593 1987-88 5,100 4,350 9,450 25,000 34.43 1988-89 4,350 3,600 7,950 25,000 32.9% 198990 3.600 2.850 6,450 25,000 31.43 1990-91 2.850 1,950 4,800 30,000 34 80( 1991-92 1,950 1,050 3,000 30.000 33.00( 1992-93 1,050 0 1,050 35.0GO 36 0% TOTAL 524.750 $18,900 $43,650 $195.000 S238,65[ Schedule of 1969 Revenue Bonds Carisbad Parking Authority, Oebt Service to Maturity Fiscal Total Principal Total Ann Debt Sew Year Interest Due October 1 198687 S 58,250 $ 75,000 S 133.2! 198849 48,743 75,000 123.71 1990-91 38.400 100,000 138.4( 1991 -92 32.000 100.000 132.0( 1992-93 25,600 1m.000 125.6( 1993-94 19,200 100,000 1 19.2( 1994-95 12.000 125,000 137.0 TOTAL s 335,680 $ 950,000 S1 285.6( 1987-88 53,506 75.000 i 28.3 198490 43,981 75,000 1 18.94 1995.96 4,000 125,000 129.0( 40 CITY OF CARLSEAO Notes to Combined Financial Statements, Continued Schedule of 1981 Revenue Bonds Carlsbad Parking Authority, Debt Service to Maturlty Fiscal Total Principal Total Annual Due February 1 Oebt Service Year Interest 198687 s110,400 $ 50.000 5 160,400 i 987.88 106400 60,000 166,400 1988-89 101,600 60.000 161 600 1984% 96.800 60,060 156.800 75,000 167.000 75,000 161.000 1990-91 92ooO 1991 -92 86.000 1992-93 80,000 75,000 155.000 1993-94 74,000 100.000 174.000 199495 66,000 100.000 166.000 1995-96 58.000 100,000 i 58.000 1997-98 42000 125,000 167.000 157.000 i 99899 32.000 12500 199400 22,cQo 125,clOo 147,000 162.000 $1,029,200 $1,380,800 S2.409.200 TOTAL - 1996-97 50.000 100,000 1 so.co0 2000-01 12.000 150,cxlo (1 1) Advances To and From Other Funds Advances to other funds Advances from other funds Fund Amount Fund Amount - $3.467.445 $3.467.445 TOTAL 93.467, .l45 - General $1,369,618 Capital Prolects Capital Proiects 2,097,827 (Redevelopment Pro] ec t) TOTAL 41 I I i I , I , GIN OF CARLS8AD i Notes to Combined Financial Statements, Continued (12) Due to and From Other Funds The following table shows amou!,ts due from funds in the City to other funds within the Cit Due to: Payroil General Constr. ation Liab. Agency Fund Fundt‘ Fmd Fun&”’ § Capital Sanit- Ins. Trus.- Genera 1 Sei f Fund -- --- Due From: General Fund $- $-s- $1,962 s9.337 Street Lighting Fund - - - 11 54 HUD-Section 8 Fund 17,315 - - 25 41 Library Bond Fund 6,300 Water Utility Fund - - 71,435 39 145 Sanitation Fund e - - 43 102 Vehicle Maintenance Fund - - - 46 107 92 Redevelopment Fund - - - - -- d 67,302 - 29 --- ~2,165 ~9.878 : -- -- $23.615- $67,302 $71,435 -- --- ;a’ General Capital Construction Fund lb’ Self-lnsurance Liability Fund (13) Line of Credit The City has a lineof credit of $l,OOO,GUO. This line of credit was not used as of June 30. 196 42 CITY OF CARLS8AO Notes to Combined Financial Statements, Continued (14) Fund BalanceslAetained Earnings The following IS a summary of resefvea and unreserved fund balances and retained earnings as of June 30, 1986, with comparative figures for June 30, 1985: Totals Governmental Fund Types (Memorandum Only) Special Debt Capital General Revenue Service Projects 1986 1985 Fund Balances: Reserved for Reserved for Inventory supplies 14,069 - - - 14,069 12.288 Reserved for debt service e - 654,658 2,097,827 2,752.j85 66a 62; Reserved for advances to Other funds 1,369,618 - - 626,689 1,996.307 2,649.07: Reserved for encumbrances 813,169 1,740,305 - 6,953.781 9,507,255 5,046.64 Unreserved: Designated for approved capital prepaidexpenses S 79,500 S 87,223 s - $ 6,650 S 173,373 S 116.209 projects 17,900 6,404,634 - 4,164,591 10,587,125 9.961.38 Undesignated - (4,759,702) 894,050 6,544,105 2,678,453 8,728.05 TOTAL Fund Balances $2294,256 S3,472,460 S1.548.708 $20,393,643 $27,709.067 S27.182.62 Totals Proprietary Fund Types (Memorandum oniy) Internal Enterprise Service 1986 1985 Retained Earnings: Reserved for construction S 445,851 S - s 445.851 s 662.9 Reserved for debt service 91 1,291 - 91 1,291 887.4 Unreserved. Designated for approved cap1 t al projecrs 2,221,387 - 2,221,387 1.329.C Undesignated 1031 8,869 647,793 70,966,662 7 304 2 TOTAL Retained Earnings S13.897.398 3647,793 $14,545.191 91 0.183.; 13 CITY OF CARLS8AD Notes to Combined Financial Statements, Cantinued Reserves for prepaid expenses, inventory supplies and advances to other funds are establt show that ceRain assets already f ommitted to otner purposes are not available for discretioi penditure. Reserves for encumbrances represent commitments related to unperformed contracts for sew undelivered goods. Reserves for debt service represent resources legally restricted to the payment of General 101 debt princtpal and interest matunng in future years. Reserves for construction represent commitments related to unperformed contracts for capi struction projects. Unreserved-designated for capital projects, identifies plans for and restrictions on the futurc financial resources for approved capital projects. Unreserved-undesignated represents the fund balanceor retained earnings remaining after ref for reserved and designated fund balances or retained earnings. In the combined special r funds, this account has a debit balance. Because many prolects in the special revenue fund: financed out of future revenues, the unreserved-undesignated fund balance represents the an- be realized before projects may be completed. As of June 30,1986, the only funds with adeficrt in fund balance were the Redevelopment Func ita1 project fund wlth adefkrt of $2,532,306, and the Lbrary Bond Fund, a debt service fund with I of 56,038. (15) Changes in Contributed Capital Additions Contributed Contr Capital Fixed Cal Cash Assets June : July 1, 1985 - Enterprrse Funds Water Utility $ 2,425080 s- 5- 3 2.4 19.8 $22.2 - Sewer 19,757,360 - 73.993 TOTAL Enterprise Funds $22,182.44 s- s73.993 - - = Internal Service Funds Workers’ Compensation S 500,000 s- 5- $5 General babiltty Self-Insurance 850,000 - - Central Garage 780,974 - - 8 7 - - Data Processing - 60,000 TOTAL Internal Service Funds S 2.130,9i? 560.000 s- 5 2.1 - - 44 CI?Y OF CARLSAD Notes to Combined Financial Statements, Continued (16) Segment Information for Enterprise =:Jnds The city maintains two enterprise funds that provide water and sewer services. Segment information for the year ended June 30, 1986, was as follows: - Water Total Utility Sewer Enterprise Fund Fund Funds Operating revenues $1,241,885 $ 4,184,905 $ 5,426,790 Oepreciation and amortization expenses 137,225 127,872 265,097 Operating income (loss) (76,0681 2,768,232 2.692.164 Nonoperating income or (expense) 237,967 673,137 911,104 3,441,369 3,603.268 Net income 161,899 Capital contributions 2,425.08G 19,831,353 22.256.433 Property, plant and equipment (at cost): 621 ,Q63 623.157 - 552.41 5 Net working capital 3,542223 8,200,942 1 1,743.165 Bonds payable from operating revenues 627,064 - 627,C64 Total Assets 9,325,810 31,350,163 48,675,973 Total Equity 7,136,124 29,O 1 7,707 36,153,831 Additions 2.094 Deletions 552,415 (17) Assessment District Bond Issues On March 10, 1986, $460,942 in Assessment District Bonds were issued under provisions of the Improvement Bond Act of 1911. The bonds were issued to finance a public infrastructure improvements project in the area located north of Basswood Avenue between Highland Drive and Valley Street. This project includes construction of a new street (James Drive) complete with curbs, gutters, sidewalks, street lights. storm drain, sewer, water and all other utilities. On May 29,1986, $9,570,250 in Assessment Oistrict Bonds were issued under provisions of the Improve- ment Bond Act of 1915. The bonds we issued to finance a public infrastructure improvements project. The improvement project consists of the construction and improvement of College Boulevard to an improved paved stfeet that extends from €1 Camino Real southwesterly to Palornar Airport Road. Street Construction consists of grading, landscaping, irrigation, curb and gutter, sidewalk, raised medians, traffic striping, sign control, signals and minor drainage stnrctur@S. The City has no obligation beyond the balances in the resewe furrds for any delinquent assessmen' district bond payments. If delinquencies occur beyond the amounts held in the reserve funds, the Cit) has no duty to pay thedelinquency out of any avaiiabte funds of the City. Neither the faith, credit no taxing power of the City is pledged to the payment of the bonds. i 45 I I I CIN OF CAALSBAO I Notes to Cambined Financial Statements, Continued (18) Contingencies (a) The Water Utility Fund of the C;t‘/ and Costa Real Municipal Water District (the “District”) ( rently are providing water services to most of the City under the terms of a basis of understanc negotiated in an effort to settle a law suit between the parties. Such understanding provides a functional allocation of responsibilities between the Water Utility Fund and the District 11 several significant issues to be resolved by Joint Committee of the parties before a final corn1 hensive agreement is reactred. As a result of a final agreement, additional assets and/or liai ties may be transferred among the parties. Single family Mortgage Revenue Bonds have been issued to provide funds to purchase mongi loans secured by first trust deeds on newlyconstructed dnd existing single-family residenc The purpose of this program is to provide low-interest-rate home mortgage loans to person: low or moderate income who are unable to qualify for conventional mortgages at market rai Multi-family Housing Revenue Bonds are issued to provide construction and perman financing to developers of multi-family residential rental projects located in the City to be pani occupi& by persons of IC N or moderate income. The following is a schedule of all such bonds issued since inception of the programs: (b) Date Issued Amount October, 1983 $20,000,000 April, 1985 16,0OO,OoO May, 7985 16.500.000 June, 1985 15,000,000 TOTAL 567,500,000 The bonds, together with interest thereon, are limited obligations of the City payable solely frl bond proceeds, revenues, and other amounts derived solely from home mortgage and develo loans secured by first deeds of trust, inevocable letters of credit. and irrevocable surety bon In the opinion of City officials, these bonds are not payable from any revenues or assets of City, and neither the full faith and credit nor the taxing power of the City of Carlsbad, the St, of California, nor any political subdivision thereof, is obligated to the payment of the princi or interest on tne bonds. Accordingly, no liability has been recorded in the General Long-Te Debt Account Group. (c) The City is a defendant in certain legal actions arising in the normal course of operations. In opinion of management and legal counsel, any liability resulting from these actions will not res in a material adverse effect on the City’s financial position. 46 $6,555,000 CITY OF CARLSBAD (SAN DIEGO COUNTY, CALIFORNIA) 1987 NOTES 0 CERTIFICATE OF MAILING I, Karen Lee, hereby state and certify that for and on behalf of the C of Carlsbad, I mailed a Report of Final Sale to the California Debt Advis Commission, postage prepaid, to P. 0. Box 942809, Sacramento, Califor 94209, a copy of which report is hereto attached, Dated: July 16, 1987 -&A&&& ' Karen Lee 0 a CDAC # 87-0570 REPORT OF FINAL SALE California Debt Advisory Commission 915 Capitol Mall, Room 400, Sacramento, CA 95814 P.O. Box 942809, Sacramento, CA 94209-0001 (916) 324-2585 0 Completion of this form is requested to provide information which was not available when the "Report of Proposed Debt Issuance" was &he CDAC or to verify information which was reported as "proposed." Additionally, please send a copy of the ofiicial statement (a circular) with this form to the CDAC. NAME OF ISSUER: City of Carl sbad 1987 Notes ISSUE NAME: OFFICIAL STATEMENT: a Enclosed 0 To be sent None available SALE DATE IS THE INTEREST ON THE DEBT EXEMPT FROM TAXATION? Under State law: 0 NO (taxable) Ild YES (tax-exempt) Under Federal law: 0 NO (taxable) July 8, 1987 PRINCIPAL AMOUNT SOLD S 6 , 555 , 000 [lil YES (taxexempt) If the issue is federally tax-exempt, is interest a specific preferen the purpose of alternative mini Yes, preference item 3mNyiot a preference item IS ANY PORTION OF THE DEBT FOR REFUNDING? 1 0 Yes, amount of this issue (including costs) which is for refunding of existing debt S Rauscher Pierce Refsnes, Inc. & No F UNDERWRITER OR PURCHASER: FINANCIAL ADVISOR: I D CATE CREDIT RATING: (For example, "AAA" or "Aaa") RATED Standard & Poor's: Fitch Moody's: MiG I Other: NOTRATED WAS THE ISSUE INSURED OR GUARANTEED? ~ No Bond insurance 0 Letter@) of credit Othe GUARANTOR'S NAME: INTEREST COST y. 2s % )&TIC c] NIC c] Variable (Please specify.) IF NEGOTIATED SALE, INDICATE GROSS SPREAD: FINANCIAL ADVISOR FEE: N/A BOND COUNSEL FEE OTHER COSTS OF ISSUANCE PAID BY THE ISSUER: (For example, advertising, printing, bond registration, bond rating $9,923.50 $5 , 000 specify amount and purpose.) Paying Agent FEe I Section 53583(c)(2)(B)of the California Government Code requires thai any Iocalogency selling refunding bondr otprivote sale or on o negotiated bc written statement, within two weeksofter the bondc ore sold, to the CDA Cexplaining the reosons why the local agency determined to sell the bonds 01 on a negotiated basis instead of at public sale. 2/4/87 CDAC: Report of Final Sale MATURITY SCHEDULE: (Please complete if an official statement is not submitted with this form.) Maturity Date Amount Interest Rate 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Name of individual (representingxBond Counsel, 0 Issuer, 0 Financial Advisor, or 0 Lead Underwriter) who completed and may be contacted for information: Name: William H. Madison, Esq. Firm/ Agency: Address: Four Embarcadero Center, Suite 1950, San Francisco, CA 94111 Jones Hall Hill & Whits I Phone: 415 - 391-5780 Date of Completion: Jul-Y 16, 1987 Contact person at issuing jurisdiction, if different from above: Name: James F. Elliott Title: Finance Director , Address: 1200 Elm Ave., Carlsbad, CA 92008 Phone: 61 9-434-2867 Name of IndMdml to ubom ill invoke for the CDAC botwatioa fee sboald be senk * Name: Firm: Address: Phone: 0 Virginia Horler Rauscher Pierce Refnses , Inc. One California St., Suite 2750 San Francisco, CA 94111 - - 2 l'?~is fee is authorized by Section 8856 of the Cai$ornia Government Code. 2/4/87 d CT4TE OF CALIFORNIA MEMBERS krcM UaruhGnJrnun @LIFORNIA DEBT ADVISORY COMMISSION YouTnOnun 4 5 CAPITOL MA& ROOM 400 P.O. BOX 942809 SACRAMENTO, CALIFORNIA 94209-0001 Gcap Dcutmc)un &vTmm Ony hnr sun ccnn&? lobmG Wy Srae Senator Nmon R RunU &ut Sewtor Jim Gorp slorr Aprmblymon Rark J Nolan SM) Aomtblymmr ~bwvlc Rupert TELEPHONE. (91 6) 324-2585 June 25, 1987 TO: William H. Madison Jones Hall Hill C White Four Embarcadero Center 7kwww. Cuy '$ Tmm Suite 1950 RrhrdB ClurfAdkruuaratw Duon Wi San Francisco, Ca 94111 Covnry of Lor Anmk FROM: CALIFORNIA DEBT ADVISORY COMMISSION SUBJECT: Acknowledqement of Report of Proposed Debt Issuance The California Debt Advisory Commission (CDAC) acknowledges you1 written notice of the following proposed debt issuance: y-3 -n'--;/) CDAC Number: J \ <> 1 \, 0 Issuer: City of Carlsbad Proposed Amount: $6,570,000.00 Proposed Sale Date: July 16, 1987 Project: Hosp Grove Acquisition Date Notice Received: June 25, 1987 Please submit the "Report of Final Sale" and the Official Statement (or offering circular) on this issue after the sale is completed. Please refer any questions regarding reporting requirements to the CDAC staff at (916) 324-2585. cc: Mr. James F. Elliott Finance Director, City of Carlsbad 1200 Elm Avenue 0 Carlsbad, CA 92008 REPORT OF PROPOSED DEBT ISSUANCE California Debt Advisory Commission 915 Capitol Mall, Room 400, Sacramento, CA 95814 P.O. Box 942809, Sacramento, CA 94209ooO1 (916) 324-2585 a Completion and timely submittal of this form to the California Debt Advisory Commission (CDAC) at the above address will assure your comp existing California State law and will assist in the maintenance of a complete data base. Thank you for your cooperation.' NAME OF ISSUER: Citv of Carlsbad ADDRESS OF ISSUER: 1200 Elm Avenue, Carlsbad, CA 92008 COUNTY: San Dieao PROPOSED SALE DATE: Julv 16. 1987 TYPE OF SALE: Competitive X Negotiated PROPOSED PRINCIPAL TO BE SOLD: $6,570,000 IS THE INTEREST ON THE DEBT EXEMPT FROM TAXATION? Under State law: - NO (taxable) - X YES (tax-exempt) Under Federal law: - NO (taxable) - X YES (tax-exempt) If the issue is Federally tax-exempt, is in specific preference item for the purpose of alternative n tax? - Yes, preference item - X No, not a preference item ANY PORTION OF THE DEBT FOR RE FUN DING?^ 0 No - Yes, proposed amount for refunding $ TYPE OF DEBT INSTRUMENT NOTE Bond - Tax anticipation (T101) - Tax and revenue anticipation (T102) - Revenue anticipation (T103) - X Bond anticipation (T104) - Conduit revenue (Private obligor) (T204) - Grant anticipation (T105) - Tax allocation (T106) - Other note (Please specify below.) (T107) - FINANCING LEASE (T301) - CERTIFICATES OF PARTICIPATION (T501) Please specify if "Other noteiOTHER" was checked: SOURCE(S) OF REPAYMENT - Public enterprise revenues (SlOl) - Private obligor payments (Sl02) -X- Bond proceeds (St 03) - Grants (S104) - X Property tax revenues (S109) - Intergovernmental transfers other than grant (St 05) - Other (Please specify.) (Sl 1 1): - General obligation (T201) - Limited tax obligation (T202) - Revenue (Public enterprise) (T203) - Special assessment (T205) - Tax allocation (T206) - Public lease revenue (T207) - COMMERCIAL PAPER (T401) - OTHER (Please specify below.) (T601) - Tax-increment (St 06) - Special assessments (Sl07) - Special tax revenues (S108) - General fund of issuing jurisdiction (SllO) ;tion 8855(g) of the California Government Code requires the issuer of any proposed new public debt issue to give written notice of the proposed si 2 Section 53583(c)(2)(B) of the California Government Code requires that any local agency selling refunding bonds at private sale or on a negotiated basis 5 a written statement. within two weeks afte! the bonds are sold. to the CDAC explaining the reasons why the local agency determined to sell the bonds sale or on a negotiated basis instead of at public sale a -5AC no later than 30 days prior to the sale CDACJ- ReDOrt of Proposed Debt Issuance Paq URPOSE(S) OF FINANCING - Cash-flow, interim financing (P101) - Airport (P401) - Ports and marinas (P402) - Recreation and sports facilities (P403) - X Parksiopen space (P419) Power generationitransmission (P404) - Parking (P405) - Hospital (P301) - Convention center {P406) - Health care facilities (P302) Solid waste recovery facilities (P4Q7) - Otherimultiple health care purposes (equipment, etc.)(P303) 1 Equipment (P408) - Flood controlistorm drainage (P409) - K-12 school facility (P501) - Water supply/storage/distribution (P410) - Collegeiuniversity facility (P502) - Wastewater collection and treatment (P411) - Student loans (P504) - Public transit (P412) - Otherimultiple educational uses (equipment, etc.) (P503) - Bridges and highways (P413) - Public building (P414) - Redevelopment, multiple uses (P601) - Street construction and improvements (P415) - Prisonsijailicorrectional facilities (P418) - Pollution control (P701) - Multiple capital improvements and public works (P41 - Commercial development (P703) - Other capital improvements and public works (P417) - Industrial development (P704) - Other than listed above (P901) Please specify typeiname of project: HOSR Grove Acauisition BOND COUNSEL: Jones Hall Hill & White. A Professional Law Corporation FINANCIAL ADVISOR: NIA Single-family housing (P20 Multifamily housing (P203) all F3 - - - Collegeiuniversity housing (P204) - @3D UNDERWRITER: Rauscher Pierce Refsnes. Inc. (or PURCHASER: or PLACEMENT AGENT: Name of individual (representing X Bond Counsel, - Issuer. - Financial Advisor, or __ Lead Underwriter) Name: William H. Madison. Esa. FirmiAgency: Address: completed this form and may be contacted for further information: Jones Hall Hill & White, A Professional Law CorDoration Four Embarcadero Center. Suite 1950 San Francisco. CA 941 11 Phone: (41 5) 391 -5780 Date of Completion: June 23, 1987 Contact person at issuing jurisdiction, if different from above: Name: Mr. James F. Elliott Title: Address: 1200 Elm Avenue, Carlsbad. CA 92008 Finance Director, Citv of Carlsbad Phone: (61 9) 434-2867 3 Certain local government issuers of housing bonds are required to obtain a certification from the State Treasurer attesting to their compliance wi housing reporting requirements prior to issuance of the bonds to finance single- or multifamily housing. a CITY OF CARLSBAD, CALIFORNIA $6,555,000 1987 Notes CONTRACT OF PURCHASE 0 July 8, 1987 Director of Finance City of Carlsbad 1200 Elm Avenue Carlsbad, California 92008 into this agreement with the City of Carlsbad, California (the "City") which, upon the City's acceptance hereof, will be binding upon the City and upon the Underwriter. This offer is made subject to the written acceptance of this Contract of Purchase by the City and the delivery of such acceptance to the Underwriter at or prior to 4:OO o'clock P.M. California time, \ on the date hereof. 1. Upon the terms and conditions and upon the basis of the representations and warranties hereinafter set forth, the Underwriter hereby purchases from the City for reoffering to the public, and the City hereby sells to the Underwriter for such purpose, all (but not less than all) of $6,555,000 (or such lesser amount as shall actually be issued in accordance with the provisions of the resolution as hereinafter defined), principal amount of City of Carlsbad 1987 Temporary Notes dated July 16, 1987 and due June 30, 1988 (the "Notes") bearing interest at the rate of four and twenty five per centum (4.25%) per annum, at a purchase price of $6,545,076.50, plus accrued interest, if any, from July 16, 1987, to the date of the Closing (as hereinafter defined). 2. The Notes shall be as described in the Resolution adopted by the City Council of the City on June 23, 1987, authorizing the issuance of the Notes (the "Resolution"), and shall be issued under the provisions of the Constitution and laws of the State of California (the "State"). 3. At the time of or before the City's acceptance hereof, the City shall deliver to the Underwriter an Official Statement of the City, dated July 7, 1987, relating to the Notes (which, together with all appendices thereto and with such changes therein and supplements thereto which are consented to in The undersigned (the "Underwriter") offers to enter 0 1 0 writing by the Underwriter, is herein called the "Official Statement"), in a form satisfactory to the Underwriter and duly executed by the City. The City has authorized the use and reproduction of the Official Statement in connection with the offering and sale of the Notes by the Underwriter. The City also has approved of the use and reproduction by the Underwriter prior to the date of the Official Statement of a Preliminary Official Statement of the City relating to the Notes (which, together with all appendices thereto, is herein called the "Preliminary Official Statement") in connection with the offering of the Notes. 4. The Underwriter agrees to make a bona fide public offering of all the Notes at the initial public offering price as set forth on the cover page of the Official Statement. Subsequent to such initial public offering, the Underwriter reserves the right to change the public offering price as it may deem necessary in connection with the marketing of the Notes. 0 5. At 1O:OO o'clock A.M., California time, on July 16, 1987, or at such other time or on such later business day as shall have been mutually agreed upon by the City and the Underwriter (the "Closing"), the City will deliver to the Underwriter at the offices of Jones Hall Hill b White, Four Embarcadero Center, San Francisco, California, or at such other place as the City and the Underwriter may mutually agree upon, the Notes in definitive form duly executed, together with the other documents hereinafter mentioned; and the Underwriter will accept such delivery and pay the purchase price as set forth in paragraph 1 hereof by check or wire in "Federal Reserve Funds" (same day funds) to the order of the City. The Notes will be made available in San Francisco, California for checking and packaging and will be delivered to the Underwriter in escrow at least one business day prior to the Closing. 6. The City represents and warrants to the Underwriter that: The City is validly existing under the laws of the State, including the State Constitution, with the right and power to sell the Notes as of the date hereof and to hereafter issue the Notes and to execute, deliver and perform its obligations under this Contract of Purchase and the Resolution. (B) (i) At or prior to the Closing, the City will , (A) have taken all action required to be taken by it to authorize the issuance and delivery of the Notes and the performance of its obligations under the Resolution, (ii) 2 0 the City has, and at the date of the Closing will continue to have, full legal right, power and authority to enter into this Contract of Purchase and, at the date of the Closing, will have full legal right, power and authority to issue and deliver the Notes to the Underwriter and to perform its obligations as provided in the Resolution and this Contract of Purchase; at or prior to the Closing, the execution and delivery of, and the performance by the City of its obligations contained in this Contract of Purchase shall have been duly authorized; (iii) this Contract of Purchase has been duly executed and delivered and constitutes a valid and legally binding obligation of the City; and (iv) the City has duly authorized the consummation by it of all transactions contemplated by this Contract of Purchase. principal and interest from the revenues and in the manner as described in the Resolution and the Official Statement. All of the Notes shall be general obligations of the City, and, to the extent not paid from the sale of general obligation bonds or certificates of participation, they shall be paid from any other moneys\of the City lawfully available therefor as described in the Resolutions. will issue bonds or certificates of particiation the proceeds of which will be in an amount and be available to pay principal of and interest on the Notes on the date indicated in the Resolution, or, in the alternative, that the revenues anticipated to be received or accrued in the City's 1987-88 fiscal year, pledged to the payment of the Notes, will be received in cash in the amounts and by the date of payment of the principal of and interest on the Notes indicated in the Resolution. As of the Closing, the City will have taken all action to be taken by the City by such date required by law, regulation or administrative order or directive, or in the City's judgment necessary and feasible, in order for the City to qualify for and to receive in cash such anticipated revenues in such amounts and by such dates, and the City will use its best efforts to cause such revenues to be received in cash at the times indicated. The City agrees that it will not issue any additional notes for the City payable out of the revenues available to pay the Notes. (E) There are no present conditions or determinations of which the City is aware which will prevent the issuance of bonds or certificates of participation by the City the proceeds of which will be in an amount and available to pay 0 (C) The Notes shall be secured as to the payment of (D) The City reasonably anticipates that the City 0 0 3 * the principal of and interest on the Notes, or, which will prevent the receipt of and application by the City or the City of the revenues available to pay the Notes. (F) The issuance of the Notes, the execution, delivery and performance of this Contract of Purchase, the performance of the City's obligations under the Resolution and compliance with the provisions hereof and thereof by the City, do not and will not conflict with or constitute on the part of the City a breach of, or a default under, any existing law, ordinance, regulation, decree, order or resolution, or (to the best knowledge of the City, after due investigation) any agreement, indenture, mortgage, lease or other instrument, to which the City is subject or by which it is bound. (G) All authorizations, consents or approvals of, or filings or registrations, if any, with any Governmental Authority or court necessary for the valid issuance by the City of, and performance by the City of its obligations under, the Notes will have been duly obtained or made prior to the issuance of the Notes (and disclosed to the Underwriter). As used herein, the term "Governmental Authority" refers to any legislative body or governmental official, department, commission, board, bureau, agency, ' instrumentality, body or public benefit corporation. Closing, no action, suit, proceeding or investigation is pending or (to the best knowledge of the City) threatened against the City or (to the best knowledge of the City, no independent investigation having been made) any other person in any court or before any Governmental Authority seeking to restrain or enjoin the issuance or delivery of any of the Notes or in any way contesting or affecting the validity of the Resolution, the Notes, this Contract of Purchase, or the receipt or application of the revenues pledged to pay the Notes or the payment of principal of and interest on the Notes, or contesting the powers of the City to issue the Notes. representative of the City and delivered to the Underwriter pursuant to this Contract of Purchase shall be deemed a representation and warranty by the City to the Underwriter as to the statements therein made. 0 (H) As of the time of acceptance hereof and as of the 0 (I) Any certificate signed by any official or other (J) A copy of the Resolution has been delivered to the Underwriter and such Resolution will not be amended without the consent of the Underwriter which consent will not be unreasonably withheld. 4 0 7. The Underwriter has entered into this Contract of Purchase in reliance upon the representations and warranties of the City contained herein, the Resolution, and the performance by the City of its obligations hereunder, as of the date hereof and as of the date of the Closing. The Underwriter's obligations under this Contract of Purchase are and shall be subject to the following further conditions as of the Closing: (A) The representations and warranties of the City contained herein shall not be materially inaccurate at the date hereof and at and as of the Closing, as if made at and as of the Closing, and the statements made in all certificates and other documents delivered to the Underwriter at the Closing pursuant hereto shall not be materially inaccurate at the Closing; and the City shall be in compliance with each of the agreements made by it in this Contract of Purchase (unless such agreements are waived by the Underwriter). (B) At the time of the Closing this Contract of Purchase shall be in full force and effect; the Resolution and this Contract of Purchase shall not have been amended, modified or supplemented except as may have been agreed to in writing by the Underwriter; all actions which, in the opinion of Jones Hall Hill & White, a Professional Corporation (Bond Counsel) and in the opinion of Brown & Wood (Underwriter's Counsel), shall be necessary in connection with the transactions contemplated hereby shall have been duly taken and shall be in full force and effect; and the City shall perform or have performed all of its obligations required under or specified in the Resolution or this Contract of Purchase to be performed at or prior to the Closing. (C) The provisions of law governing the issuance of bonds or certificates of participation by the City, or, in the alternative, the payment of the revenues pledged to pay the Notes shall be in full force and effect and shall not have been amended in any respect that would materially adversely affect the prospects that such revenues will be received in the amounts and by the date of payment of the principal of and interest on the Notes as indicated in the Resolution and the Official Statement. 0 0 (D) Except as disclosed in the Official Statement, no decision, ruling or finding shall have been entered by any court or Governmental Authority since the date of this Contract of Purchase (and not reversed on appeal or 5 0 otherwise set aside) (i) which has any of the effects described in Section 6(H), or (ii) which declares this Contract of Purchase to be invalid or unenforceable in whole or in material part. Underwriter to effect a successful public offering of the Notes, and in view of the potential adverse impact of any of the following events on a public offering, the Underwriter shall have the right to cancel its obligations to acquire the Notes, by written notice from the Underwriter to the City, if between the date hereof and the Closing: (i) the Official Statement shall have been amended, modified or supplemented without the consent in writing of the Underwriter, unless such consent was unreasonably withheld or (ii) any event shall occur which, in the reasonable professional judgment of the Underwriter, makes untrue any statement of a material fact set forth in the Official Statement or results in an omission to state a material fact necessary to make the statements therein, in the light of the circumstances under which they are made, not misleading; or (iii) the market for the Notes or the ability of the Underwriter to enforce contracts for the sale of the Notes shall have been materially and adversely affected, in the reasonable professional judgment of the Underwriter, by (a) legislation enacted by the Congress of the United States, or passed by either House of the Congress, or recommended to the Congress for passage by the President of the United States, or favorably reported for passage to either House of the Congress by a committee of such House to which such legislation has been referred for consideration, or a decision rendered by a court of the United States or by the United States Tax Court, or a ruling, order, official statement, or regulation (final, temporary or proposed) made by the Treasury Department of the United States or the Internal Revenue Service, with respect to Federal taxation upon interest received on obligations of the general character of the Notes or which would have the effect of changing, directly or indirectly, the Federal income tax consequences of interest on obligations of the general character of the Notes in the hands of the holders thereof, or (b) any new outbreak of hostilities or other national or international calamity or crisis or an event of fiscal default by a city, municipality, City or authority located in the State, the effect of such outbreak, calamity, crisis or default being such as would cause a major disruption in the municipal bond market, or (c) a general suspension of trading on the New York Stock Exchange, or fixing of minimum or maximum prices for trading or maximum ranges for prices for 0 (E) In recognition of the desire of the City and the 0 e 6 securities on the New York Stock Exchange, whether by virtue of a determination by that Exchange or by order of the Securities and Exchange Commission or any other governmental authority having jurisdiction, or (d) a general banking moratorium declared by either Federal or State authorities having jurisdiction, or (e) any action, suit, proceeding or investigation described in Section 6(H) hereof or any decision described in Section 7(D) hereof, or (f) any default by the City or the City which would affect the ability of the City to meet its obligations under the Resolution, or of the City to meet its obligations under the resolution of the Board of Trustees of the City authorizing the issuance of the Notes (the "City Resolution"). (F) At or prior to the Closing, the Underwriter shall receive the following documents each dated on and as of the date of the Closing: (1) Approving opinion of Bond Counsel, as to the 0 validity and tax-exempt status of the Notes, substantially in the form attached hereto as Exhibit A. behalf by its City Manager, substantially in the form attached hereto as Exhibit B. substantially in the form attached hereto as Exhibit C, form and substance to Bond Counsel. Certificates executed by applicable officers of the City. (6) Evidence that any rating on the Notes heretofore obtained has not been changed or withdrawn. (7) Such additional legal opinions, certificates, proceedings, instruments and other documents as the Underwriter, Underwriter's Counsel or Bond Counsel may reasonably request to evidence compliance by the City with legal requirements, the accuracy, as of the time of Closing, of the City's representations herein contained and the due performance or satisfaction by the City at or prior to such time of all agreements then to be performed and all conditions then to be satisfied by the City. (2) A certificate of the City, executed on its (3) (4) An arbitrage certificate, satisfactory in Customary Signature and No Litigation An opinion of the City Attorney, 0 (5) e 7 If the City shall be unable to satisfy the conditions to the Underwriter's obligations contained in this Contract of Purchase or if the Underwriter's obligations shall be terminated for any reason permitted by this Contract of Purchase, this Contract of Purchase shall terminate and neither the City nor the Underwriter shall not have any further obligation hereunder, except that the obligations of the Underwriter and the City, to pay certain expenses as provided in Section 9 herein shall continue in full force and effect. 8. The performance by the City of its obligations is conditioned upon (i) the performance by the Underwriter of its obligations hereunder; and (ii) receipt by the City and the Underwriter of opinions and certificates required to be delivered at the Closing. 9. (a) Whether or not the Notes are issued as contemplated by this Contract of Purchase, the Underwriter shall not be under any obligation to pay, and the City shall pay, all expenses incident to the performance of the City's obligations, including, but not limited to (i) the fees and disbursements of the accountants, financial advisers and any other experts, consultants or advisers to the City and retained on such basis by the City; (ii) the fees and disbursements of Bond Counsel; (iii) the fees of the Paying Agent and any rating agencies rating the Notes; (iv) fees and disbursements of underwriter's counsel retained by it; (v) the cost of preparation and reproduction of this Contract of Purchase, the preliminary Official Statement and the final Official Statement, and the cost of printing the Notes; and (vi) any other expenses and costs of the City incident to the performance of their obligations in connection with the authorization, issuance and sale of the Notes to the Underwriter. 10. e o Any notice or other communication to be given to the City under this Contract of Purchase may be given by delivering the same in writing to the City Finance Director, or to such other person as he may designate in writing, and any notice or other communication to be given to the Underwriter under this Contract of Purchase (other than the acceptance hereof as specified in the first paragraph hereof) may be given by delivering the same in writing to Rauscher Pierce Refsnes, Inc., One California Street, San Francisco, California 94111, Attention: Virginia Hosler. writing as heretofore specified shall constitute the entire agreement between the City and the Underwriter and is made 11. This Contract of Purchase when accepted by the City in 8 e solely for the benefit of the City and the Underwriter (including the successors or assigns of the Underwriter). No other person shall acquire or have any right hereunder or by virtue hereof. e 12. This Contract of Purchase may be executed simultaneously in several counterparts each of which shall be an original and all of which shall constitute but one and the same instrument. accordance with the laws of the State of California. 13. This Contract shall be construed and enforceable in Very truly yours, RAUSCHER PIERCE REFSNES, INC. ,I 1 BY ./ CW A LC*- Z[&L L e '\ e 9 13061 -02 June 22,1987 M5619 0 [Form of Final Opinion of Bond Counsel] July 16, 1987 City Council City of Carlsbad 1200 Elm Avenue Carlsbad, CA 92008 OPINION: $6,570,000 City of Carlsbad 1987 Notes 0 Members of the City Council: We have acted as bond counsel in connection with the issuance by the City of Carlsbad, California (the "City") of $6,570,000 City of Carlsbad 1987 Notes, dated July 16, 1987 (the "Notes"), pursuant to Article 7.6, commencing with Section 53850, of Chapter 4, Part 1, Division 2, Title 5 of the California Government Code (the "Act"), and Resolution No. of the City adopted on June 23, 1987. We have examined the law and such certified proceedings and other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the City contained in the Resolution and in the certified proceedings and other certifications furnished to us, without undertaking to verify such facts by independent investigation . Based upon our examination, we are of the opinion, under existing law, as follows: 1. The City is a duly created and validly existing municipal corporation with the power to adopt the Resolution, perform the agreements on its part contained therein and to issue the Notes. 2. The Resolution has been duly adopted by the City and constitutes a valid and binding obligation of the City enforceable upon the City. 3. Pursuant to the Act, the Resolution creates a valid lien on funds pledged by the ' Resolution for the security of the Notes, subject to no prior lien granted under the Act. I City of Carlsbad July 16, 1987 Page 2 t 0 4. The Notes have been duly authorized, executed and delivered by the City and are valid and binding general obligations of the City. 5. The interest on the Notes is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; it should be noted, however, that, for the purpose of computing the alternative minimum tax imposed on such corporations (as defined for federal income tax purposes), such interest is taken into account in determining adjusted net book income (adjusted current earnings for taxable years beginning after December 31, 1989). The opinions set forth in the preceding sentence are subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986 that must be satisfied subsequent to the issuance of the Notes in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The City has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inciusion of interest on the Notes in gross income for federal income tax purposes to be retroactive to the date of issuance of the Notes. We express no opinion regarding other federal tax consequences arisinc with respect to the Notes. 6. The interest on the Notes is exempt from personal income taxation imposed b) the State of California. The rights of the holders of the Notes and the enforceability of the Notes and thE Resolution may be subject to bankruptcy, insolvency, reorganization, moratorium anc other similar laws affecting creditors’ rights heretofore or hereafter enacted and may atsc be subject to the exercise of judicial discretion in appropriate cases. 0 Respectfully submitted, A Professional Law Corporation 0 EXHIBIT B to the Contract of Purchase 0 CERTIFICATE OF THE ACTING CITY MANAGER OF THE CITY OF CARLSBAD I, Ray Patchett, Acting City Manager of the City of Carlsbad, California (the "City"), hereby certify on behalf of the City as follows: I am the official of the City having overall responsibility for the management of the City. The representations and warranties of the City in the Contract of Purchase between the City and Rauscher Pierce Refsnes, Inc., the Underwriter, for Notes of the City, dated July 8, 1987 (the "Contract of Purchase"), are true and correct on and as of the date hereof as if made on and as of the date hereof, and the City has complied with and performed all of its covenants and agreements in the Contract of Purchase. Each of the conditions in Section 7 of the Contract of Purchase to be satisfied by the City has been satisfied by the City on the date hereof and the City is not aware of any other condition of the Contract of Purchase that has not been satisfied on the date hereof. Underwriter under the Contract of Purchase and the sources of payment thereof conform to the descriptions thereof contained in the City's Resolution, as defined in the Contract of Purchase. 5. financial condition or results of operations of the City from the date of the Contract of Purchase to the date hereof. IN WITNESS WHEREOF, I have hereunto set my hand this 16th day of July, 1987. 1. 2. 3. e 4. The Notes being delivered on the date hereof to the There has been no material adverse change in the CITY OF CARLSBAD 0 .< '. CITY OF CARLSBAD (61 9) 434-2891 1200 ELM AVENUE CARLSBAD, CALIFORNIA 92008-1 989 0 VINCENT F. BIONDO, JR. CITY ATTORNEY RONALD R. BALL ASSISTANT CITY ATTORNEY EXHIBIT C to the Contract of Purchase July 16, 1987 City Council City of Carlsbad Carlsbad, California 92008 Rauscher Pierce Refsnes, Inc. One California Street San Francisco, California 94111 $6,555,000 CITY OF CAFLSRAD, CALIFORNIA 1987 NOTES Dear Ladies and Gentlemen: 0 Reference is made to a Contract of Purchase dated July 8, 1987 ("Contract of Purchase" 1, between the City of Carlsbad, California (the "City") and Rauscher Pierce Refsnes, Inc., for Temporary Notes (the "Notes") of the City of Carlsbad, in connection with which you have requested my opinion as to the matters set forth below. All terms used herein have the definitions set forth in the Contract of Purchase. I have examined such portions of the Constitution of tk United States of America, the Constitution and Statutes of the State of California (the "State") and such applicable court decisions as I deemed necessary or relevant for purposes of the opinions set forth below, and made such further inquiries and investiuations as I deemed necessary or appropriate for purpose: of such opinions. Based on the foreqoing, I advise you that in my opinion: 1. The City is a political subdivision duly organized validly existing, and in good standinq under the Constitution a the laws of the State of California. 2. The Resolution was duly adopted at meetings of the governing body of the City which were called and held pursuant law and with all public notice reauired by law and at which a quorum was present and acting throughout. 0 ,I ,* 3. There is no action, suit, proceeding or 0 investigation at law or in equity before or by any court, public board or body, pending or, to the best of my knowledqe, threatened against or affecting the City, which would adversely impact the City's ability to complete the transactions described in and contemplated by the Contract of Purchase, or in any way contesting or affecting the validity of the Contract of Purchase, Resolution or Notes or the transactions described in and contemplated by the Contract of Purchase wherein an unfavorable decision, ruling or finding would adversely affect the validity and enforceability of the Contract of Purchase, Resolution or Notes or in which a final adverse decision could materially affect the operations of the City. 4. The execution and delivery of the Contract of Purchase, and compliance with the provisions thereof, and the execution, authentication, issuance and delivery of the Notes under the circumstances contemplated thereby, do not and will no in any material respect conflict with or constitute on the part of the City a breach of or default under any agreement or other instrument to which the City is a party or by which it is bound or any existing law, regulation, court order or consent decree tl which the City is subject. 5. The Contract of Purchase has been duly authorized, executed and delivered by the City, and, assuming due authorization, execution and delivery by the other parties thereto, as applicable, shall constitute a legal, valid and binding agreement of the City enforceable in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency or other laws affecting the enforcement c creditors' rights generally. As stated in the Official Statement, the Notes are general obligations of the City payablc from subsequent borrowings or from taxes, income, revenues, cask receipts and other moneys of the City attributable to the fiscal year 1987/88 and legally available therefor. 0 6. No authorization, approval, consent, or other ordei of the State of California or any other qovernmental authority agency within the State of California is required for the valid authorization, execution and delivery of the Contract of Purchase, the authorization, execution, authentication and delivery of the Notes. Very truly yours, 8.T 17 - I/ 'r ,/ [ i- L c.2 _- -2 E c', E :,-Lm<-ic RONALD R. BALL Ass is tant City Attorney 0 arb ' 1 NEW ISSUE In the opinion of Jones Hall Hill & White, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to certain qualifications described herein, under existing law, interest on the notes is excluded from gross income for federal income tax purposes and such interest is not an item af tax preference for purposes of the federal individual and corporate alternative minimum taxes, although it is included in adjusted net book income and current earnings in computing the alternative minimum tax imposed on certain corporations. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See "TAX EXEMPTION" herein. e $6,555,000 CITY OF CAF&SBAD COUNTY OF SAN DIEGO STATE OF CALIFORNIA 1987 NOTES Dated: July 16, 1987 Due: June 30, 1988 The Notes will be issued in the denominations of $5,000 or 0 any integral multiple thereof. Principal and interest on the Notes will be payable upon maturity in Los Angeles, Califorcia, at the Corporate Trust Department of Security Pacific National Bank, the paying agent of the City of Carlsbad (the "City"). The Notes are not subject to redemption prior to maturity. The Notes will be negotiable and not subject to registration. The Notes are by statute general obligations of the City and are payable from the proceeds of general obligation bonds or certificates of participation issued to finance the Project, defined below, on a long term basis or, if such obligations are not issued prior to the maturity of the Notes, from taxes, income, revenue, cash receipts and other moneys intended as receipts for the general fund of the City attributable to the fiscal year 1987/88 and which are generally available for the payment of current expenses and other obligations of the City, as well as other funds held by the City during fiscal year 1987/1988 which may be legally available for payment thereof (the "Unrestricted Moneys"). e I The proceeds of the Notes are being used to retire a note of the City in the principal amount of $6,459,384 plus interest accrued thereon to the order of San Diego Trust and Savings Bank (the "Temporary Note") and to pay costs of issuance incurred in connection with the issuance of the Notes. The proceeds of the Temporary Note were used by the City to acquire on June 1, 1987 approximately 52 acres of land to be maintained by the City as open space (the "Project"). The Notes are direct obligations of the City and, to the extent set forth herein, are legal investments for commercial banks in California and are eligible to secure deposits of public moneys in California. e Interest Rate Yield 4.25% 4.00% The Notes are offered when, as and if issued and recelm? by the Underwriter, subject to awroval of legality by Joncr- Hall Hill & White, a Professional Law Corporation, Sa? Francisco, California, Bond Counsel. Certain leqal matter2 will be passed on for the Underwriter by Brown & Wood, Sar Francisco, California. It is anticipated that the Notes ir definitive form will be available for delivery in New York, Net York, on or about July 16, 1987. 0 RAUSCHER PIERCE REFSNES, INC. July 7, 1987 e No dealer, broker, salesperson or other person has beer! authorized by the City to give any information or to make any representations other than those contained herein and, if giver: or made, such other information or representation must not be relied upon as having been authorized by the City. This Official Statement does not constitute an offer to sell or thc solicitation of an offer to buy nor shall there be any sale of the Notes by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation 01 sale. This Official Statement is not to be construed as i contract with the purchasers of the Notes. Statement E contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly sc described herein, are intended solely as such and are not to bc construed as a representation of facts. The information set forth herein has been obtained fron sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness, and is not to bc construed as a representation by the Underwriter. Thc information and expression of opinions herein are subject tc change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under ani circumstances, create any implication that there has been nc change in the affairs of the City since the date hereof. @ IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MA5 OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIl! THE MARKET PRICE OF THE NOTES AT A LEVEL ABOVE THAT WHICH MIGHl OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, I1 COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITE1 MAY OFFER AND SELL THE NOTES TO CERTAIN DEALERS AND DEALEI; BANKS AND BANKS ACTING AS AGENT AT PRICES LOWER THAN THE PUBLIC OFFERING PRICE STATED ON THE COVER PAGE HEREOF AND SAID PUBLI( OFFERING PRICE MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. 0 a ,I TABLE OF CONTENTS e Paqc .................................... INTRODUCTORY STATEMENT 1 Authority for Issuance 1 Purpose of the Issue .................................... 2 Description of the Notes 2 Available Sources of Repayment .......................... Article XIIIA ........................................... 3 Ad Valorem Property Taxation 5 THE NOTES ................................... ................................ Security for the Notes ................................... 2 2 CONSTITUTIONAL AND STATUTORY LIMITS AFFECTING CITY REVENUES Article XIIIB ........................................... 5 CITY FINANCIAL INFQRnlATIOM ............................ ..................................... Assessed Valuations 6 Tax Levies, Collections and Delinquencies 6 Budget Process 8 Comparative Financial Statements 8 City Debt Structure ..................................... 11 Direct and Overlapping Debt .............................. 11 ............... .......................................... ........................ .................... Financial and Accounting Information 9 GENERAL CITY INFORMATION Introduction ............................................ 13 Labor Relations ......................................... 13 Retirement Programs ..................................... 14 Employment .............................................. 14 ECONOMIC PROFILE General Description 14 Largest Employers ....................................... 14 Commercial Activity ..................................... 18 Construction Activity .................................... 19 TAX EXEMPTION ............................................. 20 LEGAL MATTERS ............................................. 21 LEGALITY FOR INVESTMENT IN CALIFOTWIA ..................... 21 XATING ..................................................... 22 UNDERWRITING .............................................. 22 ADDITIONAL INFORMATION .................................... 22 APPENDIX A-EXCERPTED 1985/86 AUDITED FINANCIAL STATEMENTS . A-1 a ..................................... Transportation .......................................... 19 LITIGATION ................................................ 21 a a 4 -- - ..-. O*.ng. C0""I" m1..-*4. Court" i;ai1nmoL . a .- - Imwnml hmcO * I! OFFICIAL STATEMENT 0 $6,555,000 CITY OF CARLSBAD COUNTY OF SAN DIEGO STATE OF CALIFORNIA 1987 NOTES INTRODUCTORY STATEMENT This Official Statement, including this Introductory Statement and the Appendix, provides information in connectior with the sale by the City of Carlsbad (the "City") of its 1987 Notes (the "Notes") in the aggregate principal amount of $6,555,000. The Notes will be issued in full conformity With the Constitution and laws of the State of California (the "State"), including Article 7.6, Chapter 4, Part 1, Division 2, Title 5 (commencing with Section 53850) of the Californiz Government Code (the "Act"). Under the Act and Resolution, defined below, the Notes are general obligations of the Citl payable from the proceeds of general obligation bonds or certificates of participation issued to finance the Project or a long term basis, defined below, or if such obligations arc not issued prior to the maturity of the Notes, from taxes, income, revenue, cash receipts and other moneys intended a5 receipts for the general fund of the City attributable to thc fiscal year 1987/88 and which are generally available for thc payment of current expenses and other obligations of the City, as well as all other funds held by the City during fiscal yea] 1987/1988 which may be legally available therefor (thc "Unrestricted Moneys"). The Notes are authorized by ResolutioI No. 9132 adopted by the City Council on June 23, 1987 (tht "Resolution"). Proceeds from the sale of the Notes will bt used to retire a note of the City in the principal amount oj $6,459,384 plus interest accrued thereon to the order of Sax Diego Trust and Savings Bank (the "Temporary Note"). Tht proceeds of the Temporary Note were used by the City to acquirc the Project on June 1, 1987. 0 THE NOTES Authority for Issuance pursuant to the Resolution. The Notes are issued under the authority of the Act ani 1 e Purpose of the Issue i?roceeds of the Notes will be used to retire the Temporary Note and to pay certain costs of issuance incurred in the issuance of the Notes. 0 Description of the No= The Notes will be issued in the aggregate principal amount of $6,555,000. The Notes are not subject to registration, and will be in bearer form, without coupons, and shall be in denominations of $5, CiOO or any integral multiple thereof. The Notes will be dated July 16, 1987 and will mature June 30, 1988. Principal and interest on the Notes will be payable at the Corporate Trust Department of Security Pacific National Bank, the Paying Agent, in Los Angeles, California. >ecurity for the Notes The principal amount of the Notes, together with the interest thereon, shall be payable from the proceeds of general obligation bonds or certificates of participation issued tc finance the Project, defined below, or if such obligations are not issued prior to the maturity of the Notes, unrestricted Moneys, which include taxes, income, revenue, cash receipts and other moneys intended as receipts for the general fund of the City during fiscal year 1987/88 and which are general11 available for the payment of current expenses and other obligations of the Cfity, as well as all other funds held by the City during fiscal year 1987/1988 which may be legally used tc pay such amounts. No specific revenues are pledged to the repayment of the Notes. Available Sources of Repayment The Notes, in accordance with State law, are general obligations of the City and, if not paid from the proceeds of E general obligation bond or certificate of participation issue, will be payable only out of Unrestricted Moneys. The City may, under existing law, issue the Notes only if the principal of and interest on its; issue of the Notes will not exceed 8: percent of the estimated amount of the then-uncollectec Unrestricted Moneys which will be legally available for the payment of principal of and interest on said Notes. a 2 0 The amount of estimated Unrestricted Moneys available tc repay the Notes and the interest thereon for the City is approximately $41,000,000 including carry-over balances. The amount of Unrestricted Moneys needed to pay principal of and interest on the Notes is $6,833,588, providing a Note coverage ratio of 6.0. The City estimates that the moneys available, if necessary, for repayment are as follows: CITY 0F CARLSBAD ESTIMATED UNRESTRICTED MONEYS AVAILABLE FOR NOTE REPAYMENT" 0 SOURCES AMOUNT Cash Balance-July 1, 1987 ..................... $ 458,301 Property Tax .................................. 7,835,000 Other Taxes ................................... 10,083,000 Licenses, Permits b Fees ...................... 1,459,000 Fines, F:,rEeitures & Penalties ................ 446,200 Service 3hacges ............................... 1,915,540 General Ca:?ital Construction Fund ............. 1,821,396 Public Facilities Fees ........................ 3,562,127 Planned Local Drainacre Fees ................... 1,960,650 Sewer Construction Fund ....................... 7,169,368 Other ......................................... 2,971,811 Transfers In .................................. 1 , 241 , 749 TOTAL UNRESTRICTED MONEYS ................... $40,924,142 TOTAL PRINCIPAL PLUS INTEREST(1) $ 6,833,588 NOTE COVERAGE RATIO ........................... 6.0 Source: City of Carl.sbad - 1987/88 Adopted Budget 0 .............. CONSTITUTIONAL AND STATUTORY LIMITS AFFECTING CITY REVENUES Article XIIIA Article XIIIA of the State Constitution limits the amounl of ad valorem taxes on real property to 1% of "full cash value' as determined by the County Assessor. Article XIIIA define: "full cash value" to mean "the County's Assessor's valuation of 3 0 real property as shown on the 1975/76 tax roll 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 period subject to exemptions in certain circiunstances of property transfer or reconstruction. " The "full cash value" is subject to annual adjustment to reflect: increases, not to exceed 2% per year, or decreases in the consumer price index or comparable local data, or to reflect reductions in property value caused by damage, destruction or other factors. Article XIIIA requires a vote of two-thirds of the qualified electorate to impose special taxes, while totally precluding the imposition of any additional ad valorem, sales or transaction tax on real property. As recently amended, Article XIIIA exempts from the 1% tax limitation any taxes above that level recpired to pay debt service on voter-approved general obligation bonds for real property or improvements thereon. In addition, Article XIIIA requires the approval of two-thirds of all members of the State Legislature to change any State laws resulting in increased tax revenues. In addition a statutory initiative was adopted by the voters at the November 4, 1986 General Election whick (i) requires that any tax for general governmental purpose: imposed by local governmental entities such as the City be approved by resoluti.on or ordinance adopted by a two-third: vote of the governmental entity's legislative body and by i majority vote of the electorate of the governmental entity, (ii) 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 within that jurisdiction, (iii) restricts the use of revenues from a special tax to the purposes or for the servicc for which the special tax was imposed, (iv) prohibits thc imposition of ad valorem taxes on real property by loca: governmental entities except as permitted by Article XIIIA, (v) prohibits the imposition of transaction taxes and sale: taxes on the sale of real property by local governmenta: entities, and (vi) requires that any tax imposed by a loca: governmental entity on or after August 1, 1985 be ratified by i majority vote of the electorate within two years of thc adoption of the initiative or be terminated by November 15 1988. The City does not anticipate any potential adverst financial impact as a result of the passage of this amendinc initiative. @ @ 4 e Article XIIIB Article XIIIB of the State Constitution limits the annual appropriations of the State and of any city, county, school district, authority or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior. fiscal year, as adjusted for changes ir the cost of living, population and services rendered by thc governmental entity. The "base year" for establishing suck appropriation limit is the 1978/79 fiscal year and the limit i: to be adjusted annually to reflect changes in population, consumer prices and certain increases in the cost of services provided by these pulolic agencies. Appropriations subject to Article XIIIB generally include the proceeds of taxes levied by the State or other entity of local government, exclusive of certain State subventions, refunds of taxes, benefit payments from retirement, unemployment insurance and disability insurance funds "Proceeds of taxes" incluLie, but are not limited to, all tal revenues and the proceeds to an entity of government fror (i) regulatory licenses, user: charges, and user fees (but on11 to the extent such proceeds exceed the cost of providing thc service or regulation), and (ii) the investment of tal revenues. Article XIIIB includes a requirement that if ax entity's revenues in any year exceed the amounts permitted tc be spent, the excess would have to be returned by revising tal rates or fee schedules over the subsequent two years. 0 (I) CITY FINANCIAL INFORMATION Ad Valorem Property Taxation City property taxes are assessed and collected by tht County of San Diego (the "County"), at the same time and on tht same rolls as the County and special district property taxes. The valuation of secured property is established as oi March 1 and is subsequently equalized in August, and is payable in two installments of taxes due November 1 and February 1 respectively. Taxes become delinquent on December 10 an( April 10 for each respective installment. Taxes on unsecurec property (personal property and leasehold) are due on August 3: of each year based on the preceding fiscal year's secured ta: rate. State law exempts $7,000 of the full cash value of ai owner-occupied dwelling, but this exemption does not result ii 5 a any loss of revenue to local agencies, since the Stat€ reimburses local agencies for the value of the exemptions. Assessed Valuations @ The State Board of Equalization assesses all property usinc 100% of value as defined by Article XIIIA of the State Constitution. State law provides exemptions from ad valorerr property taxation for certain classes of property such as churches, colleges, non-profit hospitals, and charitable institutions. The following table sets forth the five-year history of assessed valuations for the City: CITY OF CARLSBAD ASSESSED VALUATIONS Fiscal EIef ore Redevelo1,sent After Redevelopment Year - Adjustment - Adjustment 1982/83 $12 , 064,175 , 069 $2,057,172,577 1983/84 2,252,921,234 2,242,525,629 1984/85 2,548,132,552 2,534,352,353 1985/86 2,951,163,070 2,917,119,901 1986/87 3,517,751,761 3,458,390,377 e Source: County of Ssn Diego Property Tax Services. Tax Levies, Collections and Delinquencies Taxes are levied for each fiscal year on taxable real anc personal property which is situated in the City as of the preceding March 1. A supplemental roll is developed wher property changes hands which produces additional revenue. For assessment and collection purposes, property is classified as either "secured" or "unsecured" and is listed accordingly or separate parts of the assessment roll. The "secured roll" is that part of the assessment roll containing State-assessec property and real property having a tax lien which is sufficient, in the opinion of the assessor, to secure payment of the taxes. Unsecured property comprises all property not attached to land such as personal property or business property. Boats arid airplanes are examples of unsecurec property. Unsecured property is assessed on the "unsecurec roll. 'I 6 0 There is a ten percent penalty on any delinquent payment ol secured roll taxes. In addition, property on the secured rol: 0 with respect to which taxes are delinquent become: tax-defaulted. Such property may thereafter be redeemed b! payment of the delinquent taxes and the delinquency penalty plus a redemption penalty to the time of redemption. If taxe: are unpaid for a period of five years or more, the property i: subject to auction sale by the County Tax Collector. In the case of unsecured property taxes, a 10% penalti attaches to delinquent taxes on property on the unsecured roll and an additional penalty of 1.5% per month begins to accruc beginning November 1st of the fiscal year and a lien ii recorded against the assessee. The taxing authority has foul ways of collecting unsecured personal property taxes: (1) q civil action against the taxpayer; (2) filing a certificate ii the office of the County Clerk specifying certain facts ii order to obtain a judgment lien on specific property of thc taxpayer; (3) filing a certificate of delinquency for record ii the County Recorder's Office in order to obtain a lien 01 specified property of the taxpayer; and (4) seizure and sale o personal property, improvements or possessory interest: belonging or assessed to the assessee. Each county levies (except for levies to support prio voter-approved indebtedness) and collects all property taxei for property fallinq within that county's taxing boundaries The secured tax levy and year-end delinquencies for 1982/8. through 1986/87 are shown on the following table: @ CITY OF CARLSBAD SECURED TAX CHARGES AND DELINQUENCIES Secured 'Fax Amount Delinquent % Del. Charqz - June 30 June 30 1982/83 $3,824,695 $189,331 5.0% 1983/84 4,129,2134 158,975 3.9 1984/85 4,72O,Oi30 103,873 3.9 1985/86 5,589,4155 218,447 3.9 1986/87( 1) 6,680,8158 267,235 4.0 (1) Estimate. Source: County of San Diego Property Tax Services. 7 0 Budqet Process Development of an annual budget typically begins three months prior to the :Eiscal year under consideration. Budgetins is a continuing process involving the presentation of budget estimates by all departments, review of requests by the Citi Manager and referral of a preliminary budget to the Cit] Council for consideration. After the City Council review anc public hearing on the proposed budget, approval of the budget for the forthcoming year is enacted by resolution of the Citj Counc i 1 . Comparative Financial. Statements * The following table reflects the City's general fun( financial statements for the fiscal year 1985/86 actua: revenues, expenditures and fund balance, the estimated actua. for 1986/87 and the budget for 1987/88: CITY OF CARLSBAI) GENERAL FUND REVENUES, EXPENDITURES AND FUND BALANCE 1985/86 ACTUAL, 1986/87 ESTIMATED ACTUAL AND 1987/88 BUDGET Estimated Actual Actual Budget 1985/86(1) 1986/87(2) 1987/88 Taxes $14,851,803 $16,152,000 $17,918,01 License and Permits 3,996,864 2,230 , 000 1,459,OI Fines and Forfeitures 288,055 388,381 446,21 Use of Money and Property 1,066,441 700,000 700,OI Revenue from Current Svcs. 2,870,965 2 , 640,686 1,915,5, Transfers In 708 , 754 573,841 1,241,71 Miscellaneous 1,234,824 2,333,933 2,271,8 TOTAL REVENUES $25,017,706 $25,018,841 $25,952,31 REVENUES: e EXPENDITURES : General Government $ 4,120,270 $ 41630,651 $ 5,416,3 Public Safety 7,851,268 9,429,494 9,513,6 Public Works 5,734,750 6,800,325 6,623,5 Cultural and Recreation 3,539,015 4 , 610,639 4,857,O Transfers Out 3,727,322 -- TOTAL EXPENDITURIZS $24,972,625 $25,471,109 $26,410,6 REVENUES OVER (UNDER) EXPEND I TURES $ 45,081 $ (452,268) $ (458,3 FUND EQUITY JUNE 30 $ 910,569 $ 458.3 01 $ -0- (1) Figures excerpted from the City of Carlsbad 1985/86 Audite (2) Figures provided by the City of Carlsbad. Financial Report. * 8 Financial and Accountinq Information The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund arE accounted for with a separate set of self-balancing account: that comprise its assets, liabilities, fund equity, revenues, and expenditures, or expenses, as appropriate. Govermnent resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The various funds are grouped into eight generic fund types anc three broad fund categories as follows: Government Funds: 0 General Furg - The general fund is the genera- operating fund of the City. It is used to account fox all financial resources except those required to bc accounted for in another fund. Special Revenue Funds - Special revenue funds are use: to account for the proceeds of specific revenuc sources {other than special assessments, expendablc trusts, or major capital projects) that are legall: restricted 110 expenditures for specified purposes. Debt Service Funds - Debt service funds are used tc account for the accumulation of resources for, and tht payment of, the principal of and interest on genera long-term debt, and related costs. Capital Projects Fund - Capital projects funds arl used to account for financial resources to be used fo the acquisition or construction of major capita facilities (other than those financed by proprietar: funds, special assessment funds, and trust funds). Special Assessment Funds - Special assessment fund: are used to account for the financing of publi( improvements or services deemed to benefit thc properties against which special assessments arc levied. 0 Proprietary Funds: Enterprise Funds - Enterprise funds are used tl account fcr operations (a) that are financed ani operated in a manner similar to private enterprise where the intent of the governing body is that th 9 0 costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. Internal Service Funds - Internal service funds are used to accoiint for the financing of goods or services provided by one department or agency to other departments or agencies of the City, or to other governments, on a cost-reimbursement basis. a Fiduciary Funds: Trust and Aaency Funds - Trust and agency funds are used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governments and/or other funds. For the year ended June 30, 1985, the City was holding only agency funds due, for the most part, to other funds and other agencies. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. All government funds are accounted for using the modified accrued basis of accounting. Their revenues are recognized when they become measurable and available as net current assets. Taxpayer-assessed income, gross receipts, and other taxes are considered "measurable" when in the hands of intermediary collecting governments and are recognized as revenue at that time. Anticipated refunds of such taxes are recorded as liabilities and reductions of revenue when they are measurable and their validity seems certain. Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred . Exceptions to this general rule include: (1) accumulated unpaid vacation, sick pay, and other employee amounts which are not accrued; and (2) principal and interest on general long-term debt which is recognized when due. All proprietary funds are accounted for using the accrual basis of accounting. Their revenues are recognized when they are earned, and their expenses are recognized when they are incurred. 0 10 0 0 City Debt Structure Short-Term - Other than the Temporary Note, the City has nc outstanding short-term indebtedness , nor had the City prior tc the Temporary Note incurred any short-term indebtedness. Lonq-Term - The City has never defaulted on the payment OJ principal or interest on any of its indebtedness. As OJ June 30, 1986, the City had outstanding $3,310,000 principa: amount of bonds serviced by the City's Debt Service Fund, 01 which $785,000 principal amount represented general obligatioi bonds of the City and $2,525,000 principal amount representec revenue bond obligations of the City's Parking Authority an( Building Authority. See "Appendix A - Excerpted 1985/8c Audited Financial Statements" attached hereto. Lease Obliqatiors - In 1981, the City entered into ai agreement with the City of Oceanside to lease the public parking area surrourLding a regional shopping area. Under thc terms of the Agreement, the City has agreed to pay an aggregatc amount of $700,040 including interest of 10%. The annua principal and interest payments are to be $70,000 through 199 and $1 annually for each of the remaining years of the fift; year lease. In May, 1986, the City entered into a lease for ( building to be used as the City's Community Developmen. Center. The City's departments of engineering, planning anc II) development services have moved into this building. The terr of the lease is four years with an option to extend the leasc for up to six additional years. The following is; a summary of future annual minimum leasc payments to be paid from the City's General Fund under existinc leases as of June 30, 1986: Year 13nding Annual Minimum June 30 Lease Payments 19137 $315 , 544 19138 304,864 19139 304 , 864 1990 265,720 1991 70,000 40 There i3 f t e r Direct and Overlap~iiiq Debt Contained within the City are numerous overlapping loca agencies providing public services. These local agencies havl 0 11 outstanding bonds issued in the form of general obligation, e lease revenue and special assessment bonds. The direct and overlapping debt of the City is shown in the following table: CITY OF CARLSBAD STATEMENT OF DIRECT AND OVERLAPPING DEBT 1986-87 Assesspd Valuation: $3,458,390,377 (after deducting $59,561,384 redevelopment tax a1 location increment) DIRECT AND OVERLAPPING BONDED DEBT: San Diego County Building Authorities 4.245% $ 8,818,563 San Diego County Water Authority 4.407 1,425,444 San Diego County Water Authority Certificates of Participation 4.407 4,407,000 Metropolitan Water District 0.731 3,930,068 Carlsbad Unified School District (Vari ous i ssues) 95.801-95.807 644,376 Carl sbad Uni f ied School District Authority 95.770 6,775,728 San Marcos Unified School District 22.481 547,166 San Dieguito Union High School District 9.182 348,916 Encinitas Union School District 23.989 353,837 Encinitas Union School District Authority 23.989 31 1,857 Other School Districts Various 8,644 Tri-Ci ty Hospital Di strict 33.952 746,944 Pal omar Pomerado Hospi tal 0.711 116,746 District 8, Authority Leucadia County Water District and I.D. #1 49.069 & 5.045 347,909 161,697 San Marcos County Water Costa Real Municipal Water Di stri ct Certificates of Participation 98.785 12,150,555 Costa Real (Carlsbad) Municipal Water District, Improvement District #1, 2, 3, 4 97.592-98.778 978,320 01 ivenhai n Municipal Water District I.D. #1 30.219 472,927 City of Carlsbad 100. 565,000(1) City of Carlsbad Building Authorities 100. 2,375,000 City of Carlsbad 1915 Act Bonds, 100. 9.570.OOQ TOTAL DIRECT AND OVERLAPPING BONDED DEBT $55,056,647 % ADD] i cab1 e Debt 7/1/87 and I.D.'s #1, 2, 6 6.517-9.698 e (1) Excludes notes to be sold. Ratios to Asses sed Val uat i on: Direct Debt (5 2.940.000) 0.09% Total Debt 1.59% SHARE OF AUTHORIZED AND UNSOLD BONDS: Metropolitan Water District ................................ $1,937,150 Costa Real Municipal Water District, I.D. #1 ............... S 98,035 Costa Real Municipal Water District, 1.0. #3 ............... $ 195,184 STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/86: YN: ($400) ................................................. $ 314,760 Source: California Municipal Statistics, Inc. 12 a GENERAL CITY INFORMATION 0 Introduction The City was incorporated July 16, 1952. It is a general law city with a council/manaqer form of government. The City encompasses 35.6 square miles and is located approximately 35 miles north of the City of San Dieqo. CITY OF CARLSBAD COuNm OF SAN DIEGO POPULATION ESTIMATES Year City County 1970 14,944 1,357,854 1975 19,200 1,560,700 1980 35,490 1,861,846 1981 35,600 1,895,200 1982 37,650 1,944,000 1983 39,200 1,988,600 1984 40,650 2,041,400 1985 44,950 2,102,500 1986 48,850 2,165,500 1987 55,300 2,240,700 Sources: 1970 and 1980: U.S. Census. 1975, 1981-1987: State of California Department of Finance. 0 Labor Relations The City has 429 full-time permanent employees and five representation units, as follows: CITY OF CARLSBAD LABOR RELATIONS No. of Contract Expiratio1 Representation Unit Emp 1 oyee s Date Carlsbad Police Officers' Assoc. 73 June 15, 1988 Carlsbad Fireman's Assoc. 52 July 1, 1987 Carlsbad City Employees ' Assoc. 228 June 30, 1987 Carlsbad Police Manaqement 7 (1) City Management 69 (1) (1) Ongoing contracts without expiration dates. Source: City of Carlsbad. a 13 Retirement Proqrams All permanent employees of the City are covered under the Public Employees' Retirement System (PERS) of the State, a defined benefit plan. Pension costs are funded by monthly contributions from the City and covered employees. Contributions by the City during 1986/87 are estimated to be $2,628,353 and are expected to be $2,608,545 for 1987/88. Contribution rates are determined by PERS and are calculated to include unfunded prior service costs amortized through the year 2000. The Public Employees Retirement System actuary estimates the plan's unfunded liability as of June 30, 1987 to be $16,606. The City contributes to FICA only for Medicare benefits for employees hired after April 1, 1986. The amount for 1986/87 is estimated to be $19,954 and $39,508 is expected to be contributed in 1987/86. a ECONOMIC PROFILE General Description The California Ernployment Development Department forecasts that San Diego County's economy will experience growth during 1987 and 1988. Unemployment is expected to continue its downward trend in 1987. Employment As of May I, 198'7 the civilian labor force for the City was 22,580, of which 21,826 were employed. The unadjusted unemployment rate as of May 1, 1987 decreased to 3.3 percent from the May 1, 1986 rate of 4.0: percent. Larqest Employers Car lsbad : The following ti;.ble sets forth the largest employers in 14 a CITY OF CARLSBAD a SCHE'DULE OF PRINCIPAL EMPLOYERS 1986-87 Number of Firm Product/Service Employees Manufacturing: Hughes Aircraft Company Electronic Components 1,500 Eaton-Leonard Corporation Vending Machines 275 Beckman Instruments Microbics Operation 24 0 Watkins Manufacturing Corp. Portable Spas 185 Dynavied Incorporated Medical Products . 180 Sierracin-Mangnedyne, Inc. Electronic Motors 162 Sargent Industries Industrial Seals 150 Non-Manufacturing: Tri-City Medical Center District Hospital 1,450 Plaza Camin4 Real Shopping Center 1,000 La Costa Hctel and Spa Hotel/Health Spa 1,000 Car Country Caflsbad Car Dealership 500 (est.) City of Carlsbad Government 435 Carlsbad Unified School District Education 4 25 San Diego Gas & Electric Electricity and Gas 414 Pea Soup Andersen's RestaurantIHotel 200 Daniel's Cablevision Cable TV 90 0 Source: City of Carl-sbad Chamber of Commerce. 15 0 The following table presents the annual average wage and salary figures by industry classification for, San Diego County for the years 1982 th.rough 1986. rl) SAN DIEGO COUNTY WAGE AND SALARY BY INDUSTRY ANNUAL AVERAGES (In Thousands) 1982 1983 1984 1985 1986 Agriculture 13.9 13.6 12.3 11.9 11.6 Mining 0.6 0.5 0.6 0.8 0.8 Construction 29.0 31.6 41.4 47.5 52.0 Manufacturing 108.4 106.9 116.0 121.6 122.0 Transportat ion, Public Utilities 29.7 29.8 30.5 31.6 32.1 Wholesale Trade 27.5 28.3 31.0 33.6 34.8 Retail Trade 126.7 131.6 142.4 153.3 162.7 Finance, Insurance, Real Estate 42.6 45.8 48.5 52.0 56.2 Services 158.6 163.5 181.3 197.9 211.1 Government 139.6 139.5 141.8 145.7 150.0 TOTAL 6’76.4 691.0 745.8 795.7 833.4 (1) Totals may not add due to independent rounding. Source: State Department of Employment Development. 0 The following table presents annual labor force an; employment data for San Diego County, the State of Californii and the United States for the years 1980 through 1986. A: shown in the table, unemployment rates in San Diego County haw been lower than those in California and the nation as a whole. 16 0 COUNTY OF SAN DIEGO Labor Force, Employment and Unemployment Yearly Average for Years 1980 through 1986 0 Civil i an Year and Area Labor Force Ernpl oyment Unemployment Rate 1980 San Diego County ........ 774,500 723,300 52,700 6.8% California . . . . . . . . . . . . . . 11,581,000 10,791,100 789,900 6.8 United States ........... 106,940,000 99,303,000 7,637,000 7.1 1981 San Diego County ........ 797,300 740,500 55,000 6.9 California .............. 71,799,900 10,907,800 872,100 7.4 United States ........... 10&1,670,000 100,397,000 8,273,000 7.6 1982 San Diego County ........ 834,000 756,800 77,200 9.3 California .............. 12,189,000 10,978,000 1,211,000 9.9 United States ........... 110,204,000 99,526,000 10,678,000 9.7 San Diego County ........ 877,100 805,100 72,000 8.2 Cal i forni a 9.7 United States ...__...... 11'l,551,000 100,834,000 10,717,000 9.5 San Diego County _...-... 915,300 860,800 54,500 6.0 California . . .. . . . . . . . . . . 12,619,000 11,638,000 981,000 7.8 United States ........... 113,544,000 105,005,000 8,539,000 7.5 San Diego County ........ 967 ,200 915,900 51,300 5.3 1983 . . . . . . . -. . . . . . 1 >!, 281 ,000 1 1 ,095,000 1,187,000 1984 1985 0 California ..... .._.... .. 12,937,000 12,007,000 931,000 7.2 United States ........... 11!5,462,000 107,150,000 8,312,000 7.1 1986 San Diego County ........ 1,017,600 966,900 50,700 5.0 California . . . . . . . . . . . . . . 13,365,000 12,473,000 892,000 6.7 United States ........... 117.834,OOO 109,597,000 8,237,000 7.0 Source: California Employment Devel oprnent Department. 17 a Commercial Activity Taxable sales in the City have increased at an annual rate of 13% during the five-year period 1981 through 1985. A five-year history of taxable sales is shown in the following table: 0 CITY OF CARLSBAD TAXABLE TRANSACTIONS (in Thousands of Dollars) Retail Stores Total All Outlets No. of Taxable No. of Taxable Year Permits Transactions Permits Transactions 1982 422 327,179 1,121 359 I774 1984 468 439,885 1,304 482 f 963 1983 436 369,888 1 I 169 407 I 933 1985 470 483,798 1,417 542,677 1986 522 503,109 1 f 612 571,855 5,urce: California State Board of Equalization. 0 18 a Construction Activity The following table shows construction activity in the City for the past five years. 0 CITY OF CARLSBAD BUILDING PERMIT VALUATION (In Thousands of Dollars) Residential 1982 1983 1984 1985 1986 New single housing $17,596 $ 63,870 $ 86,482 $122,340 $185,433 New multi-dwelling 15,245 36,767 44,152 77,129 96,803 Additions, alterations -2,183 2,231 2,670 3,261 3,809 Total Residential - $35,024 $102,868 $233,304 $202,730 $286,045 Non-Residential New commercial I $10,760 $ 5,921 $ 22,243 '$ 31,921 $ 33,934 New industrial 6,758 8,407 1,481 745 2,509 Additions, alterations -4,311 7,736 7,140 18,994 12,280 Total non-residential $22,957 $ 24,858 $ 37,386 $ 68,732 $ 54,167 e Total Valuation - $57,981 $127,726 $170,690 $271,462 $340,212 Other 1,128 2,794 6,522 17,072 5,444 Number of new dwelling units Single dwelling 161 782 933 1,267 1,779 25 1 817 907 1,528 1,338 Total Units 412 1,599 1,840 2,795 3,117 Multi-dwelling - Source: Security Pacific Bank, California Construction Trends. Transportation the City. Major road service is provided by Interstate (north/south) and State Highway 78 (east/west). Mainline service of AMTRAK and the Santa Fe Railway i available to the City. More than 100 trucking an moving/storage firms serve North San Diego County, wit overnight delivery service to Arizona, Los Angeles, San Diego Excellent land, sea and air transportation facilities servl 19 0 San Francisco and intermediate points. Local bus service is 0 provided by North County Transit District; interurban and regional bus service is provided by Greyhound and Trailways. McClellan-Palomar Airport is located in the City and can accommodate private and light commercial aircraft. Oceanside Municipal Airport is located 8 miles north in Oceanside, California. Lindberqh Field (San Diego International Airport) is 30 miles south, arid John Wayne Airport in Irvine, California is 45 miles to the north. Deepwater general cargo and bulk service is provided by the Port of San Diego, located 37 miles to the south. TAX EXEMPTION In the opinion oE Jones Hall Hill b White, A Professional Law Corporation, San Francisco, California, Bone Counsel, subject, however, to th? qualifications set forth below, under existing law, interest on the Notes is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimurn tax imposed on individuals and corporations, provided, however, that, for the purpose of computing the alternative minimum tax imposed on such corporations (as defmed for federal income tax purposes), suck interest is taken into account in determining adjusted net book income (adjusted current earnings for taxable years beginnin5 after December 31, 1989). The opinions set forth in the preceding sentences are subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986 (the "Code") that must be satisfied subsequent to the delivery of the Note2 in order that such interest be, or continue to be, excludec from gross income for federal income tax purposes. The Citi has covenanted to comply with each such requirement. Failurc to comply with cert:ain of such requirements may cause thc inclusion of such interest in gross income for federal incomc tax purposes to be retroactive to the date of delivery of thc Notes. Bond Counsel expresses no opinion regarding othei federal tax consequences arising with respect to the Notes. Prospective purchasers of the Notes should be aware thal (i) section 265 of the Code denies a deduction for interest 01 indebtedness incurred or continued to purchase or carry thc Notes or, in the case of a financial institution, that portio1 of the Noteholders ' interest expense allocated to interesl (ii) with respect to insurance companies subject to the ta: e 20 0 imposed by section 831 of the Code, for taxable years beginnins after December 31, 1986, section 832(b)(5)(B)(i) reduces the deduction for loss reserves by 15 percent of the sum of certair items, including interest on the Notes, (iii) for taxable years beginning after December 31, 1986 and before January 1, 1992, interest on the Not:es earned by some corporations could bc subject to the environmental tax imposed by section 59A of thc Code, (iv) for taxable years beginning after December 31, 1986, interest on the Notles earned by certain foreign corporations doing business in the United States could be subject to i branch profits tax imposed by section 884 of the Code, anc (v) passive investment income, including interest on the Notes, may be subject to federal income taxation under section 1375 of the Code for subchapter S corporations that have subchapter C earnings and profits at the close of the taxable year if greater than 25% of the gross receipts of such subchapter E corporation is passive investment income and (vi) section 86 of the Code requires recipients of certain Social Security anc certain Railroad Retirement benefits to take into account, ir determining gross income, receipts or accruals of interest c.,r the Notes. In the further (opinion of Bond Counsel, such interest is 0 exempt from California personal income taxes. LEGAL MATTERS Jones Hill Hall & White, a Professional Law Corporation, San Francisco, California, Bond Counsel, will render an opinior as to the validity of the Notes. Certain legal matters will bc passed on for the Underwriter by Brown SC Wood, San Francisco, California. e LEGALITY FOR INVESTMENT IN CALIFORNIA Under the provisions of the California Financial Code, thc Notes are legal investments for commercial banks in the State. LITIGATION No litigation is pending or threatened against the Citi concerning the validity of the Notes. The City is not aware of any litigation pending or threatened questioning its political existence or contesting its ability to levy and collect ad valorem taxes or to collect or receive other Pledged Revenues or contesting the City’s ability to issue the Notes or it: ability to pay the principal of and interest on the Notes OK 21 0 .* impeding the City's ability to issue general obligation bond: or certificates of participation to retire the. Notes. e RATING Moody's Investor:; Service has assigned a rating of MIG-I tc the Notes. Certain information was supplied by the City tc said rating agency to be considered in evaluating the Notes The rating issued reflects only the views of such ratinc agency, and any explanation of the significance of such ratinc should be obtained from the rating agency. There is ne assurance that the rating will be retained for any given perioc of time or that the same will not be revised downward o withdrawn entirely by such rating agency if, in its judgment circumstances so warrant. The City undertakes nc responsibility either to bring to the attention of the holder of the Notes any downward revision or withdrawal of any ratinc obtained or to oppose any such revision or withdrawal. Aq such downward revision or withdrawal of the rating obtained ma: have an adverse effect on the market price of the Notes. UNDERWRITING The Notes are being purchased by Rauscher Pierce Refsnes Inc. (the "Underwriter"). The Underwriter has agreed tc purchase the Notes pursuant to a contract of purchase by anc among the City and the Underwriter (the "Contract of Purchase" at the purchase price of $6,545,076.50. The Contract of Purchase provides that the Underwriter wil purchase all of the Notes if any are purchased. The obligatio] to make such purchase is subject to certain terms anc conditions set forth in the Contract of Purchase. Thc Underwriter may offer and sell the Notes to certain dealers anc others at prices lower than the public offering price stated 01 the cover page hereof. The offering price may be changed fro1 time to time by the Underwriter. 0 ADDITIONAL INFORMATION The purpose of this Official Statement is to suppl. information to purcliasers of the Notes. Quotations from an1 summaries and explanations of the Notes, the resolutio. authorizing the Notes and the statutes and documents containej herein do not purport to be complete, and reference is hereb. made to said resolution, statutes and documents for full an! complete statements of their provisions. 22 0 -* All data contained herein have been taken or constructec from the City's records and other sources. The appropriatc City official, acting in such person's official capacity, ha: reviewed this Official Statement and has determined that as oi the date hereof the information contained herein is, to thc best of such official's knowledge and belief, true and correci in all material respects and does not contain an untruc statement of a material fact or omit to state a material faci necessary in order to make the statements made, in light of tht circumstances under which they were made, not misleading. Thc appropriate City official will execute a certificate to thii effect upon delivery of the Motes. This Official Statement ani its distribution have been duly authorized and approved by thc City Council. e CITY OF CARLSBAD, CALI FOWNIA DATED: July 7, 1987 0 e 23 -. II) APPENDIX A 1985 - 1986 EXCERPTED AUDITED FINANCIAL STATEMENTS a e NEW ISSUE /n the opinion of Jonts Hall Hill &? While, A Professional Luw Corporation, San Francisco, California, Bond Counsel, subject, howmer to certain gualijirations described herein, under existing luw , interest on the Notes is excludedfrom gross income for federal income tuxpurpostu andsuch interest is not an item of tax preference forpurposes of the federal individual and corporate alternative minimum taxes, although it is included in aajusted net book income andcurrent earnings in computing the alternative minimum tax imposed on certain coqorations. In the fufiher opinion of Bond Counsel, such interest is exempt from CaLifornia personal income tares. See “TAX EXEMPTIOh’” herein. $6,555,000 CITY OF CARLSBAD COUNTY OF SAN DIEGO STATE OF CALIFORNIA 1987 NOTES Dated: July 16, 1987 Due: June 30, 1988 The Notes will be issued in the demominations of $5,000 or any ‘integral multiple thereof. Principal of and interest on the Notes will be payabie upon maturity in Los Angeles, California, at the Corporate Trust Depart- ment of Security Pacific National Bank, the paying agent of the City of Carlsbad (the “City”). The Notes are not subject to redemption prior to maturity. The Notes will be negotiable and not subject to registration. The Notes are by statute general obligations of the City and are payable from the proceeds of general obligation bonds or certificates of participation issued to finance the Project, defined below, on a long term basis or if such obligations are not issued prior to the maturity of the Notes, from taxes, income, revenue, cash receipts and other moneys intended as receipts fix the general fund of the City attributable to the fiscal year 1987/88 and which are generally available for the payment of current expenses and other obligations of the City, as well as other funds held by the City during fiscal year 1987/1988 which may be legally available for payment thereof (the “Unrestricted Moneys”). The proceeds of the Notes are being used to retire a note of the City in the principal amount of $6,459,384 plus interest accrued thereon to the order of San Diego Trust and Savings Bank (the “Temporary Note”) and to pay costs of issuance incurred in connection with the issuance of the Notes. The proceeds of the Temporary Note were used by the City to acquire on June 1, 1987 approximately 52 acres of land to be maintained by the City as open space (the “Project”). The Notes are direct obligations of the City and, to the extent set forth herein, are legal investments for commercial banks in California ana‘ are eligible to secure depoxits of public moneys in Calqornia. Interest Rate Yield 4.2!5% 4.00% -- __ The Notes are offered when, as and if issued and received by the Underwriter, suhect ,to approval of legality 4 Jones Hall Hill & White, a Professional Law Corponztion, San Francisco, California, Bond Counsel. Certain legal matten will be passed on for the Underwriter by Brown & Wood, San Francisco, California. It is anticipated that the Notes in d&nitivefomz will be available for deliveq in Nm York, New York,, on or about July 16, 1987. Rauscher Pierce Refsnes, Inc. July 7, 1987 No dealer, broker, salesperson or other person has been authorized by the City to give any information or to make any representations other than those contained herein and, if given or made, such other information or representation must not be relied upon as having been authorized by the City. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale sf the Notes by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers of the Notes. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as a representation of facts. The information set forth herein has been obtained from sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the Underwriter. The information and expression of opinions herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under ani circumstances, create any implication that there has been nc change in the affairs of the City since the date hereof. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MA' OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAI! THE MARKET PRICE OF THE NOTES AT A LEVEL ABOVE THAT WHICH MIGH' OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, I1 COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITE MAY OFFER AND SELL THE NOTES TO CERTAIN DEALERS AND DEALE BANKS AND BANKS ACTING AS AGENT AT PRICES LOWER THAN THE PUBLI OFFERING PRICE STATED ON THE COVER PAGE HEREOF AND SAID PUBLI OFFERING PRICE MAY BE CHANGED FROM TIME TO TIME BY TH UNDERWRITER. TABLE OF CONTENTS P ai - INTRODUCTORY STATEMENT .................................... THE NOTES Authority for Issuance .................................. Purpose of the Issue .................................... Description of the Notes ................................ Security for the :Notes .................................. Available Sources of Repayment .......................... Article XIIIA ........................................... Article XIIIB ........................................... I Ad Valorem Property Taxation ............................ Tax Levies, Collections and Delinquencies t Budget Process E Financial and Accounting Information 5 CONSTITUTIONAL AND STATUTORY LIMITS AFFECTING CITY REVENUES CITY FINANCIAL INFOIWTION E ..................................... t Assessed Valuations Comparative Financial Statements ........................ E City Debt Structure ..................................... 11 Direct and Overlapping Debt ............................. 11 ............... .......................................... .................... GENERAL CITY INFORMATION Introduction ............................................. 13 Labor Relations .......................................... 13 General Description ..................................... 14 Largest Employers ....................................... 14 Commercial Activity ..................................... 18 Retirement Program ..................................... 14 Employment .............................................. 14 Construction Activity ................................... 19 Transportation .......................................... 19 TAX EXEMPTION ............................................. 20 LEGALITY FOR INVESTMENT IN CALIFORNIA ..................... 21 LITIGATION ................................................ 21 RATING .................................................... 22. UNDERWRITING .............................................. 22 ADDITIONAL INFORMATI~ON .................................... 22 APPENDIX A-EXCERPTED 1985/86 AUDITED FINANCIAL STATEMENTS . A-1 ECONOMIC PROFILE LEGAL MATTERS ............................................. 21 L 4 _- . 0,r-q. Count? .I-*n**o Counir ' ailormi . -m . Z& C~UW vwm - Imwnoi OOW* CITY OF CARLSBAD, CALIFORNIA MAYOR CLAUDE "BUDDY" LEWIS CITY COUNCIL ERIC WSON MARK PETTINE ANN J. KULCHIN JOHN MAMAUX ACTING CITY MANAGER RAYMOND PATCHETT FINANCE DIRECTOR JAMES F. ELLIOTT (THIS PAGE IYTENTIONXLLY LEFT BLANK) OFFICIAL STATEMENT $6,555,000 CITY OF CARLSBAD COUNTY OF SAN DIEGO STATE OF CALIFORNIA 1987 NOTES INTRODUCTORY STATEMENT This Official Statement, including this Introductol Statement and the Appendix, provides information in connectic with the sale by the City of Carlsbad (tlze "City") of its 19E Notes (the "Notes") in the aggregate principal amount c $6,555,000. The Notes will be issued in full conformity wit the Constitution and laws of the State of California (tk "State"), including Article 7.6, Chapter 4, Part 1, Division 2 Title 5 (commencing with Section 53850) of the Californi Government Code (the "Act"). Under the Act and Resolutior defined below, the Notes are general obligations of the Cit payable from the proceeds of general obligation bonds c certificates of participation issued to finance the Project c a long term basis, defined below, or if such obligations ar not issued prior to the maturity of th.e Notes, from taxes income, revenue, cash receipts and other moneys intended a receipts for the general fund of the City attributable to th fiscal year 1987/88 and which are generally available for th payment of current expenses and other obligations of the City as well as all other funds held by the City during fiscal yea 1987/1988 which may be legally available therefor (th "Unrestricted Moneys"). The Notes are authorized by Resolutio No. 9132 adopted by the City Council on June 23, 1987 (th "Resolution"). Proceeds from the sale of the Notes will b used to retire a nctte of the City in the principal amount o $6,459,384 plus interest accrued thereon to the order of Sa Diego Trust and Savings Bank (the "Temporary Note"). Th proceeds of the Temporary Note were used by the City to acquir the Project on June 1, 1987. THE NOTES Authority for Issuance - pursuant to the Resolution. The Notes are issued under the authority of the Act ani 1 Purpose of the Issue Proceeds of the Notes will be used to retire the Temporarl Note and to pay certain costs of issuance incurred in thc issuance of the Notes. Description of the Notes The Notes will be issued in the aggregate principal amount of $6,555,000. The Notes are not subject to registration, anc will be in bearer form, without coupons, and shall be ir denominations of $5,000 or any integral multiple thereof. Thf Notes will be dated July 16, 1987 and will mature June 30, 1988. Principal and interest on the Notes will be payable ai the Corporate Trust Department of Security Pacific Nationa: Bank, the Paying Agent, in Los Angeles, California. Security for the Notes The principal amount of the Notes, together with tht interest thereon, shall be payable from the proceeds of genera: obligation bonds or certificates of participation issued tc finance the Project, defined below, or if such obligations arc not issued prior to the maturity of the Notes, Unrestrictec Moneys, which include taxes, income, revenue, cash receipt: and other moneys intended as receipts for the general fund 0' the City during fiscal year 1987/88 and which are generall: available for the payment of current expenses and othe obligations of the City, as well as all other funds held by thl City during fiscal year 1987/1988 which may be legally used tl pay such amounts. No specific revenues are pledged to th repayment of the Notes. Available Sources of Repayment The Notes, in accordance with State law, are genera obligations of the City and, if not paid from the proceeds of general obligation bond or certificate of participation issue will be payable only out of Unrestricted Moneys. The City may under existing law, ,issue the Notes only if the principal o and interest on its issue of the Notes will not exceed 8 percent of the estimated amount of the then-uncollecte Unrestricted Moneys which will be legally available for th payment of principal of and interest on said Notes. 2 The amount of estimated Unrestricted Moneys available t repay the Notes and the interest thereon for the City j approximately $41,0~00,000 including carry-over balances. TI amount of Unrestriclted Moneys needed to pay principal of ax interest on the Notes is $6,833,588, providing a Note coverac ratio of 6.0. j necessary, for repayment are as follows: CITY OF CARLSBAD ESTIMATED UNRESTRICTED MONEYS AVAILABLE FOR NOTE REPAYMENT The City estimates that the moneys available, SOURCES AMOUNT Cash Balance-July 1, 1987 ..................... $ 458,301 Property Tax .................................. 7,835,000 Other Taxes 10,083,000 1,459,000 446,200 Service Charges ............................... 1,915,540 General Capital Construction Fund ............. 1,821,396 Public Facilities Fees ........................ 3,562,127 Planned Local Drainage Fees ................... 1,960,650 Sewer Construction Fund ....................... 7,169,368 Other ......................................... 2,971,811 Transfers In .................................. 1,241,749 TOTAL UNRESTRICTED MONEYS ................... $40,924,142 TOTAL PRINCIPAL PLUS INTEREST ................. $ 6,833,588 ................................... Licenses, Permits 6 Fees ...................... Fines, Forfeitures 81 Penalties ................ NOTE COVERAGE RATIO ........................... 6.0 Source: City of Carlsbad - 1987/88 Adopted Budget CONSTITUTIONAL ANI) STATUTORY LIMITS AFFECTING CITY FSWXWES Article XIIIA Article XIIIA of the State Constitution limits the amounl of ad valorem taxes on real property to 1% of "full cash value' as determined by the County Assessor. Article XIIIA defines "full cash value" to mean "the County's Assessor's valuation of 3 real property as shown on the 1975/76 tax roll under 'full cask value', or thereafter, the appraised value of real properti when purchased, newly constructed or a change in ownership ha: occurred after the 1975 assessment period subject to exemption: reconstruction. I' The "full cash value" is subject to annua: adjustment to reflect increases, not to exceed 2% per year, 01 decreases in the consumer price index or comparable local data or to reflect reductions in property value caused by damage destruction or other factors. Article XIIIA requires a vote of two-thirds of th qualified electorate to impose special taxes, while total1 precluding the imposition of any additional ad valorem, sale or transaction tax on real property. As recently amended Article XIIIA exempts from the 1% tax limitation any tax@ above that level required to pay debt service on voter-approve general obligation bonds for real property or improvement thereon. In addition, Article XIIIA requires the approval o two-thirds of all members of the State Legislature to chang any State laws resulting in increased tax revenues. In addition a statutory initiative was adopted by th voters at the November 4, 1986 General Election whic (i) requires that any tax for general governmental purpose imposed by local governmental entities such as the City k approved by resolution or ordinance adopted by a two-third vote of the governmental entity's legislative body and by majority vote of the electorate of the governmental entitj (ii) requires that any special tax (defined as taxes levied fc other than general governmental purposes) imposed by a loc: governmental entity be approved by a two-thirds vote of tk voters within that jurisdiction, (iii) restricts the use c revenues from a special tax to the purposes OK for the servic ~OE which the special tax was imposed, (iv9 prohibits tl imposition of ad valorem taxes on real property by locz governmental entities except as permitted by Article XIIfI (v) prohibits the imposition of transaction taxes and salt taxes on the sale of real property by local government' entities, and (vi) requires that any tax imposed by a loc governmental entity on or after August 1, 1985 be ratified by majority vote of the electorate within two years of t. adoption of the initiative or be terminated by November 1 1988. The City does not anticipate any potential adver financial impact as a result of the passage of this amendi. init iat fve . in certain c ir cumst ances of property transfer 01 4 I Article XIIIB Article XIIIB ctf the State Constitution limits the annui appropriations of the State and of any city, county, schoc district, authority or other political subdivision of the Stat to the level of appropriations of the particular government; entity for the prior fiscal year, as adjusted for changes j the cost of livinq, population and services rendered by tl governmental entity. The "base year" for establishing SUG appropriation limit is the 1978/79 fiscal. year and the limit i to be adjusted an.nua1ly to reflect changes in populatior! consumer prices and certain increases in the cost of service provided by these public agencies. Appropriations subject to Article XIIIB generally incluc the proceeds of taxes levied by the State or other entity c local government, exclusive of certain State subventions refunds of taxes, benefit payments from retirement unemployment insurance and disability insurance funds "Proceeds of taxes" include, but are not: limited to, all ta revenues and the proceeds to an entity of government fro (i) regulatory licenses, user charges, and user fees (but on1 to the extent such proceeds exceed the cost of providing th service or regulation), and (ii) the investment of ta: revenues. Article XIIIB includes a requirement that if a: entity's revenues in any year exceed the amounts permitted tl be spent, the excess would have to be returned by revising ta: rates or fee schedules over the subsequent two years. CITY FINANCIAL INFORMATION Ad Valorem Property Taxation City property taxes are assessed and collected by thc County of San Diego (the "County") , at the same time and on thc same rolls as the County and special district property taxes. The valuation of secured property is established as of March 1 and is s&sequently equalized in .August, and is payable in two installments of taxes due November 1 and February 1, respectively. Taxes become delinquent on December 10 anc April 10 for each respective installment. Taxes on unsecurec property (personal property and leasehold) are due on August 31 of each year based on the preceding fiscal year's secured tax rate. State law exempts $7,000 of the full cash value of an owner-occupied dwelling, but this exemption does not result in 5 any loss of revenue to local agenciesI since the State reimburses local agencies for the value of the exemptions. Assessed Valuations The State Board of Equalization assesses all property using 100% of value as defined by Article XIIIA of the State Constitution. State law provides exemptions from ad valorer property taxation for certain classes of property such as churches, colleges, non-profit hospitals, and charitable institutions. The following table sets forth the five-year history ol assessed valuations for the City: CITY OF CARLSBAD ASSESSED VALUATIONS Fiscal Before Redevelopment After Redevelopment Year Adjustment Adjustment 1982/83 $2,064,175,069 $2,057,172,577 1983/84 2,252,921,234 2,242,525,629 1984/85 2,54a,132,552 2,534,352,353 1985/86 2,951,163,070 2,917,119,901 i986/87 3,517,751,761 3,458,390,377 Source: Tax Levies, Collections and Delinquencies Taxes are levied for each fiscal year on taxable real an personal property which is situated in the City as of th preceding March 1. A supplemental roll is developed whe property changes hands which produces additional revenue. Fo assessment and collection purposes, property is classified 9 either "secured" or "unsecured" and is listed accordingly o separate parts of the assessment roll. The "secured roll" i that part of the assessment roll containing State-assesse property and real property having a tax lien which i sufficient, in the opinion of the assessor, to secure paymen of the taxes. Unsecured property comprises all property nc attached to land such as personal property or busines property. Boats and airplanes are examples of usecur€ property. Unsecured property is assessed on the "unsecurE County of San Diego Property Tax Services. roll. " 6 There is a ten percent penalty on any delinquent payment c secured roll taxes. In addition, property on the secured rol with respect to which taxes are delinquent become tax-defaulted. Such property may thereafter be redeemed b payment of the delinquent taxes and the delinquency penalty plus a redemption penalty to the time of redemption. If taxe are unpaid for a period of five years or more, the property i subject to auction sale by the County Tax Collector. In the case of unsecured property taxes, a 10% penalt attaches to delinquent taxes on property on the unsecured roll and an additional penalty of 1.5% per month begins to accru beginning November 1st of the fiscal year and a lien ii recorded against the assessee. The taxing authority has fou: ways of collecting unsecured personal property taxes: (1) l civil action against the taxpayer; (2) filing a certificate ii the office of the County Clerk specifying certain facts ii order to obtain a judgment lien on specific property of thc taxpayer; (3) filing a certificate of delinquency for record ir the County Recorder's Office in order to obtain a lien or specified property of the taxpayer; and (4) seizure and sale of personal property, improvements or possessory interest: belonging or assessed to the assessee. Each county levies (except for levies to support prior voter-approved indebtedness) and collects all property taxes for property fallinq within that county's taxing boundaries. The secured tax levy and year-end delinquencies for 1982/83 through 1986/87 are shown on the following table: CITY OF CARLSBAD SECURED TAX CHARGES AND DELINQUENCIES Secured Tax Amount Delinquent % Del. Charqel- June 30 - June 30 i982/a3 $3,824,695 $189,331 5.0% 1983/84 4,129,204 158,975 3.9 1984/85 4,720,080 183,873 3.9 19a5/a6 5,589,465 218,447 3.9 1986/87(1) 6,680,868 267,235 4.0 (1) Estimate. Source: County of San Diego Property Tax Services. 7 Budqet Process Development of an annual budget typically begins thre months prior to the fiscal year under consideration* Budgetin is a continuing process involving the presentation of budge estimates by all departments, review of requests by the Cit Manager and referral of a preliminary budget to the Cit Council for consideration. After the City Council review ar public hearing on the proposed budget, approval of the budge for the forthcoming year is enacted by resolution of the Cit Counci 1. Comparative Financial Statements The following table reflects the City's general fur financial statements for the fiscal year 1985/86 actu; revenues, expenditures and fund balance, the estimated actuz far 1986/87 and the budget for 1987/88: CITY OF CARLSBAD GENERAL FUND REVENUES, EXPENDITURES AND FUND BALANCE 1985/86 ACTUAL, 1986/87 ESTIMATED ACTUAL AND 1987/88 BUDGET Estimated Actual Budge Actual 1985/86(1) 1986/87(2) 1987/8 Taxes $14,851,803 $16,152,000 $17,918, License and Permits 3 , 996 , 864 2 , 230,000 1,459, Fines and Forfeitures 288,055 388 , 381 446, Use of Money and Property 1,066,441 700 , 000 780, Transfers In 788,754 573,841 1,241, Miscellaneous 1 , 234 I 824 2 , 333 , 933 2,271, TOTAL REVENUES $25,017,706 $25,018,841 $25,952, REVENUES: Revenue from Current Svcs. 2,870,965 2,648,686 1,915, EXPENDITURES : General Government $ 4,120,270 $ 4,630,651 $ 5,416, Public Works 5 , 734,750 6,800,325 6,623, Cultural and Recreation 3 , 539 , 015 4 , 610 , 639 4,857, Transfers Out TOTAL EXPENDITURES $24,972,625 $25,471,109 $26,410, Public Safety 7,851 , 268 9,429,494 9,513, 3 , 727 , 322 -- REVEMTES OVER (UNDER) EXPENDITURES $ 45,081 $ (452,268) $ (458, FUND EQUITY JUNE 30 $ 910,569 $ 458.3 01 $ -C (I) Figures excerpted from the City af Carlsbad 1985/86 Audi' (2) Figures provided by the City of Carlsbad. Financial Report. 8 Financial and Accounting Information The accounts sf the City are organized on the basis ( funds and account groups, each of which is considered separate accounting entity. The operations of each fund ai accounted for with a separate set of self-balancing accoun that comprise its assets, liabilities, fund equity, revenue' and expenditures, or expenses, as appropriate. govern me^ resources are allocated to and accounted for in individu, funds based upon the purposes for which they are to be spel and the means by which spending activities are controlled. TI various funds are grouped into eight generic fund types ai three broad fund categories as follows: Government Funds: General Fim - The general fund is the gener4 operating fund of the City. It is used to account fc all financial resources except those required to I accounted ffor in another fund. Special Revenue Funds - Special revenue funds are usz to account: for the proceeds of specific revem sources (clther than special assessments, expendabl trusts, or major capital projeczs) that are legall restricted to expenditures for specified purposes. Debt Service Funds - Debt service funds are used t account for: the accumulation of resources for, and tl payment of, the principal of and interest on generz long-term debt, and related costs. Capital Projects Fund - Capital projects funds ar used to acc:ount for financial resources to be used fc the acquisition or construction of major capita facilities (other than those financed by proprietar funds, special assessment funds, and trust funds). Special Assessment Funds - Special assessment func are used to account for the financing of publi improvements or services deemed to benefit tk properties against which special assessments ar levied. Proprietary Funds: Enterprise Funds - Enterprise funds are used t account for operations (a) that are financed ar operated in a manner similar to private enterprise where the intent of the governing body is that th 9 costs (expenses, including depreciation) of providinc goods or services to the general public on i continuing basis be financed or recovered primarill through user charges; or (b) where the governing bod! has decided that periodic determination of revenue: earned, expenses incurred, and/or net income i: appropriate for capital maintenance, public policy management control, accountability, or other purposes. Internal Service Funds - Internal service funds ari used to account for the financing of goods or service provided by one department or agency to othe departments or agencies of the City, or to othe governments, on a cost-reimbursement basis. Fiduciary Funds: Trust and Aqency Funds - Trust and agency funds ar used to account for assets held by the City in trustee capacity or as an agent for individuals private organizations, other governments and/or othe funds. For the year ended June 30, 1985, the City wa holding only agency funds due, for the most part, t other funds and other agencies. Agency funds ar custodial in nature (assets equal liabilities) and d not involve measurement of results of operations. All government funds are accounted for using the modifie accrued basis of accounting. Their revenues are recognize when they become measurable and available as net curren assets. Taxpayer-assessed income, gross receipts, and othe taxes are considered "measurable" when in the hands o intermediary collecting governments and are recognized a revenue at that time. Anticipated refunds of such taxes ar recorded as liabilities and reductions of revenue when they ar measurable and their validity seems certain. Expenditures are generally recognized under the modifie accrual basis of accounting when the related fund liability i incurred s Exceptions to this general rule include (1) accumulated unpaid vacation, sick pay, and other employe amounts which are not accrued; and (2) principal and interes on general long-term debt which is recognized when due. All proprietary funds are accounted for using the accrua basis of accounting. Their revenues are recognized when the are earned, and their expenses are recognized when they ar incurred . 10 City Debt Structure Short-Term - Other than the Temporary Note, the City has outstanding short-term indebtedness, nor had the City prior the Temporary Note incurred any short-term indebtedness. Long-Term - The City has never defaulted on the payment principal or interest on any of its indebtedness. As June 30, 1986, the City had outstanding $3,310,000 princil amount of bonds sei-viced by the City's Debt Service Fund, which $785,000 principal amount represented general obligat: bonds of the City and $2,525,000 principal amount represeni revenue bond obligations of the City's Parking Authority i Building Authority, See "Appendix A - Excerpted 1985, Audited Financial Statements" attached hereto. I Lease Obliqatiox - In 1981, the City entered into agreement with the City of Oceanside to lease the pub parking area surrounding a regional shopping area. Under - terms of the Agreement, the City has agreed to pay an aggregi amount of $700,040 including interest of 10%. The ann1 principal and interest payments are to be $70,000 through 1' and $1 annually for each of the remaining years of the fi. year lease. In May, 1986, the City entered into a lease foi building to be used as the City's Community Developmc Center. The City's departments of engineering, planning I development services: have moved into this building, The tc of the lease is four years with an option to extend the le for up to six additional years. The following is a summary of future annual minimum le payments to be paid from the City's General Fund under exist leases as of June 30, 1986: Year Ending Annual Minimum June 30 Lease Payments 1987 $315,544 19138 304,864 1990 265,720 1991 70,000 40 1989 304, a64 There ii f t e r Direct and Over1appir.q Debt Contained within the City are numerous overlapping lo agencies providing public services. These local agencies h 11 outstanding bonds issued in the form of general obligation, lease revenue and special assessment bonds. The direct and overlapping debt of the City is shown in the following table: CITY OF CARLSBAD STATEMENT OF DIRECT AND OVERLAPPING DEBT 1986-87 Assessed Valuation: $3,458,390,377 (after deducting $59,561,384 redevelopment tax allocation increment) DIRECT AND OVERLAPPING BONDED DEBT: % Aoplicable Oebt 7/1/07 San Diego County Building Authorities 4 ~ 245% $ 8,818,563 San Diego County Water Authority 4.407 1 ,425,444 San Diego County Water Authority Certificates of Participation 4.407 4,407,000 Metropolitan Water District 0.731 3,930,068 Carlsbad Unified School District (Various issues) 95.801-95.807 644 $326 Carl sbad Uni f i ed School Distrrct Authority 95 D 470 6,775,728 547,166 San Marcos Uni f i ed School District 22.481 San Diequito Union High School Distr~ct 9.182 348,916 Encini tas Union School District Authority 23.989 31 1,857 Other School Districts Various 8,644 Tri-Ci ty Hospital District 33.952 746,944 Pal omar Pomerado Hospi tal Di stri ct & Author1 ty 0.711 116,746 Leucadia County Water District and I.D. #1 49.069 & 5.045 347,909 San Marcos County Water and 1.0.'~ #1, 2, 6 6.517-9.698 161,697 Costa Real Muni ci pal Water District Certificates of Participation 98.785 12,150,555 Costa Real (Carl sbad) Muni ci pal Water District, Improvement District #1, 2, 3, 4 97.592-98.778 978,320 Qlivenhain Municipal Water City of Carl sbad 100. 565,000(1) City of Carlsbad Building Authorities 100. 2,375,000 City of Carlsbad 1915 Act Bonds 100. 9.570, OOQ $55,056,647 (1) Excludes notes to be sold. Ratios to Assessed Val ua t i on : Enci ni tas Union School District 23.989 353,837 District 1.0- #l 30.219 472.927 TOTAL DIRECT AND OVERLAPPING BONDED DEBT Direct Debt (52.9 40.000 ) 0.09% Total Debt 1.59% SHARE OF AUTHORIZED AND UNSOLD BONDS: Costa Real Municipal Water District, 1.0. #1 ............... $ 98,035 Costa Real Municipal Water District, 1.0. #3 ............... $ 195,184 Metropol i tan Water District ................................ $1,937,150 TAT€ SCHOOL BUILDING AI0 REPAYABLE AS OF 6/30/8 : SUN: ($400) ..................................... h........... $ 314,760 Source: California Municipal Statistics, Inc, 12 GENERAL CITY 1NE'ORMATI:ON Introduction It is a genera law city with a coiincil/manager form of government. The Cit encompasses 35.6 square miles and is located approximately 3 miles north of the City of San Diego. CITY OF CARLSBAD COUNTY OF SAN DIEGO POPULATION ESTIMATES The City was incorporated July 16, 1952. Year City County - 1970 14,944 1,357,854 1975 19,200 1,560,700 1980 35,490 1,861,846 1981 35,600 1,895,200 1982 37,650 1,944,000 1983 39,200 1,988,600 1984 40,650 2,041,400 1985 44,950 2,102,500 2,165,500 1986 48,850 1987 55,300 2,240,700 Sources: 1970 and 19130: U.S. Census. 1975, 1981-1987: State of California Department 0: Finance. Labor Relations representation units, as follows: The City has 429 full-time permanent employees and fiw CITY OF CARLSBAD LABOR RELATIONS No. of Contract Expi r at ior Representation Unit Emp 1 oyee s Date Carlsbad Police Officers' Assoc. 73 June 15, 1988 Carlsbad Fireman's Assoc. 52 July 1, 1987 Carlsbad City Employees' Assoc e 228 June 30, 1987 Carlsbad Police Management City Management (1) Source: City of Carlsbad. 7 (1) 69 (1) Ongoing contracts without expiration dates. 13 Retirement Proqrams I All permanent employees of the City are covered under thg Public Employees' Retirement System (PERS) of the State, E defined benefit plan. Pension costs are funded by month11 contributions from the City and covered employees Contributions by the City during 1986/87 are estimated to bc $2,628,353 and are expected to be $2,608,545 for P987/88 Contribution rates are determined by PERS and are calculated tc include unfunded prior service costs amortized through the yea] 2000 * The Public Employees Retirement System actuary estimate the plan's unfunded liability as of June 30, 1987 to be $16,606 The City contributes to FICA only for Medicare benefits fo employees hired after April 1, 1986. The amount for 1986/87 i estimated to be $19,954 and $39,508 is expected to b contributed in 1987/88. I ECONOMIC PROFILE General Description The California Employment Development Department forecast that San Diego County's economy will experience growth durir; 1987 and 1988. Unemployment is expected to continue it downward trend in 1987. Emp 1 oyment As of Hay I, 1987 the civilian labor force for the City wi 22,580, of which 21,826 were employed. The unadjustc unemployment rate as of May 1, 1987 decreased to 3.3 percer from the May 1, 1986 rate of 4.0 percent. Larqest Employers Car 1 sbad : The following table sets forth the largest employers 14 CITY OF CARLSBAD SCHEDULE OF PRINCIPAL EMPLOYERS 1986-87 Number of Firm Product/Service Emp 1 o yee s Manufacturing: Hughes Aircraft Company Electronic Components 1,500 Eaton-Leonard Corporation Vending Machines 275 Beckman Instruments Microbics Operation 240 Watkins Manufacturing Corp. Portable Spas 185 DynaMed Incorporated Medical Products 180 Sierracin-Mangnedyne, Inc. Electronic Motors 162 Sargent Industries Industrial Seals 150 Non-Manufacturing: Tri-City Medical Center District Hospital 1,450 Plaza Camino Real Shopping Center 1,000 La Costa Hotel and Spa Hotel/Health Spa 1,000 Car Country Carlsbad Car Dealership 500 (est.) City of Carlsbad Government 435 Carlsbad Unified School Ilistrict E duc a t ion 425 San Diego Gas & Electric Electricity and Gas 414 Pea Soup Andersen's Restaurant/Hotel 200 Daniel's Cablevision Cable TV 90 Source: City of Carl.sbad Chamber of Commerce. 15 The following table presents the annual average wage anc salary figures by industry classification for San Diego Count; for the years 1982 through 1986. SAN DIEGO COUNTY WAGE AND SALARY BY INDUSTRY ANNUAL AVERAGES (In Thousands) 1982 1983 1984 - 1985 1986 Agriculture 13.9 13.6 12.3 11.9 11.6 Mining 0.6 0.5 0.6 0.8 0.8 Construction 29.0 31*6 41.4 47.5 52.0 Manufacturing 108.4 106.9 116.0 121,6 122.0 Transportation, Public Utilities 29.7 29.8 30.5 31.6 32.1 Wholesale Trade 27.5 28.3 31.0 33.6 34.8 Retail Trade 126.7 131.6 142.4 153.3 162.7 Finance, Insurance, Real Estate 42,6 45.8 48.5 52.0 56.2 Services 158.6 163.5 181.3 197.9 211.1 Government 139.6 139.5 141.8 145.7 150.0 TOTAL 676.4 691.0 745.8 795.7 833.4 (I) Totals may not add due to independent rounding, Source: State Department of Employment Development. The following table presents annual labor force a1 employment data for San Diego County, the State of CaPiforn: and the United States for the years 1980 through 1986. I shown in the table, unemployment rates in San Diego County hay been lower than those in California and the nation as a whole. 16 COUNTY OF SAN DIEGO Labor Force, Employment and Unemployment Yearly Average for Years 1980 through 1986 Civil i an Year and Area L'ibor Force Employment Unemployment Rate 1980 San Oiego County ........ 774,500 723,300 52,700 6.8% California .............. 11,581,000 10,791,100 789,900 6.8 United States ........... 106,940,000 99,303,000 7,637,000 7.1 1981 San Diego County ........ 797,300 740,500 55,000 6.9 United States ........... 108,670,000 100,397,000 8,273,000 7.6 Cali fornia .............. 11,799,900 10,907,800 872,100 7.4 1982 San Diego County ........ 834,000 756,800 77,200 9.3 California .............. 12,189,000 10,978,000 1,211,000 9.9 United States ........... 110,204,000 99,526,000 10,678,000 9.7 San Diego County ........ 877,100 805,100 72,000 8.2 California .............. li,281,000 11,095,000 1,187,000 9.7 United States ........... 111,551,000 100,834,000 10,717,000 9.5 San Oiego County ........ 915,300 860,800 54,500 6.0 California .............. 12,619,000 11,638,000 981 ,000 7 .8 United States ........... 113,544,000 105.005,OOO 8,539,000 7.5 San Diego County ........ 967,200 91 5,900 51,300 5.3 1983 1984 1985 California .............. 12,937,000 12,007,000 931,000 7.2 United States ........... 115,462,000 107,150,000 8,312,000 7.1 1986 San Diego County ........ 1,017,600 966,900 50,700 5.0 California .............. 13,365,000 12,473,000 892,000 6.7 Uni ted States ........... 11 7,834,000 109,597,000 8,237,000 7.0 Source: Cal i f orni a Employment Development Department. 17 Commercial Activity Taxable sales in the City have increased at an annual 1 of 13% during the five-year period 1981 through 1985. five-year history of taxable sales is shown in the follob table: CITY OF CARLSBAD TAXABLE TRANSACTIONS (in Thousands of Dollars) Retail Stores Total All Outlets No. of Taxable No. of Taxable Year Permits Transactions Permits Transactions 1982 422 327,179 1,121 359 f 774 1983 436 369,888 1 J 169 407 J 933 1984 468 439 I 885 1,304 482,963 198s 470 483,798 1,417 542,677 1986 522 503,109 1,612 541,855 Source: California State Board of Equalization. 18 Construction Activitx for the past five years. The following table shows construction activity in the Ci CITY OF CARLSBAD BUILDING PERMIT VALUATION (In Thousands of Dollars) 19 Residential p& 1983 1984 - 1985 - New single housing $17,596 $ 63,870 $ 86,482 $122,340 $185,4 New multi-dwelling 15 , 245 36,767 44 , 152 77 , 129 96,8 Additions, alterations - 2,183 2,231 2,670 3,261 3,8 Total Residential - $35,024 $102,868 $133,304 $202,730 $286,0 Non-Residential New commercial $:L0,760 $ 5,921 $ 22,243 $ 31,921 $ 33,9 New industrial 6,758 8,407 1 , 4-81 745 295 5 94 Other 1,128 2,794 6,522 17,072 Additions, alterations -4,311 7,736 7,140 18,994 12,2 Total non-residential @:2,957 $ 24,858 $ 37,386 $ 68,732 $ 54,l Total Valuation - $57,981 $127,726 $170,690 $271,462 $340,2 Number of new dwelling units Single dwelling 161 78 2 933 1,267 LY7 Multi-dwelling - 25 1 817 -- 90 7 1,528 L.3 Total Units 412 1,599 1,840 2,795 3Y1 Source: Security Pacific Bank, California Construction Trends. Transportation Excellent land, sea and air transportation facilities sei the City. .Major road service is provided by Interstate (north/south) and State Highway 78 (east/west). available to the City. More than 100 trucking i moving/storage firms serve North San Diego County, w: overnight delivery service to Arizona, Los Angeles, San Die( Mainline service of AMTRAK and the Santa Fe Railway 19 San Francisco and intermediate points. Local bus servicE provided by North County Transit District; interurban regional bus service is provided by Greyhound and Trailways. McClellan-Palomar Airport is located in the City and accommodate private and light commercial aircraft. Ocean Municipal Airport is located 8 miles north in Oceans California. Lindbergh Field (San Diego International Airp is 30 miles south, and John Wayne Airport in Irvine, Califo is 45 miles to the north. Deepwater general cargo and bulk service is provided by Port of San Diego, located 37 miles to the south. TAX EXEMPTION In the opinion of Jones Hall Hill & White, A Professi Law Corporation, San Francisco, California, Bond Coun subject, however, to the qualifications set forth below, u existing law, interest on the Notes is excluded from g income for federal income tax purposes and such interest is an item of tax preference for purposes of the fed alternative minimum tax imposed on individuals corporations, provided, however, that, €or the purpose computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), interest is taken into account in determining adjusted net income (adjusted current earnings for taxable years begin after December 31, 1989). The opinions set forth in the preceding sentences subject to the condition that the City comply with requirements of the Internal Revenue Code of 1986 (the “Co that must be satisfied subsequent to the delivery of the N in order that such interest be, or continue to be, excl from gross income for federal income tax purposes. The has covenanted to comply with each such requirement. Fai to comply with certain of such requirements may cause inclusion of such interest in gross income for federal in tax purposes to be retroactive to the date of delivery of Notes. Bond Counsel expresses no opinion regarding o federal tax consequences arising with respect to the Notes. Prospective purchasers of the Notes should be aware (i) section 265 of the Code denies a deduction for interest indebtedness incurred or continued to purchase or carry Notes or, in the case of a financial institution, that por of the Noteholders‘ interest expense allocated to inte (ii) with respect to insurance companies subject to the 20 imposed by section 831 of the Code, for taxable years beginnir after December 31, 1986, section 832(b)(5)(B)(i) reduces tl deduction for loss reserves by 15 percent of the sum of certa: items, including interest on the Notes, (iii) for taxable yea1 beginning after December 31, 1986 and before January 1, 199: interest on the Notes earned by some corporations could lr subject to the environmental tax imposed by section 59A of tf Code, (iv> for taxable years beginning after December 31, 198( interest on the Notes earned by certain foreign corporatior doing business in the United States could be subject to branch profits tax imposed by section 884 of the Code, ai (VI passive investment income, including interest on the Note: may be subject to federal income taxation under section 1375 ( the Code for subchapter S corporations that have subchapter earnings and profits at the close of the taxable year : greater than 25% of the gross receipts of such subchapter corporation is passive investment income and (vi) section 86 the Code requires recipients of certain Social Security a certain Railroad Retirement benefits to take into account, determining gross income, receipts or accruals of interest the Notes, In the further opinion of Bond Counsel, such interest exempt from California personal income taxes. LEGAL MATTERS Jones Hill Hall & White, a Professional Law Corporatio San Francisco, California, Bond Counsel, wlll render an opini as to the validity of the Notes. Certain legal matters will passed on for the Underwriter by Brown & Wood, San Francisc California. LEGALITY FOR INVESTMENT IN CALIFORNIA Under the provisions of the California Financial Code, t’ Notes are legal investments for commercial banks in the State. LITIGATION No litigation is pending or threatened against the Ci concerning the validity of the Notes. The City is not aware any litigation pendinq or threatened questj.oning its politic existence or contesting its ability to levy and collect valorem taxes or to collect or receive other Pledged Revenu or contesting the City’s ability to issue the Notes or i ability to pay the principal of and interest on the Notes 21 impeding the City's ability to issue general obligation b or certificates of participation to retire the Notes. RATING Moody's Investors Service has assigned a rating of MIG- the Notes. Certain information was supplied by the Citi said rating agency to be considered in evaluating the No The rating issued reflects only the views of such ra agency, and any explanation of the significance of such ra should be obtained from the rating agency. There is assurance that the rating will be retained for any given pe of time or that the same will not be revised downward withdrawn entirely by such rating agency if, in its judgm circumstances so warrant D The City undertakes responsibility either to bring to the attention of the hol of the Notes any downward revision or withdrawal of any ra obtained or to oppose any such revision or withdrawal, such downward revision or withdrawal of the rating obtained have an adverse effect on the market price of the Notes. UNDERWRITING The Notes are being purchased by Rauscher Pierce Refs Inc. (the "Underwriter"). The Underwriter has agreed purchase the Notes pursuant to a contract of purchase by among the City and the Underwriter (the "Contract of Purcha at the purchase price of $6,545,076.50. The Contract of Purchase provides that the Underwriter purchase a11 of the Notes if any are purchased. The obliga to make such purchase is subject to certain terms conditions set forth in the Contract of Purchase. Underwriter may offer and sell the Notes to certain dealers others at prices lower than the public offering price statel the cover page hereof. The offering price may be changed time to time by the Underwriter. ADDITIONAL INFORMATION The purpose of this Official Statement is to su information to purchasers of the Notes, Quotations from summaries and explanations of the Notes, the resolu authorizing the Notes and the statutes and documents conta herein do not purport to be complete, and reference is he made to said resolution, statutes and documents for full complete statements of their provisions, 22 All data contained herein have been taken or constructec from the City's records and other sources. The appropriatc City official, acting in such person's official capacity, ha: reviewed this Official Statement and has determined that as of the date hereof the information containled herein is, to the best of such official's knowledge and belief, true and correct in all material respects and does not contain an untruc statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of thc circumstances under which they were made, not misleading. Thc appropriate City official will execute a certificate to thi: effect upon delivery of the Notes. This Official Statement anc its distribution have been duly authorized and approved by the city Council. CITY OF CARLSBAD, CAL I FORN I A By: /s/ Raymond R. Patchett Acting City Manager DATED: July 7, 1987 23 I I I APPENDIX A 1985 - 1986 EXCERPTED AUDITED FINANCIAL STATEPENTS AUOlTORS' OPlNlON Honorable City Council City of Carisbad. California: We have examined the combtned financial Statemem3 of the City of Carisbad as of June 30. 1586 and the year then ended. as listed in the foreqoing table of contents. Our examination was made in accorda with generally accepted auditing standatds and, accordingly, included such tests of the accounting recc and sucil other auditing PrOCedUteS as we considefed necessary in the circumstances. In our opinion, the abovementioned combined financial statements present fairly the financial oositio the City of Carfsbad at June 30.1986 and the results of its operations and the changes in financial posr of its proprietary fund types for the year then ended, in conformity with generally accepted accoun principles aoplied on a basis consistent with that of the preceding year. Our examination also comprehended the suoplernental combining and account group financial statemc as of and for the year ended June :IO, 1986 as listed in the foregotng table of contents. In our opinion, s suppfemental combining and account group financial statements. when considered in fetation to the &a combined financial statements. present fairly in all material respects the information shown therein. z!L&2!2 /A A{& SAN OIEGO. CALJFORNIA October 3,1986 14 Ct7Y OF CARLSRAD CCMBINED SAUNCE ShE5 ALL FUN0 NPES AN0 ACCGUNT GROUPS JUNE 30,1986 WITH COMPARATIVE FiGLlRES FOR JUNE 30,1985 Governmental fund Types Debt Cac Notes General Revenue Servrce Pro ASSETS - Casn and investments 3 ~1,494,284 ~3,743.008 si.w,??a sz.7 Receivables: Specral Loan - f 1,663 - Taxes 657,010 - i a55 Accounts 31,021 7,301 - Accrued interest 710.364 37,764 24 073 1 Due from other funds 12 23,6 15 - - Due from other governments e 66.156 - Advances to other funds 11 1,369,618 - Inventory, at cost 14.C69 - - Prepaid expenses 79,500 87,223 - - 2.c Aestncted assets: Cash and investments I - - Accrued in teres - - - Investment in sewage treatment faciiity e - - Property, plant and equipment. net Amount available in Oebt Sefltce funds - - - Amount re be provided for retirement of TOTAL ASSETS LIABILITIES Accounts payable $ 397,925 S 350.536 S - 5 1,C - - - a - - - - general long-term debt Ki,T79.081 S3.953,160 SI 569.646 - 525.: - Accrued wages payable 1,076,001 14 836 - Due to other funds '2 9 9,299 Y 7,446 .;A Advances from other funds 11 Advances from other governments - 97 a82 - Deposits payablg - - - Oeferred compensation payable 7 Estimated claims payable - - - Accrued interest payable 9 - 14 638 Current portion of revenue bonds payable e - - Revenue bonds payable, net of unamortized discount of 54,936 in 1986 ($6,170 in 1985) 10 - - - Deferred revenue - - - Other payables TOTA b LIABl LlTi ES f 485.225 &30.7CO FUN0 EQUlN Contributed capital 6 -r - 3.1 - - - - - Payable from restricted assets: 9 - - General obligation bonds payable 10 - - - Obligations under capital lease 8 - - - 0- 20.938 J - - - - - - - investment in general fixed assets 15 Retained earnings 2,118 Fund balances 14 TOTAL FUND Eaum - s3.m.da1 ~3.953.160 s~ 569.6~ 525. - - - 2.294 256 3,4?2.460 1 5.18.7c8 20. 2.294256 3.472.460 1 548.708 29. - - - TOTAL LIABlLlTlES AN0 FUN0 EQUIN See accornnanvrng notes ro tinanciai staremcnra 1% - Totals Proprietary Fund Types Fiduciary Accaunt Groups fund Type Internal .-- Enterprise Service 511,565.014 32.973.650 913,164,862 S - 3 -. S 57.220.364 54Q.CC8.214 - - I. 11.563 J.a74 I e e - -, 658,865 5 12.055 1,329.75 1 1,236.952 (Memoranaum Only) General General Long Agency fixed Assets Term Debt 1986 1985 -7 - - 1,291.1 81 248 - - - 90,679 24.233 a:mi - - 46.1.26 :as. ; 9; 71,435 2165 $3,878 - - 174295 : wi 7 - - 6& 156 231.01 4 - - - - - 3.467.3A5 2.262.54: ia.agz - - - - 163.961 137.504 - - - - - 'T 73.373 121,525 - - - 552.931 - - - - 552.931 5 If ,J6C 4,590 - - - - 4.590 - 16.640.927 - - - - l6.U0.$27 '6.256.23: 10,509,324 821,403 -. 27.136.537 - 38.~67.254 20.7 ea.eij: - - - - 1.568.708 r.zwca 1.531.35: - - - 2076.731 2.076~1 2.~~8.177 - - 90.675.973 93.821.699 373.257S41 927,736.537 S3.625.439 S722.9d3.250 596.3C6.30; - - S 1,277,659 S 55.381 S 356.5389 S - s - S 3.520.159 S 1.309.7EE 34,781 16,708 - - - 1,156.020 C64.39 n,n4 153 - - - 174.395 168.91; - - - - - 3.467.4AS 2.362.54 - 0 - - 0 97,882 98.94 40,822 .- - iz.228.aa3 - - 12.269.665 2.524.49: - - 671,709 - - 671,709 1d9.97. - 910,597 - - - 910,597 5oa.95! 21,265 - - - - 35,?Q3 41.W 9 40,000 - I- - - 140,000 130,0C( - - .- - 3.31 0.000 3,310,000 3.575.001 627,064 - -- - - 627,C64 765.83 2.30am - .- - - 2.308.777 2.454.77: - - -- - 39.656 39.656 76.39 4.522.1d2 982.929 13.257.541 - 3.625.439 29.C05.015 !5.i69.82 - - -- - 275.783 275,783 338. i 31 - - 22.256.433 2.190.977 -- - - 24447.41 0 24.37 3.4 7 - e -- 27,136,537 - 27,136.537 18.896.66 13.89738 647,793 -- - - 14.5d5.191 10.143.7c 36.153.831 2.838.770 -. 27.126.537 - 93.338.205 80.526.6; fP0.675.973 f3.821 A49 S13.257.54'i 927.136.537 S3.625.139 St 22.243.2EO S96.3C6.3@ - - -I - - 27.709.C67 27. 182.~8 19 I I CIN OF CARLSBAO COMBINED STATEMENT OF REVENUES, EXPENDITURES. AND CHANGES IN FUND 8AUIh ALL GOVERNMENTAL FUN0 NPES FOR THE YEAR ENCED JUNE 30.1986 WITH COMPARATlVE FIGURES FOR THE YEAR ENOEO JUNE 30. la85 I REVENUES General ST 4.85 1 .am hcenses and permits 3.996.864 Fines and forfetts zaa,o55 Taxes Intergovernmental revenue3 Cr,a;363 & 10; ~sid ..-e, \sura :-..e 2870.965 Interest I ncme t ,066,461 1.2%,824 Miscellaneous revenues TOTAL REVENUES 24.208.952 MPEN OlrU RES CUKent: - I Gemral government 4,Y 20.270 Public safety 7,851,268 Public works 5,734,750 Welfare Culture and recreation 3,539,015 Capital outlay - 0 Debt SeNIC8: - Principal retirement Interest and fiscal cRarges Misceilaneous - - 21,245,303 3.C63.649 TOTAL EXPENOITURES EXCESS (OEFICIENCY) OF REVENUES OVER EXPENOITWRES OTHER FfNANClNG SOURCES (USES) Qperating transfers out (3,667,322) TOTAL OTHER FINANCING SOURCES (USES) (3.014.010) MC€SS (OEFlCIENCU) OF REVENUES AN0 Operanfig transfets in 653.372 OTHER FINANCING SOURCES OVER EXPENOITURES AN0 OTHER FINANCING USES 49.639 2,250. f 75 RESlQUAL EQUITY TRANSFERS IN 54,442 RESIOUAL EQUiN TRANSFERS OUT (60,000) FUN0 BALANCES AT EN0 Of YEAR S 2.294.256 FUN0 BALANCES AT BEGiNNlNG Of YEAR See accompanytng nates to financial statements. 20 Capital rotais (Memorandum Only) Oebt 1985 I 986 Senrica Projects -- S76,364,31 i S14,0%, I 68 s 728.252 S 30’1,947 39996,864 3.470.656 2924,892 2,060,542 9,406,829 8,541.600 288.055 345,750 2857,223 ‘2.638536 7,240,056 119.492 37,078,226 31,272.764 - - - - 6,4Tr,443 1 16,977 1,254,962 - - - - - -- - 245.229 a.034m -- 4124.793 3.008.056 7,85 1,268 7 020.1C5 6,412310 2,974,480 1,052.394 860,556 12333,087 4.6 19.242 265,000 230.000 4.523 - - - - - - - 3,710,505 3,27a,290 - - 8,879,866 265,000 - 218,352 236,255 487,875 9.1 16.121 (242.646) ( 1 ,d8 1,769) 21 0,000 3,038,299 (156.000) - 454,607 2a9.000 2888 - 871.384 a. 993. o 1 5 - - -- 36206,852 2279.729 -- -- 3.901.67 1 788.000 (4, f 86.6 1 1) (788.000) - -- (285,000) - 210.000 2882.299 -- 8.993.01 5 27, iaz6a 18,189,668 (1 14,442) (3,678.744) S27,709.067 927.782.683 1,800.!530 586.384 (32646) 1,587,354 18,645,671 (529583 . 54,442 3.678.744 - - - - sma.708 S20.393,tz = _____i 21 CIM GF CARLSaAO COMBINED STATEMENTOF REVENUES AND EXPENOITURES 8UDGRAND ACTUAL(8UDGUARY BASIS) ALLGOVERNMENTAL FUND NPES FORTHEYEAR ENDED JUNE30,7986 General Fund Special Revenue Fund Actual on Varianca Actual an Va Budgetary favorable Budgetary Fat Basis (Unf; - REVENUES Budget Basis (Unfavorable) Budget Taxes 513,819,000 S14,851,803 S 1,032803 5 1,035,419 S 7.082.317 S hcenses and permits 3,160,000 3,996,864 836.864 - - Intergovernmental Charges for semtces 2.260.000 2870,965 6 t 0.965 45,000 58,427 Fines and forfeits 485.OOO 288,055 (116.945) - - interest income n5.m 1,866,441 m,441 1 z,ooo 41 8.841 TOTAL REVENUES i General government 4,993,730 4,525,735 468.003 - - Public safety 8,wm 7,a93,787 573,472 e e revenues e e - a. 172.064 2.924 a92 15. - Miscellaneous revenues 1,112,963 1,234,824 121,861 1 .&x 5.232 21,531,%3 24.308.952 2776,989 9,379.083 4.489.703 (6 EXPENOlTURES Public works 6,138,483 6,029,974 108,509 1,973.967 634247 1 Culture and recreation 3,700,481 3,608,976 91,505 398,813 182.889 Capital outlay Debt semice: Welfare - - - 1,056.079 1.052.394 - - - 10,161,511 5,175,441 4 - - - Pnnctpal retirement - - Interest and fiscal ctlarges - e a e - - Miscellaneous - - - - 2.888 TOTAL EXPENOITURES 23.299.~ z.o!ja,47z ~1.489 13.590.370 7 097 959 - E EXPEN OITURES (1,767,998) 2.250.48G 4,018,478 (4,231,287) (2.608.156) - ' EXCESS (OERCIENCW OF REVENUES OVER OTHER FlNANClNG SOURCES (USES) Operating transfers in TOTAL OTHER FINANCING (out) 163.419 (3.014.010) (3,177,629) (718.419) (363.239) - SOURCES (USES) 163,419 (3,014.010) (3.177.429) (718.419) (363.289) - EXCESS (DEFICIENCY) OF REVENUES AND OTHER FINANCING SBURCES OVER WBENOITURES AND AND OTHER FINANCING USES S (1,604.579) S 33.530) 5 841.049 S(4,929,706) 32.974 ads] S - - Sea accompanying notes re financial statements. 22 Debt Service Funds Capital Prolect Funds Actual on V2P dnC8 Actual on Varian Eudgetary Favcrabk Budgetary Favora Eudget Basis (Unfavorable) Budget Basis (Unf avot S 141,000 s 728,252 W2748) s Mo.000 S 301,947 S (138. - - - - - - - - - - - - - 5,485,000 6,4?7,443 992. 12O,903 1 16.9f7 (3,926) 198,000 1,254,962 1,056. 1911 261.903 245,229 (4 6.674 6,123.0W 8.034,352 - 0 - - - - - - - - - -... - - 4.523 4,523 - - - - - - - e e - - - - - - - - - - - - - - 19.90 t ,757 15833,647 4,ma - 0 - 265,000 265,000 220.344 218,352 1,992 - 236.255 (236 - - - - - 689.867 47.875 1,992 19,901,757 4 6.069.902 3.831 5.743 - (227.W) (242,6461 (14,~ (13,773,757) (8.035.S50) 394 - 21 0,000 210,000 - 2.488.167 2882.299 210.000 270.000 - 2488,161 2.aa2.299 394 - S 5.137 - - S (17,964) S (32,646) S(l4 682) $411 290.5961 S (5.153.2511 23 ClTy OF CARLSEAO COMBINED STATEM€NT OF REVENUES, EXPENSES. AN0 CHANGES IN AETAINED SPNINGS- ALL PAOPRI€TARY FUN0 >PES FOR THE YEAR ENCED JUNE 30, ;986 WITH COMPARATIVE FIGURES FOR THE YEAR ENOEO JUNE 30,1985 Internal Totals (Memorandum 0 1986 1985 Metered water sales S 93(9,107 S - s 930,707 s a76 Sewer service charges 1 ,607,828 - 1.607.828 1 437 Other charges for Services 336.238 7W075 7,080.313 i.ca4 Reimbursed expenses 8,380 1,082.899 7,091,279 49€ Miscellaneous revenue (expense) (88) 46 (42) c TOTAL OPERATING REVENUES 5,426,790 1,827,020 7,253.810 5.aa OPERAtING EXPENSES Personnel services 878,573 240.154 1 ,118,727 94E Office expenses 66,256 10.942 77.198 62 Repairs and maintenance 336.055 56.852 392.907 7CE Professional services 823,192 15,133 a3~mx a71 - - Enterprise Service 0 PERAfl NG R WEN U ES Sewer connection fees 2,544,325 - 2.544.325 1971 Insurance I 1 ,a50 e 1 1,850 ( Purchased water 4090 - 4 090 Loss on disposal of property 360,391 - 360,391 Bad debt expense (1 0,878) - (1 0.878) 7' Oepreciation and amortization 265,897 1po,040 405.137 :ai Fuel - 185,697 185.697 1% a 85.608 Supplies and parts e 85.608 Claims expense . - 977.790 971,790 TOTAL OPERATING EXPENSES 2.734.626 1,706.27 6 4.440.a42 OPEAATlNG INCOME 2.692 4 64 129.ao4 2.81 2.968 Interest income 953.635 21 0.549 1,164.1 Bo 97 Interest expense and fiscal agent fees (42,531) - (42.531) I5 TOTAL NON-0 P ERATI NG REV ENU ES 91 1,104 237,475 1~14a.579 40 3.64 2.:c - - - NON-OPERATING RNENU ES (EXPENSES) 7 91 - Sale of property e 26.926 26.926 - OTHER FiNANClNG SOURCES Operating transfer in e 285.000 285.000 TOTAL OTHER FlNANClNG SOURCES - 285.000 205.000 3.0: NET INCOME 3.W3268 643.279 4.246.547 (2 Prior period adjustment (Note 2) 154.938 - 154 938 Retained earnings, at beginning Of Yearv 70 as adjusted 10,294,133 4.514 10.298.6M Retained earnings. at end of year(Note 19) %13.897,398 $ 647.793 $74 56.791 S"0.7 - - - - Retained earnings, at beginning of year 10,139,192 4,514 10,143.706 7.3' - - - See accomDanytng notes to frnancral sraiemenrs 24 CITY OF CARLS8AO COMBINED STATEMENT OF CHANGES IN FiNANClAL POSITION ALL PAOPqIETARY FUN0 NPES FOR THE YEAR ENOED JUNE 30.1986 WITH COMPARATIVE FlGUAES FOR THE YMR ENOED JUNE 30.1985 internal Totals (Memorandum C 198 Net income S 3,603.268 $ 643,279 S 4,246,547 S3.057 Items not requiring working capital: - 1986 - SOURCES OF WORKING CAPITAL Enterprise Serf1ce Operations: Depreciation and amontzation 265,097 1 N.040 405,137 3aE Gain on sale of propeny e (26.926) (26.926) I2C Loss on disposal of property 360,391 - 360.391 - Working capital provided by operations 4,228,756 756.393 4,985,149 3.12E - 24 Proceeds from sale of propeny - - Cantributtons from other funds - 60,000 60.COO 37 -- TOTAL SOURCES OF WORKING CAPITAL 4 228.756 a rag3 5,045,149 3 187 USES OF WORKING CAPITAL -- Acquisition of property, piant and equipment 623,157 172.922 796,079 54' Oecrease in tongterm revenue bonds payable 140,ooo - 1 a,ooo i 3C Reducttan of deferred revenue 146,001 - 146.001 1 a< Net decrease (increase) in other restricted (10E TOTAL USES IN WORKING CAPI'TAL 948.892 1 72.922 1 121 814 57: S 3,279.864 S 643,471 S 3,923.335 52.31 $ NET INCREASE IN WORKING CAPITAL ELEMENTS OF NET lNCREASE(I1ECREASE) IN UNRESTRICTED WORKING CAPITAL - assets and related liabilities 39,734 - 39,734 -- -- -- -- - Cash and investments s 4,134,833 si,o31.4~1 sm6.2a4 ~2.30: Accounts receivable 78,808 2.246 81 054 21d Inventory 24,675 - 24,675 15 Prepaid expenses (5,320) P (5,320) ( Estimated claims payable - (401,642) (407,642) (2 Accrued wages payable (9,073) (1,518) (10.541) (2: Oeposits payable i9.ao6 - 19.806 2' Accrued interest receivable 90,679 24,233 f 14 912 Oue from other funds 8,479 - 8,419 Accounts payable (1,054,205) (1 1 ,146) (7,065.35 1) 29 Due to other funds (8.758) (1 53) (8.91 21 -- S 3,279.864 S 643.471 S 3.923335 S2.81f - - -- -- NET INCREASE IN WORKING CAPITAL See accompanying noms fo financial stat8mcnts $3 CIW OF CARLSBAO Notes to Combined Financial Statements June 30,1986 (1) Summarj of Significant Accounting Policies The accounting policies of the City of Cartsbad, California. conform to generally accepted accounti princrples for governmental units. The following is a summary of the more significant ?olic~es: (a) Oescription and Scope of the Reporting Entity The City conforms to the provisions of National Council on Governmental Accounting (NCC Statement No. 3 regarding the definition of the "Reporting Entity." Accordingty, the gene purpose financial statements include the activities of the vanous funds and account gou for which the City Council has effective oversight responsibility. This responsibilty tnc!ud but is not limited to, the authority to govern, manage, approve budgets, and assdne rise accountability. The financial statements of the City of Carisbad include the financial activities of :he City, ; Housing Authanty of the City of Carlsbad. the Parking and Building Authorities of the City Carisbad and the Carisbad Redevelopment Agency. Their financial operations are closely relar and the City Council has a continuing oversight responsibiiity over the entities. The oversic responsibility IS determined on the basis of budget adoption, taxing authority, funding a appointment of the governing board. The City has an interest of approximately 25% in a joint sewer system known as the Encina Wa Pollution Control Facility. The major owner is San Oiego Gas and Electric Company, wno includ the facility in their financial statements. Since the City does not have significant influence 01 the management or the operation of the facility, the City accounts for its investment on an equ basis and excludes the financial statements for the facility. (b) Fund Accounting The accounts of the City are organized on the basts of funds or account groups, each of whi is considered to be a separate accounting entity. Theoperations of each fund or account gro are accounted for by providing a separate set of self-balancing accounts that comprise its asse liabilities, reserves. fund baiancelretained earnings, revenues, expenditures or expenses. T various funds and account groups are summarized by type in the financial Statements. Fu types and account groups used by the City are as follows: GOVERNMENTAL FUNOS: General Fund The General Fund IS the general operating fund of the City. All general tax revenues and ott receipts that are not allocated by law or contractual agreement to some other fund are acccunl for in this fund. The fund is used to account for payments made for general operating excen: and capital improvement costs that are not paid througn other funds. 16 CITY OF CARLSBAD Notes to Combined Financial Statements. Continued Special Revenue Funds The Special Revenue Funds are used to account for revenues derived from specific sources tnat are restricted by law or administrative regulation to expenditures for specified purposes. Debt Service Funds Debt Service Funds are used to account for the accumulation of resources tor, and the payment of, general long-term debt priricipal, interest and related costs. Capital Project Funds Capital Ptoject Funds are used to account for financial resources to be used far the acauisition or construction of major capital facilities (other than those financed by proprietary funds). PRO PA I ETARY FUN OS: Enterprise Funds The Water Utility Fund and thesewer Fund are used to account for operations that are financed and operated in a manner similar to a private business enterprisc? where the intent of the City Council is that the costs (expc!nses, including depreciation) of providing goods and SeNiCeS '10 the general public on a continuing basis be financed or recovered primarily through user charges. Internal Service Funds Internal Service Funds are used to finance and account for activities involved in rendering services to departments within the City. Costs of services are accmtulated in these funds and charged to user departments as such costs are incurred. FIDUCIARY FUND: AgencyFunds The Agency Funds are used tso account for assets held by the City in an agency capacity for in- dividuals and private businesses. 3 CITY OF CARLSBAD Notes to Combined Financial Statements, Continued ACCOUNT GROUPS: General Fixed Assets Account Group General Fixed Assets have been acquired for general governmental purposes. Assets ourcfiasm are recorded as expenditures in the governmental fund types and capitalized at cost in th!s group of accounts. In the case of gifts or contnbutions, SUCR assets are recorded in general fixed assets at fair market value at the time recetved. fixed assets consisting of certain improvements other than buildings, including roads. bridges. curbs and gutters. streets and sidewalks. and drainage systems, have not been capitalized. SUC~ assets normally are mnovable and sf value only to the City; therefore, stewardship for caoital expenditures is satisfied without recording of these assets. No depreciation has been provided on general fixed assets. General Long Term Oebt Account Group This group of accounts is used to account for General Long Term Debt (backed by the full faith and credit of the City) including the City’s obligations under capital leases. (c) Measurement Focus and Basis of Accounting The proprietary (enterprise and internal service) fund types are accounted for on an ”income de- termination” or “cost af services” measurement focus. Accordingly, all assets and IiaDiiities are included on the balance sheet, and the reported fund equity provides an indication of tbe eco. nomic net worth of the fund. Operating statements fOP proprietary fund types report increases (revenues) and decreases (expenses) in total economic net worth. Governmental (general, special revenue, debt Service and capital projects) fund types are ace counted for on a “spending” measurement focus. Accordingly, only current assets and current liabilities are included on their balance sheets, and the reponed fund balance provides an [nul- Cation of available. spendable resources, Operating statements for governmental fund types report increases (revenues) and decreases (expenditures) in available spendable resources. Agency funds are custodtal tn nature (assets equal liabilities) and do not involve measurement of results of operations. Governmental and fiduc:ary fund types use the modified accrual basis of accounting. Revenues are recognized when susceptible to accrual, i.e., both measureable and available. Available means collectible within the current pertod or soon enough thereafter to be used to pay liabili- ties of the current period. In applying the susceptible to accrual concept to lntergovernmental revenues. the legal and contractual requirements Of the individual programs are used as guidance. 23 C17Y OF CARLS8AO Notes lo Combined Financial Statements, Continued Revenues that are accrued include r?al and personal property taxes, sales tax. interest. and state and federal grants and subventions. Real property taxes are levied on October 15 against owners of record at March 1. The tae3 are due in two installments on November 1 and Feoruarj 1 and become delinquent after December 10 and April 10 resuectiveiy. Under the provisions of NCGA Interpretation 3. property tax menue is recognized in the fiscal year for whm the taxes have wen levied, provided it is collected within 60 days of the end of the fiscal year. Governmental and fiduciary fund expenditures generally are recognized when the related fund liability is incurred. Exceptions to this general rule include: (1) principal and interest on long-term debt, which is recogntzed whsn due; (2) prepaid expenses, whtch are reponed as current period expenditures rather than allocated: and (3) accumulated unpaid vacation, sick leave. and other employee benefits, which are reponed in the period due and payable ratner than In the period earned by employees. Prourretary Funls use the accfual basis of accounting, i.e., revenues are recognized in the Cericd earned and expenses are recognized in the perrod incurred. (dl Budgetary Oata The City allows these procedures in establishing the budgetary data reflected in the financial st at em en t s: 1. Ouring May or June, the City Manager submits to the City Cauncil a proposed operating budget for all funds of tht? City for the fiscal year commencirlg the following July 7. The budget includes proposecl expenditures and estimated revenues on a line item basis. Public hearings are conducted at City Council meetings to obtain citizens’ comments during June. A Citizens’ Budget Review Chmrnittee facilitates this process. Prior to July 1, the budget ia legally enacted through passageof an appropriation resolution. The City Manager is authorized to make transfers of appropriated amounts within a fund and function for up to S10,OOO. Revisions that alter the total appropriations of any fund or function must be approved i3y the City Council. A mid-year budget review is conducted each year. Any major Changes io the adopted budget are approved by the City Council at that ti me. Monthly budget control reports are generated to assist the Finance Department and Other departmental heads in conrrolling the budget. Budgets for all gOVefnment2ll type funds are adopted on the modified accrual basis. except that encumbrances are treated as budgeted expenditures in the year of incurrence of commitment to purchase. Expenditures may not exceed budgeted appropriations at the department level. Unencum- bered appropriations lapse at year end. 2. 3. 4. 5. 6. 7. 29 CITY OF CARLSBAO Notes to Combined Financial Statements, Continued 8. On June 30, at the direction of the City Councii in the annual budget resolution. the biffer- ence between revenue and expe*lditures in the General Fund IS transferred to the General Capital Construction Fund (a cawal prolect fund). This operating transfer provides funds for various capital projects. For purposes of a budgetary presentation, actual generally accepted accounting prtncioal expenditures have been adlusted to include encumbrances outstanding at year end. The following encumbrance amounts existed at year end and therefore were included in tP@ Statements of Revenues and Expenditures-Budget and Actual (Budgetary Basis) in order to provide a meaningful comparison of the actual results of operations with the budget: 9. Ertcumbrances General Fund $ 813,169 Specla. Revenue Funds 1,740.305 Capitdl PlOjeCtS Funds 6,%3,78 1 (e) Investments Investments are stat& at cost, which approximates market. (f) Inventories lnventotres within thevarious fund types consist of matenals and supplies that are valued at the lower ol average cost or market and are recorded as expenses when consumed. (g) Compensated Absences Vacation pay. which IS included in accrued wages payable. IS payable to employees at the time used or upon termination of employment. Vacation days are cumulative up to a maximum of 29 days in any one year for miscellaneous employees and safety employees, and 40 days in any one year for management employees. Sick leave accrued but unused is cumulatrve from year to year. For employees within the rnent system, sick leave may not be taken as vacatlon or compensated in cash. Permanent miscellaneous employees (as defined) accumulating and maintaining 1CO hours of sick leave can convert up to 12 days of stck leave to vacation at a ratto of three sick leave days to one vacation day. Upon retirement, such employees may also convert accrued and unused sick leave to extend semtce time at the rate of 25 sick days to one month of SeNiCe tlme. (h) Self-insurance The City ts self-mured for general liability and workers' compensatton claims UP to S100.00Q and $1 00,OW per occurrence. respectively. The City purchased outside insurance coverage for workers' compensation between S100,oOO and $10 million per occurrence. The City contracts with 8ieriy and Associates to manage workers' compensation claims and with Carl Warren and Company to manage generai liability claims. mese companies determine the amounts that must be accrued at year-end tor estimated claims payable. 30 CITY OF CARLSBAO Notes to Combined Financial Statements, Cantinued (i) Memorandum-Only Totals Columns in the accompanying financial Statements captioned "Totals (Memorandum Only)" are presented as additional aniilytical data and do not present financial statements in accordance with generally accepted accounting principles. (j) Encumbrances Encumbrances accounting, under which purchase orders. Contracts and other commitments for the expenditureof monies are recorded in order to reserfe that portion of the applicable acprocn- ation, is employed as an exitension of formal budgetary control in the governmental funds. En. cumbrances outstanding at 'year end do not constitute expenditures or liabilities. but are rezoned as reservations of fund balance for subsequent-year expenditures. (k) Unbilled Service Receivables - Unbilled service receivables in proprietary funds are reflected in accounts receivable at year enb with a corresponding increase in revenues. (1) Investment in Sewer Facility The City haS an ownership of approximately 25% in ajoint sewer system known as the Encina Water Pollution Control Facility (the Facility). The City accaunts for such investment on an equity basis. The Facility charges the City usage fees on an equity basis: such cnarqes totaled S795.249 and are ciassified within professional services expense. (m) Fixed Assets - Proprietary Funds Fixed assets owned by prop:rietary funds are capitalized at historical cost or !air market value as of date of contribution. Depreciation is charged to operations using a straignr-line method based on the estimated useful life of the asset. The estimated useful lives of the assets are as follows: Buildings 10-25 years Structures alnd improvements 50 years Sewer, sewer lines and wells 40 years €qui pmen t 4-10 years Wells, reseriloirs and dams 10.100 years Transmission and distribution lines 40-70 years Filters and pumps 10.50 years Fire hydrants 58 years (n) Oefened Revenue The deferred revenue balances of the Enterprise Fund relate to deposits or in-kind ;repayments for semices to be rendered (e.g., Sewef installation, etc.). 31 CITY OF CARLS8AD Notes to Combined Financral Statements, Continued (0) Comparative OatalTotals Only Comparativedata for the prior year has been presented In certain of the accompanylng tmanc:a statements in order to provide an understanding of changes in the City’s financial position ant operations. Also. certain of the prior year amounts have been reclassified to conform “itn the cgr rent year financial statement presentatlons. (2) Prior Period Adjustments Water Utility Fund In the prroryear, the City overstated regair and maintenance expense and accounts Zava %’34,938. This overstatement was corrected durrng the current year by an adjustment ;o ret earnings at beginning of year. (3) Cash and Investments A summary of cash and Investments as of June 30.1986 follows: Interest Rates CO S 50 Certificates of Oeposit 7.05 - 9.50% 31.55 Federal Agency Notes 7.27 - 8.69% 7 74 Treasury Coupons 7.49- 8.22% 3.04 15.42t s57 77 - Cash 0 - 6.35°/~ - Mi scel I anesus I nvestmen ts 4.00 - 11.50% - - (4) Property Plant and Equipment Summary of Changes in General Fixed Assets Balance Balanc July 1, 1985 Additions Celetions June 30. Land $ 5,656,682 3 4,321,247 s - s 9.97; Buildings 3,523.822 2,238.928 - 5.76; Other Improvements 7,974,627 207.770 7. 131.2% 1051 Furniture and Construction TOTAL €qui pmen t 1,741,537 473.388 313.883 1,901 in Progress - a.w.67a - a. 443 s27 136 Sl8396.668 SlS,685.011 97,445142 32 CllY OF CARLS8AO Notes to Combined Financial Statements, Continued A summary of proprierary fund proosny, plant and equipment a1 June 30. 1986. foflows: Internal Total Enterprise Service Proprret Funds Funds Fund. Land, water rights, rights-of-way S 659,206 s - s 459. 37. Buildings 37,188 - 37. Structures and improvement:j 37,948 - Wells. reservoirs and dams i,zag, 152 - 1.289. Transmission and distributiorr lines 4.068,674 - 4.C68. Sewer, sewer lines and weils 5,090.44 - 5.090. Purification, pumps and 4. booster stations 4,684 - Equipment and vehicies 653,908 7,626,199 2.280. Fire protection services 5,759 - 2.637. Construction in progress 2.657.916 - TOTAL 14,304,881 1,626.199 7 5.937, Less accumulated depreciation (3,795.55f) (804,796) (4.600. TOTAL $1 0,549,324 S 821,403 SI 1.330. J. (5) Joint Venture - Encina Water Pollution Control Faciiity The Encina Water Pollution Control Facility (the Facility) is a sewer system owned jointty by the Cities of Cartsbad and Vista, this Leucadia Water District, the Buena Vista SanitaFy Oistricr. :he San Marcos County Water District and tne Encrnitas Sanitary District. The Leucadia County Wa District is the operator and administrator of the facility and is responsible for the management. maintenance and operations of the joint system. Ownersnip percentages were determined by JC agreement at the time the assets were acquired. The following is a summary of the facility’s financiat information as of June 30, 1985, the date o the most recent audited financiaJ statements. Operating revenue S 176.000 Operating expenses 2.91 6.000 Operating loss S (2.760.000) Contribution frrsm participants S 3.027.000 Total assets S66.579,OOO Total liabilities S 1.064.000 Total equity 365s 15.000 City of Carlsbad’s invesfmen t interest St 6.440.927 33 CfTY OF CARLSBAD Notes to Combined Financial Statements, Continued (6) Retirement Plan The City’s permanent employees areccvered by the Public Employees Retirement System (PEW of the State of California in which the Ciry participates. The total pension exDense of the City for ?he cur- rent year was approximately S2.387,OOO for current and past sewice costs. Pension costs are recorded as expenditures when paid and are funded by monthly contributions from the City and employees to PERS. Contributions are based on rates sea by PERS based on certain actuarial assumptions. such as length of employment, estimated salary rates. mortality rates, Prolected retirement benefits and other factors. The actuarial cost rnetbod used is entry age normal cost. At June 30. 1986, the plan net asset3 attributed to the City for benefits totaled 916.128.413, and the present value of the City’s unfunded obligation for prior Sewice costs totaled 920.632 which will be funded through the year 2000 from established contribution rates. The excess. if any. of the actuari- ally computed value of vested benefits to City employees over amounts avaiiable in the PERS Cension fund is not determinable under the PERS SySlem of accounting. (7) Oeferred Compensation Plan The City has established a deferred compensation plan whereby City employees may elect to defel portions of their compensation in return for retirement, disability and death benefits. Amounts deferrec may not exceed the lesser of $7,500 OrZ% of a particrpant’s “incfudable compensation.” as define( in the participation agreement. The City makes no contnbution to the Plan. The City does not manage the defened compensation plan. Instead, employees may cfiaose betweei three financial institutions that offer ten different deferred COmpensaIlon plans. These financial institutions invest plan assets in a combination of deferred compensatlon cptrons <r cluding short-term certificates 06 deposit. bond funds, stock funds, and government secuntres. At Jun 30.1986, the amount of the deferred compensation investments (and the resulting deposits recorce in the Agency Fund) was 5671,709. The City does not indemnify employees against losses incurred in the deferred compensation plan Distributions are made upon the occurrence of the participant’s tennrnatlon. retirement. death or tot disability, and in a manner in accordance with the electlon made by the participant. Ail City employe are eligible for plan parttcrpation. (8) Obligations Under Capital Leases In 1981 the City entered into an agreement with the City of Oceanside to lease the public parking an surrounding a regional shopping area. Under the terms of the agreement. the City of Cartsbad Wet to pay an aggregate amount of 9700.040 including interest of 10%. The annual principle and mere Payments are to be $%O,ooO through 1991 and $1 annually for each of the remaining years of a fifty Ye lease. The City’s leasehold interest of 3430,152 has been recorded in the City’s general fixed aSSe In 1978 the City panicipated with the City of Oceanside for purchase of an automated ClrCuIatl system for tnerr respective libraries. The City’s leasehold interest of 5102.025 IS recorded In Gene fixed assets. The lease purchase requires annual payments of principal of %11,722 through AuW 1986 with interest at 5’10 per annum. 34 CITY OF CARLSBAO Notes tei Combined Financial Statements. Continued The following is a summary by years of future minimum lease oayrnents undercaoltal leases (pale frcrr the General Fund) and the present valu f of minimum lease payments at June 30. 1986: Year Ending June 30 Annual Minimum Lease Payments 1987 S 80.680 1988 70,000 1989 70,000 1990 70,000 1991 70,000 Thereafter 00 Total minimum lease payments 360,720 84,937 Less amount representing interest -- Present value of minimum lease payments 3275.783 (9) Lease on Community Development Building In May, 1986, the City entered into a lease for the building at M75 Las Palmas Drive. me building is rc be used as the Citys Community Development Center. The depanments of engineering, planning am development services have moved into the Community Development Center. The term of the lease is four years with an option to extend the lease for up to six additional years. The following is a summary by yeiafs of future minimum lease payments under the lease (paid fro1 General fund) at June 30, 1986: Year Ending June 30 Annual Minimum Lease Payments 1987 5234.864 1989 234,864 1988 234,864 1990 t 95.720 3900.31 2 Total minimum lease payments 55 CITY OF CARLS8AO Notes to Combined financial Statements, Continued (10) Long-Term Cebt (a) Revenue bonds A summary of changes in Revenue Bonds Payable-Proprtetary (Water Utility) fund IS shown: Balance galance July 1, 1985 Payments June SO. 1986 1958 Waterworks Revenue Bonds. prin- cipal due in amounts ranging from S40,oOO to 347,000 on July 1 of each year through 1988 (Interest IS payable on January 1 and July 1 of each year at 4. lo ‘/a) S177,QOO s 40.c00 S13? CCC 1W Waterworks Revenue Bonds, prin- c.pal due rn amounts ranging from 510,ooO to $65,000 on July 1 of each year through 1990 (Interest is payable on January 1 and July t of each year at varying rates from 3.875% to 4.25%) 175,000 10,000 7 65.E 1970 Waterworks Revenue Bonds, prin- cipal due in amounts ranging from S8O.OOO to %1oO.ooO on July 1 of each year through 1990 (Interest IS payable on January 1 and July 1 of each year at valying rates from 6.OO% to 6.SU0/a) 550.000 ac.ooo 4i’O.C( TOTAL Revenue Bonds Payable 5902.QOU 9130.000 S772.0( __. Less unamortized discount ( 49: Less current portion (14O.C TOTAL 9627 C Oebt service requirements to maturity ate as follows: Schedule of 1958 Water Revenue Bonds Debt Service to Maturity Interest Total Principal Total Ann\ Due July 1 Due January 1 Interest Due July 1 Oebt Semi $ 1.886 S 4.695 5 45.800 S 49.69f 47.85 47 96 $445.50 Fiscal Interest Year 198687 1987.88 1,886 964 2.850 45.008 1988-89 964 964 47.000 0 TOTAL 3 5.659 s as09 51 3~.OOo f 2.850 - $ 2.809 - - - - - - 36 c!l"f OF CARLS8AO Notes to Combined Financial Statements, Continued Schedule of 1960 Water Revenue Bonds Oebt Service to Maturity Total Annual Fiscal Interest I n : erest Total Principal Year Due July 1 Oue January 1 Interest Due July 1 Debt Serrrce - 1986-87 S 3.272 s 3.059 5 6.331 $ 10.000 5 16.331 4 987-88 3,059 2.759 5.818 lS,OOO 20.898 20.21 8 1988-89 2.759 2459 5,218 lS,OOo 198490 2.459 1,259 3,718 60,000 w*a 1.259 0 1,259 65,000 66.259 1990-91 TOTAL s 12.808 S 9.536 s22.344 $165.000 St87.344 - Schedule of 1970 Water Revenue Bonds Oebt Service to Maturity Fiscal Interest Interest Total Principal Total Annual Year Oue July 1 Due January 1 I nterest Due July 1 Oebt Serv i ce - - I 986-87 815,185 SI 2.338 927,523 $ 85,000 S112.523 1987-88 I 2.338 9,278 21,616 98,000 111,616 1988-89 9,278 6.000 15,278 95,000 110,278 198490 6,000 3,000 9.000 100,000 109.000 1940-91 3.000 100.000 103.000 3.000 0 $45.801 $30,616 576.41 7 $470,000 9546.41 7 TOTAL -- - - -- -- - (b) Genera1 Obligation Bonds A summary of changes rn general obligation bonds payable (serviced by the City's Oebt Service Fund) IS as follows: Balance Balance July 1,1985 Payments June 30.1066 -- 1962 Series A General Obligation Sewer Gonds, pnncipal due in amounts rangtng from sd0,oOO to S5O.ClOO on July 9 of each year through 1988 (In- terest is payable on January 1 and July 1 at 3.5% per annum) Sf 70.000 s a0,ooo $1 30.CCO 1962 Series 8 General Obligation Sewer 8onds. principal due in amounts ranging from 340.m to S100.1300 on July 1 of each year through 1991 (Interest IS payable on January 1 and July 1 at rates varying from 3.!5% to 3.64'0) 440.M)o 40.008 4.20 cco 37 ClTY OF CARLSBAD Notes !o Combined Financial Statements, Continued Balance ealance July 1, 1985 Payments June 30. '98 1962 Series C Genera! Obligation Sewer Bonus. principal due in amounts ranging from $20.000 to S25,OOO on July 1 of eacn year through 1941 (In- terest IS payable on January 1 and July 1 at rates varying from 3.7% to 3.75%) 165,000 20.000 145,COO 1966 bbrary General Obligation Bonds. principal due in amounts ranging from 515,ooO to $25,000 on January 1 of each year tnrougn '992 (Interest IS payable on Januaty 4 and July I at 4.5% per annum) 9 25,ooo 15,000 1 q 0,cco 1967 Carfsbad Building Authority Revenue Bonds. principal due rn amounts ranging from %25,008 to $35.000 on Oeeernber 1s of each year through 1992 (Interest is payable on December 15 and June 15 at 6.0% per annum) 220,000 25,000 195.ccc I964 Carisbad Parking Authorrty Revenue Bonds. principal due in amounts ranging from 675,000 to 5725,000 on October 1 of eacb year through 19% (Interest IS payable on October 1 and April 1 at rates varying from 6.3% to 6.4%) $1,025,000 5 75,000 S 950.CC 1981 Cartsbad Parking Authority Revenue Bonds. pnncipal due in amounts ranging from S40.000 to S150.000 on February 1 of each year through 2001 (Interest is payable on August 1 and February 1 at 8% per annum) 1,430,0(38 50.000 i.3ao.c 53,575000 5265,000 S3.310.C TOTAL 38 CITY OF CARLSBAO Notes to Combined Financial Statements, Continued Debt sewice requirements to ma urity are as follows: Schedule of 1962 General Obligation Sewer Bonds, Series A, Debt Senice to Maturity Fiscal Interest Interest Total Principal Total Annua - Year Due July 1 Due January 1 1 nterest Oue Juiy 1 Oebt Servicf S 1,575 s 3.850 s 40,000 s 43,850 1986437 S 2.275 1987-88 1.575 a75 2cSO 60,000 42.450 a75 50.000 50.a75 875 1 98889 TOTAL s 4,725 s 2450 S 7.175 Sl30,OOO 937 175 - -0- - - - Schedule of 1962 General Obligatton Sewer Ronds, Series 8, Oebt Service to Maturity Fiscal Interest Interest Total Ptinci pat Tot a I Ann u a Year Due July 1 Oue Januarj 1 Interest Due July 1 Debt Service S 53.660 1986-87 s 7,180 $ 6,480 $13.660 s 40,000 1 9874~3 6,480 5.760 12.240 40,000 sz.z4a 1988-89 5,760 5,040 ? 0,800 60,000 50.800 198890 5,040 3.420 8,460 90,000 98.460 1990-91 3,420 1,800 5,220 90,000 95.220 1,800 -0- i ,am 100.000 701 800 7991-92 S29.680 922,500 SS2.180 s4ao.000 sa. 1 a0 TOTAL - - - Schedule of 1962 General Obltgattoii Sewer Bonds, Series C, Oebt Service 10 Maturity Fiscal Interest Interest Total FJrinc!pal Total Annual Year Oue July 1 - Clue January 1 Interest Due July 1 OeOt Semtce - - 1986-87 S 2.707 S 2.338 s 5,045 9 20.000 S 25.045 1987-88 2,338 1,875 4,213 25,000 29.21 3 1988439 1,875 1,406 3.281 25,000 28.281 198WO 1,406 938 2.344 25.000 27.344 199Q-91 937 469 1,406 25.000 26.406 1991-92 469 25.000 25.469 469 0 TOTAL S 9.732 S 7,026 616,758 -- - - sm .75a S 745.000 =- 39 CITY OF CARLSBAO Notes to Combined Financial Statements, Continued Schedule of 1966 General Obligation Librar, Bonds, Debt Service to Maturity Fiscal interest Interest Total Principal Total Annua Year Due July 1 Oue January 1 Interest Oue January 1 Debt ServtcE - i 986-07 S 2475 s 2475 S 4,950 S 15,000 s 19.950 1988-89 1,800 1,800 3.600 15.000 ia.~~o 1990.91 1,013 1,013 2.026 20,000 22.026 19874 2. i 38 2138 4,276 15.000 7 9.276 1989-90 1,462 1,462 2.924 20,000 22.924 1,124 25.000 26.124 s 9,450 s 9,450 si 8,900 S170.000 51 28.900 - 562 - 562 - 1991 -92 - - TOTAL Schedule of 1367 Revenue Bonds Cartsbad Building Authoflty, Oebt Service to Maturity Fiscal Interest Oue Interest Due Total Principal Due Total Annu; Year December 15 June 15 Interest Oecember 15 Oebt Servic S 35.950 1986-87 S 5,850 S 5,100 $10,950 S 25,000 I 987.88 5,100 4,350 9,450 25,000 34.450 198849 4,350 3,600 7,950 25.000 32.950 1 gas90 3.600 2,850 6,450 25,000 37,450 1990.91 1991 -92 7,950 1,050 3,000 30.000 33.000 1,050 35.000 36.050 1992-93 TOTAL 524.750 si 8.m 543.650 $795.000 9228.650 - 2.850 1,950 4,800 30,000 34 800 - 0 - 1,058 - - Schedule of I969 Revenue 8onds Carlsbad Parking Authority, Oebt Service to Maturity Fiscal Total Principal Total Ann Oebt Sew Year Interest Due October f S 133.2! 1986-87 S 58,250 S 75.0CU t 98788 53,506 75,000 128.3 1988-89 48,743 75,000 123.71 7 984% 43,981 75,080 118.91 1990-91 3a.m 100,000 1384 I991 -92 32.000 100,000 132.0( 1992.93 25,600 100.000 125.6' 1993-94 19,200 400.000 1 19.2 1994-95 12.000 125,000 137.0 129.C 1995-96 4,000 125,000 TOTA b S 335,680 S 950,000 S1.285.E - so C!N OF CARLSBAO Notes to Combined financial Statements, Continued Schedule of 1981 Revenue Bonds Cartsbad Parking Authority, Oebt Semci! to Maturlty Fiscal Total Principal total Annual Year lrrterest Due February 1 Oebt Semlce I 986437 5170,400 ?I 5o.m S 160.400 1987-88 106,400 60,Om 166.400 198849 101,600 60,0063 161 600 1990.91 92OOO 75,000 167,000 1991.92 86.000 75.000 161,GOO 1992-93 80,000 75,000 155,OCO 199394 74,000 100,000 174.000 199695 66,000 100,000 166.000 1996-97 50.000 ?oO,OCi~ 150.COO r~7.98 42000 125,oOa 167,000 isa99 32000 125,oOcI 157.000 199900 aooo 125,Ooa 147,000 12000 150,ooo t 62.0CO 2000-01 $1,380.00(9 92.409.200 TOTAL - -- - 198990 96,800 60,000 7 56.aoo 1995-96 58,000 100,ooo 158,OCO -- S1,CI29.200 -- -- (1 1) Advances lo and From Other funds Advances to other funds fund Amount General 3 1,369.6 18 Capital Pvolects 53.467.445 Capital Projects 2097.827 (Redevelopment Prolect) TOTAL S3.467.44s TOTAL 93.467. -145 - Advances from other funds Fund Amount - - 41 CITY OF CARLSBAO Notes to Combined Financial Statements, Continued (121 Due to and From Other Funds The following table shows arnouiats due from funds in the City to other funds withln the City: Due to: General Se! f Payroll 5 Capital Sanit- Ins. Trus _- General Constr. ation Liab. Agency Fund Fundfa Fund FundcO' fund TUti Due Fiom: General Fund s-s- t- 51,962 59.337 $1 Street bghting Fund - - - 11 54 HUO-Section 8 Fund 17,315 - - 25 41 1 Library Sond Fund 6,300 Water Utility Fund - - 71,435 49 145 7 Sanitation Fund - - - 43 f 02 Vehicle Maintenance Fund - - - 46 107 Redevelopment Fund e 67,302 - 29 92 6 S23.615 $67,302 571,435 -- -- - e e e -- - ~2.165 99.878 si7 -- -- --- tal General Capital Construction Fund iD1 Self-Insurance bability Fund (13) Line of Credit The City has a lineof credit of $1,OoO,ooO. This line of credit was not used as of June 30. 1986. 4% CITY OF CARLSBAO Nates to Combined Financtal Statements, Cantinued (14) Fund BalancesiAetained Earnings - The following is a summary of nsservea and unreserved fund balances and retamed earnmgs as of June 30, 1986, with comparative figtires for June 30, 1985: Totals iMemorandum Only) - Governmental Fund Types - Special Debt Cap i tal Genevat Revenue Service Protects 1986 I 985 -- Fund Balances: Reserved for prepaidexpenses S 75,500 S 87,223 S - S 6,650 5 173,373 S 116.209 Reserved for - - 14,069 f 2.288 inventory supplies 14,069 - Reserved for debt service - - 654,658 2,097,827 2.752.45 56a.622 Resewed for advances to Other funds 1,369,618 - - 626,689 1,996,307 2.649.079 Resewed for encumbrances 813,169 1,740,305 - 6,953.7a~ 9,507,255 5,046.4.41 Unreserved: Designated for approved capital projects 17,900 6,404,634 - 4,1wsgi 10,587,125 gsi ?86 TOTAL Fund Balances $2294.256 S3,472,460 81,548,708 S20.393.643 527,709.067 $27 182.683 - (4,759,702) 894,050 6,544105 2.678.453 8.728.058 -- -- Undesignated -- -- -- Totals Proprietary Fund Types (Memorandum onlv) Internal Enterprise Service 1986 1985 Retained Earnings: Reserved for construction S 445.851 S - s ~5.851 s m2.995 Reserved for de4t service 91 1,291 4 91 1,291 887.441 Un reserved: Designated for approved capital prolecis 2221.307 - 2,221,387 ? ,329.064 Undesignated 10,318.869 647,793 10,966.662 7 304 206 TOTAL Retained Earnings s -I 3897.398 5647,793 514,545,191 Sl 0.183.706 43 CITY OF CARLSBAO Notes to Combined Financial Staternerrts, Continued Reserves for prepaid expenses. inventory supplies and advances to other funds are establlsr show that certain assets already c Ommitted to other purposes are not available for discretiona penditure. Reserves for encumbrances represent commitments related to unperformed contracts for sewce: undelivered goods. Reserves for debt service represent resources legally restncted to the payment of General long debt pnnctpai and interest matunng in future years. Reserves for construction represent commitments related to unperformed contracts for capital struction prolects. Unreserveddesignated for capital prolects, identifies plans for and restrictions on the future u financial resources for approved capital projects. Unreserved-undesrgnated represents the fund balanceor retained earnings remaining after reduc for reserved and designated fund balances or retained earnings. In the combined special revc funds, this account has a debit balance. Because many projects in the special revenue funds WI financed out of future revenues, the unreserved-undesignated fund balance represents the arnou be realized before prolects may be completed. As of June 30,1986. tbeonly funds with a deficit tn fund balance were the Redevelopment Fund, a ital pmlecf fund with adeficrt of $2.532206, and the Library 6ond Fund. a debt Service fund with a 66 of 56,038. (15) Changes in Contributed Capital Add it ions Contrtbuted Contrrbu Capital Fixed Capita July 1, 1985 Cash Assets June 30. 1 Enterprise Funds Water Utility $ 2.425.080 s- 8- S 2.425.1 Sewer 19,757,360 - 73.993 19.831 ,: TOTAL Enterprise Funds $22182400 f- 973.993 S22.256.d Internal Service Funds Workers' Compensation $ 500,000 f- s- s 5oo.c General bability Self-Insurance 850,000 - - 850.0 Central Garage 780,977 P - 780.9 Oata Processing - 60.006 - 60.C TOTAL Internal Service Funds $ 2,130.9TI S60.000 s- S 2.190.9 44 CITY OF CARLSBAO Notes to Combined Financial Statements, Continued (1 6) Segment Information for Enterprise %rids The City maintains two enterprise funds that provide water and sewer serrices. Segment information for the year ended June 30, 1986, was as follows: -- Water Total Utility Sewer Enterprise Fund Fund Funds Operating revenues Sl,241,885 S 4,184,905 S 5,426,790 Depreciation and amortization expenses 137,225 127,872 265.097 Operating income (loss) (76,068) 2768,232 2,692,164 Nonoperating income or (expense) 237,967 673,137 91 I, 704 Capital conttibutlons 2425.086 19,831,353 22.256.433 Property, plant and equipment Net income 161,899 3,441,369 3.603.26a (at cost): Additions 2094 621,063 623,157 Deletions 552,415 - 552.41 5 Net working capital 3,542223 8,200,942 17,743,165 Bonds payable from operating revenues 627,064 - 627.C64 Total Assets 9,325,810 31.350,163 40.6T5.973 Total Equity 7,136,124 29,017,707 36.1 53,831 (1 73 Assessment District Bond Issues On March 10, 1986, $460,942 in Assessment Oistrict Bonds were issued under provisions of the Improvement Bond Act of 191 1. ‘mebonds were issued to finance a public infrastructure improvements project in the area located north of Basswood Avenue between Highland Orive and Valley Street. Thts project includes construction of a new street (James Drive) complete with curbs. gutters, sidewalks, street lights. storm drain, sewer, water and all other utilities. On May 29,1986, $9,570,29 in Assessment District Bonds were issued under provisions of the Improve merit Bond Act of 1915. The bonds wefe issued to finance a public infrastructure improvements project. The improvement project consists of the construction and improvement of College Boulevard to an improved paved street that extends trom El Camino Real scuthwesterty to Palomar AirpoR Road. Street construction consists of grading, landscaping, irrigation, curb and gutter, sidewalk. raised medians. traffic striping, sign control. signals and minor drainage structures. The City has no obligation beyond the balances in the reserve funds for any delinquent assessment district bond payments. If delinquencies occur beyond the amounts held in the reSef.de funds, the City has no duty to pay the delinquency out of any available funds of the City. Neither the faith, credit nor taxing power of the City is pledged to the payment of the bonds. - 43 CITY OF CARLSBAO Nates to Cmbtned Financial Statements, Conttnued (18) Contingencies (a) The Water Utility Fund of the Gt-i and Costa Real Municipal Water Oisfrict (the "0Istrict"j cu rently are providing water SeNICe.i to mOSt of the City under the terns of a basis of understandin negotiated in an effort to Settle a law suit between the parties. Such understanding provides fc a functional allocation of responsibilities between the Water Utility Fund and the Oistrlct Nlt several srgnificant issues to be resolved by Joint Committee of the parties before a final comprc hensive agreement is reached. As a result of a final agreement, additional assets andlor 1 laoil ties may be transferred among the parties. Single family Mortgage Revenue Bonds have been issued to provide funds to purchase mongag loans secured by first trust deeds on newlyconstructed dnd existing singlefamily residence5 The purpose of this program is to provide low-tnterest-rate home mortgage loans to persons o low or moderate income who are unable to qualify for conventional mortgages at market rates Multi-f amily Housing Revenue Bonds are issued to provide Construction and permanen financoog to developen of multi-family residential rental prolects located in the City to be partiall\ occupizd by persons of IC N or moderate income. The following is a schedule of all such bonds issued since mception of the programs: (b) Date Issued Amount October, 1983 $28,000.000 April, 1985 16,QoO,OOO May, 1985 16,500,000 June, 1985 15,000.000 TOTAL S67,SQO.OOO The bonds, together wlth interest thereon, are limited obligations of the City payable solely from bond proceeds, revenues, and other amounts derived solely from home mortgage and developer loans secured by fiat deedsof trust, irrevocable letters of credit, and irrevocable surety bonds. In the opinion of City officials, these bonds are not payable from any revenues or assets of the City, and neither the full faith and credit nor the taxing power of the City of Carlsbad. the State of California, nor any political subdivision thereof, is obligated to the payment of the principal or interest on the bonds. Accordingly, no liability has been recorded in the General Long-Term Debt Account Group. (cl The City is adefendant in certain legal actions arising in the normal course of operations. In the opinion of management and legal counsel, any liability resulting from these actions will not result in a material adverse effect on the City's financial position. 46 rn RAUSCHER PIERCE REFSNES, INC. I 1306 1.02 JHHW BDO kla 07/09/87 KL2310 $6,555,000 CITY OF CARLSBAD (SAN DIEGO COUNTY, CALIFORNIA) 1987 NOTES a INCUMBENICY AND SIGNATURE CERTIFICATE The undersigned hereby state and certify: (i) that they are the drily elected or appointed, qualified and acting Acting City Manager and City Clerk, respectively, of the City of Carlsbad, a general law city duly organized and existing under the Constitution and laws of the State of California (the "City"), and as such, are familiar with the facts herein certified and are authorized to certify the same; (ii) that the following are now, and have continuously been since the dates of beginning of their respective current terms of office shown below, the duly elected, qualified and acting members of the City Council of the City. and the dates of the beginning and ending of their respective current terms of office are hereunder correctly designated opposite their names: Date of Date of Beginning of Ending of Current Term Current Term 0 ,Member Claude A. Lewis, Mayor November, 1986 November, 1990 Ann Kulchin November, 1984 November, 1988 John Mamaux November, 1986 November, 1990 M(ark Pettine j November, 1986 November, 1990 Eric Larson March, 1987 November, 1988 (iii) that the signatures set forth opposite the names and titles of the following persons are the true and correct specimens of, or are, their genuine signatures: Name and Title Sianature Ray Patchett, Acting City Manager b'illiam Esterline, Treasurer a < /7 J James F. Elliott, Finance Director &a 0 - (iv) and, that the notes issued by the City, designated City of Carlsbad (San Diego County, California) 1987 Notes, in the aggregate principal amount of $6,555,000, dated July 16, 1987 (the "Notes"), bear the manual signature of the Treasurer named herein, bear the facsimile signature of the City Clerk named herein and the seal of the City impressed hereon is reproduced on the Notes in facsimile. Aletha Rautenkranz. City Clerk C1M OF CARLSMR Dated: July 16, 1987 CITY OF CARLSBAD, CALIFORNIA [S E P. L] BY 4-YG5 J&leriP e e -2- i I: I' VV5037 * $6,555,000 CITY OF CARLSBAD (SAbJ DIE60 COUNTY. CALlFORNlA) 1987 NOTES - CERTIFICATE AS TO ARBITRAGE I, the undersigned Finance Director of the City of Caslsbad, California (the "City") being one of the officers of the City charged with the responsibility of issuing the City's $6,555,000 1987 Notes (the "Notes") dated July 16, 1987, and being issued this date, hereby certify as follows: (1) The Notes are being issued, pursuant to the terms and conditions of Article 7.6 (commencing with Section 53850) of Chapter 4, Part 1, Division 2 of Title 5 of the California Government Code and a resolution authorizing the issuance of the Notes, adopted by the City Council of the City on June 23, 1987, as amended on July 14, 1987 (the "Resolution") for the purpose of refunding the outstanding note of the City dated May 'I 9, 1987, (the "Prior Note") issued for the purpose of enabling the City to acquire certain land to be used for open space. (2) On the basis of the facts, estimates and circunnstances in existence on the date hereof, I reasonably expect the following with respect to the Notes and the proceeds thereof: (a) The proceeds of the Notes will be the $6,555,000 face amount thereof less underwriter's discount of $9,923.50, without accrued interest, for tota proceeds of $6,545,076.50. The proceeds of the Notes, together with interes thereon (except to the extent that such interest is required to be rebated to the United States), will not exceed the amount required for the governmental purposes of the Notes, namely the amount needed to refund the Prior Notes and to pay costs of issuance of the Notes. (b) Of the proceeds of the Notes received on the date hereof, $6,459,38d will be used on the dale hereof to pay the Outstanding principal amount of the Prio Note, $55,745.37 will be used on the date hereof to pay the interest due on the Prio Note and the remaining $29,947.13 will be deposited into a segregated account tc be held by the City ancl used for the payment of costs of issuance of the Notes. a (c) The proceeds of the Notes deposited into a segregated account to pay legal fees, printing costs and other costs and expenses of Issuance of the Notes will be fully expended within six (6) months of the date hereof and will be invested without yleld limitations. Interest earnings and profits resulting from said investment Will be deposited in sald segregated account and usad for the purposes of said account. (d) TRe Notes wlll be paid on thelr maturlty (June 30, 1988) from the proceeds of general oblligatlon bonds issued by the City or from the proceeds of a certificate of partlclpatiorr financing undertaken by the City or from advances from city funds available thirty (30) days prior to the maturity of the Notes. Funds Or accounts for the paymelnt of the Notes have not bem established on the date hereof and ate not expecded to be established. 0 (e) A reserve fund has not been established for the Notes. (1) The City has covenanted in the resolution authorizing the Notes to rebate excess Investment earnings from proceeds to the Unltsd States of America. In the event of excess investment earnings, the City will rebate such amount within si* (60) daya following the maturity of the Notes. (g) The yield on the Notes Is 4,359%, determined on the basis of payments of debt $en/lce on the Notes and a purchase price of 99,9% of the face amount Of the Notes. The underwriter of the Notes has represented that a substantial amount of the Notes were sold aft such purchase price. (h) No portion of the proceeds of the Notes will be used as a substitute for other funds (replacemelnt funds) which are otherwlse available to be used as a source of repayment of the Prior Note or for the payment of the Notes and which have been or will bla used to acquire directly or Indirectly securities, annulw contracts, obligations or other investment-type property produclng a yleld in excess of the yleld of the Notes. (i) Except as set forth herein, no funds or other amounts have been pledgec to the payment of the Notes which have been or wlll be used to acquire directly 01 indirectly securities, annulty contracts, obligations or other Investment-type propert) producing a yield In 8xc;ess of the yield of the Notes. 3. The Clty has not recelved notice that its Certificate as to Arbitrage may not bc relied upon with respect to Its own issues nor has it been advised that any adverse act10 by Commissioner of Internal P,evenue is contemplated. TO the best of my knowledge, information and belief, the expectations herei expressed are reasonable and there are no facts, estimates or circumstances other tha those expressed hereln that would materially affect the expectations herein expressed, ON WiTNESS WHEREOF, I have hereunto set my name this 18th day of July, 1987 0 -2- 0 IN WITNESS WHEREOF, I have hereunto set my 0 Finance Director e a -3- 0 CERTIFICATE OF THE ACTING CITY MANAGER OF THE CITY OF CARLISBAD I, Ray Batchett, Acting City Manages of the City of Carlsbad, California (the "City"), hereby certify on behalf of the City as fullows: responsibility for the management of the City. Contract of Purchase between the City and Rauscher Pierce Refsnes, Inc., the Underwriter, for Notes of the City, dated July 8, 1987 (the "Contract of Purchase"), are true and correct on and as of the date hereof as if made on and as of the date hereof, and the City has complied with and performed all of its covenants and agreements in the Contract of Purchase. 3. Each of the conditions in Section 7 of the Contract of Purchase to be satisfied by the City has been satisfied by the City on the date hereof and the City is not: aware of any other condition of the Contract of Purchase that has not been satisfied on the date hereof. Underwriter under the Contract of Purchase and the sources of payment thereof conform to the descriptions thereof contained in the City's Resolution, as defined in the Contract of Purchase. financial condition or results of operations of the City from the date of the Contract of Purchase to the date hereof. IN WITNESS WHEREOF, I have hereunto set my hand this 16th .. 1. I am the official of the City having overall ,- 2. The representations and warranties of the City in the a 4. The Notes being delivered on the date hereof to the 5. There has been no material adverse change in the day of July, 1987. e 13031 42 JHHW WHM KL 07/09/87 KL2309 $6,555,000 CITY OF CARLSBAD (SAN DlEGO COUNTY, CALIFORNIA) 1987 NOTES a - OJSCLOSURE CERTIFICATE The undersigned hereby states and certifies: (i) that he is the duly appointed, qualified and acting Finance Director of the City of Carlsbad, California (the "City"), and as such, is familiar with the facts herein certified and is authorized to certify the same, (ii) that on the date hereof, said date being the delivery date of the City of Carlsbad (San Diego County, California) 1987 Notes in the aggregate principal amount of $6,555,000, dated July 16, 1987 (the "Notes"), Resolution No. 91 32, "Resolution of the City Council of the City of Carlsbad Providing for the Borrowing of Funds for the Hosp Grove Acquisition and and the Issuance and Sale of 1987 Notes Therefor," adopted by the City Council of the City on June 23, 1987, as amended by Resolution No. - adopted by the Cily Council of the City on July 14, 1987, and all official action of the City relating to the sale and delivery of the Notes are in full force and effect, and have not been amended, a modified or supplemented; and (iii) that nothing has corne to his attention to lead him to believe that the material contained in the Official Statement relating to the Notes contains any untrue statement of material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein in the light of the circumstances under which they were made, not misleading. Daited: July 16, 1987 e $6,555 , 000 CITY OF CARLSBAD (SAN DIEGO COUNTY, CALIFORNIA) 1987 NOTES a CERTIFICATE OF MAILING I, Karen Lee, hereby state and certify that, for and on behalf of the City of Carlsbad, on July 16, 1987, I caused to be mailed Form 8038-6, Information Return for Tax-Exempt Governmental Bond Issues, postage prepaid, via certified mail, to the Internal Revenue Service, Philadelphia, Pennsylvania 19255, a copy of which report is attached hereto. Dated: July 16, 1987 \-y. " -.J- L, [ c, *,L b .I I d,t--c4--/ Karen Lee e 0 . lriformatlon Return for TaxoExempt OM8 Nt LDW6 aOV8?flmbntsl Bond iSrSU8S c* Undrt lrctlon ¶(@(e) DtunmtM of tlu lnriuy 3 Numw rod met I Q$w wwn, ruse, mad Zt? cow .I 1200 Elm Avenue Carlsbad, California 92 .... ',...,,I.,,,.. 10 PtDcel)d$ UW~ for hCcfu0d tnterot 20 CroMIdru~dfofbo~diu~incccort,(includin~un6arwr1ters'discout). , , . . . , , . . , 2 1 hocaeaa urod for credit enkncomcnt . , . , . . . , , , . , , , , , . . , . , 21t Plos~ds~~loc~tOd!orerronrbly~qulrrdre8efv(orreplrc~mrntfune , , . . , , . . , , . &I Lnto~t~enmrlniqwoi~t@d~vrn~~m~tur~ty6ftho bond8tokrdundee . , . . , . . , . .- t6 &Mar tho list drte on which the nfuinded bond6 ~Ill be ullid a , , , . , , , , . a , , e ,7/16 'I Ents SI the refwd bo neb; wero lrrurd - b frdE2: ne0 "I 911 €nt,rth~~mount(~~ny)ofthrtrtrvolumou~r~locrtebto thisiuur . . , , , . . , , , e ,- I 89 Arbttn&e rebate: CMck box ~f the rmrli#ousmmrntal unit exception to the rrb1trr8s rebat8 mquiromrnt rpp~rer , , , . , . , . . b Chock box If the 6.month UmpOfBfy tnv@Stm@nt exception to tho clbltrr8e row(, requirement 1, rxp@ctrd to rppry . . e Chock box W you expect 16 barn and rrbtc atbitrap prof* !e !ne U.S. . . . , , , I , . , , , . , . a 10 €ntw tht rmount of the bonds deSfpnht,d by the #suer under 80ction 26S(b)(3)(B)(ti) , , , . , b ,-, t L Pooh$ flnrnti48: I Check bot If any Of tk$ OroCrrdr of tlJ iuuo Ire to be u8.d to make IDanb to othor govetnmrnul unit, e D and ontet the rmount b oerrdr of another trx~rrrmgt itsue b a me enter the fume of the ma the date 8f tha iwue b A nit wrum a,w rtsompinvg bcwouyI on0 uawmru). m tc vw RSI of my L~W July 16, 1987 Finance Djrector bbte 1 Titit 8 page 1 ol the Inrtrutt)on@. form 110: CITY OF CARLSBAD 1200 ELM AVENUE CARLSBAD, CALIFORNIA 92008-1 989 e VINCENT F. BIONDO, JR. ZITY ATTORNEY RONALD R. BALL ASSISTANT CITY ATTORNEY (619) 434-2891 EXHIBIT C to the Contract of Purchase July 16, 1987 City Council City of Carlsbad Carlsbad, California 92008 Rauscher Pierce Refsnes, Inc. One California Street San Francisco, California 94111 $6,555,000 CITY OF CAFLSRAD, CALIFORNIA 1987 NOTES Dear Ladies and Gentlemen: e Reference is made to a Contract of Purchase dated July 8, 1987 ("Contract of Purchase"), between the City of Carlsbad, California (the "City") and Rauscher Pierce Refsnes, Inc., for Temporary Notes (the "Notes") of the City of Carlsbad, in connection with which you have requested my opinion as to the matters set forth below. All terms used herein have the definitions set forth in the Contract of Purchase. I have examined such portions of the Constitution of th United States of America, the Constitution and Statutes of the State of California (the "State") and such applicable court decisions as I deemed necessary or relevant for purposes of the opinions set forth below, and made such further inquiries and investigations as I deemed necessary or appropriate for purposes of such opinions. Based on the foreqoing, I advise you that in my opinion: 1. The City is a political subdivision duly organized, validly existing, and in good standing under the Constitution ar the laws of the State of California. 2. The Resolution was duly adopted at meetings of the governing body of the City which were called and held pursuant 1 law and with all public notice rewired by law and at which a quorum was present and acting throughout. 3. There is no action, suit, proceeding or @ investigation at law or in equity before or by any court, public board or body, pending or, to the best of my knowledge, threatened against or affecting the City, which would adversely :impact the City's ability to complete the transactions described :in and contemplated by the Contract of Purchase, or in any way contesting or affecting the validity of the Contract of Purchase, liesolution or Notes or the transactions described in and contemplated by the Contract of Purchase wherein an unfavorable decision, ruling or ffinding would adversely affect the validity and enforceability of the Contract of Purchase, Resolution or Notes or in which a final adverse decision could materially affect the operations of the City. 4. The execution and delivery of the Contract of Purchase, and compliance with the provisions thereof, and the execution, authentication, issuance and delivery of the Notes under the circumstances contemplated thereby, do not and will not in any material respect conflict with or constitute on the part of the City a breach of or default under any agreement or other instrument to which the City is a party or by which it is bound or any existing law, regulation, court order or consent decree tl which the City is subject. 5. The Contract of Purchase has been duly authorized, executed and delivered by the City, and, assuming due authorization, execution and delivery by the other parties thereto, as applicable, shall constitute a legal, valid and binding agreement of the City enforceable in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency or other laws affectinq the enforcement c creditors' rights generally, As stated in the Official Statement, the Notes are general obligations of the City payable from subsequent borrowings or from taxes, income, revenues, cash receipts and other moneys of the City attributable to the fiscal year 1987/88 and legally available therefor. 0 6. No authorization, approval, consent, or other ordei of the State of California or any other qovernmental authority ( agency within the State of California is required for the valid authorization, execu'tion and delivery of the Contract of Purchase, the authorization, execution, authentication and delivery of the Notes. Very truly yours, (--; p 1 C~YerV. p ( 2 c- -* - A-. RONALD R, BALL Assis tan t City Attorney arb !Moody’s Investors Service 99 Church Street, New York, NY 10007 4D June 26, 1987 Mr. James Elliot @lX3EJlMED Finance Director 1200 Elm Street Carlsbad, California 92008 RAUSCHER PIERCE REFSMES Dear Mr. Elliot: City of Carlsbad 3UL - Z 1987 SAN FRANCJSCO OFFICE We wish to inform you that our Rating Committee has assigned the rating of MIG 1 to the $6,570,000 Carlsbad, California 1957 Notes to be sold through negotiation on June 29, 1987; Dated July 16, 1987 and Due June 30, 1988. In order that we may maintain the currency of this rating over the period of the loan, we will require current financial and other updating information. We will appreciate your continued cooperation in the future. We would appreziate receiving a copy of the final Official Statement when available. e Under separate cover you will be receiving a copy of our credit report on the above referenced note sale. Should you have any questions regarding the above, please do not hesitate to contact Mr. Adam Whiteman at (212) 553-0300. Sincerely yours, $&JLJw-- Freda Stern Ackerman Executive Vice President AW :pl cc: Ms. Virginia h,orler Rauscher Pierce Refsnes Inc. 1 California Street / Suite 2750 San Francisco, California 94104 e 1:106102 JHI IW WHM KL 07,09187 KL2313 $6,555,000 CITY OF CARLSBAD (SANI DIEGO COUNN, CALIFORNIA) 1987 NOTES @ ACCEPTANCE OF DUTIES OF PAYING AGENT The undersigned hereby states and certifies: (i) that he is an authorized officer of Security Pacific National Bank, acting as the paying agent (the "Paying Agent") for the captioned notes, and as such, he is familiar with the facts herein certified and is authorized and qualified to certify the same; and (ii) that the duties and obligations of the Paying Agent imposed upon it under that certain Resolution No. 9132, "Resolution of the City Council of the City of Carlsbad Providing for the Borrowing of Funds for the Hosp Grove Acquisition and the Issuance and Sale of 1987 Notes Therefor", adopted by the City Council of the City of Carlsbad on June 2:3, 1987, have been duly accepted by the Paying Agent and such acceptance is hereby acknowledged. Dated: July 16, 1987 SECURITY PACIFIC NATIONAL BANK, 0 as Paying Agent BY Titfe: ASSISTANT VICE PRESIDENT 0 CXKI'IFICATE OF PAYING AGEWT 0 ?he Unaersigned, SEKXTRITY PACIFIC "& BANK, as Paying Merit under Resolution No. 9132 adopted by the Council of the City of Carlsbad on June 23, 1987 (the 8%esohrtiontt) authorizing the issuance of the City of Carlsbad San Diego County, California 1987 Nates in the principal amount of $6,570,000 (the t%teslt) hereby certifies as follaJs: 1. ?he person whose m aml office appears belm was at the time of the execution of the Agnetrmt and nm is a duly aminted, qualified and acting - of said office. The signature appearing after the name of said person is a true and corm& specimen of that person's signature. - hm Off ice Sicmature sammtcher mistant Vice president .. I I 2. Attached hereto h Exhibit A is a true and correct cwpy of resolution duly adopted IJY the Board of DirectorS of Security Pacific National Bank, which resc~lutions are in full force and effect on the date hereof. 0 IN WITNESS WHERMlF, Security Pacific National Barik, as Paying Agent has caused this certificate to be executed in its coqmrate name by an officer thereunto duly authorized and its coxpoxate seal to be affixed hereto as of the 16th day of July, 1987. SECURITY PACIFIC NATIONAL BANK, as Paying zigent i- ,' 7 istant Secretary (sa) 0 GENERAL SIGNATURE RESOLUTION RESOLVED THAT, Instruments, documents or agreements relating to or affecting the property or business and affairs ofthis Bank, or ofthis Bank. when acting in any representative or fiduciary capacity, may be executed in its name, with or without its corporate seal, by the persons hereinafter designated. For the purposes of this resolution, the term e “Senior Officer” shall mean: the Chairman of the Board, President, Vice Chairman of the Board, any Vice Chairman, any Managing Director, any Vice President (including any Executive Vice President, any Senior Vice President or any First Vice President), Personnel Director, General Counsel, Assistant General Counsel, Associate Genera! Counsel or any individual designated as a “Senior Officer” by any member of the Office of the Chairman or by any Executive Vice President and the term “Signing Officer” shall mean: Any !Senior Officer, the Secretary, the Cashier, Counsel, Division Chairman of the Board, Division President, Division Vice Chairman, Division Executive Vice President, Division Senior Vice President, Division Vice President, any Assistant Vice President, Assistant Secretary, Assistant Cashier, Associate Counsel, Attorney, Senior Trust Officer, Trust Officer, Senior Investment Officer, Investment Officer, Senior Trust Advisor, Trust Advisor, District Trust Office Manager, Operations Officer, Senior Real Enate Officer, Real Estate Officer, Senior Tax Officer, Tax Officer, Trust Counsel, Associate Trust Counsel, Controller, Division Controller, Assistant Controller, Accounting Officer, Account Officer, Credit Officer, Consumer Credit Officer, Manager, Aissistant Manager, Branch Manager, Assistant Branch Manager, Interna- tional Officer, International Operations Officer, Senior Flight Officer, Flight Officer, Financial Analysis Officer, Financial Counselor or Associate. 1. Any two Senior Officers or any Senior Officer and any other Signing Officer, acting together, may execute: (a) Deeds, leases, assign:ments and conveyances of any real or personal property or any interest e therein. (b) Bonds of indemnity or other undertakings, repurchase agreements and guaranties. (c) Any other instruments, documents or agreements which may be found necessary, proper or expedient to be executed in conducting the business of the Bank. 2. Any Senior Officer, acting, alone, may execute: (a) Deeds to real property described in any deed of trust which names this Bank as trustee, after a trustee’s sale thereunder in the manner provided by law. (b) Reconveyances ofany property held under any deed oftrust which names this Bank as trustee. (c) Loan agreements, commitments to lend, participation agreements and certificates of participation. (d) Underwriting agreements, purchase agreements, placement agent agreements and remarket- ing agent agreements relating to securities for which the Bank serves as underwriter, place- ment agent or remarlceting agent and any instruments incidental thereto. 3. Any Signing Officer, acting alone, may execute: (a) Security agreements, building loan agreements and assignments of accounts, financing state- ments, termination slatements, continuation statements and statements of assignment with respect to which this Bank is a secured party; releases of security interests in and liens upon personal property; reassignments of stocks, bonds, notes, leases and other property held by this Bank as security; and requests of reconveyances of property held for this Bank as security under deeds of trust. (b) Receipts for any money or property paid or delivered to this Bank. 0 (c) Extensions of the timc for payment of any note or other obligation held by this Bank. (d) Notices ofdefault and of election to sell or cause to be sold the property described in any deed of trust held by this Bank, notices to the trustee named in any such deed of trust, and do any other act or sign any other document provided for by law, or which may be necessary, expedient or proper in order to protect or enforce the rights of this Bank under any such deed of trust. (e) Checks, drafts, cashiers checks, money orders, certificates of deposit, savings certificates, acceptances, letters of credit, other similar obligations of this Bank, and underwriting agree- ments and similar agreements relating to the marketing of certificates of deposit or other obligations of this Bank. (0 Certifications of checks of customers. (g) Guaranties of the signatures of customers, or other signatures, when appearing as endorsements of bonds or of certificates of stock, or of other securities. (h) Claims of this Bank as a creditor of any decedent, or of a person who is a party to any form of proceeding in bankruptcg , insolvency or similar proceeding, or any other claim of this Bank in any other type of action or proceeding. (i) Proxies to vote stock held by this Bank. 0) Pleadings and documents to be filed in any court or other proceeding involving this Bank, including verifications of any such pleadings or documents. (k) The “Oath of Officer of Incorporated Company” required by 46 U.S.C.A. 9 838 or any similar statute, and other documents in favor of or affecting this Bank in connection with the recording of preferred mortgages. (1) Declarations oftrust and trust and agency agreements, acceptances thereofand consents thereto, and any similar documents however denominated, including any documents or agreements referenced within the declaration oftrust or agency agreement or similar document and required or permitted to effect the fiduciary purpose; petitions for the appointment of this Bank in any representative or fiduciary capacity; certificates of ownership in and to any trust held by this Bank certificates of authentication with respect to bonds, notes, debentures and other obliga- tions issued under corporate mortgages, trust agreements and other indentures; certificates for securities deposited, interim certificates and other certificates for and on behalf of this Bank as depositary or agent; countersignatures of bonds, notes, certificates of stock, voting trust certifi- cates or participation certificates on behalf of this Bank as transfer agent or registrar, certificates of cancellation and of cremation of stocks, bonds or other securities; and resignations of this Bank in any representalive or fiduciary capacity. e a (m) Instruments required Ito transfer securities into the name of any nominee of the Bank. (n) Any tax return or other document to be filed with the Internal Revenue Service, the California Franchise Tax Board or any other taxing authority. (0) Merchant bankcard participation agreements and amendments thereof. 4. Any person who from time to time has the title ofAuditor, or any other title which includes the word “Auditor” and any Audit Officer or any Reconcilement Officer, shall be authorized to sign receipts for statements of accounts, verification of accounts, correspondence, and advices incident thereto. 0 5. Senior Escrow Officers and those persons who from time to time shall be authorized by the Executivc Vice President of the Management Services Group or, in his absence, the Personnel Director or tht Manager of the Compen!;ation Division of the Personnel Department to sign in the name and or behalf of this Bank as “For Manager” or “For Cashier” or “Authorized Signature” shall be and the! hereby are authorized to sign checks, drafts, cashiers checks, money orders, certificates of deposit savings certificates, acceptances, letters of credit and other similar obligations of this Bank, to certif! checks and to execute receipts for any money or property paid or delivered to this Bank. 6. The officers in charge of the departments under Article VI1 of the Bank’s By-Laws may, any onc acting alone, designate those persons who are authorized to execute certificates of authentication fo bonds, notes, debentures. and other obligations issued under corporate mortgages, trust agreement and other indentures, and to countersign bonds, notes, debentures, certificates of stock or voting trus certificates on behalf oft his Bank as transfer agent or registrar. 7. Any member of the Management Committee of this Bank is hereby authorized to designate person who may use facsimile signatures in exercising their authority under this resolution, but thc signatures of all other peirsons exercising authority hereunder shall be manual. a FURTHER RESOLVED, that a11 signing resoIutions authorizing Officers or others to sign any documents fc or on behalf of this Bank, heretofore adopted by the Board of Directors, which are inconsistent or in conflict wit the foregoing resolutions, be and they hereby are rescinded. The undersigned, Secretary o Security Pacific National Bank, Los Angeles, California, hereby certifies that the foregoing is a full, true an correct copy of a resolution duly adopted by the Board of Directors of said Bank on February 12, 1974, with a amendments to the date hereof, which resolution as amended is in full force and effect. @ The undersigned further certifies that is - and that is - of said Bank, and that any copies of th signatures of said Officer or Officers affixed or attached hereto, and initialed by the undersigned (including an facsimile signatures so affixed or attached and so initialed), are genuine. - -, 19- Secretary of SECURITY PACIFIC NATIONAL BANK (SEAL) a 13Cil-02 JHHW WHM KL 07113.8/ I.LCY"Y $6,555,000 CITY OF CARLSBAD (SAN DIEGO COUNW. CALIFORNIA) 1987 NOTES a RECEllPT FOR PROCEEDS OF NOTES I hereby certify that I received from Rauscher Pierce Refsnes, lnc. the purchase price for the following described Notes: "City of Carlslbad (San Diego County, California) 1987 Notes", dated July 16, 1987, issued as notes payable to bearer in the denomination of $25,000 each, numbelred consecutively 1 through 262 and one note in the denomination of $5,000, numbered 263 (the "Notes"). The purchase price of the Notes is computed as follows: $6,555,000.00 Principal Amount of Notes 9.923.50 less Underwriter's discount $6,545,076.50 TOTAL PURCHASE PRICE The proceeds of the Notes will be used as follows: Principal and interest payment to be paid on the Temporary Note with San Diego Trust and Savings Bank on July 16, 1987 (representing $6,459,384 principal and $55,745.37 interest) for payment of Costs of issuance 0 $651 5,129.37 29.947.13 $6,545,076 SO Total Purchase Price 0 The amount of $29,947.13 will be deposited into a segregated account for payment of Costs of Issuance, which amount will be invested in the following investments. a Amount Descrip'tion Principal Interest Purchase - Account pf Deposit bv Name Amount Maturity Rate Price 430103520 $29,947.13 City of $29.947.13 N/A none N/A San Diego Trust: & Savings Account NOTE - This is a non-interest bearing accou Bank Carlsbad - Hosp Grove Dated: July 16, 3987 YV i e (0 13061 -02 JHHW WHM KL 07rn~m7 KL2312 $6,555,000 CITY OF CARLSBAD (SAN DIEGO COUNTY, CALIFORNIA) 1987 NOTES e CUSTODIAL RECEIPT FOR NOTES Rauscher Pierce Refsnes, Inc. (the "Underwriter") acknowledges receipt from the City of Carlsbad (the "City") of the following described notes: "City of Carlsbad 1987 Notes", in the aggregate principal amount of $6,555,000, dated July 16, 1987, issued as notes payable to bearer and bearing interest at the rate of 4.25% in the denomination of $25,000 each, numbered consecutively 1 through 262, inclusive, and one note in the denomination of $5,000, numbered 263. The Underwriter agrees to hold the City and any of its officers, employees, agents, Jones Hall Hill & White or Security Pacific National Bank, as paying agent, harmless from ariy liability, loss, damage or expense in connection with the loss, theft, destruction or other disappearance of said Notes while they are in possession, custody or other control of the Underwriter, its officers, employees or agents prior to the conclusion of the formal closing of said Notes on Thursday, July 16, 1987. @ The Underwriter furtheir agrees not to release said Notes until telephone confirmation of the Closing is received from Jones Hall Hill & White, A Professional Law Corporation. Dated: July 10, 1987 RAUSCHER PIERCE REFSNES, INC. as Underwriter By: Titi 0 0 $6,555,000 CITY OF CARLSBAD (SAIV DlEGO COUNTY, CALIFORNIA) 1987 NOTES RECEIPT FOR NOTES Receipt is hereby acknowledged from the City of Carlsbad, California, of the "City of Carlsbad (San Diego County, California) 1987 Notes", in the aggregate principal amount of $6,555,000, dated July 16, 1987, issued as notes payable to bearer in the denomination of $25,000 each, numbered consecutively 1 through 262, inclusive, and one note in the denomination of $5,000, numbered 263. following described Notes: e Dated: July 16, 1987 RAUSCHER PIERCE REFSNES, INC. as Underwriter By: Title: e 0 EOZ0GG p&gG;x 55' e gqooQ'" "WI"1 ", - &3gmwzzZ;:g "3h 2% gc" "E 2 3 g --;Q E' 0 " 2 z "" g 40" T"iP :.Ft 3 4g 5;g *a?$ $3 2 E3 ;x g,iTK"$u - gg4= h-r Y ",; gpg: gG 25% " 0 p-' c) mu -2 2.: -I o =6 c w" €F g o Rg.Ft p 2 3 0 5 - rSggGgw 2 &3z $ BE:,gS32 i;"%OCI RTOX -4 6 a sszg22g gggh 2 p 0 g "'.: "35 2 $ gouak! B Ymrg mg c EaEge& FgEg r:: ~~-poOBY a532 mw 5"rSg 9~ c b a + n 2 a 4 --*E 3 X-zgiEg Lr wga- q 3 a" E?o ?< 0 x. R-, E"-@ u 5 Znw5gE ggzg? g2"iez 4 ,O TRU Sara 5 ;win -4 sw 0 g T 2 0 0 a s $8 6;a z< 5$ oc P 0F om -Jn gE 0< Ern ZU WS 8. nG Y* WCD 0- v e ~3Wl"N~2"kT L 001 0 2: gw c: e -5 OK "1 gwaG-o %g 00 20 23 gg2.g $! 45 g$ 7J W 9 "LO,- x -5 :g g'E? 2,:. B WE -a g: El 2Gt.gg.W 2 m s<E' ggp2sla E g 52 $3 v: p&~~3g: 6.0 w " 3 3-c 0 &% $0, g s gs g4$:gT3DE !? gg :g Y" Eg+g%o~a- " 3 ys 1110 gG~z&~~~ : g Euw3;;$og$ 3 Em Bggp?~,~ 0" 2 gg agP-gwc)gb fi 60 rD Gggo%g$:8 e,g'wQ$R b w G U RF-3 ,S%g :g 0 rn 2~ &O hg?; " 5'- $g -i "0 2980-4cc, 9% 2 0. m=* ?i 0" -2 1 c " go 3- 36" e c: 00 cwo 1 x Ef in- ss<w:$ g? gEzg&ggSZ 5 3% % 2. v, 8 0" z E: Y s 0 $7 %E g .. $rE zw u "9 *a %- 5r: w N ur 0 0 0 4 0%- ,+a (I &!!Lz%;PR& 0 LEGAL OPlNlON I hereby certify that the following is a correct copy of the signed legal opinion of Jones Hall Hill & White, A Profe Corporation, San Francisco, California, addressed to the City of Carlsbad and on file in my office, dated the date of del payment for the Notes therein described. CITY CLERK JONES HALL HILL & WHITE, A PROFESSIONAL LAW CORPORATION ATTORNEYS AT LAW FOUR EMBARCADERO CENTER SUITE 1950 SAN FRANCISCO CA 94 11 1 OPINION: $6,555,000 City of Carlsbad I987 Notes We have acted as bond counsel in connection with the issuance by the City of Carlsbad, California (the “City”), of City of Carlsbad 1987 Notes, dated July 16, 1987 (the “Notes”), pursuant to Article 7.6, commencing with Sectio Chapter 4, Part 1, Division 2, Title 5 of the California Government Code (the “Act”), and Resolution No. 9132 of the < on June 23, 1987. We have examined the law and such certified proceedings and other papers as we deem necessary tc opinion. As to questions of fact material to our opinion, we have relied upon representations of the City contained in the Re! in the certified proceedings and other certifications furnished to us, without undertaking to verify such facts by i investigation. Based upon our examination, we are of the opinion, under existing law, as follows: 1. The City is a duly created and validly existing municipal corporation with the power to adopt the Resoluti the agreements on its part contained therein and to issue the Notes. 2. The Resolution has been duly adopted by the City and constitutes a valid and binding obligation of the City upon the City. 3. Pursuant to the Act, the Resolution creates a valid lien on funds pledged by the Resolution for the sec Notes. 4. The Notes have been duly authorized, executed and delivered by the City and are valid and binding general of the City. 5. The interest on the Notes is excluded from gross income for federal income tax purposes and is not an preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; it shoul however, that, for the purpose of computing the alternative minimum tax imposed on such corporations (as definec income tax purposes), such interest is taken into account in determining adjusted net book income (adjusted cum for taxable years beginning after December 31, 1989). The opinions set forth in the preceding sentence are su condition that the City comply with all requirements of the Internal Revenue Code of 1986 that must be satisfied su the issuance of the Notes in order that interest thereon be, or continue to be, excluded from gross income for federal purposes. The City has covenanted to comply with each such requirement. Failure to comply with certain of such rt may cause the inclusion of interest on the Notes in gross income for federal income tax purposes to be retroactive tc issuance of the Notes. We express no opinion regarding other federal tax consequences arising with respect to rnia. The rights of the holders of the Notes and the enforceability of the Notes and the Resolution may be su ct to 1 insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enact1 also be subject to the exercise of judicial discretion in appropriate cases. * 6. The interest on the Notes is exempt from personal income taxation imposed by the State of Respectfully submitted, *&k m-, r A Professional Law Corporation 0 $6,555,000 CITY OF CARLSBAD (SAN DIEGO COUNTY, CALIFORINIA) 1987 NOTES CERTIFXXTE REGARDING SALE OF NOTES The undersigned, on behalf of Rauscher Pierce Refsnes, Inc., as Underwriter of thc City of Carlsbad 1987 Notes (the "Notes") being issued by the City as of the date hereof hereby represents and certifies that at least ten percent (10%) in the aggregate principa amount of the Notes have heretofore been sold by the Underwriter for a purchase pricc not in excess of the purch,ase price shown on the cover page of the Final Officia Statement relating to the Notes. @ Dated: July 16, 1987 RAUSCHER PIERCE REFSNES, INC. m BROWN &WOOD 555 CALIFORNIA STREET ONE WORLD TRADE CENTER NE\V YORK, N Y 10048 :)AN FRANCISCO, CALIFORNIA 94104 415 398-3909 10900 WI LS H I RE BOUL LOS ANGELES, CA 9( 212-839-5300 213 -208 -4343 0 64!5 MADISON AVENUE ONE FARRAGUT SQUARE NEv4 YORK, N Y 10022 WASHINGTON, D C 21 212 752-8668 202 393-7400 July 16, 1987 Rauscher Pierce Refsnes, Inc. One California Street San Francisco, CA 94111 RE: $6,555,000 City of Carlsbad, California 1987 Note Ladies and Gentlemen: We have acted as counsel for you as the Underwriter in connection with your purchase of $6,555,000 City of Carlsbad, California 1987 Notes (the "Notes") pursuant to the Contract of Purchase, dated July 8, 1987 (the "Purchase Contract"), betweer you and the City of Carlsbad, California (the "City"). 0 We have as such counsel examined originals, or copies certified or otherwise identified to our satisfaction, of such documents, records and other instruments as we deemed necessarl or appropriate for the purpose of this opinion. In rendering 01.11: opinion herein, we are not expressing any opinion or view on the validity, accuracy or sufficiency of documents, certificates or opinions that we have examined or or the authorization, execution, delivery or validity of the Note: nor the exclusion from gross income for Federal income tax purposes or the exemption from State of California personal income taxes of interest on the Notes. Further, we have assumed, but not independently verified, that the signatures or all documents, cert2tficates and opinions that we have reviewed are genuine. opinion that the Notes are not subject to the registration requirements of the Securities Act Of 1933, as amended. Based on and subject to the foregoing,, we are of the 0 Page 2 0 Because the primary purpose of our professional engagement was not to establish factual matters and because of the wholly or partially non-legal character of many determinations involved in the preparation of the Official Statement dated July 7, 1987, relating to the Notes (the "Official Statement"), we are not passing upon and do not assume any responsibility for the accuracy, completeness or fairness of any of the statements contained in the Official Statement, and make no representation that we have independently verified the accuracy, completeness or fairness of any such statements. However, in our capacity as counsel for you during the course of our preparation of the Official Statement, we participated in conferences with representatives of the City, Jones Hall Hill E; White, A Professional Law Corporation, as bond counsel and you, during which conferences the contents of the Official Statement and related matters were discussed. Based on our participation in such conferences, and reliance thereon and on the certificates, opinions and other documents we have reviewed, we advise you that no information has come to our attention which would cause us to believe that the Official Statement as of its date and as of the date of this opinion (except for any financial or statistical data or forecasts included therein and in Appendix A thereto, as to which we express no opinion or view) contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. This opinion is being rendered to you solely for your benefit and may not be relied on by anyone else without our prior written consent. 0 Respectfully submitted, & #kJd 0 JONES HALL HILL &WHITE, A PROFESSIONAL LAW CORPORATION ATTORNEYS AT LAW CHARLES F. ADAbfS STEPHEN R. CASALEQGIO SUITE 1950 EDSELL M. EADY, JR. ANDREW C. HALL, JR. ICEbTNETH I. JONES PHILIP NELSON LEE AUTOMATIC TEmCOPIER FOUR EMBARCADERO CENTE a SAN FRANCISCO 94111 (415) 391-5780 (4l5) 301-5784 (415) 956-6300 WILLIAM H. MADISON July 16, 1987 BRIAN D. OUINT PAUL J. THIMMIQ SHARON STANTON WHITE City Council City of Carlsbad 1200 Elm Avenue Carlsbad, CA 92008 OPINION: $6,!355.000 CiW of Carlsbad 1987 Notes Members of the City Council: We have acted as bond counsel in connection with the issuance by the City of Carlsbad, California (the "City" 1, of $6,555,000 City of Carlsbad 1987 Notes, dated July 16, 1'387 (the "Notas"), pursuant to Article 7.6, commencing with Section 53850, of Chapter 4, Part 1, Division 2, Title 5 of the California Government Code (the "Act"), and Resolution No. 9132 of the City adopted on June 23, 1987, as amended on July 14, 1987 (the "17esolution"). We have examined the law and such certified proceedings and other papers as we deem necessary to render this opinion. '0 As to questions of fact material to our opinion, we have relied upon representations of the City contained in the Resolution and in the certified proceedings and other certifications furnished to us, without undertaking to verify such facts by independent investigation. Based upon our examination, we are of the opinion, under existing law, as follows: 1. The City is a duly created and validly existing municipal corporation with the power to adopt the Resolution, perform the agreements on its part contained therein and to issue the Notes. 2. The Resolution has been duly adopted by the City and constitutes a valid and binding obligation of the City eriforceable upon the City. 3. Pursuant to the Act, the Resolution creates a valid lien on funds pledged by the Flesotution for the security of the Notes. a City of Carlsbad Judy 16, 1987 0 Page 2 - 4. The Notes have been duly authorized, executed and delivered by the City and are valid and binding general obligations of the City. 5. The interest on the Notes is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; it should be noted, however, that, for the purpose of computing the alternative minimum tax imposed on such corporations (as defined for federal income tax purposes), such interest is taken into account in determining adjusted net book income (adjusted current earnings for taxable years beginning after December 31, ‘I 989). The opinions set forth in the preceding sentence are subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986 that must be satisfied subsequent to the issuance of the Notes in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The City has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the incliJsion of interest on the Notes in gross income for federal income tax purposes to be retroactive to the date of issuance of the Notes. We express no opinion regarding other federal tax consequences arising ~k;? respect to the Notes. 6. The interest on the Notes is exempt from personal income taxation imposed by the State of California. The rights of the holders of the Notes and the enforceability of the Notes and the Flesolution may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in appropriate cases. e Respectfully submitted, fiWrnA4 A Professional Law Corporation a ., -EN LEE USAGEK (:I,OSING DEPARTMENT ro I. H E: M HAR(’,ZI) E110 (‘EYTX 11 SI.ITE: 1950 SAX PRAS(‘IS(’0 $341 11 JONF;~ ~~~~~~I~€~II~I~~~‘HITE, ,, l~l~~~~~ss~~~s,~~, !.AM l’~ll~l~O~ATl~~~ (4 1%) :301-57so WILLIAM H. MADISON ATTORNEY AT LAW FOUR EMBARCADERO CENTER SUITE 18SO JoNESHALLHILL&WHITE. saw FRANCISCO 94111 A PROFESSIONAL LAW COWOR~TIO~- 1415) 3R1-6780