HomeMy WebLinkAbout10 Investment Policy Agenda Item #jd`
/d
TRUCKEE
DONNER
,,__St1PJubhc Utility District
WORKSHOP STAFF REPORT
To: Board of Directors
From: Mary Chapman, Administrative Services Manager/Treasurer CL�L
Kim Szczurek, Finance & Accounting Manager
Date: December 1, 2006
Subject: INVESTMENT POLICY
1. WHY THIS MATTER IS BEFORE THE BOARD
The Board last updated its investment policy in 1987. Since that time, there have been changes
in reporting requirements for investments by the Governmental Accounting Standards Board as
part of GASB 40. We are recommending that the Board adopt an updated policy that addresses
the risk factors identified in GASB 40 and further delineate its policy as to allowed investments.
2. HISTORY
The Board has adopted several investment resolutions over the past 30 years. The current
policy was adopted in 1987 and is attached for your review. This policy rescinded all previous
investment policies.
As mentioned above, the GASB 40 pronouncement has significantly changed (and lengthened)
the reporting requirements for a local government's investments and also requires the
disclosure of the Board's policy for addressing specific risks relating to investing public funds. In
addition to this requirement for reporting, it seems prudent for the Board to update its policy in
regards to investing the District's available cash.
Our outside auditors, Virchow Krause included a discussion in their management letter in
regards to this issue. They specifically recommended that the Board consider the adoption of
an investment policy that addresses the risks delineated in GASB 40. Attached are the
following documents for your review:
• Current District Investment Policy
• Draft of new Investment Policy
• Auditor Recommendation —2005 Management Letter— Page 1 only
• Audit Report— Pages 20—25 relating to District Investments as of 12/31/06
• Status of investments— 10/31/06
• Government Code Sections 53600-53609 relating to investments
• Copies of Authorized Investments & Permitted Investments of COP and CFD Reserve
and other funds
3. NEW INFORMATION
Kim prepared a draft investment policy from samples she obtained from the Government
Finance Officers Association. We then made revisions to the policy to accommodate what
we thought would be an acceptable policy for our District.
4. RECOMMENDATION
This is a workshop. No action is required at this time.
RESOLUTION NO. 8721
OF THE
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
AUTHORIZING INVESTMENT OF TRUCKEE DONNER PUBLIC
UTILITY DISTRICT MONIES IN LOCAL AGENCY INVESTMENT FUND
WHEREAS, pursuant to Chapter 730 of the statutes of 1976 Section 16429.1
was added to the California Government Code to create a Local Agency
Investment Fund in the State Treasury for the deposit of money of a local
agency for purposes of investment by the State Treasurer; and
WHEREAS, the Board of Directors hereby find that the deposit and withdrawal
of money in the Local Agency Investment Fund in accordance with the
provisions of Section 16429.1 of the Government Code for the purpose of
investment as stated therein is in the best interests of the Truckee Donner
Public Utility District.
NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Truckee
Donner Public Utility District as follows:
1. That the deposit and withdrawal of Truckee Donner Public Utility
District monies in the Local Agency Investment Fund in the State
Treasury in accordance with the provisions of Section 16429.1 of the
Government Code for the purpose of investment as stated therein is
hereby authorized.
2. That the following Truckee Donner Public Utility District officers
or employees be authorized to order the deposit or withdrawal of
monies in the Local Agency Investment Fund:
General Manager
Finance Supervisor
Deputy District Clerk
3. The Deputy District Clerk is hereby directed to send a certified
copy of this resolution and the names of the individuals holding said
Positions to the Truckee River Bank, and to up-date the names whenever
a change has taken place.
4. All previous resolutions pertaining to the investment of monies in
the Local Agency Investment Fund are hereby rescinded.
PASSED AND ADOPTED by the Board of Directors of the Truckee Donner Public
Utility District at a meeting duly called and held within said District on
the 18th day of May, 1987 , by the following roll call vote:
AYES: Cooley, Maass, Sutton and Corbett.
NOES: None.
ABSENT: Hamilton.
TR CKEF DONNER PU IC UTILITY DISTRICT
By �L. Cor
hnett , President
ATTEST•
S san Macdonald, Deputy District Clerk
sm/d2a.26
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
STATEMENT OF INVESTMENT POLICY
DRAFT 1211106
I. INVESTMENT AUTHORITY
In accordance with Section 53600 et seq. of the Government Code of the State
of California, the authority to invest public funds is expressly delegated to the
Board of Directors for subsequent delegation to the Treasurer. The Treasurer of
the District receives direction and authority to invest any and all District funds
from the Board of Directors of the District.
Il. STATEMENT OF OBJECTIVES
Per section 53600.5 of the California Government Code, the primary objective of
the Treasurer shall be to safeguard the principal of the funds under his/her
control when investing public funds. The secondary objective shall be to meet all
liquidity requirements and the third objective shall be to achieve a return on the
funds under his/her control.
In order of priority, three fundamental criteria shall be followed in the investment
program:
1. Safety of principal — Investments shall be undertaken in a manner
which first seeks to ensure the preservation of principal of the portfolio.
Each investment transaction shall be entered into after taking into
consideration the quality of the issuer, the underlying security or
collateral, and diversification of the portfolio. Market risk shall be
reduced by performing periodic cash flow analysis to avoid the need to
sell securities prior to maturity.
2. Liquidity— In an effort to ensure that the District's portfolio will be
sufficiently liquid to meet current and anticipated operating
requirements, periodic cash flow analysis will be performed.
Investments shall be made so that the maturity date is compatible with
cash flow needs and safety of principal.
3. Return on investment— Investments shall be undertaken to produce an
acceptable rate of return after first considering safety of principal and
liquidity and the prudent investor standard.
Investment Strategy— The portfolio will be managed to meet the District's cash
flow needs. The maximum maturity of any security will not exceed 5 years
except as specifically noted below. All investment activity shall be consistent
with prudent investor standard and in accordance with the authorized
investments included under Section V of this policy.
III. PRUDENT INVESTOR STANDARD
As applicable to the District, the prudent investor standard is a standard of
conduct whereby any person authorized to make investment decisions on behalf
of the District acts with care, skill, prudence and diligence under the
circumstances then prevailing, including but not limited to, the general economic
conditions and the anticipated needs of the District, that a prudent person acting
in like capacity and familiarity with those matters would use in the conduct of
funds of a like character and with like aims, to safeguard the principal and meet
the liquidity needs of the District.
IV. PORTFOLIO
Any reference to the portfolio shall mean the total of the District's cash and
securities under management by the Treasurer.
Except for cash in certain restricted and special funds, the District will consolidate
cash and reserve balances from all funds to maximize investment earnings and
to increase efficiencies with regard to investment pricing, safekeeping, and
administration. Investment income will be allocated to the various funds or
accounts based on their respective participation and in accordance with generally
accepted accounting principles.
The Treasurer may invest in any security authorized for investment under the
California Government Code, subject to the limitations described herein:
1. Maturity Limitations —
a. the aggregate maturity of the total portfolio must not exceed five (5)
years for the general operating funds of the District.
b. Funds which represent debt service reserve funds may be invested
up to a term of ten years, as long as the period invested does not
exceed that of the term of the debt repayment.
c. Investments of restricted funds held for the Donner Lake
Assessment District that are not expected to be needed to pay debt
service on the SRF loan may be invested up to the term of the SRF
loan.
d. Construction funds may be invested to mature on or before the
funds are expected to be needed for construction purposes.
2. Investment Transactions — the purchase of any investment other than
those purchased directly from the issuer shall be to the extent possible
from a firm designated as a Primary Dealer by the Federal Reserve of
New York.
3. Sale of Securities — Securities may be sold to provide needed liquidity, to
restructure the portfolio to reduce risk or to increase the expected return of
the portfolio. In no instance shall a sale of securities be used for
speculative purposes. All sales are to be reported to the Board on a
monthly basis.
4. Prohibited Investments— Prohibited investments include inverse floaters,
range notes, interest only strips derived from a pool of mortgages
(Collateralized Mortgage Obligations), and any security that could result in
zero interest accrual if held to maturity. (Zero interest accrual means the
security has the potential to realize zero earnings depending upon the
structure of the security. Zero coupon bonds and similar investments that
start below the face value are legal because their value does increase.)
5. Safekeeping
a. All securities transactions entered into by the District shall be
conducted on a delivery versus payment (DVP) basis.
b. Securities shall be held by an independent custodian designated by
the Treasurer and held in safekeeping pursuant to a safekeeping
agreement.
c. All financial institutions which provide safekeeping services for the
District shall be required to provide reports or safekeeping receipts
directly to the Treasurer to verify securities taken into their
possession.
V. AUTHORIZED INVESTMENTS
1. The District's authorized commercial banking institution in an
interest bearing checking or savings account.
2. Local Agency Investment Fund (LAIF) — Deposits for the purpose if
investment in the Local Agency Investment Fund of the State of
California Treasury may be made up to the maximum amount
permitted by State Treasury policy. Any LAIF investments made by
the District shall be considered to be short-term in nature even if
the LAW has invested in individual longer-term securities. The
Treasurer is authorized to make regular transfers to and from LAIF
up to the limit of transactions established by the LAW investment
policy for purposes of meeting the District's daily cash flow needs
and earning interest on surplus funds.
3. Any other investments authorized and listed in the Government
Code Sections 53600-53609. Each investment will be specifically
authorized by the Board of Directors.
VI. REPORTING
In accordance with Section 53646 of the California Government Code, the
Treasurer shall submit a quarterly report to the Board of Directors within 30
days following the end of the quarter covered by the report. The report shall
include investment activity, including yield and earnings, and the status of
cash by depository.
VII. INTERNAL CONTROLS
Annually, the Truckee Donner Public Utility District will have an independent
audit by an external auditor. This audit will provide internal control by
assuring compliance with policies and procedures.
VIII. PARTIES AUTHORIZED TO ACT IN THE EVENT OF THE
ABSENCE OF THE TREASURER
In the event of the absence of the Treasurer, the following positions are
authorized to make necessary and authorized investments pursuant to
Section V of this policy:
General Manager
Assistant General Manager
Finance and Accounting Manager
VirchOrause
&company
April 7, 2006
Truckee Donner Public Utility District
11570 Donner Pass Road
PO Box 309
Truckee, CA 96160
Dear Board Members:
We are presenting for your consideration our comments and recommendations on the system of
internal control and other operating matters. These matters came to our attention during our audit
of the financial statements of Truckee Donner Public Utility District (district) for the year ended
December 31, 2005, which we reported upon on April 7, 2006.
This letter, by its nature, focuses on improvements and does not comment on the many strong
areas of the district's systems and procedures. The comments and suggestions on the attached
report are not intended to reflect in any way on the integrity or ability of the personnel of the
district. They are made solely in the interest of establishing sound internal control practices and
improving the district's operations.
This report is intended solely for the information and use of the directors and management and is
not intended to be and should not be used by anyone other than these specified parties.
NEW ACCOUNTING STANDARDS
GASB NO. 40—DEPOSITS AND INVESTMENT RISK DISCLOSURES
The Governmental Accounting Standards Board (GASB) has adopted new rules which modified
the required financial statement disclosures for deposits and investments.
In the past, the district was required to disclose in the notes to the financial statements
summarized information on its bank deposits and other investments. Those disclosures focused
on custodial credit risk, which is the risk that the custodian of the district's money, either the
banks or brokerage firms, would fail to return this money.
The new requirement, known as GASB No. 40, changes the disclosure of custodial credit risk to
an exception reporting method. The only deposits or investments disclosed are those that are
uninsured, unregistered and uncollateralized or collateralized or held but not in the government's
name.
In addition, the new rules require disclosure of several other risks related to the district's
investment portfolio. These include credit risk, which is related to the rating of investment by the
nationally recognized agencies, interest rate risk, which is based on the maturity or liquidity of
investments and concentrations of risk with any one issuer.
Finally, the new rules require disclosure of your investment policy as it relates to the items
described above, or a statement that no such policy exists. The current district investment policy
does not have address these risks. We recommend that management draft and the board
approve an investment policy that addresses each of the risks outlined in the notes to the financial
statements.
Ten Terrace Court • PO Box 7398 • Madison, WI 53707-7398 • Tel 608.249.6622 • Fax 608.249.8532 • www.virchowkrause.com
Virchow, Krause & Company, LLP
Certified Public Accountants & Consultants • An Independent Member of Baker Tilly International
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
NOTES TO FINANCIAL STATEMENTS
December 31, 2005 and 2004
NOTE 2—CASH AND INVESTMENTS
Cash and investments are recorded in accounts as either restricted or unrestricted as required
by the District's certificates of participation indentures or other third-party legal restrictions.
Restricted assets represent funds that are restricted by certificates of participation covenants or
third party contractual agreements. Assets that are allocated by resolution of the board of
directors are considered to be board designated assets. Board designated assets are a
component of unrestricted assets as their use may be redirected at any time by approval of the
Board. Upon Board approval, assets from designated accounts may be used to fund capital
projects. These designated accounts are replenished with lost earnings accordingly. Such
accounts have been designated by the board of directors for the following purposes:
Building Fund
In compliance with Board rules, the District maintains a building fund to pay for capital
improvements to the District office complex.
Storm Damage Fund
The District maintains a designated fund to provide for storm damages that may occur in the
future.
Electric Rate Reserve
In compliance with Board rules, the District has created an electric rate stabilization fund in
anticipation of future costs. During both 2005 and 2004, there was no utilization of these
funds to offset increased power costs in lieu of raising electric rates.
Reserve for Future Meters
Prior to 1992, connection fees charged to applicants for water service included an amount,
which was maintained in a designated fund, to offset the cost of future metering. As meters
are installed, these funds are used to pay for related costs.
Prepaid Connection Fees
In compliance with Board rules, the District has set aside prepaid connection fees to cover
installation costs of water services within specified subdivisions.
Land Sale Trust Fund
The District's Board has set aside certain funds from the sale of surplus properties to pay for
future capital improvement projects.
Page 20
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
NOTES TO FINANCIAL STATEMENTS
December 31, 2005 and 2004
NOTE 2—CASH AND INVESTMENTS (cont.)
As of December 31, board designated accounts consisted of the following:
2005 2004
Building fund $ 268,076 $ 274,202
Storm damage fund 331,581 323,052
Electric rate reserve 452,512 440,870
Reserve for future meters 270,210 184,739
Prepaid connection fees 73,755 72,865
Land sale trust fund 27,553 -
Totals $ 1,423,687 $ 1,295,728
Certain assets have been restricted by certificates of participation covenants or third party
contractual agreements for the following purposes:
Certificates of Participation: Electric
The terms of the Electric Division's Certificates of Participation require a reserve fund as
security for each principal and interest payment as they come due. A reserve fund is set
aside for the highest annual principal and interest payment over the life of the borrowed
amount. All of these reserve funds are held by BNY Western Trust Company.
Certificates of Participation: Water
The terms of the Water Division's Certificates of Participation require a restricted fund to
provide for payment of principal and interest as they come due. The Water Division's
Certificates of Participation debt funds are held by BNY Western Trust Company.
Facilities Fees
The District charges facilities fees to applicants for new service to cover the costs of
infrastructure needed to meet their systems demand. The use of such funds is restricted by
California state law.
Department of Water Resources (DWR) Prop 55 Reserve Fund
Regulations relating to the Department of Water Resources loan require the accumulation of
a reserve fund as security for each principal and interest payment as they come due. The
total reserve fund equals two semi-annual payments. These funds will be set aside for the life
of the borrowed amount. All of the reserve funds are invested in the State of California Local
Agency Investment Fund.
Page 21
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
NOTES TO FINANCIAL STATEMENTS
December 31, 2005 and 2004
NOTE 2—CASH AND INVESTMENTS (cont.)
Glenshire Escrow Accounts
As described in more detail in note 10, the District received cash as part of its acquisition of
the Glenshire water system and from a monthly surcharge paid by residents. The terms of the
acquisition agreement specify that the cash be utilized for the construction of improvements
to the Glenshire water system. The funds are being used to pay the debt service costs
related to improvements.
Donner Lake Special Assessment District Improvement Fund
The District established the Donner Lake Special Assessment District Improvement Fund to
account for all funds received from the Special Assessment Receivable, which will be used to
pay the debt service costs related to the Donner Lake Water System project.
Old Greenwood Construction Fund
During 2003, the Old Greenwood Community Facilities District issued $12,445,000 of Special
Tax bonds to finance various property improvements within Old Greenwood. The District
established the Old Greenwood Construction Fund to account for the unspent bond proceeds.
The District is allowed to draw upon such funds as valid construction costs are incurred.
Gray's Crossing Project Fund
During 2004, the Gray's Crossing Community Facilities District issued $15,375,000 of Special
Tax bonds to finance various property improvements with Gray's Crossing. Additional bonds
of $19,155,000 were issued in 2005. The District established the Gray's Crossing Project
Fund to account for the unspent bond proceeds. The District is allowed to draw upon such
funds as valid construction costs are incurred.
Equipment Loans Escrow Accounts
During 2005 and 2004, the District obtained loans to purchase various capital equipment. As
the District receives loan funds, the proceeds are held in escrow until qualified purchases are
made. The District intends to use funds remaining in escrow for future purchases of capital
equipment.
Other (Area Improvement Funds)
The District receives funds from the County of Nevada, which are to be used only for
improvements to specific areas within the District's boundaries in Nevada County. These
areas include various Nevada County assessment districts.
When both restricted and unrestricted resources are available for use, it is the district's policy
to use restricted resources first, then unrestricted resources as they are needed.
Page 22
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
NOTES TO FINANCIAL STATEMENTS
December 31, 2005 and 2004
NOTE 2—CASH AND INVESTMENTS (cont.)
As of December 31, restricted cash and cash equivalents and investments consisted of the
following:
2005 2004
Certificates of participation $ 9,298,300 $ 7,158,078
Facilities fees 3,410,386 2,447,104
DWR-Prop 55 reserve fund 305,918 275,358
Glenshire escrow accounts 98,054 81,361
Donner Lake Special Assessment District
Improvement Fund 2,896,845 1,201,328
Old Greenwood Construction fund 1,264 384,642
Gray's Crossing Project Fund 15,377,777 5,677,129
Equipment loans escrow accounts 156,193 387,154
Other(area improvement funds) 163,316 159,110
Total Restricted Cash and Cash
Equivalents and Investments $ 31,708,053 $ 17,771,264
Cash and investments are comprised of the following cash and cash equivalents and investments
as of December 31:
2005 2004
Cash and cash equivalents $ 37,829,127 $ 23,637,068
Investments—repurchase agreement 808,470 808,470
Totals $ 38,637,597 $ 24,445,538
Cash and cash equivalents of W,829,127 and $23,637,068 at December 31, 2005 and 2004,
respectively, consist primarily of investments in the state pooled fund and US Treasury notes.
For purposes of the statements of cash flows, the District considers all highly liquid instruments
with original maturities of three months or less to be cash equivalents.
The District follows GASB No. 31, Accounting and Financial Reporting for Certain Investments
and for External Investment Pools. This statement establishes fair value standards for recording
investments. The recorded amount for the District's investments approximated their fair values
as of December 31, 2005 and 2004.
Page 23
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
NOTES TO FINANCIAL STATEMENTS
December 31, 2005 and 2004
NOTE 2—CASH AND INVESTMENTS (cont.)
INVESTMENTS AUTHORIZED BY THE DISTRICT'S INVESTMENT POLICY
The District's investment policy only authorizes investment in the local government investment
pool administered by the State of California ("LAIF"). The District's investment policy does not
contain any specific provisions intended to limit the District's exposure to interest rate risk, credit
risk, and concentration of credit risk. At December 31, 2005 the District's deposits and
investments were held as follows:
Deposits $ 550,579
LAIF 15,064,201
Money Market Mutual Funds 22,214,347
Repurchase Agreement 808,470
Total 38.637
,597
DISCLOSURES RELATING TO INTEREST RATE RISK
Interest rate risk is the risk that changes in the market interest rates will adversely affect the fair
value of an investment. Generally, the longer the maturity of an investment, the greater the
sensitivity of its fair value to changes in market interest rates. As of year end, the weighted
average maturity of the investments contained in investment pools and money market mutual
funds is as follows:
LAIF 138 days
Fidelity Tax Exempt Daily MMF 28 days
Federated U.S. Treasury Cash Reserve 43 days
The district also has one repurchase agreement at year end for $808,470, at 6.31%, due on
11/15/2021 and backed by U.S. Agency securities.
DISCLOSURES RELATING TO CREDIT RISK
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the
holder of the investment. This is measured by the assignment of a rating by a nationally
recognized statistical rating organization. LAIF does not have a rating provided by a nationally
recognized statistical rating organization. The Fidelity Tax Exempt Daily MMF is also not rated.
The Federated U.S. Treasury Cash Reserve is rated AAAm by S&P and Aaa by Moody's. The
U.S. Agency securities pledged as security for the repurchase agreement are not rated but are
implicitly backed by the U.S government.
Page 24
TRUCKEE DONNER PUBLIC UTILITY DISTRICT
NOTES TO FINANCIAL STATEMENTS
December 31, 2005 and 2004
NOTE 2—CASH AND INVESTMENTS (cont.)
CUSTODIAL CREDIT RISK
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository
financial institution, a government will not be able to recover its deposits or will not be able to
recover collateral secu.rities that are in the possession of an outside _party: The California
Government Code and the District's investment policy do not contain legal or policy requirements
that would limit the exposure to custodial credit risk for deposits, other than the following for
deposits: The California Government Code requires that a financial institution secure deposits
made by state or local governmental units by pledging securities in an undivided collateral pool
held by a depository regulated under state law (unless waived by the government unit). The
market value of pledged securities in the collateral pool must equal at least 110% of the total
amount deposited by the public agencies.
As of December 31, 2005 and 2004 all deposits were fully insured or collateralized.
The custodial credit risk for investments is the risk that, in the event of the failure of the
counterparty (e.g., broker/dealer) to a transaction, a government will not be able to recover the
value of its investment or collateral securities that are in the possession of another party. The
California Government Code and the District's investment policy do not contain legal or policy
requirements that would limit the exposure to custodial credit risk for investments. With respect
to investments, custodial credit risk generally applies only to direct investments in marketable
securities. Custodial credit risk does not apply to a local government's indirect investment in
securities through the use of money market mutual funds or governmental investment pools
(such as LAIF). The securities underlying the repurchase agreement are held by the counterparty
in the district's name.
INVESTMENT IN STATE INVESTMENT POOL
The District is a voluntary participant in the Local Agency Investment Fund (LAIF) that is
regulated by the California Government Code under the oversight of the Treasurer of the State of
California. The fair value of the District's investment in this poc' is reported in the accompanying
financial statements at amounts based upon the District's pro-rata share of the fair value
provided by the LAIF for the entire LAIF portfolio (in relation to the amortized cost of the
portfolio). The balance available for withdrawal is based on the accounting records maintained
by the LAIF, which are recorded on an amortized cost basis.
Page 25
TRUCKEE DONNER PUD
INVESTMENT BALANCES
As of Month Ended 10/31/06
FIDELITY FEDERATED FEDERAL FIDELITY
LAIF MONEY MKT US TREASURY HOME LN MTG INSTL PRIME CASH
ELECTRIC FUNDS 5.10% 2.92% 4.58% 5.35%-Matures 9/2011 4.93% 0.00% Total
General Fund $5,900,888 $0 $0 $0 $0 $0 $5,900,888
Facilities Fees-Post AB1600 1,703,487 0 0 0 0 0 1,703,487
2003 Purchase Power Buy-Out 0 0 3,638,067 0 0 0 3,638,067
Storm Damage Fund 309,413 0 0 0 0 0 309,413
Building Fund 279,984 0 0 0 0 0 279,984
Electric Rate Reserve Fund 694,128 0 0 0 0 0 694,128
Total Electric Investments $8,887,900 $0 $3,638,067 $0 $0 $0 $12,525,967
WATER FUNDS
General Fund $537,104 $0 $0 $0 $0 $0 $537,104
Facilities Fees-Global after 5/5/97 3,441,567 0 0 0 0 0 3,441,567
2006 COP 11,765,000 0 0 1,901,089 16,918 27,880 13,710,887
Water Capital Reserve 101,579 0 0 0 0 0 101,579
Reserve for Future Meters 290,224 0 0 0 0 0 290,224
Donner Lake Refunds Fund 64,110 0 0 0 0 0 64,110
West River St.Assessment District 30,726 0 0 0 0 0 30,726
Prepaid Connection Fees 77,024 0 0 0 0 0 77,024
Ponderosa Palisades 4 Improvement 873 0 0 0 0 0 873
Sierra Meadows 3 Improvement Fund 5,177 0 0 0 0 0 5,177
Glenshire Loan Repayment Fund 130,422 0 0 0 0 0 130,422
Donner Lake Assessment District Fund 5,182,600 0 0 0 0 0 5,182,600
TSA SAD II Improvement Fund 71,091 0 0 0 0 0 71,091
TSA SAD V Improvement Fund 62,620 0 0 0 0 0 62,620
Land Sales Trust Fund 148,196 0 0 0 0 0 148,196
Reserve Fund-TDPUD Prop 55 310,423 0 0 0 0 0 310,423
Total Water Investments $22,218,736 $0 $0 $1,901,089 $16,918 $27,880 $24,164,623
MELLO ROOS-OLD GREENWOOD
General Fund $1,201,168 $127,143 $0 $0 $0 $0 $1,328,310
Total Mello Roos-Old Greenwood $1,201,168 $127,143 $0 $0 $0 $0 $1,328,310
MELLO ROOS-GRAY'S CROSSING
General Fund $1,538,458 $0 $4,973,055 $0 $0 $1,891 $6,513,404
Total Mello Roos-Gray's Crossing $1,538,458 $0 $4,973,055 $0 $0 $1,891 $6,513,404
Total Investments $33,846,262 $127,143 $8,611,122 $1,901,089 $16,918 $29,772 $44,532,305
WAIS Document Retrieval Page 1 of 13
CALIFORNIA CODES
GOVERNMENT CODE
SECTION 53600-53609
53600. As used in this article, "local agency" means county, city,
city and county, including a chartered city or county, school
district, community college district, public district, county board
of education, county superintendent of schools, or any public or
municipal corporation.
53600.3. Except as provided in subdivision (a) of Section 27000.3,
all governing bodies of local agencies or persons authorized to make
investment decisions on behalf of those local agencies investing
public funds pursuant to this chapter are trustees and therefore
fiduciaries subject to the prudent investor standard. When
investing, reinvesting, purchasing, acquiring, exchanging, selling,
or managing public funds, a trustee shall act with care, skill,
prudence, and diligence under the circumstances then prevailing,
including, but not limited to, the general economic conditions and
the anticipated needs of the agency, that a prudent person acting in
a like capacity and familiarity with those matters would use in the
conduct of funds of a like character and with like aims, to safeguard
the principal and maintain the liquidity needs of the agency.
Within the limitations of this section and considering individual
investments as part of an overall strategy, investments may be
acquired as authorized by law.
53600.5. When investing, reinvesting, purchasing, acquiring,
exchanging, selling, or managing public funds, the primary objective
of a trustee shall be to safeguard the principal of the funds under
its control. The secondary objective shall be to meet the liquidity
needs of the depositor. The third objective shall be to achieve a
return on the funds under its control.
53600.6. The Legislature hereby finds that the solvency and
creditworthiness of each individual local agency can impact the
solvency and creditworthiness of the state and other local agencies
within the state. Therefore, to protect the solvency and
creditworthiness of the state and all of its political subdivisions,
the Legislature hereby declares that the deposit and investment of
public funds by local officials and local agencies is an issue of
statewide concern.
53601. This section shall apply to a local agency that is a city, a
district, or other local agency that does not pool money in deposits
or investments with other local agencies, other than local agencies
that have the same governing body. However, Section 53635 shall
apply to all local agencies that pool money in deposits or
investments with other local agencies that have separate governing
bodies. The legislative body of a local agency having money in a
http://www.leginfo.ca.gov/cgi-bin/waisgate?WAISdocID=0005405929+0+0+0&WAISacti... 12/1/2006
WAIS Document Retrieval Page 2 of 13
sinking fund or money in its treasury not required for the immediate
needs of the local agency may invest any portion of the money that it
deems wise or expedient in those investments set forth below. A
local agency purchasing or obtaining any securities prescribed in
this section, in a negotiable, bearer, registered, or nonregistered
format, shall require delivery of the securities to the local agency,
including those purchased for the agency by financial advisers,
consultants, or managers using the agency's funds, by book entry,
physical delivery, or by third-party custodial agreement. The
transfer of securities to the counterparty bank's customer book entry
account may be used for book entry delivery.
For purposes of this section, "counterparty" means the other party
to the transaction. A counterparty bank's trust department or
separate safekeeping department may be used for the physical delivery
of the security if the security is held in the name of the local
agency. Where this section specifies a percentage limitation for a
particular category of investment, that percentage is applicable only
at the date of purchase. Where this section does not specify a
limitation on the term or remaining maturity at the time of the
investment, no investment shall be made in any security, other than a
security underlying a repurchase or reverse repurchase agreement or
securities lending agreement authorized by this section, that at the
time of the investment has a term remaining to maturity in excess of
five years, unless the legislative body has granted express authority
to make that investment either specifically or as a part of an
investment program approved by the legislative body no less than
three months prior to the investment:
(a) Bonds issued by the local agency, including bonds payable
solely out of the revenues from a revenue-producing property owned,
controlled, or operated by the local agency or by a department,
board, agency, or authority of the local agency.
(b) United States Treasury notes, bonds, bills, or certificates of
indebtedness, or those for which the faith and credit of the United
States are pledged for the payment of principal and interest.
(c) Registered state warrants or treasury notes or bonds of this
state, including bonds payable solely out of the revenues from a
revenue-producing property owned, controlled, or operated by the
state or by a department, board, agency, or authority of the state.
(d) Bonds, notes, warrants, or other evidences of indebtedness of
any local agency within this state, including bonds payable solely
out of the revenues from a revenue-producing property owned,
controlled, or operated by the local agency, or by a department,
board, agency, or authority of the local agency.
(e) Federal agency or United States government-sponsored
enterprise obligations, participations, or other instruments,
including those issued by or fully guaranteed as to principal and
interest by federal agencies or United States government-sponsored
enterprises.
(f) Bankers acceptances otherwise known as bills of exchange or
time drafts that are drawn on and accepted by a commercial bank.
Purchases of bankers acceptances may not exceed 180 days' maturity or
40 percent of the agency's money that may be invested pursuant to
this section. However, no more than 30 percent of the agency's money
may be invested in the bankers acceptances of any one commercial
bank pursuant to this section.
This subdivision does not preclude a municipal utility district
from investing any money in its treasury in any manner authorized by
the Municipal Utility District Act (Division 6 (commencing with
Section 11501) of the Public Utilities Code) .
(g) Commercial paper of "prime" quality of the highest ranking or
http://www.leginfo.ca.gov/cgi-bin/waisgate?WAIS docID=0005405929+0+0+0&WAIS acti... 12/1/2006
WAIS Document Retrieval Page 3 of 13
of the highest letter and number rating as provided for by a
nationally recognized statistical-rating organization (NRSRO) . The
entity that issues the commercial paper shall meet all of the
following conditions in either paragraph (1) or paragraph (2) :
(1) The entity meets the following criteria:
(A) Is organized and operating in the United States as a general
corporation.
(B) Has total assets in excess of five hundred million dollars
($500, 000, 000) .
(C) Has debt other than commercial paper, if any, that is rated "A"
or higher by a nationally recognized statistical-rating organization
(NRSRO) .
(2) The entity meets the following criteria:
(A) Is organized within the United States as a special purpose
corporation, trust, or limited liability company.
(B) Has programwide credit enhancements including, but not limited
to, overcollateralization, letters of credit, or surety bond.
(C) Has commercial paper that is rated "A-1" or higher, or the
equivalent, by a nationally recognized statistical-rating
organization (NRSRO) .
Eligible commercial paper shall have a maximum maturity of 270
days or less. Local agencies, other than counties or a city and
county, may invest no more than 25 percent of their money in eligible
commercial paper. Local agencies, other than counties or a city and
county, may purchase no more than 10 percent of the outstanding
commercial paper of any single issuer. Counties or a city and county
may invest in commercial paper pursuant to the concentration limits
in subdivision (a) of Section 53635.
(h) Negotiable certificates of deposit issued by a nationally or
state-chartered bank, a savings association or a federal association
(as defined by Section 5102 of the Financial Code) , a state or
federal credit union, or by a state-licensed branch of a foreign
bank. Purchases of negotiable certificates of deposit may not exceed
30 percent of the agency's money which may be invested pursuant to
this section. For purposes of this section, negotiable certificates
of deposit do not come within Article 2 (commencing with Section
53630) , except that the amount so invested shall be subject to the
limitations of Section 53638. The legislative body of a local agency
and the treasurer or other official of the local agency having legal
custody of the money are prohibited from investing local agency
funds, or funds in the custody of the local agency, in negotiable
certificates of deposit issued by a state or federal credit union if
a member of the legislative body of the local agency, or any person
with investment decisionmaking authority in the administrative office
manager's office, budget office, auditor-controller's office, or
treasurer's office of the local agency also serves on the board of
directors, or any committee appointed by the board of directors, or
the credit committee or the supervisory committee of the state or
federal credit union issuing the negotiable certificates of deposit.
(i) (1) Investments in repurchase agreements or reverse repurchase
agreements or securities lending agreements of any securities
authorized by this section, as long as the agreements are subject to
this subdivision, including the delivery requirements specified in
this section.
(2) Investments in repurchase agreements may be made, on any
investment authorized in this section, when the term of the agreement
does not exceed one year. The market value of securities that
underlay a repurchase agreement shall be valued at 102 percent or
greater of the funds borrowed against those securities and the value
http://www.leginfo.ca.gov/cgi-bin/waisgate?WAISdocID=0005405929+0+0+0&WAISacti... 12/1/2006
WAIS Document Retrieval Page 4 of 13
shall be adjusted no less than quarterly. Since the market value of
the underlying securities is subject to daily market fluctuations,
the investments in repurchase agreements shall be in compliance if
the value of the underlying securities is brought back up to 102
percent no later than the next business day.
(3) Reverse repurchase agreements or securities lending agreements
may be utilized only when all of the following conditions are met:
(A) The security to be sold on reverse repurchase agreement or
securities lending agreement has been owned and fully paid for by the
local agency for a minimum of 30 days prior to sale.
(B) The total of all reverse repurchase agreements and securities
lending agreements on investments owned by the local agency does not
exceed 20 percent of the base value of the portfolio.
(C) The agreement does not exceed a term of 92 days, unless the
agreement includes a written codicil guaranteeing a minimum earning
or spread for the entire period between the sale of a security using
a reverse repurchase agreement or securities lending agreement and
the final maturity date of the same security.
(D) Funds obtained or funds within the pool of an equivalent
amount to that obtained from selling a security to a counterparty by
way of a reverse repurchase agreement or securities lending agreement
shall not be used to purchase another security with a maturity
longer than 92 days from the initial settlement date of the reverse
repurchase agreement or securities lending agreement, unless the
reverse repurchase agreement or securities lending agreement includes
a written codicil guaranteeing a minimum earning or spread for the
entire period between the sale of a security using a reverse
repurchase agreement or securities lending agreement and the final
maturity date of the same security.
(4) (A) Investments in reverse repurchase agreements, securities
lending agreements, or similar investments in which the local agency
sells securities prior to purchase with a simultaneous agreement to
repurchase the security may only be made upon prior approval of the
governing body of the local agency and shall only be made with
primary dealers of the Federal Reserve Bank of New York or with a
nationally or state-chartered bank that has or has had a significant
banking relationship with a local agency.
(B) For purposes of this chapter, "significant banking
relationship" means any of the following activities of a bank:
(i) Involvement in the creation, sale, purchase, or retirement of
a local agency's bonds, warrants, notes, or other evidence of
indebtedness.
(ii) Financing of a local agency's activities.
(iii) Acceptance of a local agency's securities or funds as
deposits.
(5) (A) "Repurchase agreement" means a purchase of securities by
the local agency pursuant to an agreement by which the counterparty
seller will repurchase the securities on or before a specified date
and for a specified amount and the counterparty will deliver the
underlying securities to the local agency by book entry, physical
delivery, or by third-party custodial agreement. The transfer of
underlying securities to the counterparty bank's customer book-entry
account may be used for book-entry delivery.
(B) "Securities, " for purpose of repurchase under this
subdivision, means securities of the same issuer, description, issue
date, and maturity.
(C) "Reverse repurchase agreement" means a sale of securities by
the local agency pursuant to an agreement by which the local agency
will repurchase the securities on or before a specified date and
includes other comparable agreements.
http://www.leginfo.ca.gov/cgi-bin/waisgate?WAISdocID=0005405929+0+0+0&WAISacti... 12/1/2006
WAIS Document Retrieval Page 5 of 13
(D) "Securities lending agreement" means an agreement under which
a local agency agrees to transfer securities to a borrower who, in
turn, agrees to provide collateral to the local agency. During the
term of the agreement, both the securities and the collateral are
held by a third party. At the conclusion of the agreement, the
securities are transferred back to the local agency in return for the
collateral.
(E) For purposes of this section, the base value of the local
agency's pool portfolio shall be that dollar amount obtained by
totaling all cash balances placed in the pool by all pool
participants, excluding any amounts obtained through selling
securities by way of reverse repurchase agreements, securities
lending agreements, or other similar borrowing methods.
(F) For purposes of this section, the spread is the difference
between the cost of funds obtained using the reverse repurchase
agreement and the earnings obtained on the reinvestment of the funds.
(j) Medium-term notes, defined as all corporate and depository
institution debt securities with a maximum remaining maturity of five
years or less, issued by corporations organized and operating within
the United States or by depository institutions licensed by the
United States or any state and operating within the United States.
Notes eligible for investment under this subdivision shall be rated
"A" or better by a nationally recognized rating service. Purchases
of medium-term notes shall not include other instruments authorized
by this section and may not exceed 30 percent of the agency's money
that may be invested pursuant to this section.
(k) (1) Shares of beneficial interest issued by diversified
management companies that invest in the securities and obligations as
authorized by subdivisions (a) to (j) , inclusive, or subdivisions
(m) or (n) and that comply with the investment restrictions of this
article and Article 2 (commencing with Section 53630) . However,
notwithstanding these restrictions, a counterparty to a reverse
repurchase agreement or securities lending agreement is not required
to be a primary dealer of the Federal Reserve Bank of New York if the
company's board of directors finds that the counterparty presents a
minimal risk of default, and the value of the securities underlying a
repurchase agreement or securities lending agreement may be 100
percent of the sales price if the securities are marked to market
daily.
(2) Shares of beneficial interest issued by diversified management
companies that are money market funds registered with the Securities
and Exchange Commission under the Investment Company Act of 1940 (15
U.S.C. Sec. 80a-1 et seq. ) .
(3) If investment is in shares issued pursuant to paragraph (1) ,
the company shall have met either of the following criteria:
(A) Attained the highest ranking or the highest letter and
numerical rating provided by not less than two nationally recognized
statistical rating organizations.
(B) Retained an investment adviser registered or exempt from
registration with the Securities and Exchange Commission with not
less than five years' experience investing in the securities and
obligations authorized by subdivisions (a) to (j) , inclusive, or
subdivisions (m) or (n) and with assets under management in excess of
five hundred million dollars ($500, 0o0, 000) .
(4) If investment is in shares issued pursuant to paragraph (2) ,
the company shall have met either of the following criteria:
(A) Attained the highest ranking or the highest letter and
numerical rating provided by not less than two nationally recognized
statistical rating organizations.
http://www.leginfo.ca gov/cgi-bin/waisgate?WAISdocID=0005405929+0+0+0&WAISacti... 12/1/2006
WAIS Document Retrieval Page 6 of 13
(B) Retained an investment adviser registered or exempt from
registration with the Securities and Exchange Commission with not
less than five years' experience managing money market mutual funds
with assets under management in excess of five hundred million
dollars ($500, 000, 000) .
(5) The purchase price of shares of beneficial interest purchased
pursuant to this subdivision shall not include any commission that
the companies may charge and shall not exceed 20 percent of the
agency's money that may be invested pursuant to this section.
However, no more than 10 percent of the agency's funds may be
invested in shares of beneficial interest of any one mutual fund
pursuant to paragraph (1) .
(1) Moneys held by a trustee or fiscal agent and pledged to the
payment or security of bonds or other indebtedness, or obligations
under a lease, installment sale, or other agreement of a local
agency, or certificates of participation in those bonds,
indebtedness, or .lease installment sale, or other agreements, may be
invested in accordance with the statutory provisions governing the
issuance of those bonds, indebtedness, or lease installment sale, or
other agreement, or to the extent not inconsistent therewith or if
there are no specific statutory provisions, in accordance with the
ordinance, resolution, indenture, or agreement of the local agency
providing for the issuance.
(m) Notes, bonds, or other obligations that are at all times
secured by a valid first priority security interest in securities of
the types listed by Section 53651 as eligible securities for the
purpose of securing local agency deposits having a market value at
least equal to that required by Section 53652 for the purpose of
securing local agency deposits. The securities serving as collateral
shall be placed by delivery or book entry into the custody of a
trust company or the trust department of a bank that is not
affiliated with the issuer of the secured obligation, and the
security interest shall be perfected in accordance with the
requirements of the Uniform Commercial Code or federal regulations
applicable to the types of securities in which the security interest
is granted.
(n) Any mortgage passthrough security, collateralized mortgage
obligation, mortgage-backed or other pay-through bond, equipment
lease-backed certificate, consumer receivable passthrough
certificate, or consumer receivable-backed bond of a maximum of five
years' maturity. Securities eligible for investment under this
subdivision shall be issued by an issuer having an "A" or higher
rating for the issuer's debt as provided by a nationally recognized
rating service and rated in a rating category of "AA" or its
equivalent or better by a nationally recognized rating service.
Purchase of securities authorized by this subdivision may not exceed
20 percent of the agency's surplus money that may be invested
pursuant to this section.
(o) Shares of beneficial interest issued by a joint powers
authority organized pursuant to Section 6509.7 that invests in the
securities and obligations authorized in subdivisions (a) to (n) ,
inclusive. Each share shall represent an equal proportional interest
in the underlying pool of securities owned by the joint powers
authority. To be eligible under this section, the joint powers
authority issuing the shares shall have retained an investment
adviser that meets all of the following criteria:
(1) The adviser is registered or exempt from registration with the
Securities and Exchange Commission.
(2) The adviser has not less than five years of experience
investing in the securities and obligations authorized in
http://www.leginfo.ca.gov/cgi-bin/waisgate?WAISdocID=0005405929+0+0+O&WAISacti... 12/1/2006
WAIS Document Retrieval Page 7 of 13
subdivisions (a) to (n) , inclusive.
(3) The adviser has assets under management in excess of five
hundred million dollars ($500, 000, 000) .
53601.1. The authority of a local agency to invest funds pursuant
to Section 53601 includes, in addition thereto, authority to invest
in financial futures or financial option contracts in any of the
investment categories enumerated in that section.
53601.2. As used in this article, "corporation" includes a limited
liability company.
53601.5. The purchase by a local agency of any investment
authorized pursuant to Section 53601 or 53601.1, not purchased
directly from the issuer, shall be purchased either from an
institution licensed by the state as a broker-dealer, as defined in
Section 25004 of the Corporations Code, or from a member of a
federally regulated securities exchange, from a national or
state-chartered bank, from a savings association or federal
association (as defined by Section 5102 of the Financial Code) or
from a brokerage firm designated as a primary government dealer by
the Federal Reserve bank.
53601.6. (a) A local agency shall not invest any funds pursuant to
this article or pursuant to Article 2 (commencing with Section 53630)
in inverse floaters, range notes, or mortgage-derived, interest-only
strips.
(b) A local agency shall not invest any funds pursuant to this
article or pursuant to Article 2 (commencing with Section 53630) in
any security that could result in zero interest accrual if held to
maturity. However, a local agency may hold prohibited instruments
until their maturity dates. The limitation in this subdivision shall
not apply to local agency investments in shares of beneficial
interest issued by diversified management companies registered under
the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et seq. )
that are authorized for investment pursuant to subdivision (k) of
Section 53601.
53601.7. Notwithstanding the investment parameters of Sections
53601 and 53635, a local agency that is a county or a city and county
may invest any portion of the funds that it deems wise or expedient,
using the following criteria:
(a) No investment shall be made in any security, other than a
security underlying a repurchase agreement, reverse repurchase
agreement, or a securities lending agreement, that, at the time of
purchase, has a term remaining to maturity in excess of 397 days, and
that would cause the dollar-weighted average maturity of the funds
in the investment pool to exceed 90 days.
(b) All corporate and depository institution investments shall
http://www.leginfo.ca.gov/cgi-bin/waisgate?WAISdocID=0005405929+0+0+0&WAISacti... 12/1/2006
WAIS Document Retrieval Page 8 of 13
meet or exceed the following credit rating criteria at time of
purchase:
(1) Short-term debt shall be rated at least "A-1" by Standard &
Poor's Corporation, "P-1" by Moody's Investors Service, Inc. , or "F-1"
by Fitch Ratings. If the issuer of short-term debt has also issued
long-term debt, this long-term debt rating shall be rated at least
"A, " without regard to +/- or 1, 2, 3 modifiers, by Standard & Poor's
Corporation, Moody's Investors Service, Inc. , or Fitch Ratings.
(2) Long-term debt shall be rated at least "A, " without regard to
+/- or 1, 2, 3 modifiers, by Standard & Poor's Corporation, Moody's
Investors Service, Inc. , or Fitch Ratings.
(c) (1) No more than 5 percent of the total assets of the
investments held by a local agency may be invested in the securities
of any one issuer, except the obligations of the United States
government, United States government agencies, and United States
government-sponsored enterprises.
(2) Up to 25 percent of the total assets of the investments held
by a local agency may be invested in the first tier securities of a
single issuer for a period of up to three business days after
acquisition. The securities of no more than one issuer may be
invested pursuant to this paragraph at a time.
(3) No more than 10 percent of the total assets of the investments
held by a local agency may be invested in any one mutual fund.
(d) Where this section specifies a percentage limitation for a
particular category of investment, that percentage is applicable only
at the date of purchase. A later increase or decrease in a
percentage resulting from a change in values or assets shall not
constitute a violation of that restriction. If subsequent to
purchase, securities are downgraded below the minimum acceptable
rating level, the securities shall be reviewed for possible sale
within a reasonable amount of time after the downgrade.
(e) Within the limitations set forth in this section, a local
agency electing to invest its funds pursuant to this section may
invest in the following securities:
(1) Direct obligations of the United States Treasury or any other
obligation guaranteed as to principal and interest by the United
States government.
(2) Bonds, notes, debentures, or any other obligations of, or
securities issued by, any federal government agency, instrumentality,
or government-sponsored enterprise.
(3) Registered state warrants or treasury notes or bonds of this
state, including bonds payable solely out of the revenues from a
revenue-producing property owned, controlled, or operated by the
state or by a department, board, agency, or other entity of the
state.
(4) Bonds, notes, warrants, or other indebtedness of the local
agency, or any local agency within this state, including bonds
payable solely out of the revenues from a revenue-producing property
owned, controlled, or operated by the local agency, or by a
department, board, agency, or authority of the local agency.
(5) Bankers acceptance, otherwise known as bills of exchange or
time drafts drawn on and accepted by a commercial bank, primarily
used to finance international trade. Purchases of bankers acceptances
may not exceed 180 days to maturity.
(6) Short-term unsecured promissory notes issued by corporations
for maturities of 270 days or less. Eligible commercial paper is
further limited to the following:
(A) Issuing corporations that are organized and operating within
the United States, having total assets in excess of five hundred
million dollars ($500, 000, 000) .
http://www.leginfo.ca.gov/cgi-bin/waisgate?WAISdoc1D=0005405929+0+0+0&WAISacti... 12/1/2006
WAIS Document Retrieval Page 9 of 13
(B) Maturities for eligible commercial paper that may not exceed
270 days and may not represent more than 10 percent of the
outstanding paper of an issuing corporation.
(7) A certificate representing a deposit of funds at a commercial
bank for a specified period of time and for a specified return at
maturity. Eligible certificates of deposit shall be issued by a
nationally or state-chartered bank or a state or federal association,
as defined in Section 5102 of the Financial Code, or by a
state-licensed branch of a foreign bank. For purposes of this
subdivision, certificates of deposits shall not come within Article 2
(commencing with Section 53630) , except that the amount so invested
shall be subject to the limitations of Section 53638. The legislative
body of a local agency and the treasurer or other official of the
local agency having legal custody of the money may not invest local
agency funds, or funds in the custody of the local agency, in
negotiable certificates of deposit issued by a state or federal
credit union if a member of the legislative body of the local agency,
or any person with investment decisionmaking authority in the
administrative office, manager's office, budget office,
auditor-controller's office, or treasurer's office of the local
agency also serves on the board of directors, or any committee
appointed by the board of directors, other credit committee or the
supervisory committee of the state or federal credit union issuing
the negotiable certificate of deposit.
(8) Repurchase agreements, reverse repurchase agreements, or
securities lending agreements of any securities authorized by this
section, if the agreements meet the requirements of this paragraph
and the delivery requirements specified in Section 53601. Investments
in repurchase agreements may be made, on any investment authorized
by this section, when the term of the agreement does not exceed one
year. The market value of the securities that underlay a repurchase
agreement shall be valued at 102 percent or greater of the funds
borrowed against those securities, and the value shall be adjusted no
less than quarterly. Because the market value of the underlying
securities is subject to daily market fluctuations, the investments
in repurchase agreements shall be in compliance with this section if
the value of the underlying securities is brought back to 102 percent
no later than the next business day. Reverse repurchase agreements
may be utilized only when all of the following criteria are met:
(A) The security being sold on reverse repurchase agreement or
securities lending agreement has been owned and fully paid for by the
local agency for a minimum of 30 days prior to the sale.
(B) The total of all reverse repurchase agreements on investments
owned by the local agency not purchased or committed to purchase does
not exceed 20 percent of the market value of the portfolio.
(C) The agreement does not exceed a term of 92 days, unless the
agreement includes a written codicil guaranteeing a minimum earning
or spread for the entire period between the sale of a security using
a reverse repurchase agreement and the final maturity date of the
same security.
(D) Funds obtained or funds within the pool of an equivalent
amount to that obtained from selling a security to a counterparty by
way of a reverse repurchase agreement or securities lending
agreement, may not be used to purchase another security with a
maturity longer than 92 days from the initial settlement date of the
reverse repurchase agreement or securities lending agreement, unless
the agreement includes a written codicil guaranteeing a minimum
earning or spread for the entire period between the sale of a
security using a reverse repurchase agreement or securities lending
agreement and the final maturity date of the same security.
http://www.leginfo.ca.gov/cgi-bin/waisgate?WAISdoclD=0005405929+0+0+0&WAISacti... 12/1/2006
WAIS Document Retrieval Page 10 of 13
(E) Investments in reverse repurchase agreements or similar
investments in which the local agency sells securities prior to
purchase with a simultaneous agreement to repurchase the security,
shall only be made with prior approval of the governing body of the
local agency and shall only be made with primary dealers of the
Federal Reserve Bank of New York or with a nationally or
state-chartered bank that has or has had a significant banking
relationship with a local agency.
"Securities, " for purposes of this paragraph, means securities of
the same issuer, description, issue date, and maturity.
(9) All debt securities issued by a corporation or depository
institution with a remaining maturity of not more than 397 days,
including securities specified as "medium-term notes, " as well as
other debt instruments originally issued with maturities longer than
397 days, but which, at time of purchase, have a final maturity of
397 days or less. Eligible medium-term notes shall be issued by
corporations organized and operating within the United States or by
depository institutions licensed by the United States or any state
and operating within the United States.
(10) (A) Shares of beneficial interest issued by diversified
management companies that invest in the securities and obligations
described in this subdivision and that comply with the investment
restrictions of this section. However, notwithstanding these
restrictions, a counterparty to a reverse repurchase agreement shall
not be required to be a primary dealer of the Federal Reserve Bank of
New York if the company's board of directors finds that the
counterparty presents a minimal risk of default. The value of the
securities underlying a repurchase agreement may be 100 percent of
the sales price if the securities are marked to market daily.
(B) Shares of beneficial interest issued by diversified management
companies that are money market funds registered with the Securities
and Exchange Commission under the federal Investment Company Act of
1940 (15 U.S.C. Sec. 80a-1 et seq. ) .
(C) All shares of beneficial interest described in this paragraph
shall have met either of the following criteria:
(i) Attained the highest ranking or the highest letter and
numerical rating provided by not less than two nationally recognized
statistical rating organizations.
(ii) Retained an investment adviser registered or exempt from
registration with the Securities and Exchange Commission and who has
not less than five years' experience investing in money market
instruments and with assets under management in excess of five
hundred million dollars ($500, 000, 000) .
(11) Any mortgage passthrough security, collateralized mortgage
obligation, mortgage-backed or other paythrough bond, equipment
lease-backed certificate, consumer receivable passthrough
certificate, or consumer receivable-backed bond.
Securities eligible for investment under this paragraph shall be
issued by an issuer having an "A" or higher rating from the issuer's
debt as provided by a nationally recognized rating service and rated
in a rating category of "AA" or its equivalent or better by a
nationally recognized rating.
(12) Contracts issued by insurance companies that provide the
policyholder with the right to receive a fixed or variable rate of
interest and the full return of principal at the maturity date.
(13) Any investments that would qualify under SEC Rule 2a-7 of the
Investment Company Act of 1940 guidelines. These investments shall
also meet the limitations detailed in this section.
(f) For purposes of this section, all of the following definitions
shall apply:
http://www.leginfo.ca.gov/cgi-bin/waisgate?WAISdocID=0005405929+0+0+O&WAIS acti... 12/1/2006
WAIS Document Retrieval Page 11 of 13
(1) "Repurchase agreement" means a purchase of securities pursuant
to an agreement by which the counterparty seller will repurchase the
securities on or before a specified date and for a specified amount
and the counterparty will deliver the underlying securities to the
local agency by book entry, physical delivery, or by third-party
custodial agreement.
(2) "Significant banking relationship" means any of the following
activities of a bank:
(A) Involvement in the creation, sale, purchase, or retirement of
a local agency's bonds, warrants, notes, or other evidence of
indebtedness.
(B) Financing of a local agency's securities or funds as deposits.
(C) Acceptance of a local agency's securities or funds as
deposits.
(3) "Reverse repurchase agreement" means a sale of securities by
the local agency pursuant to an agreement by which the local agency
will repurchase the securities on or before a specified date and
includes other comparable agreements.
(4) "Securities lending agreement" means an agreement with a local
agency that agrees to transfer securities to a borrower who, in turn
agrees to provide collateral to the local agency. During the term of
the agreement, both the securities and the collateral are held by a
third party. At the conclusion of the agreement, the securities are
transferred back to the local agency in return for the collateral.
(5) "First tier security" has the same meaning as that phrase is
defined by SEC Rule 2a-7 of the Investment Company Act of 1940 (15
U.S.C. Sec. 80a-1 et seq) .
(6) "Local agency" means a county or city and county.
(g) For purposes of this section, the base value of the local
agency's pool portfolio shall be that dollar amount obtained by
totaling all cash balances placed in the pool by all pool
participants, excluding any amounts obtained through selling
securities by way of reverse repurchase agreements, or other similar
borrowing methods.
(h) For purposes of this section, the spread is the difference
between the cost of funds obtained using the reverse repurchase
agreement and the earnings obtained on the reinvestment of the funds.
(i) This section shall remain in effect only until January 1,
2007, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2007, deletes or extends
that date.
53602 . The legislative body shall invest only in notes, bonds,
bills, certificates of indebtedness, warrants, or registered warrants
which are legal investments for savings banks in the State,
provided, that the board of supervisors of a county may, by a
four-fifths vote thereof, invest in notes, warrants or other
evidences of indebtedness of public districts wholly or partly within
the county, whether or not such notes, warrants, or other evidences
of indebtedness are legal investments for savings banks.
53603 . The legislative body may make the investment by direct
purchase of any issue of eligible securities at their original sale
or after they have been issued.
http://www.leginfo.ca.gov/cgi-bin/waisgate?WAIS docID=0005405929+0+0+O&WAIS acti... 12/1/2006
WAIS Document Retrieval Page 12 of 13
53604. The legislative body may sell, or exchange for other
eligible securities, and reinvest the proceeds of, the securities
purchased.
53605. From time to time, the legislative body shall sell the
securities so that the proceeds may be applied to the purposes for
which the original purchase money was placed in the sinking fund or
the treasury of the local agency.
53606. The bonds purchased, which were issued by the purchaser, may
be canceled either in satisfaction or sinking fund obligations or
otherwise. When canceled, they are no longer outstanding, unless in
its discretion, the legislative body holds then uncanceled. While
held uncanceled, the bonds may be resold.
53607. The authority of the legislative body to invest or to
reinvest funds of a local agency, or to sell or exchange securities
so purchased, may be delegated for a one-year period by the
legislative body to the treasurer of the local agency, who shall
thereafter assume full responsibility for those transactions until
the delegation of authority is revoked or expires, and shall make a
monthly report of those transactions to the legislative body.
Subject to review, the legislative body may renew the delegation of
authority pursuant to this section each year.
53608. The legislative body of a local agency may deposit for
safekeeping with a federal or state association (as defined by
Section 5102 of the Financial Code) , a trust company or a state or
national bank located within this state or with the Federal Reserve
Bank of San Francisco or any branch thereof within this state, or
with any Federal Reserve bank or with any state or national bank
located in any city designated as a reserve city by the Board of
Governors of the Federal Reserve System, the bonds, notes, bills,
debentures, obligations, certificates of indebtedness, warrants, or
other evidences of indebtedness in which the money of the local
agency is invested pursuant to this article or pursuant to other
legislative authority. The local agency shall take from such
financial institution a receipt for securities so deposited. The
authority of the legislative body to deposit for safekeeping may be
delegated by the legislative body to the treasurer of the local
agency; the treasurer shall not be responsible for securities
delivered to and receipted for by a financial institution until they
are withdrawn from the financial institution by the treasurer.
53609. Notwithstanding the provisions of this chapter or any other
provisions of this code, funds held by a local agency pursuant to a
written agreement between the agency and employees of the agency to
defer a portion of the compensation otherwise receivable by the
agency's employees and pursuant to a plan for such deferral as
http://www.leginfo.ca.gov/cgi-bin/waisgate?WAISdocID=0005405929+0+0+0&WAISacti... 12/1/2006
WAIS Document Retrieval Page 13 of 13
adopted by the governing body of the agency, may be invested in the
types of investments set forth in Sections 53601 and 53602 of this
code, and may additionally be invested in corporate stocks, bonds,
and securities, mutual funds, savings and loan accounts, credit union
accounts, life insurance policies, annuities, mortgages, deeds of
trust, or other security interests in real or personal property.
Nothing herein shall be construed to permit any type of investment
prohibited by the Constitution.
Deferred compensation funds are public pension or retirement funds
for the purposes of Section 17 of Article XVI of the Constitution.
http://www.leginfo.ca.gov/cgi-bin/waisgate?WAISdocID=0005405929+0+0+0&WAISacti... 12/1/2006
co e,!�_) __Tru_,�;f /19 rt ern(2)(')-t
f ,
Nominee. The term "Nominee" means the nominee of the Depository, which may be the
Depository, as determined from time to time pursuant to Section 2.10 hereof.
Opinion of Counsel. The term "Opinion of Counsel" means a legal opinion issued by Special
Counsel addressed to the District, the Corporation, the Trustee, and the Insurer to the effect that an
action proposed to be taken is not prohibited by the laws of the State or the Agreement.
Outstanding. The term "Outstanding," when used as of any particular time with reference to
Certificates, means (subject to the provisions of Section 11.4) all Certificates except: (1)certificates
canceled by the Trustee or delivered to the Trustee for cancellation; (2)Certificates paid or deemed
to have been paid within the meaning of Section 10.1; and(3)Certificates in lieu of or in substitution
for which other Certificates shall have been executed and delivered by the Trustee pursuant to
Section 2.10; provided however, that Certificates paid from amounts paid by the Bond Insurer shall
not be considered paid or deemed paid for purposes of this Agreement but shall remain outstanding
until paid from Installment Payments.
Owner. The term "Owner" or "Certificate Owner" or"Owner of Certificates" or any similar
term, when used with respect to the Certificates, means any person who shall be the registered owner
of any Outstanding Certificate.
Participants. The term "Participants" means those broker-dealers, banks and other financial
institutions from time to time for which the Depository holds book-entry certificates as securities
depository.
Payment Dates. The term "Payment Dates" means May 15 and November 15 in each year
commencing May 15, 2007 and any date on which the unpaid Installment Payments are declared to
be due and payable immediately and provided such declaration is not rescinded or annulled, all in
accordance with Section 8.1 of the Installment Purchase Agreement.
Permitted Investments. The term "Permitted Investments" means any of the following which
at the time of investment are legal investments under the laws of the State for the moneys proposed
to be invested therein:
(a) Direct obligations of the United States of America (including obligations issued or held
in book-entry form on the books of the Department of the Treasury, and CATS and
TIGRS) or obligations the principal of and interest on which are unconditionally
guaranteed by the United States of America.
(b) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any
of the following federal agencies and provided such obligations are backed by the full
faith and credit of the United States of America (provided, however, that stripped
securities are only permitted if such stripped securities have been stripped by the agency
issuing such securities):
(1) U.S. Export-Import Bank (Eximbank) Direct obligations or fully guaranteed
certificates of beneficial ownership
(2) Farmers Home Administration (FmHA) Certificates of beneficial ownership
(3) Federal Financing Bank
4
DOCSSFl59525v 12/022925-0017
(4) Federal Housing Administration Debentures(FHA)
(5) General Services Administration Participation certificates
(6) Government National Mortgage Association (GNMA or "Ginnie Mae") GNMA
- guaranteed mortgage-backed bonds and GNMA - guaranteed pass-through
obligations
(7) U.S.Maritime Administration Guaranteed Title XI financing
(8) U.S. Department of Housing and Urban Development (HUD) Project Notes,
Local Authority Bonds, New Communities Debentures - U.S.
government guaranteed debentures, and U.S. Public Housing Notes and Bonds -
U.S.government guaranteed public housing notes and bonds
(c) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any
of the following non-full faith and credit U.S. government agencies (provided, however,
that stripped securities are only permitted if such stripped securities have been stripped
by the agency issuing such securities):
(1) Federal Home Loan Bank System Senior debt obligations
(2) Federal Home Loan Mortgage Corporation (FHLMC or "Freddie Mac")
Participation Certificates, Senior debt obligations
(3) Federal National Mortgage Association (FNMA or "Fannie Mae") Mortgage-
backed securities and senior debt obligations
(4) Resolution Funding Corte. (REFCORP)obligations
(5) Farm Credit System Consolidated systemwide bonds and notes
(d) Money market funds registered under the Federal Investment Company Act of 1940,
whose shares are registered under the Federal Securities Act of 1933,and having a rating
by S&P of AAAm-G; AAA-m, including such funds for which the Trustee or an affiliate
acts as an investment advisor or provides other services.
(e) Certificates of deposit secured at all times by collateral described in (A)or(B)above and
by commercial banks, savings and loan associations or mutual savings banks; provided,
however, that such collateral must be held by a third party and the Trustee must have a
perfected first security interest in such collateral.
(f) Certificates of deposit, savings accounts, deposit accounts or money market deposits
which are fully insured by Federal Deposit Insurance Corporation (FDIC), including the
Bank Insurance Fund(BIF) and Savings Association Insurance Fund(SAIF).
(g) Investment agreements, including guaranteed investment contracts, forward purchase
agreements and reserve fund put agreements approved in writing by the Bond Insurer.
(h) Commercial paper rated, at the time of purchase, "Prime - 1" by Moody's and "A-1" or
better by S&P.
5
DOCSSF/59525v 12/022925-0017
(i) Bonds or notes issued by any state or municipality which are rated by Moody's and S&P
in one of the two highest rating categories assigned by such agencies.
0) Federal funds or bankers acceptances with a maximum term of one year of any bank
which has an unsecured, uninsured and unguaranteed obligation rating of "Prime - V or
"AY or better by Moody's and "A-I" or"A"or better by S&P.
(k) Repurchase agreements with terms of 30 days or less which meet the following criteria:
Repurchase agreements providing for the transfer of securities from a dealer bank or
securities firm to the District, and the transfer of cash from the District to the dealer bank
or securities firm with an agreement that the dealer bank or securities firm will repay the
cash plus a yield to the District in exchange for the securities at a specified date.
(1) Repurchase Agreement must be between the District and a dealer bank or
securities firm as provided below:
0) Primary dealers on the Federal Reserve reporting dealer list which are
rated A or better by S&P and Moody's, or
(ii) Banks rated "A" or above by S&P and Moody's.
(2) The written repurchase contract must include the following:
(i) Only the securities below are acceptable for transfer:
(A) Direct U.S. governments,or
(B) Federal agencies backed by the full faith and credit of the U.S.
government(and FNMA&FHI.,MC)
00- The term of the repurchase agreement may be no more than 30 days
(iii) The collateral must be delivered to the District, Trustee (if Trustee is not
supplying the collateral) or third party acting as agent for the Trustee (if
the Trustee is supplying the collateral) prior to a simultaneous payment
so as to perfect by possession such certificated securities.
(iv) Valuation of Collateral
(A) The collateral must be valued by the Trustee or a third party
calculating the collateral weekly, marked-to-market at current
market price plus accrued interest
1. The value of collateral must be equal to at least 104% of
the amount of cash transferred by the District to the
dealer bank or security firm under the repurchase
agreement plus accrued interest. If the value of
securities held as collateral is calculated to be less than
104% of the value of the cash transferred by the District,
then additional cash and securities meeting the
6
DOCSSF/59525v 12/022925-0017
requirements set forth above must be transferred to the
entity holding the collateral; notwithstanding the
foregoing, if the securities used as collateral are FNMA
or FHI.MC, then the value of collateral is required to be
equal to at least 105%.
(3) The dealer bank or security firm must deliver to the District an Opinion of Bond
Counsel acceptable to the District to the effect that the repurchase agreement
meets the requirements under California law for legal investment of public funds;
or
Repurchase agreements with terms of more than 30 days approved in writing by the Bond
Insurer.
(1) The Local Agency Investment Fund; and
(m) Other forms of investments approved in writing by the Bond Insurer.
Prepayment Fund. The term "Prepayment Fund" means the fund by that name established in
Section 5.2 hereof.
Prepayment Price. The term "Prepayment Price" means the principal amount with respect to
any Certificate (or portion thereof) plus the applicable premium, if any, payable upon prepayment
thereof pursuant to the provisions of such Certificate and this Agreement.
Principal Corporate Trust Office. The term "Principal Corporate Trust Office" means the
principal corporate trust office in Los Angeles, California or such other office as the Trustee may
from time to time designate in writing to the District, the Corporation and the Owners, provided,
however, that with respect to presentation of Certificates for payment or for registration of transfer
and exchange such term shall mean the office or agency of the Trustee at which, at any particular
time, its corporate trust agency business shall be conducted.
Principal Fund. The term "Principal Fund" means the fund by that name established in
Section 5.2 hereof.
Rebate Fund. The term "Rebate Fund" means the fund by that name established in
Section 5.6 hereof.
Record Date. The term "Record Date" means, with respect to any Payment Date for a
Certificate, the first day of the calendar month prior to such Payment Date regardless of whether such
day is a business day.
Reserve Fund. The term "Reserve Fund" means the fund by that name established in
Section 5.2 hereof.
S&P. The term "S&P" means Standard& Poor's Ratings Services, a Division of The
McGraw-Hill Companies, and its successors or assigns, except that if such entity shall be dissolved
or liquidated or shall no longer perform the services of a municipal securities rating agency, then
"S&P" shall be deemed to refer to any other nationally recognized municipal securities rating agency
rating the Certificates at the request of the District
7
DOCSSF/59525v 12/022925-0017
n ve_s+m&n�
Outst_andinQ. The term "Outstanding," when used as of any particular time with reference to
Certificates, means (subject to the provisions of Section 11.4) all Certificates except: (1) Certificates
canceled by the Trustee or delivered to the Trustee for cancellation; (2) Certificates paid or deemed
to have been paid within the meaning of Section 10.1; and (3) Certificates in lieu of or in substitution
for which other Certificates shall have been executed and delivered by the Trustee pursuant to
Section 2.10.
Owner. The term "Owner" or"Certificate Owner" or"Owner of Certificates" or any similar
term, when used with respect to the Certificates, means any person who shall be the registered owner
of any Outstanding Certificate.
Participants. The term "Participants" means those broker-dealers, banks and other financial
institutions from time to time for which the Depository holds book-entry certificates as securities
depository.
Payment Dates: Payment Date. The term "Payment Dates" means January 1 and July 1 in
each year commencing July 1, 2003 and any date on which the unpaid Installment Payments are
declared to be due and payable immediately and provided such declaration is not rescinded or
annulled, all in accordance with Section 8.1 of the Installment Purchase Agreement.
Permitted Investments. The term "Permitted Investments" means any of the following which
at the time of investment are legal investments under the laws of the State for the moneys proposed
to be invested therein:
i (a) for all purposes, including but not limited to defeasance investments in refunding
escrow accounts: (1) cash (insured at all times by the Federal Deposit Insurance Corporation or
otherwise collateralized with obligations described in paragraph (2) below), or (2) direct obligations
of(including obligations issued or held in book entry form on the books of) the Department of the
Treasury of the United States of America; and
(b) for all purposes other than defeasance investments in refunding escrow accounts:
(1) obligations of any of the following federal agencies which obligations represent full faith and
credit of the United States of America, including the Export - Import Bank; Farmers Home
Administration; General Services Administration; U.S. Maritime Administration; Small Business
Administration; Government National Mortgage Association (GNMA); U.S. Department of Housing
& Urban Development (PHA's); and Federal Housing Administration; (2)bonds, notes or other
evidences of indebtedness rated "AAA" and "Aaa" by the applicable Rating Agency issued by the
Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation with
remaining maturities not exceeding three years; (3) U.S. dollar denominated deposit accounts,
certificates of deposit, federal funds and banker's acceptances with domestic commercial banks
(including the Trustee and its affiliates) which are either insured by the Federal Deposit Insurance
Corporation or have a rating on their short term certificates of deposit on the date of purchase of
"A-1" or"A-1+" by S&P and "P-I" by Moody's and maturing no more than 360 days after the date
of purchase (ratings on holding companies are not considered as the rating of the bank); (4)
commercial paper which is rated at the time of purchase in the single highest classification, "A-1+"
by S&P and "P-1"by Moody's and which matures not more than 270 days after the date of purchase;
(5) investments in a money market fund rated "AAAm" or "AAAm-G" or better by S&P, including
such funds for which the Trustee or an affiliate acts as investment advisor or provides other services;
(6) pre-refunded municipal obligations defined as follows: any bonds or other obligations of any
3
DOUSS F'3,-473N 1)2292 4;0006
state of the United States of America or of any agency, instrumentality or local governmental unit of
any such state which are not callable at the option of the obligor prior to maturity or as to which
irrevocable instructions have been given by the obligor to call on the date specified in the notice and
which are rated, based on the escrow, in the highest rating category of S&P and Moody's or any
successor thereto; (7) the Local Agency Investment Fund; and (8) other forms of investments
approved in writing by the Bond Insurer with notice to S&P.
Prepayment Account. The term "Prepayment Account" means the account within the
Certificate Payment Fund by that name established in Section 5.2 hereof.
Prepayment Price. The term "Prepayment Price" means the principal amount with respect to
such Certificate (or portion thereof) plus the applicable premium, if any, payable upon prepayment
thereof pursuant to the provisions of such Certificate and this Agreement.
Principal Corporate Trust Office. The term "Principal Corporate Trust Office" means the
principal corporate trust office of the Trustee in Los Angeles, California, or such other office as the
Trustee may from time to time designate in writing to the District, the Corporation and the Owners.
Principal Account. The term "Principal Account" means the account within the Certificate
Payment Fund by that name established in Section 5.2 hereof.
Rebate Fund. The term "Rebate Fund" means the fund by that name established in
Section 5.6 hereof.
Record Date. The term "Record Date" means, with respect to any Payment Date for a
Certificate, the fifteenth day of the calendar month prior to such Payment Date.
Reserve Fund. The term "Reserve Fund" means the fund by that name established in
Section 5.2 hereof.
S&P. The term "S&P"means Standard & Poor's Ratings Group, or its successors.
Series 2003A Certificates. The term "Series 2003A Certificates" means the Revenue
Certificates of Participation, Series 2003A executed and delivered by the Trustee pursuant to this
Agreement.
Series 2003A Reserve Account. The term "Series 2003A Reserve Account" means the
account within the Reserve Fund by that name established in Section 5.2 hereof.
Series 2003B Taxable Certificates. The term "Series 2003B Taxable Certificates" means the
Revenue Certificates of Participation, Taxable Series 2003B executed and delivered by the Trustee
pursuant to this Agreement.
Securities Depositories. The term "Securities Depositories" means The Depository Trust
Company or, in accordance with then-current guidelines of the Securities and Exchange
Commission, such other securities depositaries, or no such depositaries as the Corporation or the
District may designate in a Written Request of the Corporation or a Written Request of the District,
as the case may be, to the Trustee.
4
�0 Greitn�,Uor w - i
"Act"means the Mello-Roos Community Facilities Act of 1982, as amended, Sections 53311
et seq. of the California Government Code.
"Acquisition and Construction Fund"means the fund by such name created and established
pursuant to Section 3.1.
"Acquisition and Disclosure Agreement"means the Acquisition and Disclosure Agreement,
dated as of October 1, 2003, by and between the PUD, on behalf of itself and the District, and the
Developer, as the same may be amended from time to time pursuant to the provisions thereof and
consistent with the provisions of this Indenture.
"Administrative Expenses"means the administrative costs incurred by the District or the
PUD on behalf of the District with respect to the calculation, levy, and collection of the Special
Taxes, including all attorneys' fees and other costs related thereto, the fees and expenses of the
Trustee, any fees for credit enhancement for the Bonds which are not otherwise paid as Costs of
Issuance, any costs related to the District's compliance with State and federal laws requiring
continuing disclosure of information concerning the Bonds and the District and arbitrage rebate, and
any other costs otherwise incurred by the District or the PUD on behalf of the District in order to
carry out the purposes of the District as set forth in the Resolution of Formation and any obligation of
the District hereunder.
"Administrative Expense Account"means the account by such name in the Special Tax Fund
created and established pursuant to Section 3.1.
"Administrative Expense Cap"means the amount of$25,000, with such amount escalating
by 2%per Bond Year beginning September 2, 2004, provided that the District may, in its sole
discretion, fund Administrative Expenses, without limitation, from any other funds available to the
District, including the Surplus Fund.
"Alternative Penalty Account"means the account by such name created and established in
the Rebate Fund pursuant to Section 3.1.
"Annual Debt Service"means the principal amount of any Outstanding Bonds payable in a
Bond Year either at maturity or pursuant to a Sinking Fund Payment and any interest payable on any
Outstanding Bonds in such Bond Year, if the Bonds are retired as scheduled.
"Authorized Investments"means any of the following which at the time of investment are
legal investments under the laws of the State for the moneys proposed to be invested therein:
(a) Direct obligations of the United States of America(including obligations issued or
held in book-entry form on the books of the Department of the Treasury, and CATS and TIGRS)or
obligations the principal of and interest on which are unconditionally guaranteed by the United States
of America ("Direct Obligations");
(b) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by
any of the following federal agencies and provided such obligations are backed by the full faith and
credit of the United States of America (stripped securities are only permitted if they have been
stripped by the agency itself):
2
DOCSOC\I000985v5\22925.0009
(i) U.S. Export-Import Bank ("Eximbank") - direct obligations or fully
guaranteed certificates of beneficial ownership,
(ii) Farmers Home Administration("FmHA") - certificates of beneficial
ownership,
(iii) Federal Financing Bank,
(iv) Federal Housing Administration Debentures("FHA"),
(v) General Services Administration-participation certificates,
(vi) Government National Mortgage Association("GNMA"or"Ginnie Mae") -
GNMA-guaranteed mortgage-backed bonds and GNMA-guaranteed pass-through
obligations,
(vii) U.S. Maritime Administration- guaranteed Title XI financing, and
(viii) U.S. Department of Housing and Urban Development("HUD") - project
notes, local authority bonds, new communities debentures (U.S. government guaranteed
debentures), and U.S. Public Housing Notes and Bonds(U.S. government guaranteed public
housing notes and bonds);
(c) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by
t any of the following non-full faith and credit U.S. government agencies(stripped securities are only
permitted if they have been stripped by the agency itself):
(i) Federal Home Loan Bank System - senior debt obligations,
(ii) Federal Home Loan Mortgage Corporation("FHLMC"or"Freddie Mac") -
participation certificates and senior debt obligations,
(iii) Federal National Mortgage Association("FNMA"or"Fannie Mae") -
mortgage-backed securities and senior debt obligations,
(iv) Student Loan :Marketing Association("SLMA" or"Sallie Mae") - seniu debt
obligations,
(v) Resolution Funding Corp. ("REFCORP")obligations, and
(vi) Farm Credit System Corp. - Consolidated system-wide bonds and notes;
(d) Money market funds registered under the Federal Investment Company Act of 1940,
whose shares are registered under the Securities Act of 1933, and having a rating by Standard&
Poor's of AAAm-G, AAAm or AAm, and, if rated by Moody's, rated Aaa, Aa 1 or Aa2 (including
those of the Trustee and its affiliates or funds for which the Trustee or affiliates provide investment
advisory or other management services);
(e) Certificates of deposit secured at all times by collateral described in(a) and/or(b)
above. Such certificates must be issued by commercial banks, savings and loan associations or
3
DOCSOCU 000985v5122925.0009
mutual savings banks. The collateral must be held by a third party and the Trustee on behalf of the
Bondholders must have a perfected first security interest in the collateral;
(f) Certificates of deposit, savings accounts, deposit accounts or money market deposits
which are fully insured by FDIC or which are with a bank rated AA or better by Standard& Poor's
and Aa or better by Moody's (including those of the Trustee and its affiliates);
(g) Investment Agreements with any corporation, including banking or financial
institutions, provided that:
(i) the long-term debt of the provider of any such investment agreement, or in
the case of a guaranteed corporation the long-term debt of the guarantor, or in the case of a
monoline financial guaranty insurance company the claims paying ability, is rated, at the time
of investment, in one of the two highest rating categories offered by each Rating Agency
(without regard to gradations of plus or minus, or numerical gradations, within such
category), and
(ii) any such investment agreement shall include a provisions that in the event
that the long-term debt rating or claims paying ability rating of the provider or the guarantor
is downgraded below AA- by Standard& Poor's or Aa3 by Moody's during the term of the
agreement the provider must either(A) deliver to the Trustee or a third party custodian
collateral in the form of Unites States Treasury or agency obligations which at least equal
102% of the principal amount invested thereunder or(B) assign the existing agreement and
all of its obligations thereunder to a financial institution mutually acceptable to the provider,
the District and the Trustee which is rated in one of the two highest rating categories offered
by each Rating Agency(without regard to gradations of plus or minus, or numerical
gradations, within such category), and
(iii) any such investment agreement shall include a provision that in the event that
the long-term debt rating or claims paying ability rating of the provider, or the guarantor, is
downgraded below A- by Standard & Poor's or A3 by Moody's during the term of the
agreement the provider must repay the principal of and accrued by it unpaid interest on the
invested moneys, and
(iv) any such agreement shall include a provision to the effect that in the event of
default under such Investment Agreement by such provider or in the event of a bankruptcy of
such provider, the District has the right to withdraw or cause the Trustee to withdraw all
funds invested in such agreement and thereafter to invest such funds pursuant to this
Indenture, and
(v) any such investment agreement permits withdrawal upon not more than three
(3) days notice(excepting only withdrawals from the Acquisition and Construction Fund,
from which withdrawals may be permitted upon not more than seven(7)days notice) for any
purpose authorized for the use of the invested funds under this Indenture;
(h) Commercial paper rated, at the time of purchase, "Prime - 1" by Moody's and"A-1"
or better by Standard & Poor's;
4
DOC S OC\100098 5 v5\22925.0009
(i) Bonds or notes issued by any state or municipality which are rated by both Rating
Agencies in one of the two highest rating categories assigned by such agencies;
0) Federal funds or bankers acceptances with a maximum term of one year of any bank
which has an unsecured, uninsured or unguaranteed obligation rating of"Prime - 1"or"A3"or better
by Moody's and "A-1"or"A"or better by Standard& Poor's;
(k) Repurchase agreements collateralized by Direct Obligations, GNMAs, FNMAs or
FHLMCs with any registered broker/dealer subject to the Securities Investors' Protection
Corporation jurisdiction or any commercial bank insured by the FDIC, if such broker/dealer or bank
has an uninsured, unsecured and unguaranteed obligation rated "P-1"or"A3" or better by Moody's,
and"A-I" or"A-"by Standard& Poor's; provided:
(i) a master repurchase agreement or specific written repurchase agreement
governs the transaction, and
(ii) the securities are held free and clear of any lien by the Trustee or an
independent third party acting solely as agent("Agent") for the Trustee, and such third party
is (i) a Federal Reserve Bank, (ii) a bank which is a member of the Federal Deposit Insurance
Corporation and which has combined capital, surplus and undivided profits of not less than
$50 million, or(iii) a bank approved in writing for such purpose by the District, and the
Trustee shall have received written confirmation from such third party that it holds such
securities, free and clear of any lien, as agent for the Trustee, and
(iii) a perfected first security interest under the Uniform Commercial Code, or
book entry procedures prescribed at 31 C.F.R. 306.1 et seq. or 31 C.F.R. 350.0 et seq. in such
securities is created for the benefit of the Trustee, and
(iv) the Agent will value the collateral securities no less frequently than weekly
and will liquidate the collateral securities if any deficiency in the required collateral
percentage is not restored within two Business Days of such valuation, and
(v) the fair market value of the securities in relation to the amount of the
repurchase obligation, including principal and interest, is equal to at least 103%;
(1) The State of California Local Agency Investment Fund; and
(m) Any other investment which the District is permitted by law to make.
To the extent that any of the requirements concerning Authorized Investments embodies a
legal conclusion, the Trustee shall be entitled to conclusively rely upon a certificate from the
appropriate party or an opinion from counsel to such party, that such requirement has been met.
"Authorized Representative of the District"means the General Manager of the PUD, the
Assistant General Manager of the PUD and any other person or persons designated by the legislative
body of the District and authorized to act on behalf of the District by a written certificate signed by
the President of the legislative body of the District and containing the specimen signature of each
such person.
5
DOC S00 1000985 v 5\2292 5.0009
1 � .
g
�0r i zed T VAS s
2004 Bonds"means any of the District's Special Tax Bonds, Series 2004 that are
Outstanding under this Indenture.
"Act"means the Mello-Roos Community Facilities Act of 1982, as amended, Sections 53311
et seq. of the California Government Code.
"Acquisition and Construction Fund"means the fund by such name created and established
pursuant to Section 3.1.
"Acquisition and Disclosure Agreement"means the Acquisition and Disclosure Agreement,
dated as of July 22, 2004,by and between the PUD,on behalf of itself and the District,and the
Developer,as the same may be amended from time to time pursuant to the provisions thereof and
consistent with the provisions of this Indenture.
"Administrative Expenses"means the administrative costs incurred by the District or the
PUD on behalf of the District with respect to the calculation,levy,and collection of the Special
Taxes, including all attorneys' fees and other costs related thereto,the fees and expenses of the
Trustee, any fees for credit enhancement for the Bonds which are not otherwise paid as Costs of
Issuance, any costs related to the District's compliance with State and federal laws requiring
continuing disclosure of information concerning the Bonds and the District and the calculation or
payment of arbitrage rebate,and any other costs otherwise incurred by the District or the PUD on
behalf of the District in order to carry out the purposes of the District as set forth in the Resolution of
Formation and any obligation of the District hereunder.
"Administrative Expense Account"means the account by such name in the Special Tax Fund
created and established pursuant to Section 3.1.
"Administrative Expense Cap"means the amount of$25,500,with such amount escalating
by 2%per Bond Year beginning September 2,2005,provided that the District may, in its sole
discretion, fund Administrative Expenses,without limitation, from any other funds available to the
District,including the Surplus Fund.
"Affiliate"of another Person means(i)a Person directly or indirectly owning, controlling, or
holding with power of vote,25%or more of the outstanding voting securities of such other Person,
(ii)any Person 25%or more of whose outstanding voting securities are a directly or indirectly
owned, controlled,or held with power to vote,by such other Person, and(iii) any Person directly or
indirectly controlling, controlled by,or under common control with, such other Person; for purposes
hereof, control means the power to exercise a controlling influence over the management or policies
of Person,unless such power is solely the result of an official position with such Person.
"Alternative Penalty Account"means the account by such name created and established in
the Rebate Fund pursuant to Section 3.1.
"Annual Debt Service"means the principal amount of any Outstanding Bonds payable in a
Bond Year either at maturity or pursuant to a Sinking Fund Payment and any interest payable on any
Outstanding Bonds in such Bond Year, if the Bonds are retired as scheduled.
—;)(
"Authorized Investments"means any of the following which at the time of investment are
legal investments under the laws of the State for the moneys proposed to be invested therein:
2
DOCSOC/1054957v5/22925-00 1 0
(a) Direct obligations of the United States of America(including obligations issued or
held in book-entry form on the books of the Department of the Treasury, and CATS and TIGRS)or
obligations the principal of and interest on which are unconditionally guaranteed by the United States
of America("Direct Obligations");
(b) Bonds, debentures,notes or other evidence of indebtedness issued or guaranteed by
any of the following federal agencies and provided such obligations are backed by the full faith and
credit of the United States of America(stripped securities are only permitted if they have been
stripped by the agency itself):
(i) U.S. Export-Import Bank("Eximbank") -direct obligations or fully
guaranteed certificates of beneficial ownership,
(ii) Farmers Home Administration ("FmHA") -certificates of beneficial
ownership,
(iii) Federal Financing Bank,
(iv) Federal Housing Administration Debentures("FHA"),
(v) General Services Administration-participation certificates,
(vi) Government National Mortgage Association("GNMA"or"Ginnie Mae")-
GNMA-guaranteed mortgage-backed bonds and GNMA-guaranteed pass-through
obligations,
(vii) U.S. Maritime Administration- guaranteed Title XI financing, and
(viii) U.S. Department of Housing and Urban Development("HUD")-project
notes,local authority bonds,new communities debentures(U.S. government guaranteed
debentures), and U.S. Public Housing Notes and Bonds(U.S. government guaranteed public
housing notes and bonds);
(c)r Bonds,debentures,notes or other evidence of indebtedness issued or guaranteed by
any of the following non-full faith and credit U.S. government agencies(stripped securities are only
permitted if they have been stripped by the agency itself):
(i) Federal Home Loan Bank System- senior debt obligations,
(ii) Federal Home Loan Mortgage Corporation ("FHLMC" or"Freddie Mac") -
participation certificates and senior debt obligations,
(iii) Federal National Mortgage Association ("FNMA" or"Fannie Mae")-
mortgage-backed securities and senior debt obligations,
(iv) Student Loan Marketing Association("SLMA"or"Sallie Mae")- senior debt
obligations,
(v) Resolution Funding Corp. ("REFCORP")obligations,and
3
DOCSOC/1054957v5/22925-0010
(vi) Farm Credit System Corp. -Consolidated system-wide bonds and notes;
(d) Money market funds registered under the Federal Investment Company Act of 1940,
whose shares are registered under the Securities Act of 1933,and to which Standard&Poor's has
assigned a rating of AAAm-G,AAAm or AAm,and,which,if they are rated by Moody's,are rated
Aaa,Aal or Aa2 (including the money market funds of the Trustee and its affiliates or funds for
which the Trustee or affiliates provide investment advisory or other management services);
(e) Certificates of deposit secured at all times by collateral described in(a)and/or(b)
above. Such certificates must be issued by commercial banks, savings and loan associations or
mutual savings banks. The collateral must be held by a third party and the Trustee on behalf of the
Bondholders must have a perfected first security interest in the collateral;
(f) Certificates of deposit, savings accounts, deposit accounts or money market deposits
which are fully insured by FDIC or which are with a bank rated AA or better by Standard& Poor's
and Aa or better by Moody's(including those of the Trustee and its affiliates);
(g) Investment Agreements with any corporation, including banking or financial
institutions,provided that:
(i) the long-term debt of the provider of any such investment agreement, or in
the case of a guaranteed corporation the long-term debt of the guarantor, or in the case of a
monoline financial guaranty insurance company the claims paying ability, is rated,at the time
of investment,in one of the two highest rating categories offered by each Rating Agency
(without regard to gradations of plus or minus, or numerical gradations,within such
category),and
(ii) any such investment agreement shall include a provisions that in the event
that the long-term debt rating or claims paying ability rating of the provider or the guarantor
is downgraded below AA-by Standard&Poor's or Aa3 by Moody's during the term of the
agreement the provider must either(A)deliver to the Trustee or a third party custodian
collateral in the form of Unites States Treasury or agency obligations which at least equal
102% of the principal amount invested thereunder or(B)assign the existing agreement and
all of its obligations thereunder to a financial institution mutually acceptable to the provider,
the District and the Trustee which is rated in one of the two highest rating categories offered
by each Rating Agency(without regard to gradations of plus or minus,or numerical
gradations,within such category),and
(iii) any such investment agreement shall include a provision that in the event that
the long-term debt rating or claims paying ability rating of the provider, or the guarantor,is
downgraded below A-by Standard& Poor's or A3 by Moody's during the term of the
agreement the provider must repay the principal of and accrued by it unpaid interest on the
invested moneys, and
(iv) any such agreement shall include a provision to the effect that in the event of
default under such Investment Agreement by such provider or in the event of a bankruptcy of
such provider, the District has the right to withdraw or cause the Trustee to withdraw all
funds invested in such agreement and thereafter to invest such funds pursuant to this
Indenture,and
4
DOC SOC/105495 7v5/22925-0010
(v) any such investment agreement permits withdrawal upon not more than three
(3)days notice(excepting only withdrawals from the Acquisition and Construction Fund,
from which withdrawals may be permitted upon not more than seven(7)days notice) for any
purpose authorized for the use of the invested funds under this Indenture;
(h) Commercial paper rated,at the time of purchase,Prime- 1 by Moody's and A-1 or
better by Standard&Poor's;
(1) Bonds or notes issued by any state or municipality which are rated by both Rating
Agencies in one of the two highest rating categories assigned by such agencies;
0) Federal funds or bankers acceptances with a maximum term of one year of any bank
which has an unsecured,uninsured or unguaranteed obligation rating of Prime- 1 or A3 or better by
Moody's and A-1 or A or better by Standard&Poor's;
(k) Repurchase agreements collateralized by Direct Obligations, GNMAs, FNMAs or
FHLMCs with any registered broker/dealer subject to the Securities Investors' Protection
Corporation jurisdiction or any commercial bank insured by the FDIC,if such broker/dealer or bank
has an uninsured,unsecured and unguaranteed obligation rated P-1 or A3 or better by Moody's,and
A-1 or A-by Standard &Poor's; provided:
(i) a master repurchase agreement or specific written repurchase agreement
governs the transaction,and
(ii) the securities are held free and clear of any lien by the Trustee or an
independent third party acting solely as agent("Agent") for the Trustee, and such third party
is(i)a Federal Reserve Bank,(ii)a bank which is a member of the Federal Deposit Insurance
Corporation and which has combined capital, surplus and undivided profits of not less than
$50 million,or(iii)a bank approved in writing for such purpose by the District, and the
Trustee shall have received written confirmation from such third party that it holds such
securities, free and clear of any lien, as agent for the Trustee,and
(iii) a perfected first security interest under the Uniform Commercial Code,or
book entry procedures prescribed at 31 C.F.R. 306.1 et seq. or 31 C.F.R. 350.0 et seq. in such
securities is created for the benefit of the Trustee,and
(iv) the Agent will value the collateral securities no less frequently than weekly
and will liquidate the collateral securities if any deficiency in the required collateral
percentage is not restored within two Business Days of such valuation,and
(v) the fair market value of the securities in relation to the amount of the
repurchase obligation,including principal and interest,is equal to at least 103%;
(1) The State of California Local Agency Investment Fund; and
(m) Any other investment which the District is permitted by law to make.
To the extent that any of the requirements concerning Authorized Investments embodies a
legal conclusion,the Trustee shall be entitled to conclusively rely upon a certificate from the
appropriate party or an opinion from counsel to such party,that such requirement has been met.
5
DOCSOC/1054957v5/22925-0010