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10 Attachment 15 Water Official Statement Truckee Donner PUD 2022 Water COP
Stradling Yocca Carlson & Rauth Draft of 5111122 PRELIMINARY OFFICIAL STATEMENT DATED JUNE 2022 In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Special Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described in this Official Statement, interest (and original issue discount) with respect to the Certificates is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. In the further opinion of Special Counsel, interest (and original issue discount) with respect to the Certificates is exempt from State of California personal income tax. See the caption "TAXMATTERS. " NEW ISSUE —BOOK -ENTRY ONLY RATING: S&P: " " See the caption "RATING" TRUCKEE DONNER PUBLIC UTILITY DISTRICT WATER SYSTEM REVENUE CERTIFICATES OF PARTICIPATION, SERIES 2022A Dated: Date of Delivery Due: November 15, as shown on the inside cover The Certificates are being executed and delivered to provide funds to finance certain capital improvements to the District's Water System and to pay certain costs of delivery of the Certificates. Interest due with respect to the Certificates is payable on November 15, 2022 and each May 15 and November 15 thereafter. The Certificates are being executed and delivered in fully registered form and when executed and delivered will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York. Purchasers of the Certificates will not receive certificates representing their beneficial ownership in the Certificates purchased. The principal and interest with respect to the Certificates are payable by the Trustee to Cede & Co. and such interest and principal payments are to be disbursed to the beneficial owners of the Certificates through their nominees. Individual purchases will be made in multiple denominations of $5,000. The Certificates are subject to optional and mandatory sinking fund prepayment prior to maturity as described in this Official Statement The Certificates are payable from Series 2022 Installment Payments payable by the District and amounts on deposit in certain funds and accounts established under the Trust Agreement. The obligation of the District to make Series 2022 Installment Payments is a special obligation of the District payable solely from Net Revenues, consisting of Revenues of the District's Water System remaining after payment of Operation and Maintenance Costs, and from certain other funds and accounts created under the Installment Purchase Agreement, on a parity with the obligation of the District to make payments on the District's Water System Refunding Revenue Bonds, Series 2015, which are currently outstanding in the aggregate principal amount of $11,740,000. The District has covenanted not to incur additional obligations payable from Net Revenues senior to the Series 2022 Installment Payments. The District may incur additional obligations on a parity to the Series 2022 Installment Payments, subject to the tenns and conditions set forth in the Installment Purchase Agreement. No reserve fund has been established in connection with the execution and delivery of the Certificates. THE OBLIGATION OF THE DISTRICT TO MAKE THE SERIES 2022 INSTALLMENT PAYMENTS IS A SPECIAL OBLIGATION OF THE DISTRICT PAYABLE SOLELY FROM NET REVENUES OF THE DISTRICT AND OTHER FUNDS DESCRIBED IN THE INSTALLMENT PURCHASE AGREEMENT, AND DOES NOT CONSTITUTE AN OBLIGATION OF THE DISTRICT FOR WHICH THE DISTRICT IS OBLIGATED TO PAY FROM ANY OTHER REVENUES OR TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE DISTRICT HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE DISTRICT TO MAKE THE SERIES 2022 INSTALLMENT PAYMENTS UNDER THE INSTALLMENT PURCHASE AGREEMENT DOES NOT CONSTITUTE A DEBT OF THE DISTRICT OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. This cover page contains certain information for quick reference only. It is not a summary of this issue. Potential investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. Capitalized terms used on this cover have the definitions ascribed thereto in this Official Statement. The Certificates will be offered when, as and if executed and received by the Underwriter, subject to the approval as to their validity by Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, Special Counsel. Certain legal matters will be passed upon for the District and the Corporation by Porter Simon, Truckee, California, as General Counsel to the District and the Corporation. Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, is acting as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by Kutak Rock LLP, Irvine, California, as Underwriter's Counsel, and for the Trustee by its counsel. It is anticipated that the Certificates in definitive form will be available for delivery to DTC on or about July —, 2022. [Brandis Tallman A Division of Oppenheimer & Co. Inc.] Dated: June 2022 Preliminary; subject to change. 4892-6277-7113v6/022925-0110 MATURITY SCHEDULE BASE CUSIPt TRUCKEE DONNER PUBLIC UTILITY DISTRICT WATER SYSTEM REVENUE CERTIFICATES OF PARTICIPATION, SERIES 2022A Maturity Principal (November 15) Amount Interest Rate Yield Price CIISIPt I % Term Certificates due November 15, 20_, Yield: %, Price: , CUSIPt Preliminary; subject to change t CUSIPS is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by FactSet Research Systems Inc. Copyright© CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. None of the District, the Corporation, the Underwriter or their agents or counsel assume responsibility for the accuracy of such numbers. 4892-6277-7113v6/022925-0110 TRUCKEE DONNER PUBLIC UTILITY DISTRICT BOARD OF DIRECTORS Christa Finn, President Jeff Bender, Vice President Joe Aguera, Director Kim Harris, Director Anthony Laliotis, Director DISTRICT STAFF Brian C. Wright, General Manager Michael Salmon, Chief Financial Officer Chad Reed, Water Utility Director Shanna Kuhlemier, District Clerk SERVICES General Counsel Porter Simon Truckee, California Special Counsel and Disclosure Counsel Stradling Yocca Carlson & Rauth, A Professional Corporation San Francisco, California Municipal Advisor Fieldman, Rolapp & Associates, Inc. Irvine, California Trustee The Bank of New York Mellon Trust Company, N.A. [Los Angeles], California 4892-6277-7113v6/022925-0110 Table of Contents INTRODUCTION ................................................ 1 THE 2022 PROJECT ............................................ 2 ESTIMATED SOURCES AND USES OF FUNDS................................................................. 3 THE CERTIFICATES .......................................... 3 Terms of the Certificates ................................ 3 Prepayment of Certificates ............................. 3 Notice of Prepayment ..................................... 4 Book -Entry Only System ............................... 4 Transfers and Exchanges Upon Termination of Book -Entry Only System ............................... 5 Debt Service Schedule ................................... 6 SECURITY FOR THE CERTIFICATES ............. 6 General........................................................... 6 Revenue Pledge .............................................. 7 Allocation of Revenues .................................. 7 Certificate Payment Fund ............................... 8 Rate Covenant ................................................ 9 Limitations on Parity and Superior Obligations; Subordinate Obligations ............ 9 No Reserve Fund .......................................... 11 Rate Stabilization Fund ................................ 11 THE DISTRICT .................................................. 11 General......................................................... 11 Land Use and Service Area .......................... 12 Seismic Considerations ................................ 12 Governance and Management ...................... 13 Employees.................................................... 14 Budget Process ............................................. 15 District Insurance ......................................... 15 Outstanding Parity Obligations .................... 16 Outstanding Subordinate Obligations .......... 16 Financial Statements .................................... 16 COVID-19 Pandemic ................................... 17 THE WATER SYSTEM ..................................... 19 General......................................................... 19 Water Quality ............................................... 20 Water Supply ................................ :.............. 21 Drought Declarations ................................... 22 Historical Water System Supply .................. 24 Historical Water System Deliveries ............. 25 Historical Water System Accounts .............. 25 Historical Water System Sales Revenues .... 26 Largest Water System Customers ................ 27 Water System Rates and Charges ................ 27 Water System Collection Procedures........... 30 Future Water System Improvements............ 31 Projected Water System Supply ................... 31 Projected Water System Deliveries .............. 32 Projected Water System Accounts ............... 32 Projected Water System Sales Revenues ..... 32 FINANCIAL INFORMATION ...........................33 Available Cash..............................................33 Historical Operating Results and Debt Service Coverage....................................................... 33 Projected Operating Results and Debt Service Coverage....................................................... 34 Employee Benefits........................................35 RISK FACTORS.................................................40 Accuracy of Assumptions .............................40 System Demand............................................40 System Expenses..........................................40 Limited Recourse on Default ........................40 Natural Disasters..........................................41 Limitations on Remedies Available; Bankruptcy...................................................41 Limited Obligations......................................42 Statutory and Regulatory Compliance .......... 42 Parity Obligations.........................................42 Loss of Tax Exemption.................................42 Secondary Market for the Certificates ..........43 Cybersecurity................................................ 43 Climate Change............................................43 CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES ..............44 Article XIIIB................................................44 Proposition 218.............................................44 Proposition 26...............................................46 Future Initiatives...........................................47 THE CORPORATION........................................47 TAX MATTERS ................................................. 47 CERTAIN LEGAL MATTERS .......................... 49 MUNICIPAL ADVISOR....................................49 LITIGATION...................................................... 49 RATING.............................................................. 49 UNDERWRITING .............................................. 50 CONTINUING DISCLOSURE UNDERTAKING ............................................................................. 50 MISCELLANEOUS ............................................ 50 APPENDIX A AUDITED FINANCIAL STATEMENTS ......................... A-1 APPENDIX B SUMMARY OF PRINCIPAL LEGAL DOCUMENTS ...........B-1 APPENDIX C FORM OF LEGAL OPINION .................... C-1 APPENDIX D DTC AND BOOK -ENTRY ONLY SYSTEM ................................... D-1 APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE ......................... E-1 4892-6277-7113v6/022925-0110 NO DEALER, BROKER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFER OR SALE OF THE CERTIFICATES, OTHER THAN AS CONTAINED IN THIS OFFICIAL STATEMENT, AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE DISTRICT, THE CORPORATION OR THE UNDERWRITER. THIS OFFICIAL STATEMENT DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE DESCRIBED ON THE COVER PAGE, AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BY ANY SALE OF THE CERTIFICATES BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OR SALE. THE OFFICIAL STATEMENT IS NOT TO BE CONSTRUED AS A CONTRACT WITH THE PURCHASERS OF THE CERTIFICATES. The information contained in this Official Statement has been obtained from sources that are believed to be reliable, but this information is not guaranteed as to accuracy or completeness. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of this information. The information and expressions of opinion in this Official Statement are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District since the date hereof. This Official Statement contains forward -looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended, including: (a) statements containing projections of Net Revenues, expenditures and other financial items; (b) statements of the plans and objectives of the District for future operations of its water system; (c) statements of future economic performance of the water system; and (d) statements of the assumptions underlying or relating to statements described in (a), (b) and (c) above (collectively, "Forward-Looldng Statements"). All statements other than statements of historical facts included in this Official Statement regarding the District's financial position, business strategy, capital resources and plans and objectives for future operations of the water system, are Forward -Looking Statements. Although such expectations reflected in such Forward -Looking Statements are believed to be reasonable, there can be no assurance that such expectations will prove to have been correct. Statements of important factors (collectively, the "Cautionary Statements") that could cause actual results to differ materially from expectations of the District are disclosed in this Official Statement. All subsequent written and oral Forward -Looking Statements attributable to the District or any person acting on behalf of the District are expressly qualified in their entirety by the Cautionary Statements. This Official Statement is submitted in connection with the sale of the Certificates and may not be reproduced or be used, as a whole or in part, for any other purpose. In connection with the offering of the Certificates, the Underwriter may overallot or effect transactions which stabilize or maintain the market price of the certificates at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Underwriter may offer and sell the certificates to certain dealers and dealer banks and banks acting as agent and others at prices lower than the public offering prices stated on the cover page of this Official Statement, and the Underwriter may change those public offering prices from time to time. THE CERTIFICATES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), IN RELIANCE UPON AN EXEMPTION CONTAINED IN THE ACT. THE CERTIFICATES HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. The District maintains a website and certain social media accounts. However, the information presented there is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the Certificates. 4892-6277-7113v6/022925-0110 TRUCKEE DONNER PUBLIC UTILITY DISTRICT WATER SYSTEM REVENUE CERTIFICATES OF PARTICIPATION, SERIES 2022A INTRODUCTION This Official Statement sets forth information concerning the sale and delivery of the Truckee Donner Public Utility District Water System Revenue Certificates of Participation, Series 2022A (the "Certificates") to be delivered by The Bank ofNew York Mellon Trust Company, N.A., as trustee (the "Trustee"). See the caption "THE CERTIFICATES" for a detailed description of the terms of the Certificates. The Certificates are being executed and delivered to provide funds to finance certain capital improvements to the District's Water System (the "2022 Project"), as described under the caption "THE 2022 PROJECT," and to pay certain costs of delivery of the Certificates. The Certificates are being executed and delivered under a Trust Agreement, dated as of July 1, 2022 (the "Trust Agreement"), by and among the Trustee, the Truckee Donner Public Utility District (the "District") and Truckee Donner Public Utility District Financing Corporation (the "Corporation"). The Corporation has assigned to the Trustee the right of the Corporation to receive and collect the installment payments (the "Series 2022 Installment Payments") payable by the District to the Corporation under the Installment Purchase Agreement, dated as of July 1, 2022 (the "Installment Purchase Agreement"), by and between the District and the Corporation, and other amounts payable by the District to the Corporation, pursuant to the Assignment Agreement, dated as of July 1, 2022 (the "Assignment Agreement"), by and between the Trustee and the Corporation. The Certificates are payable from the Series 2022 Installment Payments made by the District and amounts on deposit in certain funds and accounts established under the Trust Agreement. The obligation of the District to make the Series 2022 Installment Payments is a special obligation of the District payable solely from Net Revenues, consisting of Revenues of the District's Water System remaining after payment of Operation and Maintenance Costs, and from certain other funds and accounts created under the Installment Purchase Agreement, on a parity with the obligation of the District to make payments on the District's Water System Refunding Revenue Bonds, Series 2015 (the "2015 Bonds"), which are currently outstanding in the aggregate principal amount of $11,740,000. See the captions "THE DISTRICT —Outstanding Parity Obligations" and "SECURITY FOR THE CERTIFICATES." The obligation of the District to pay the Series 2022 Installment Payments does not constitute an obligation of the District for which the District is obligated to levy any form of taxation or for which the District has levied any form of taxation. The obligation of the District to make the Series 2022 Installment Payments under the Installment Purchase Agreement does not constitute a debt of the District or of the State of California (the "State") or of any political subdivision of the State, including the Counties of Nevada or Placer, within the meaning of any constitutional or statutory debt limitation or restriction. Under no circumstances is the District required to advance any moneys derived from any source of income other than the funds described above, nor are any other funds or property of the District liable for the payment of the Series 2022 Installment Payments, including but not limited funds of the District's electric system. See the caption "SECURITY FOR THE CERTIFICATES —Revenue Pledge." No reserve fund has been established in connection with the execution and delivery of the Certificates. The District has covenanted not to incur additional obligations payable from Net Revenues senior to the Series 2022 Installment Payments. The District may incur additional obligations on a parity with the Series 2022 Installment Payments, subject to the terms and conditions described under the caption "SECURITY FOR THE Preliminary; subject to change. 4892-6277-7113v6/022925-0110 CERTIFICATES —Limitations on Parity and Superior Obligations; Subordinate Obligations Additional Obligations on a Parity with the Installment Payments." The Bank of New York Mellon Trust Company, N.A., will act as Trustee with respect to the Certificates. Certain proceedings in connection with the execution and delivery of the Installment Purchase Agreement and the Trust Agreement are subject to the approval of Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, Special Counsel to the District ("Special Counsel'). Certain legal matters will be passed upon for the District and the Corporation by Porter Simon, Truckee, California, General Counsel to the District and the Corporation. Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, is acting as Disclosure Counsel. Fieldman, Rolapp & Associates, Inc., Irvine, California is acting as municipal advisor to the District (the "Municipal Advisor"). There follows in this Official Statement (and attached appendices) a brief description of the Certificates, the security for the Certificates, the District, the Water System and certain other information that is relevant to the execution and delivery of the Certificates. The descriptions and summaries of various documents in this Official Statement do not purport to be comprehensive or definitive, and reference is made to each document for complete details of all terms and conditions. All statements in this Official Statement are qualified in their entirety by reference to each document. All capitalized terms which are used in this Official Statement and not normally capitalized have the meanings assigned to them in the Trust Agreement and the Installment Purchase Agreement, the summaries of which are included in Appendix B, unless otherwise stated in this Official Statement. The Appendices are integral parts of this Official Statement and must be read together with all other parts of this Official Statement. THE 2022 PROJECT 2022 Project Component New water pipeline Replacement water pipelines New water pump station New water storage tank Total Estimated Cost $5,588,000 4,670,000 3,008,000 2,226,000 15,492,000 The District intends to apply a portion of the proceeds of the Certificates to pay for the costs of the 2022 Project. The District expects to comply with all governmental approval, environmental review, public bidding and other permitting requirements for each component of the 2022 Project as required by law, and to complete the 2022 Project by mid-2025. Pursuant to the Installment Purchase Agreement, the District may substitute or add additional projects to the 2022 Project. See Appendix B under the caption "INSTALLMENT PURCHASE AGREEMENT — ACQUISITION OF THE 2022 PROJECT —Changes to the 2022 Project." 2 4892-6277-7113v6/022925-0110 ESTIMATED SOURCES AND USES OF FUNDS The estimated sources and uses of funds with respect to the Certificates are set forth below. Sources') Principal Amount of Certificates $ Plus/Less Net Original Issue Premium/Discount Total Sources $ Uses') Deposit in Acquisition Fund Costs of Issuance(2) Total Uses 0) Amounts rounded to the nearest dollar. (2) Includes fees of Trustee, Municipal Advisor, Special Counsel and Disclosure Counsel, Underwriter's discount, printing costs, rating agency fees and other costs of delivery. THE CERTIFICATES Terms of the Certificates The Certificates will be dated as of their date of initial execution and delivery. Interest with respect to the Certificates (other than at maturity) is payable by check or draft of the Trustee mailed by first class mail on November 15, 2022 and each May 15 and November 15 thereafter (each an "Interest Payment Date"). Interest is payable to the registered Owner of the Certificates at the close of business on the first day of the calendar month in which such Interest Payment Date falls (the "Record Date"), provided, that in the case of an Owner of $1,000,000 or more in aggregate principal amount of Certificates, upon written request of such Owner to the Trustee 15 days prior to any Interest Payment Date, such interest will be paid on the Interest Payment Date in immediately available funds by wire transfer to an account in the United States of America. Interest with respect to any Certificate which is payable but has not been punctually paid or duly provided for on any Interest Payment Date will immediately cease to be payable to the owner on the relevant Record Date by virtue of having been such owner and such interest will be payable to the person in whose name such Certificate is registered at the close of business on a special record date as determined by the Trustee. Interest with respect to the Certificates will accrue at the rates per annum and will mature on the dates set forth on the inside front cover page of this Official Statement. Interest with respect to the Certificates will be computed based on a year consisting of 360 days and twelve 30-day months. Individual purchases will be made in $5,000 multiples. Principal of the Certificates is payable in lawful money of the United States of America at the principal corporate trust office of the Trustee in [Los Angeles], California. Prepayment of Certificates Optional Prepayment. The Certificates maturing on or after November 15, 20_ are subject to optional prepayment prior to their respective stated maturities, as a whole or in part on 15, 20 or any date thereafter in the order of maturity as directed by the District in a written request to the Trustee at least 60 days (or such lesser number of days acceptable to the Trustee) prior to such date and by lot within each maturity, in integral multiples of $5,000 from amounts prepaid by the District pursuant to the Installment Purchase Agreement at a Prepayment Price equal to the principal amount of the Certificates to be prepaid, plus accrued interest represented thereby to the date fixed for prepayment, without premium. 4892-6277-7113v6/022925-0110 Mandatory Sinking Fund Prepayment. The Certificates with stated maturities on November 15, 20_ are subject to mandatory sinking fund prepayment in part (by lot) on November 15, 20 and each November 15 thereafter, in integral multiples of $5,000 at a Prepayment Price of the principal amount thereof plus accrued interest to the date fixed for redemption, without premium, in accordance with the following schedule: Redemption Date Principal (November 15) Amount 20 * Maturity. If some but not all of the Certificates maturing on November 15, 20 are optionally prepaid, the principal amount of the applicable Certificates subject to mandatory sinking fund redemption on any subsequent November 1 will be reduced, by $5,000 or an integral multiple thereof, as designated by the District in a Written Order of the District filed with the Trustee; provided, however, that the aggregate amount of such reductions may not exceed the aggregate amount of the applicable Certificates that were optionally prepaid. Notice of Prepayment Notice of prepayment will be mailed, first class postage prepaid, to the respective Owners of any Certificates designated for prepayment at their addresses appearing on the Certificate registration books and to the Information Services and by registered or certified or overnight mail or electronically to the Securities Depositories at least 20 days but not more than 60 days prior to the prepayment date. Each such notice of prepayment will state the date of notice, the prepayment date, the place or places of prepayment and the Prepayment Price, will designate the maturities, CUSIP numbers, if any, and, if less than all of any such maturity is to be prepaid, the respective portions of the principal amount thereof to be prepaid. Each such notice will also state that on said date there will become due and payable on each of said Certificates the Prepayment Price thereof or of said specified portion of the principal represented thereby in the case of a Certificate to be prepaid in part only, together with interest accrued with respect thereto to the prepayment date, and that (provided that moneys for prepayment have been deposited with the Trustee) from and after such prepayment date interest with respect thereto will cease to accrue, and will require that such Certificate be then surrendered to the Trustee. Any defect in the notice or the mailing will not affect the validity of the prepayment of any Certificate. With respect to any notice of optional prepayment of Certificates, such notice may state that such prepayment will be conditional upon the receipt by the Trustee on or prior to the date fixed for such prepayment of moneys that are sufficient to pay the principal of, premium, if any, and interest with respect to such Certificates to be prepaid and that, if such moneys shall not have been so received, said notice will be of no force and effect and the Trustee will not be required to prepay such Certificates. In the event that such notice of prepayment contains such a condition and such moneys are not so received, the prepayment will not be made, and the Trustee will within a reasonable time thereafter give notice, in the manner in which the notice of prepayment was given, that such moneys were not so received. Book -Entry Only System One fully -registered Certificate for each maturity of the Certificates will be executed and delivered in the principal amount of such Certificate. Such Certificates will be registered in the name of Cede & Co. and will be deposited with The Depository Trust Company ("DTC"). 4 4892-6277-7113v6/022925-0110 The District may decide to discontinue use of the system of book -entry transfers through DTC (or a successor securities depository). In that event, the Certificates will be printed and delivered and will be governed by the provisions of the Trust Agreement with respect to payment of principal and interest and rights of exchange and transfer. The District cannot and does not give any assurances that DTC participants or others will distribute payments with respect to the Certificates received by DTC or its nominee as the registered Owner, or any prepayment or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or that DTC will service and act in the manner described in this Official Statement. See Appendix D for additional information concerning DTC. Transfers and Exchanges Upon Termination of Book -Entry Only System In the event that the book -entry system described above is abandoned, the Certificates will be printed and delivered as provided in the Trust Agreement. Thereafter, any Certificate may, in accordance with its terms, be transferred upon the Certificate registration books by the person in whose name it is registered, in person or by such person's duly authorized attorney, upon surrender of such Certificate for cancellation at the corporate trust office of the Trustee in [Los Angeles], California, accompanied by delivery of a duly executed instrument of transfer in a form approved by the Trustee. Whenever any Certificate or Certificates are surrendered for transfer, the Trustee will execute and deliver a new Certificate or Certificates of the same series and maturity, for a like aggregate principal amount, and of authorized denomination or denominations. The Trustee may charge a sum for each new Certificate executed and delivered upon any transfer. The Trustee may require the payment by any Owner requesting any such transfer of any tax or other governmental charge required to be paid with respect to such transfer. Following any transfer of Certificates the Trustee will cancel and destroy the Certificates it has received in accordance with its customary procedures. The transferor will also provide or cause to be provided to the Trustee all information necessary to allow the Trustee to comply with any applicable tax reporting obligations, including without limitation any cost basis reporting obligations under Section 6045 of the Code. The Trustee may rely on the information provided to it and has no responsibility to verify or ensure the accuracy of such information. Certificates may be exchanged at the corporate trust office of the Trustee, for a like aggregate principal amount of Certificates of other authorized denominations of the same series and maturity. The Trustee may charge a sum for each new Certificate executed and delivered upon any exchange except in the case of any exchange of temporary Certificates for definitive Certificates. The Trustee may require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. Following any exchange of Certificates the Trustee will cancel and destroy the Certificates it has received in accordance with its customary procedures. The Trustee is not required to register the exchange or transfer of any Certificate: (i) within 15 days preceding selection of Certificates for prepayment; or (ii) selected for prepayment (except for any non -prepaid portion thereof). 4892-6277-7113v6/022925-0110 Debt Service Schedule Set forth below is a schedule of Series 2022 Installment Payments and debt service on the 2015 Bonds for each annual period ending on December 31 in the years indicated, assuming no optional prepayments. Period Ending December 31 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 2051 2052 Series 2022 Installment Payments Parity Total Debt Obligations(') Principal Interest Total Service TOTAL ID1 1 .n ,n ,n (1) Reflects debt service on 2015 Bonds. See the caption "THE DISTRICT —Outstanding Parity Obligations." Source: Underwriter. SECURITY FOR THE CERTIFICATES General Each Certificate represents an undivided interest in the Series 2022 Installment Payments to be made by the District under the Installment Purchase Agreement. Pursuant to the Assignment Agreement, the Corporation has assigned substantially all of its right, title and interest in the Installment Purchase Agreement to the Trustee, for the benefit of the Owners of the Certificates, including its right to receive the Series 2022 6 4892-6277-7113v6/022925-0110 Installment Payments thereunder and its right to exercise all of the rights and remedies conferred on the Corporation under the Installment Purchase Agreement. The obligation of the District to make the Series 2022 Installment Payments is a special obligation of the District payable solely from Net Revenues, consisting of Revenues of the District's Water System remaining after the payment of Operation and Maintenance Costs of the District's Water System, and from certain other funds and accounts created under the Installment Purchase Agreement, on a parity with the obligation of the District to make payments on the 2015 Bonds, which are currently outstanding in the aggregate principal amount of $11,740,000. See the caption "THE DISTRICT —Outstanding Parity Obligations." Revenue Pledge All Revenues and all amounts on deposit in the Revenue Fund and the Rate Stabilization Fund are irrevocably pledged to the payment of the Series 2022 Installment Payments as provided in the Installment Purchase Agreement, and the Revenues will not be used for any other purpose while any of the Series 2022 Installment Payments remain unpaid; provided that out of the Revenues there may be apportioned such sums for such purposes as are expressly permitted in the Installment Purchase Agreement. Such pledge, together with the pledge created by all other Contracts and Bonds, constitutes a first lien on Revenues, the Revenue Fund, the Rate Stabilization Fund and all amounts on deposit in such funds as permitted in the Installment Purchase Agreement and is subject to the application of Revenues in accordance with the Installment Purchase Agreement. The obligation of the District to make the Series 2022 Installment Payments is payable from Net Revenues. Net Revenues means, for any Fiscal Year of the District (currently, the District's Fiscal Year begins January 1) (each, a "Fiscal Year"), the Revenues for such Fiscal Year less the Operation and Maintenance Costs for such Fiscal Year, as such terms are defined in Appendix B under the caption "INSTALLMENT PURCHASE AGREEMENT —DEFINITIONS." Allocation of Revenues %J In order to carry out and effectuate the pledge and lien of Revenues contained in the Installment Purchase Agreement, the District has agreed and covenanted that all Revenues will be received in the "Revenue Fund," which fund has been continued and which fund the District has agreed and covenanted to maintain and to hold separate and apart from other funds so long as any Installment Payments or Bonds remain unpaid. Moneys in the Revenue Fund will be used and applied by the District as provided in the Installment Purchase Agreement. The District will, from the moneys in the Revenue Fund, pay all Operation and Maintenance Costs (including amounts reasonably required to be set aside in contingency reserves for Operation and Maintenance Costs, the payment of which is not then immediately required) as such Operation and Maintenance Costs become due and payable. All remaining moneys in the Revenue Fund will be set aside by the District at the following times in the following respective special funds in the following order of priority and all moneys in each of such funds will be held in trust and applied, used and withdrawn only for the purposes authorized in the Installment Purchase Agreement: Certificate Payment Fund. On or before each Series 2022 Installment Payment Date, the District will, from the moneys in the Revenue Fund, transfer to the Trustee for deposit in the Certificate Payment Fund (as described below under the caption "—Certificate Payment Fund") a sum equal to the Series 2022 Installment Payment coming due on such Series 2022 Installment Payment Date. The District will also, from the moneys in the Revenue Fund, transfer to the applicable trustee or payee for deposit in the applicable payment fund, without preference or priority, and in the event of any insufficiency of such moneys ratably without any discrimination or preference, any other Debt Service in accordance with the provisions of the Contract, resolution or indenture relating thereto. 7 4892-6277-7113v6/022925-0110 No deposit need be made in the Certificate Payment Fund as Series 2022 Installment Payments if the amount in the Certificate Payment Fund is at least equal to the amount of the Series 2022 Installment Payment due and payable on the next succeeding Series 2022 Installment Payment Date. All money in the Certificate Payment Fund will be used and withdrawn by the Trustee in accordance with the Trust Agreement. Reserve Funds. On or before each Series 2022 Installment Payment Date the District will, from the remaining moneys in the Revenue Fund, thereafter, without preference or priority and in the event of any insufficiency of such moneys ratably without any discrimination or preference, transfer to the applicable trustee for such reserve funds and/or accounts, if any, as may have been established in connection with Bonds or Contracts, that sum, if any, necessary to restore such funds or accounts to an amount equal to the reserve requirement with respect thereto. Subordinate Obligations. On or before the payment of principal or interest is due with respect to any Subordinate Obligations, the District will, from moneys in the Revenue Fund, transfer to the applicable trustee or payee for deposit in the applicable payment fund, without preference or priority, and in the event of any insufficiency of such moneys ratably without discrimination or preference, payment on such Subordinate Obligations, in accordance with the provisions of such Subordinate Obligation. Su lus. Moneys on deposit in the Revenue Fund on each Installment Payment Date not required to make any of the payments required above may be expended by the District at any time for any purpose permitted by law, including but not limited to transfers to the Rate Stabilization Fund. THE OBLIGATION OF THE DISTRICT TO MAKE THE SERIES 2022 INSTALLMENT PAYMENTS IS A SPECIAL OBLIGATION OF THE DISTRICT PAYABLE SOLELY FROM NET REVENUES OF THE DISTRICT AND OTHER FUNDS DESCRIBED IN THE INSTALLMENT PURCHASE AGREEMENT, AND DOES NOT CONSTITUTE AN OBLIGATION OF THE DISTRICT FOR WHICH THE DISTRICT IS OBLIGATED TO PAY FROM ANY OTHER REVENUES OR TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE DISTRICT HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE DISTRICT TO MAKE THE SERIES 2022 INSTALLMENT PAYMENTS UNDER THE INSTALLMENT PURCHASE AGREEMENT DOES NOT CONSTITUTE A DEBT OF THE DISTRICT OR OF THE STATE OR OF ANY POLITICAL SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. Certificate Payment Fund There has been established with the Trustee the Certificate Payment Fund, which the Trustee has covenanted to maintain and hold in trust separate and apart from other funds held by it so long as any Series 2022 Installment Payments remain unpaid. The Trustee will transfer from the Certificate Payment Fund the following amounts at the times and in the manner provided in the Trust Agreement, and will deposit such amounts in one or more of the following respective funds, each of which the Trustee will establish and maintain and hold in trust separate and apart from other funds held by it, and each of which will be disbursed and applied only as authorized in the Trust Agreement. Such amounts will be so transferred to and deposited in the following respective funds in the following order of priority, the requirements of each such fund at the time of deposit to be satisfied before any transfer is made to any fund subsequent in priority: Interest Fund. The Trustee will, on each Series 2022 Installment Payment Date (commencing on the Series 2022 Installment Payment Date preceding November 15, 2022), deposit in the Interest Fund an amount representing the portion of the Series 2022 Installment Payments designated as interest coming due on the next succeeding May 15 and November 15, as the case may be. No deposit need be made into the Interest Fund so long as there is in such fund moneys sufficient to pay the interest portion of all Certificates then Outstanding on the next May 15 or November 15, as the case may be. 4892-6277-7113v6/022925-0110 Except as provided in the Trust Agreement, moneys in the Interest Fund will be used and withdrawn by the Trustee solely for the purpose of paying the interest with respect to the Certificates when due and payable (including accrued interest with respect to any Certificates prepaid prior to maturity pursuant to the Trust Agreement). Principal Fund. The Trustee will, on the Series 2022 Installment Payment Date prior to each November 15 (commencing on the Series 2022 Installment Payment Date preceding November 15, 2022), deposit in the Principal Fund an amount equal to the principal coming due with respect to the Certificates on the next succeeding November 15. No deposit need be made into the Principal Fund so long as there is in such fund moneys sufficient to pay the portion of all Certificates then Outstanding designated as principal and coming due on the next succeeding November 15. Except as provided in the Trust Agreement, moneys in the Principal Fund will be used and withdrawn by the Trustee solely for the purpose of paying the principal with respect to the Certificates when due and payable. Prepayment Fund. Moneys to be used for prepayment of Certificates will be transferred by the Trustee from the Certificate Payment Fund and deposited in the Prepayment Fund on the prepayment date specified in the Written Request of the District filed with the Trustee pursuant to the Installment Purchase Agreement. Said moneys will be set aside in the Prepayment Fund solely for the purpose of prepaying the Certificates in advance of their respective stated maturities and will be applied on or after the date specified for prepayment pursuant to the Trust Agreement to the payment of the Prepayment Price with respect to the Certificates to be prepaid upon presentation and surrender of such Certificates. Rate Covenant To the fullest extent permitted by law, the District will fix and prescribe, at the commencement of each Fiscal Year, rates and charges for the Water Service provided by the Water System which are reasonably expected to be at least sufficient to yield during each Fiscal Year Net Revenues equal to 125% of Debt Service payable in such Fiscal Year; provided, however, that for purposes of the Installment Purchase Agreement, Revenues in such Fiscal Year do not include any amount transferred from the Rate Stabilization Fund to the Revenue Fund in excess of 25% of Debt Service payable in such Fiscal Year. The District may make adjustments from time to time in such rates and charges and may make such classification thereof as it deems necessary, but may not reduce the rates and charges then in effect unless the Net Revenues, from such reduced rates and charges are reasonably expected to be sufficient to meet the foregoing requirements. So long as the District has complied with its obligations set forth in the above paragraph, the failure of Net Revenues to equal 125% of Debt Service at the end of a Fiscal Year does not constitute a default or an Event of Default under the Installment Purchase Agreement. Limitations on Parity and Superior Obligations; Subordinate Obligations Additional Obligations Superior to Installment Payments. The District has covenanted in the Installment Purchase Agreement that the District will not issue any additional evidences of indebtedness or incur other additional obligations that are payable from or secured by a pledge of and lien on Revenues or any money in the Revenue Fund superior to the pledge securing the Series 2022 Installment Payments. Additional Obligations on a Parity with the Installment Payments. The District may at any time execute any parity Contract or issue any parity Bonds, as the case may be, in accordance with the Installment Purchase Agreement; provided: (a) The Net Revenues (not including amounts transferred from the Rate Stabilization Fund to the Revenue Fund in excess of 25% of Debt Service for such Fiscal Year) for the most recent audited Fiscal Year 9 4892-6277-7113v6/022925-0110 preceding the date of adoption by the Board of Directors of the District of the resolution authorizing the issuance of such Bonds or the date of the execution of such Contract, as the case may be, as evidenced by both a calculation prepared by the District and a special report prepared by an Independent Certified Public Accountant or an Independent Municipal Advisor on such calculation on file with the District, produces a sum equal to at least 125% of the Debt Service for such Fiscal Year; and (b) The Net Revenues (not including amounts transferred from the Rate Stabilization Fund to the Revenue Fund in excess of 25% of Debt Service for such Fiscal Year) for the most recent audited Fiscal Year preceding the date of the execution of such Contract or the date of adoption by the Board of Directors of the District of the resolution authorizing the issuance of such Bonds, as the case may be, including adjustments to give effect as of the first day of such Fiscal Year: (i) to increases or decreases in rates and charges for the Water Service approved and in effect as of the date of calculation, as evidenced by a calculation prepared by the District; and (ii) to each new connection to the Water System that, during all or any part of such Fiscal Year, was not in existence and that would have been derived from such connection if it had been made prior to the beginning of such Fiscal Year, produces a sum equal to at least 125% of: (1) the Debt Service for such Fiscal Year; plus (2) the Debt Service which would have accrued on any Contracts executed or Bonds issued since the end of such Fiscal Year, assuming that such Contracts had been executed or Bonds had been issued at the beginning of such Fiscal Year; plus (3) the Debt Service which would have accrued had such proposed additional Contract been executed or such proposed additional Bonds been issued at the beginning of such Fiscal Year; and (c) The estimated Net Revenues (not including amounts transferred from the Rate Stabilization Fund to the Revenue Fund in excess of 25% of Debt Service for such Fiscal Year) for the then current Fiscal Year and for each Fiscal Year thereafter to and including the first complete Fiscal Year after the latest date of operation of any uncompleted Project, as evidenced by a certificate of the Manager on file with the District, including (after giving effect to the completion of all such uncompleted Projects) an allowance for estimated Net Revenues (not including amounts transferred from the Rate Stabilization Fund to the Revenue Fund in excess of 25% of Debt Service for such Fiscal Year) for each of such Fiscal Years arising from any increase in the income, rents, fees, rates and charges estimated to be fixed, prescribed or received for the Water Service and which are economically feasible and reasonably considered necessary based on projected operations for such period, as evidenced by a certificate of the Manager on file with the District, produce a sum equal to at least 125% of the estimated Debt Service for each of such Fiscal Years, after giving effect to the execution of all Contracts and the issuance of all Bonds estimated to be required to be executed or issued to pay the costs of completing all uncompleted Projects within such Fiscal Years, assuming that all such Contracts and Bonds have maturities, interest rates and proportionate principal repayment provisions similar to the Contract last executed or then being executed or the Bonds last issued or then being issued for the purpose of acquiring and constructing any of such uncompleted Projects; and Notwithstanding the foregoing, Bonds or Contracts may be issued or incurred to refund outstanding Bonds or Contracts if, after giving effect to the application of the proceeds thereof, total Debt Service will not be increased in any Fiscal Year in which Bonds or Contracts (outstanding on the date of issuance or incurrence of such refunding Bonds or Contracts, but excluding such refunding Bonds or Contracts) not being refunded are outstanding. Notwithstanding satisfaction of the other conditions to the execution of any Contract or the issuance of Bonds set forth in the Installment Purchase Agreement, no such execution or issuance may occur if an Event of Default (or any event which, once all notice or grace periods have passed, would constitute an Event of Default) exists, unless such Event of Default will be cured upon such execution or issuance. Subordinate Obligations. The District may at any time issue evidence of indebtedness or incur other obligations for any lawful purpose that are payable from and secured by a lien on Revenues or moneys in the Revenue Fund as may from time to time be deposited therein subordinate to the Series 2022 Installment Payments. 10 4892-6277-7113v6/022925-0110 No Reserve Fund No reserve fund has been established under the Trust Agreement, the Installment Purchase Agreement or any other document in connection with the execution and delivery of the Certificates. Rate Stabilization Fund There has been previously established with the District a fund called the "Rate Stabilization Fund." The District has agreed and covenanted to maintain the Rate Stabilization Fund so long as any Certificates remain outstanding. There is $[-1 on deposit in the Rate Stabilization Fund as of the date of the initial execution and delivery of the Certificates. The District may withdraw and deposit amounts therein from time to time in its sole discretion. Amounts in the Rate Stabilization Fund will be disbursed, allocated and applied by the District solely to the uses and purposes described in the Installment Purchase Agreement, and the Rate Stabilization Fund will be accounted for separately and apart from all other accounts, funds, money or other resources of the District. The Rate Stabilization Fund and all amounts on deposit therein have been irrevocably pledged to the payment of the Bonds and Contracts as provided in the Installment Purchase Agreement; provided that amounts on deposit in the Rate Stabilization Fund may be apportioned for such purposes as are expressly permitted therein. The foregoing pledge constitutes a first lien on amounts on deposit in the Rate Stabilization Fund for the payment of Contracts and Bonds in accordance with the terms of the Installment Purchase Agreement. The District may withdraw all or any portion of the amounts on deposit in the Rate Stabilization Fund from time to time and transfer such amounts to the Revenue Fund for application in accordance with the Instalment Purchase Agreement. Amounts transferred from the Rate Stabilization Fund to the Revenue Fund pursuant to the Installment Purchase Agreement during or within 270 days after the end of a Fiscal Year may be taken into account as Revenues for purposes of the calculations that are described under the captions "—Rate Covenant" and "—Limitations on Parity and Superior Obligations; Subordinate Obligations —Additional Obligations on a Parity with the Installment Payments" for such Fiscal Year to the extent provided in the definition of "Revenues." See Appendix B under the caption "INSTALLMENT PURCHASE AGREEMENT — Definitions." THE DISTRICT General The District is primarily located in eastern Nevada County (the "County"), with a small area of the District (approximately 1.5 square miles) located in neighboring Placer County. The District is situated in the Sierra Nevada mountains approximately 180 miles northeast of San Francisco and 32 miles west of Reno, Nevada. Lake Tahoe is approximately 12 miles south of the District's boundaries. The current population within the District's 47 square mile service area is estimated to be approximately 16,200 residents. The Town of Truckee, the largest city within the District's boundaries, was established in 1862 and became an important location on the Central Pacific Railroad, the first transcontinental railroad, which was completed in 1869. At the eastern end of Donner Pass, Truckee has remained an important transportation center as the gateway to the mountain pass between California and Nevada. Truckee was incorporated in 1993 and has become a center of tourism due to its proximity to the Dormer Pass and Lake Tahoe area ski resorts as well as summer recreational activities. The District was established on August 9, 1927 as a Public Utility District under Division 7 of the State Public Utility Code. At the time of its establishment, the District provided electric service only. Since 1935, the District has also provided water service within the Truckee and Donner Lake areas, with the Water System and 11 4892-6277-7113v6/022925-0110 the District's electric system maintained and operated separately. Revenues of the District's electric system are not available to pay the Series 2022 Installment Payments, and operation and maintenance costs of the District's electric system do not constitute Operation and Maintenance Costs of the Water System. The District has broad general powers over the use of water within District boundaries, including the right of eminent domain and the authority to acquire, control, distribute, store, spread, sink, treat, purify, reclaim, process and salvage any water for beneficial use, to provide sewer service, to sell treated or untreated water, to contract with the United States, other political subdivisions, public utilities and other persons, and, subject to certain State Constitutional limits, to levy taxes on lands. As of December 31, 2021, the District provided water service to 12,709 residential and 767 commercial, governmental, institutional and other customers. The District is the sole provider of water service within its service area. The District's sole source of water is groundwater that is extracted from 13 active wells in the Martis Valley Groundwater Basin (the "Basin"). Groundwater from the Basin is of high quality and is not treated extensively prior to delivery to customers. The District also has surface water rights in Donner Lake and six local springs, although the District does not currently utilize these surface water rights. See the caption "THE WATER SYSTEM —Water Supply." In addition to groundwater wells, the Water System includes: (i) 25 pump stations; (ii) 33 active water storage tanks with a combined storage capacity of approximately 9.6 million gallons; (iii) approximately 220 miles of distribution pipelines varying from 2" to 24" in diameter; (iv) 47 pressure zones; and (v) 35 active control valve stations. See the caption "THE WATER SYSTEM --General." Land Use and Service Area The District serves a region that ranges in elevation from less than 5,700 feet above sea level in Hirschdale to over 7,400 feet above sea level at the western end of the District, which is located close to the crest of the Sierra Nevada mountains. The District's service area includes the Town of Truckee and the communities of Armstrong Tract, Blitz Tract, Glenshire, Tahoe Donner, Meadow Park, Gateway, Prosser Heights, Prosser Lakeview, Donner Lake and Hirschdale. Interstate 80 bisects the District's service area and provides easy access to San Francisco to the west and Reno, Nevada to the east. The District is approximately 75% developed (69% residential and 80% commercial), with buildout of both residential and commercial development projected to occur in the 2040 to 2050 timeframe. The District estimates that the population within the District's service area at buildout will be approximately 28,300. Seismic Considerations The District is located in a seismically active region. Significant faults in or near the District's service area include the West Tahoe Fault, the Incline Village Fault, the Stateline Fault and the Mohawk Fault Zone. There is potential for destructive ground shaking during the occurrence of a major seismic event, and land along fault lines may be subject to liquefaction. In the event of a severe earthquake, there may be significant damage to both property and infrastructure within the District, including the Water System. The District maintains $2.5 million in earthquake insurance. See the caption "—District Insurance." Newer Water System facilities are designed to withstand earthquakes with minimal damage, as earthquake loads are taken into consideration in the design of project structures. The District has also undertaken a vulnerability assessment of critical Water System facilities. The vulnerability assessment ranks the District's infrastructure by importance, builds redundancy into existing operations, and includes contingency plans in the event of damage to assets and succession plans for critical staff. The impact of lesser magnitude events is expected by the District to be temporary, localized and repairable. The Water System has never sustained major damage to 12 4892-6277-7113v6/022925-0110 its facilities or experienced extended incidences of service interruptions as a result of seismic disturbances. See the caption "RISK FACTORS —Natural Disasters." Governance and Management General. The District is governed by a five -person Board of Directors (the "Board") elected at large for staggered four-year terms. The Board selects a President and a Vice President from among its members, each of whom serves in such capacity for a one-year term. Current Board members are listed below: Board Member Christa Finn, President Jeff Bender, Vice President Joe Aguera Kim Harris Tony Laliotis Truckee Donner Public Utility District Board of Directors Occupation Small Business Owner Small Business Owner Retired Business Owner Local Government Employee Public Utility Executive Expiration of Term 2022 2024 2024 2024 2022 Day-to-day management of the District is delegated to Brian C. Wright, General Manager since May 2021. Mr. Wright has been with the District since 2013, previously serving as Interim General Manager, Assistant General Manager and Water Utility Director, among other positions. Prior to coming to the District, Mr. Wright served as a Water Utility Supervisor for the City of Manhattan Beach, California, and in various roles for a private water company. In his role as General Manager, Mr. Wright is responsible for implementing policies adopted by the Board and managing day-to-day operations associated with all aspects of water and electric services. Michael Salmon serves as the Chief Financial Officer of the District. Mr. Salmon has been with the District since April 2020. Prior to coming to the District, Mr. Salmon served as a director of finance and corporate controller for several ski resorts in the Lake Tahoe region, and served in public accounting as a Certified Public Accountant (license inactive). Mr. Salmon's public accounting experience included utility audits and utility rate making consulting services. Mr. Salmon has a Bachelor's Degrees in Accounting and Finance from Florida State University. Chad Reed serves as the Water Utility Director of the District. [To come.] Management Policies. The District has adopted several policies which are designed to ensure the prudent and effective management of its operations, including a Debt Management Policy, an Investment Policy and a Reserve Policy (part of a broader set of finance and accounting policies). Further information about these policies is set forth below. Debt Management Policy. The District has adopted a Debt Management Policy in accordance with Government Code Section 8855 to establish guidelines and parameters for the effective governance, management and administration of debt issued by the District and its related entities and to ensure compliance with legislation, statutes and laws that place regulations on local agency debt. The following elements have been incorporated into this policy: • The purposes for which debt may be incurred; • The types of debt that may be issued; • The relationship of the debt to, and integration with, the District's capital improvement program or budget; • Policy goals related to the District's planning goals and objectives; and 13 4892-6277-7113v6/022925-0110 • Debt management practices, including the investment of proceeds and monitoring of expenditures. Investment Policy. The District invests its funds in accordance with the District's investment policy (the "Investment Policy"), which was established in 2006 and is reviewed by the Board annually. The Investment Policy: (a) describes the policies and procedures which govern the investment of District cash; (b) establishes guidelines for the prudent investment of the District's funds; and (c) lists and describes suitable investments. The goals of the District's investment policy and investment management function are compliance with law, enhancement of the economic status of the District, and protection of the District's funds by limiting credit and interest rate risks. In accordance with Government Code Section 53600 et seq., idle cash management and investment transactions are the responsibility of the Chief Financial Officer, who serves as the District Treasurer. Eligible investments are generally limited to the Local Agency Investment Fund which is operated by the State Treasurer and other investments which are authorized for public agencies under Government Code Section 53600 et seq. Funds are invested in the following order of priority: • Safety of Principal; • Liquidity; and • Return on Investment. Staff provides a quarterly report to the Board showing the type of investment, date of maturity, amount invested, current market value, rate of interest and other such information as may be requested by the Board. See the caption "FINANCIAL INFORMATION —Available Cash" for current information with respect to the District investments. Reserve Policy. The Board has adopted a wide-ranging set of finance and accounting policies, including policies related to financial goals, budgeting, procurement, purchasing, asset capitalization and reserves. Under the Reserve Policy: (i) the Water System enterprise fund will maintain a cash reserve in an amount that is equal to one half of annual budgeted operating expenses, excluding depreciation; (ii) the Water System will maintain a Board -restricted operating reserve fund (known as the Deferred Liability fund) to fund unfunded liabilities such as pension costs, with the reserve target determined by the Board on an annual basis; (iii) the Water System will maintain a revolving water capital reserve in an amount that is equal to the average annual budget for capital replacements; and (iv) The Water System will maintain a reserve to pay for vehicle and equipment purchases as needed. Long term financing for these purposes should only be used when necessary and when the life of the asset purchased is greater than 15 years. See the caption "SECURITY FOR THE CERTIFICATES —Rate Stabilization Fund" for a discussion of the pledge of moneys in the Rate Stabilization Fund to the Series 2022 Installment Payments. Employees As of December 31, 2021, the District had 81.5 authorized full-time equivalent employees, of whom 18 were authorized for water operations, 38 worked in general and administrative functions, and 25.5 worked in electric operations. The District has one bargaining unit — the International Brotherhood of Electrical Workers, Local 1245 (the "IBEW"). Relations between the District and the IBEW are governed by a memorandum of 14 4892-6277-7113v6/022925-0110 understanding which expires on December 31, 2024. Certain senior managers are unrepresented. The District has never experienced a strike, slowdown or work stoppage. See the caption "FINANCIAL INFORMATION —Employee Benefits" for a discussion of pension and other post -employment benefits offered to retired employees. Budget Process The District prepares and adopts a balanced budget for each Fiscal Year which includes proposed expenditures and the means of financing such expenditures. The budget takes the form of a two-year financial plan which is adopted by the Board. The budgetary process begins each year on or about August 1, with final approval generally occurring in November. The Board reviews the adopted budget semiannually to determine whether amendments are necessary. The General Manager is authorized to transfer budgeted amounts between line items within a department or activity provided that the total appropriation does not exceed the budgeted amount. Most other budget amendments require authorization by the Board. The General Manager is responsible for controlling expenditures within budgeted appropriations. The Board adopted the budget for Fiscal Year 2022 on November 3, 2021. District Insurance The District maintains a self -funded vision insurance program, with claims processed on behalf of the District. The District does not maintain a claim liability; rather, claims were expensed as paid. The amount of claims paid for each of the past three years has not been material. The District is exposed to various risks of loss related to torts, theft of, damage to and destruction of assets, errors and omissions, injuries to employees and natural disasters. The District purchases insurance coverage for these risks from commercial insurers. The District currently maintains the following coverages: • Liability (general, automobile, public officials and employee errors and omissions: $55 million per occurrence, with various sublimits); • Workers Compensation (statutory limits); • Employers' Liability ($4 million); • Property (scheduled value up to $500 million limit; boiler and machinery sublimit $100 million, with a $25,000 — $50,000 deductible for scheduled assets; earthquake: $2.5 million, with a deductible of 5% per unit of insurance subject to minimum $75,000 of total insurable value (currently approximately $107,742,579); and flood: $25 million, except Zones A&V, limit of $10 million, with a $100,000 deductible); • Excess carriers pooled limits; Liability $5 million, Property $100,000 (including earthquake and flood); • Cyber liability; limit $5 million (no pooled layer); and • Employee Dishonesty Coverage (Crime); pooled layer $100,000, excess limit $3 million. Certain portions of the Water System, including water pipelines that are not in the vicinity of above- ground assets, are not covered by the District's property insurance. No assurance can be given as to the adequacy of the insurance maintained now or in the future by the District to fund necessary repairs or replacement of any 15 4892-6277-7113v6/022925-0110 portion of the Water System, and the District does not have any obligation under the Installment Purchase Agreement to maintain earthquake coverage or to maintain other coverages in the current coverage amounts. Significant damage to the Water System could affect the District's ability to generate sufficient Net Revenues to pay the Series 2022 Installment Payments. See the caption "RISK FACTORS —Natural Disasters." The District has not settled any claims that exceeded its insurance coverage in the past three years. See Appendix B under the caption "INSTALLMENT PURCHASE AGREEMENT —COVENANTS OF THE DISTRICT —Insurance" for a description of insurance coverages that are required to be maintained while the Certificates are outstanding. Outstanding Parity Obligations In 2015, the District issued the 2015 Bonds to refinance certain improvements to the Water System. As of December 31, 2021, the 2015 Bonds were outstanding in the aggregate principal amount of $11,740,000. The 2015 Bonds are payable in semiannual installments and bear interest at rates of between 2.00% and 4.00% per annum. The final payment under the 2015 Bonds is due in 2035. The obligation of the District to pay principal of and interest on the 2015 Bonds from Net Revenues of the Water System is on a parity with the obligation of the District to pay Series 2022 Installment Payments. The District is permitted to incur additional obligations that are payable from Net Revenues on a parity with the Series 2022 Installment Payments in the future upon satisfaction of the conditions that are described under the caption "SECURITY FOR THE CERTIFICATES —Limitations on Parity and Superior Obligations; Subordinate Obligations —Additional Obligations on a Parity with the Installment Payments." Outstanding Subordinate Obligations In 2016, the District issued its Taxable Pension Obligation Refunding Bonds, Series 2016 (the "2016 POBs") in an aggregate amount of $5,589,000 to refinance its Taxable Pension Obligation Bonds, Series 2011, which were issued to refund the District's "side fund" for pension benefits for its employees who are members of CalPERS in accordance with the contract between the District and the Board of Administration of Ca1PERS, dated as of August 21, 2004. As of December 31, 2021, the 2016 POBs were outstanding in the aggregate principal amount of $539,000. The final payment under the 2016 POBs is due June 30, 2022. Net Revenues of the Water System have paid 40% of the debt service on the 2016 POBs, but the obligation of the District to pay principal and interest on the 2016 POBs from Net Revenues of the Water System is subordinate to the obligation of the District to pay Series 2022 Installment Payments. The District is permitted to incur additional obligations that are payable from Net Revenues subordinate to the Series 2022 Installment Payments in the future as described under the caption "SECURITY FOR THE CERTIFICATES —Limitations on Parity and Superior Obligations; Subordinate Obligations —Subordinate Obligations." Financial Statements A copy of the most recent audited financial statements of the District prepared by Moss Adams LLP, Portland, Oregon (the "Auditor") is set forth in Appendix A. The Auditor's letter dated May 10, 2022 is located at the beginning of the Financial Section therein. The summary operating results that are contained under the caption "FINANCIAL INFORMATION — Historical Operating Results and Debt Service Coverage" are derived from these financial statements and audited financial statements for prior Fiscal Years (excluding certain non -cash items and after certain other adjustments), and are qualified in their entirety by reference to such statements, including the notes thereto. 16 4892-6277-7113v6/022925-0110 The District accounts for moneys received and expenses paid in accordance with generally accepted accounting principles applicable to public entities ("GAAP"). Generally, the District recognizes revenues and expenses on the full accrual basis of accounting, meaning that revenues are recognized in the accounting period in which they are earned and expenses are recognized in the period in which they are incurred, regardless of when the related cash flows take place. However, in certain cases, GAAP requires or permits moneys that are collected in one Fiscal Year to be recognized as revenue in a subsequent Fiscal Year and requires or permits expenses that are paid or incurred in one Fiscal Year to be recognized as expenses in a subsequent Fiscal Year. See Note 1.13 to the financial statements that are set forth in Appendix A. Except as otherwise expressly noted herein, all financial information that has been derived from the District's audited financial statements reflects the application of GAAP. For financial reporting purposes, the District operates the Water System as an enterprise fund with a set of self -balancing accounts that is accounted for as a proprietary fund type using the economic resources measurement focus. In governmental accounting, enterprise funds are used to account for operations that are financed and operated in a manner similar to private business enterprises, where the intent is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis are to be financed or recovered primarily through user charges, or where periodic determination of revenues earned, expenses incurred and/or net income is deemed appropriate for capital maintenance, public policy, management control, accountability or other purposes. COVID-19 Pandemic The spread of the strains of coronavirus which are collectively called SARS-CoV-2, which cause the disease known as COVID-19 ("COVID-19"), and local, State and federal actions in response to COVID-19, have impacted the District's operations and finances. In response to the increasing number of COVID-19 infections and fatalities, health officials and experts recommended, and some governments mandated, a variety of responses ranging from travel bans and social distancing practices to complete shutdowns of certain services and facilities. The World Health Organization declared the COVID-19 outbreak as a pandemic and, on March 4, 2020, as part of the State's response to address the outbreak, the Governor declared a state of emergency. On March 13, 2020, the President declared a national emergency, freeing up funding for federal assistance to state and local governments. Many school districts across the State temporarily closed some or all school campuses (including schools within the District) in response to local and State directives or guidance. On March 19, 2020, the Governor issued Executive Order N-33-20, a mandatory Statewide shelter -in - place order applicable to all non -essential services. Certain aspects of the shelter -in -place directives were extended indefinitely until indicators for modifying the stay-at-home order were met. The County and Placer County also declared states of emergency in response to the COVID-19 outbreak. On May 4, 2020, the Governor issued an executive order informing local health jurisdictions and industry sectors that they could gradually re- open under new modifications and guidance provided by the State. A phased re -opening of various sectors was underway beginning in mid-2020 in accordance with a four -stage re -opening plan that ended with a full reopening of the economy on June 15, 2021. Although pursuant to the re -opening plan certain restrictions on activities were eased, restrictions were also re -imposed in various jurisdictions as local conditions warranted, and such restrictions may be renewed as the pandemic continues. On March 27, 2020, the President signed the $2.2 trillion Coronavirus Aid, Relief, and Economic Stabilization Act (the "CARES Act") which provided, among other measures, $150 billion in financial aid to states, tribal governments and local governments to provide emergency assistance to those most significantly impacted by COVID-19. Under the CARES Act, local governments were eligible for reimbursement of certain costs which were expended to address the impacts of the pandemic. The District does not expect to receive any funds under the CARES Act. On December 27, 2020, the President signed the $900 billion Coronavirus Response and Relief Supplemental Appropriations Act. Although the act did not provide additional financial assistance to state and 17 4892-6277-7113v6/022925-0110 local governments, it did extend the deadline (to October 2021) for them to use unspent funds that were previously approved under the CARES Act. On March 11, 2021, the President signed the American Rescue Plan Act of 2021 (the "ARP Act"), a $1.9 trillion economic stimulus package that was designed to help the United States' economy recover from the adverse impacts of the COVID-19 pandemic. The ARP Act includes approximately $350 billion in aid to state and local governments such as the District, consisting of both direct funding from the United States Department of Treasury and program moneys that will flow from other federal agencies. Half of the aid to state and local governments was distributed in spring 2021, with the other half following in 2022. County governments have been allocated a total of approximately $65.1 billion under the ARP Act and any District funding received under the ARP Act will be allocated through the County. In 2022, the District received reimbursement of $216,665 under the ARP Act, consisting of $113,135 received for the District's electric system through the State Department of Community Services and Development and $103,530 received for the Water System through the CWWAPP, as discussed below. Any ARP Act funds received by the District must be used: (i) to assist households, small businesses, nonprofit entities and impacted industries including hospitality, travel and tourism; (ii) to pay a salary premium to essential workers up to $13 an hour with an annual cap of $25,000; (iii) to cover for lost revenue in providing services; and (iv) to make investments in water, sewer or broadband infrastructure. The effects of the COVID-19 outbreak and governmental actions responsive to it have altered the behavior of businesses and people in a manner that has had significant negative impacts on global and local economies. In addition, financial markets in the United States and globally have experienced significant volatility attributed to COVID-19 concerns. The outbreak resulted in increased pressure on State finances as budgetary resources were directed towards containing the pandemic and tax revenues sharply declined in early 2020. Identified cases of COVID-19 and deaths attributable to the COVID-19 outbreak continue to occur throughout the United States, including the County. Potential impacts to the District associated with the COVID-19 outbreak include, but are not limited to, increased costs and challenges to the public health system in and around the District, cancellations of public events and disruption of the regional and local economy, with corresponding decreases in the District's revenues, including as a result of reduced water use (particularly among commercial and hotel establishments). In addition, the Governor suspended utility service shutoffs and the collection (although not the imposition) of late fees and penalties for residential customers (including Water System customers) through December 31, 2021. Despite the foregoing actions, the District has not accumulated a significant number of uncollectible accounts and has written off approximately $10,817 (for 2020 and 2021 combined) of nonpayment, including uncollected late fees. The District has an allowance for doubtful accounts as of December 31, 2021 of $20,500, and in May 2022 re -instituted its pandemic -paused standard collection procedures. See the caption "THE WATER SYSTEM —Water System Collection Procedures." The District has made low income assistance programs available to delinquent customers and is participating in the California Water and Wastewater Arrearage Payment Program (the "CWWAPP"), a State program that will provide up to $1 billion to water service providers to cover delinquencies by commercial and residential customers during the period between March 4, 2020 and June 15, 2021. CWWAPP funds will initially be available to cover potable water service charge delinquencies, with delinquencies in wastewater service charges covered to the extent that funds remain after water service charges are covered. In early 2022, the District received $103,530 under the CWWAPP to cover water service arrearages. In response to the COVID-19 outbreak, the District temporarily modified its operations to implement remote work opportunities for employees, shift employees to alternate locations and provide services online, closed the District's administrative building to the public, and deferred several non -essential capital improvement projects. In order to transition District employees to working from home, the District procured additional hardware, established secure access to District computer systems and remote access to District telephone systems, and deployed tele-conferencing applications. In addition, large gatherings of District 18 4892-6277-7113v6/022925-0110 personnel at any one time were prohibited for much of 2020 and early 2021 per health officer orders. Board meetings occurred via teleconference, and public comment and participation for Board meetings were also conducted via teleconference and electronic means. With improvements in local case rates, the District has phased in the resumption of normal operations and activities while complying with public health orders and California Occupational Safety and Health Administration COVID-19 Prevention Plan mandates. The District has not experienced and does not at this time foresee a future negative impact on the execution of District services as a result of the COVID-19 pandemic. The District has worked diligently to provide its employees with personal protective equipment and voluntary access to screening and vaccinations. However, there can be no assurance that absences of employees or District leadership due to COVID-19 will not adversely impact District operations. The District reports that Fiscal Year 2020 and 2021 Water System revenues and expenses were not materially affected by the COVID-19 outbreak. The District's customer base is primarily residential and its water rate structure consists of variable and fixed rate components, which partially mitigates the effect of any reduced water usage by non-residential customers. In Fiscal Year 2021, the variable portion of the District's Water System revenue was approximately 15% and the fixed rate component was approximately 85%. The District experienced an increase in water usage in 2020 and 2021 as compared to the three-year historical average, attributed primarily to an increased occupancy of residential primary and secondary homes during the pandemic. See the captions "THE WATER SYSTEM —Historical Water System Accounts" and "THE WATER SYSTEM —Water System Rates and Charges." The projected Water System operating results which are set forth under the caption "FINANCIAL INFORMATION —Projected Operating Results and Debt Service Coverage" include the following assumptions based on the trends that the District has experienced since the beginning of the outbreak: (i) projected water sales for Fiscal Year 2022 are assumed to remain at levels which are approximately equal to water sales in recent years, with incremental revenue increases resulting from increased rates (as the District did not experience material decreases in water sales in 2020 or 2021 compared to prior years); (ii) Water System write-offs for Fiscal Year 2022 are projected to total approximately $25,000 (roughly the same as the District experienced in Fiscal Year 2021); and (iii) Water System connections are expected to grow at 0.5% for Fiscal Years 2022 and 2023 (for a 10-year growth rate of 0.8%). The COVID-19 pandemic is ongoing, and the duration and severity of the outbreak and the economic and other actions that may be taken by governmental authorities to contain the outbreak or to treat its impact are uncertain. The ultimate impact of COVID-19 on the operations and finances of the District and the Water System is unknown. The District continues to actively monitor Water System usage, payment delinquencies, and revenues and expenditures, so that any further impacts of the COVID-19 pandemic can be anticipated. The District does not currently expect that the COVID-19 pandemic will have a material adverse effect on the District's ability to pay the Series 2022 Installment Payments. THE WATER SYSTEM General As of December 31, 2021, the District provided water service to 12,709 residential and 767 commercial, governmental, institutional and other customers. All but 34 water connections are metered, with these remaining 34 projected to be metered by December 31, 2023. The District's sole source of water is groundwater that is extracted from 13 active wells in the Basin, including 10 wells which supply potable water and 3 wells which supply non -potable water to certain customers for golf course irrigation and construction purposes. The total production capacity of the District's potable water wells is approximately 10,260 gallons per minute ("gpm"), or 14.8 million gallons per day ("mgd"), with the 19 4892-6277-7113v6/022925-0110 output from individual wells ranging from approximately 33 to 2,500 gpm. Average daily demand is approximately 3.8 mgd. Groundwater from the Basin is of high quality and is not treated extensively prior to delivery to customers. Seethe caption "—Water Quality." The District also has 990 acre feet per year of surface water rights in Donner Lake and six local springs, although the District does not currently utilize these surface water rights and the utilization of these rights would require the construction of extensive water distribution improvements and water treatment infrastructure which do not currently exist. See the caption "—Water Supply." In addition to groundwater wells, the Water System's physical assets include: (i) 25 pump stations (many of which have multiple individual pumps); (ii) 33 active water storage reservoirs with a combined storage capacity of approximately 9.6 million gallons; one of the District's reservoirs is an elevated steel tank (water tower), one is a half -buried concrete tank and the remainder are steel tanks that rest on the ground; (iii) approximately 220 miles of distribution pipelines varying from 2" to 24" in diameter, although steel pipelines of between 4" and 8" in diameter are predominant; most of the District's pipelines were installed after 1960; (iv) 47 pressure zones; and (v) 35 active control valve stations. The District operates two water systems within its service area: (i) the Hirschdale System, which serves fewer than 30 accounts; and (ii) the Truckee System, which serves all other Water System accounts. The two systems are physically separate and not interconnected. The District maintains an interconnection with the Northstar Community Services District ("NCSD"), a neighboring agency. This interconnection serves as an emergency source of supply in the event of a water supply shortage (as discussed under the caption "—Drought Declarations —Water Shortage Contingency Plan") and collectively enhances water supply reliability for the District and NCSD. Water Quality General. The District's sole water source is groundwater, which is extracted from the Basin. Groundwater within the Basin is of high quality. The District maintains disinfection systems at each of its potable water wells which inject water supplies with chlorine prior to delivery to customers, but no other treatment is required to meet applicable drinking water standards. Previously, the District treated groundwater from two of its wells to remove arsenic, iron and manganese. These elements are not currently found in elevated levels in the water that is extracted from the wells, although the treatment facilities remain in place should they be needed in the future. PFAS. In 2019, the State Water Resources Control Board's (the "SWRCB") Division of Drinking Water (the "Division") lowered the Notification Levels (the "NLs") for Perfluorooctanoic acid ("PFOA") and Perfluorooctanesulfonic acid ("PFOS") to 5.1 and 6.5 parts per trillion ("PPT"), respectively. NLs are non - regulatory, precautionary health -based measures for concentrations of chemicals in drinking water that warrant notification and further monitoring and assessment. 20 4892-6277-7113v6/022925-0110 In 2020, the Division lowered the Response Levels (the "RLs") for PFOA and PFOS from 70 PPT, combined, to 10 and 40 PPT, respectively. RLs are non -regulatory, precautionary health -based measures that are set at higher levels than NLs and represent thresholds at which the Division recommends that water systems remove a water source from use or treat it. PFOA and PFOS are fluorinated organic chemicals which are part of a family of synthetic compounds referred to as per- and polyfluoroalkyl substances ("PFAS"). PFAS are water and lipid resistant substances that were previously used in a variety of manufacturing processes and industrial applications. They are often present in water supplies which are impacted by wastewater treatment plant effluent or active or former military installations. The District understands that recent technological advances have enabled water agencies to detect PFAS compounds at very low concentrations. The District's goal is to ensure that all drinking water served to customers does not exceed the NLs for PFAS (which are lower than the RLs). The District has tested the water within its distribution system for PFAS under the Unregulated Contaminant Monitoring Rule, and all wells were "non -detect," except that, in 2020, two of the District's wells contained PFOA and PFOS at levels that were below the NLs (Airport Well (3.3 ppt) and Martis Valley (2.4 ppt)). Because the PFOA and PFOS concentrations were below the NLs, the District has not taken any action to further treat or idle the affected wells. The District does not anticipate that implementation of the lowered PFAS RLs by the Division will have a material adverse effect on the operation of the Water System or the costs thereof. The projected operating results which are set forth under the caption "FINANCIAL INFORMATION —Projected Operating Results and Debt Service Coverage" do not assume significant increases in water treatment or other Water System operating costs to meet State regulations relating to PFAS. Water Supply Groundwater. The District's sole source of water is groundwater that is extracted from the Basin. The District operates 13 active wells in the Basin, including 10 wells which supply potable water and 3 wells which supply non -potable water to certain customers for golf course irrigation and construction purposes. The total production capacity of the District's potable water wells is approximately 10,260 gpm, or 14.8 mgd. The District also owns five additional wells that are considered inactive, two of which the District is evaluating for the potential to supply non -potable water in the future. See the captions "—Historical Water System Supply" and "—Projected Water System Supply" for historical and projected information with respect to the District's water supplies. The Basin underlies an area of approximately 57 square miles. The District's service area is mountainous and the primary source of recharge to the Basin is snowfall and snowmelt during the winter. In 2016, a consultant to the District and other nearby water service providers estimated that the safe yield of the Basin is approximately 22,000 acre feet per year, which is well above projected water demands on the Basin at buildout. See the caption "THE DISTRICT —Land Use and Service Area." A 2015 study of the Basin and surrounding areas by the United States Bureau of Reclamation indicated that climate change could cause a 10% increase in groundwater recharge under a "wet" scenario and a 25% decrease in groundwater recharge under a "hot/dry" scenario. The District believes that a 25% decrease in groundwater levels in the Basin, while significant, would be manageable given current and projected water demand within the District's service area. The Basin has not been adjudicated and has been designated as a low priority basin under the provisions of Assembly Bill No. 1739 and Senate Bill Nos. 1168 and 1319 (collectively, the Sustainable Groundwater 21 4892-6277-7113v6/022925-0110 Management Act, or "SGMA"), which was enacted on September 16, 2014. SGMA constitutes a legislative effort to regulate groundwater on a Statewide basis. As a low priority basin, the Basin is not subject to certain provisions of SGMA which require a groundwater management plan to be implemented. Notwithstanding the foregoing, the District, together with NCSD and Placer County Water Agency ("PCWA"), another local water supplier which extracts groundwater from the Basin, have voluntarily developed a groundwater management plan (the "GMP") for the Basin in order to ensure the long-term sustainability of the Basin. The GMP's goals include safeguarding the quality of water in the Basin and maintaining sufficient supplies in the Basin to serve the needs of the community into the future. The District, NCSD and PCWA meet at least annually to discuss the implementation of the GMP, and the GMP is updated every five years. As part of the GMP process, the three agencies partnered to fund the creation of a computer model of the Basin, including a climate change modeling component. In 1990, the federal government enacted Public Law 101-618, known as the Truckee -Carson -Pyramid Lake Water Rights Settlement Act (the "Settlement Act"). The Settlement Act established entitlements to the waters of Lake Tahoe, the Truckee River and its tributaries and various other water bodies in the region, including in northern Nevada. As part of the Settlement Act's implementation, the United States Department of the Interior negotiated an operating agreement for the operation of Truckee River reservoirs among the State, the State of Nevada, Sierra Pacific Power Company, Pyramid Tribe and the United States. The operating agreement is known as the Truckee River Operating Agreement (the "TROA"). The TROA allocates all of the water within the District's service area at a level that is more than two times greater than the current production from the Basin for all public and private groundwater users. In addition, the TROA requires that the drilling of any new wells in the Basin minimize disruption of surface stream flows to the maximum extent feasible. The District does not currently expect to drill any new wells in the Basin in the near future. As an active participant in the implementation of the GMP and a party to the TROA, the District does not expect its groundwater extraction rights or costs in the Basin to change significantly as a result of the enactment and implementation of SGMA, the GMP or the TROA, nor does the District currently expect the enactment and implementation of SGMA, the GMP or the TROA to have a material adverse effect on the District's ability to make the Series 2022 Installment Payments from Net Revenues. Surface Water Rights. In addition to its groundwater rights, the District has surface water rights to 990 acre feet per year from a freshwater lake near the District's service area called Donner Lake and surface water rights to six local springs, known as McGlashan, Southside, Greenpoint, Tonnini, Sheepherder and Hofert Springs. The District has drawn from these sources in the past but does not currently utilize its surface water rights. The springs are at a low capacity, and the District has no physical facilities at Sheepherder and Hofert Springs, with facilities at the other springs currently inactive. The utilization of any of the District's surface water rights would require the construction of extensive water distribution and water treatment infrastructure which do not currently exist. Drought Declarations State Orders. On January 17, 2014, the Governor declared a drought state of emergency (the "Declaration") with immediate effect. The Declaration included an order encouraging local urban water suppliers, including the District, to implement their local water shortage contingency plans; the District's plan is discussed under the subcaption "—Water Shortage Contingency Plan." On April 7, 2017, after significant improvement in water supply conditions across the State, the Governor issued Executive Order B-40-17, which rescinded mandatory conservation measures for most counties in the State (including the County). 22 4892-6277-7113v6/022925-0110 In 2018, the Governor signed Senate Bill 606 and Assembly Bill 1668 into law. These bills relate to water conservation and drought planning and empower DWR and the SWRCB to adopt long-term standards for the following: (i) indoor residential water use; (ii) outdoor residential water use; (iii) commercial, industrial and institutional water use for landscape irrigation; and (iv) water loss. The indoor water use standard has been defined as 55 gallons per person per day ("GPCD") until January 2025; the standard will decrease over time to 50 GPCD in January 2030. Standards for outdoor residential water use and commercial, industrial and institutional water use for landscape irrigation are still being developed. Urban water suppliers will be required to stay within annual water budgets, based on these standards, for their service areas. The District is planning to respond to the impacts on the Water System of the implementation of Senate Bill 606 and Assembly Bill 1668 or any future legislation with respect to water conservation and water loss. However, the District is prepared to meet the 55 GPCD standard for indoor water use, along with annual State - mandated water use efficiency standards, based on the District's current water demands and ongoing efforts to encourage conservation, as described below under the subcaption "—Water Shortage Contingency Plan." The District also has a tiered rate structure for residential customers that further promotes water use efficiency by charging a higher rate for water use in excess of 8,000 gallons per month. See the caption "—Water System Rates and Charges —Adopted Rates and Charges." On October 19, 2021, the Governor declared a Statewide drought state of emergency and requested that all water users voluntarily reduce water use by 15%. The declaration encouraged water agencies to draw upon supplies other than groundwater and to implement their water shortage contingency plans and authorized the SWRCB to adopt regulations that prohibit wasteful water use (such as the use of potable water to wash paved surfaces or to irrigate landscaping during the two days following rainfall). There can be no assurance that subsequent State declarations will not impose mandatory water use restrictions should dry conditions persist in 2022 or future years. On March 28, 2022, the Governor issued Executive Order NO-27-22, which directed the SWRCB to issue drought regulations, including a recommendation to have urban water suppliers initiate Level 2 of their water shortage contingency plans. The District believes that it has significant water supplies and storage, and that it is well positioned to respond to both drought and regulatory requirements. At this time, the District does not foresee a water supply shortage. Water Shortage Contingency Plan. The District's water shortage contingency plan, which is referred to as the Water Shortage Conservation Plan (the "WSCP") and which meets State guidelines for such plans, calls for the District to respond to a water shortage in stages as follows: • Level 1 is intended to effect a reduction in water use of up to 10% on a voluntary basis. Under Level 1, irrigation of ornamental landscapes and turf with potable water is limited to every other day, the use of potable water to wash down paved surfaces is prohibited and hoses used to wash motor vehicles must be equipped with a shutoff nozzle. • Level 2 is intended to effect a reduction in water use of up to 20%. Under Level 2, the Level 1 restrictions are in place and customers may be subject to penalties for failure to comply. • Level 3 is intended to effect a reduction in water use of over 30%. Under Level 3, the Level 1 and 2 restrictions are in place, irrigation of ornamental landscapes and turf with potable water is limited to three days per week and the District may install flow restriction devices for noncompliant customers. • Level 4 is intended to effect a reduction in water use of over 40%. Under Level 4, the Level 1, 2 and 3 restrictions are in place, irrigation of ornamental landscapes and turf with potable water is limited to two days per week and the customers must repair water leaks within 10 days. 23 4892-6277-7113v6/022925-0110 • Level 5 is intended to effect a reduction in water use of 50%. Under Level 5, the Level 1, 2, 3 and 4 restrictions are in place, irrigation of ornamental landscapes and turf is prohibited and the District may implement rolling water outages. • Level 6 is intended to effect a reduction in water use of over 50%. Under Level 6, the Level 1, 2, 3, 4 and 5 restrictions are in place and all outdoor water use is prohibited. The District is empowered to enforce its water shortage contingency plan with successively increasing fines, the installation of flow restriction devices, billing of enforcement costs to customers, and the termination of water service. The projected Water System operating results that are set forth under the caption "FINANCIAL INFORMATION —Projected Operating Results and Debt Service Coverage" do not reflect the implementation of the WSCP [as the projections reflect a return to historical average precipitation levels before full implementation of Executive Order NO-27-22 (as discussed under the subcaption "—State Orders")]. The District does not currently expect that the implementation of the WSCP in the future will have a material adverse effect on its ability to pay the Series 2022 Installment Payments from Net Revenues. As discussed under the caption "—Water System Rates and Charges," the District's rate structure consists of variable and fixed rate components. Decreased water revenues are partially offset by a decrease in related variable costs, while fixed water charges largely cover the Water System's fixed operating and maintenance costs. In addition, the District has covenanted to set Water System rates and charges in amounts that it expects to be sufficient to pay the Series 2022 Installment Payments from Net Revenues. See the caption "SECURITY FOR THE CERTIFICATES — Rate Covenant." If a water shortage should arise again in the future, legal issues exist as to whether different State Water Code provisions or State regulations will be invoked to manage the allocation of water. Any curtailment pursuant to State orders could necessitate an increase in the District's water rates to Water System customers. See the caption "CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES —Proposition 218" for a discussion of certain restrictions on the District's ability to raise water rates. Historical Water System Supply The following table shows sources of supply for the Water System for the last five Fiscal Years. Table 1 Truckee Donner Public Utility District Historical Water Supply in Millions of Gallons Fiscal Year Ended December 31 2017 2018 20190) 2020 2021 Groundwater Production (2) 0) Decrease reflects wet hydrological year. (2) Includes potable and non -potable groundwater production. Source: District. 1,487 1,579 1,503 1,713 1,715 Percentage Increase/ (Decrease) 6.19% (4.81) 13.97 0.12 24 4892-6277-7113v6/022925-0110 Historical Water System Deliveries The following table shows water deliveries to District customers for the last five Fiscal Years. Table 2 Truckee Donner Public Utility District Historical Water System Deliveries in Millions of Gallons(') Fiscal Year Percentage Ended Residential Other Potable Non -Potable Water Increase/ December 31 Customers Water Customers Customers Total (Decrease) 2017 665 301 182 1,148 -- 2018 708 308 217 1,233 7.40% 2019(2) 676 291 199 1,166 (5.43) 2020 801 301 226 1,328 13.89 2021 768 304 246_ 1,318 (0.32) Differences between the above water deliveries and the water supplies set forth under the caption "—Historical Water System Supply" reflect unaccounted for water, including water losses and inaccuracies in water meter readings. (2) Decrease reflects wet hydrological year. Source: District. Historical water deliveries reflect connections to the Water System as well as water demand, which can be affected by weather conditions, State mandates and other factors. Historical Water System Accounts The following table shows the average number of Water System accounts for the last five Fiscal Years. Table 3 Truckee Donner Public Utility District Historical Water System Accounts (Year Average) Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Connection Type 2017 2018 2019 2020 2021 Residential 12,218 12,317 12,416 12,505 12,635 Commercial/Other 706 709 710 748 765 TOTAL 12,924 13,026 13,126 13,253 13,400 Percentage Increase/(Decrease) -- 0.79% 0.77% 0.97% 1.11 % Source: District. 25 4892-6277-7113v6/022925-0110 Historical Water System Sales Revenues The following table shows the sales revenues of the Water System for the last five Fiscal Years. Connection fees are not included in the below numbers. Table 4 Truckee Donner Public Utility District Historical Water System Sales Revenues Fiscal Year Residential Commercial Percentage Increase/ Ended December 31 Customers Customers Totals21 (Decrease) 2017 $10,383,019 $1,464,514 $11,847,533 -- 2018 10,819,427 1,558,775 12,378,202 4.48% 2019 11,190,154 1,577,004 12,767,158 3.14 2020 11,812,092 1,691,596 13,503,688 5.77 20210) 13,245,056 1,705,843 14,950,899 10.72 (1) Reflects unaudited actual Fiscal Year 2021 results. (2) Differences between these amounts and the amounts in the "Sales to Customers" line item in Table 13 under the caption "FINANCIAL INFORMATION —Historical Operating Results and Debt Service Coverage" reflect the exclusion of unbilled accruals in the above table. Source: District. Water System sales revenues reflect water deliveries as well as adopted rates and charges. See the captions "—Historical Water System Deliveries" and "—Water System Rates and Charges." 26 4892-6277-7113v6/022925-0110 Largest Water System Customers The following table shows the largest Water System customers for Fiscal Year 2021, as determined by annual payments. Table 5 Truckee Donner Public Utility District Ten Largest Water System Customers Water Usage in Percentage of Millions of Annual Total Water System Customer Customer Type Gallons Revenues Sales Revenues0) Private company Golf Course 181.09 $186,321 1.25% Private company Golf Course 23.39 134,302 0.90 Private Company Golf Course 75.90 64,058 0.43 Truckee Donner Recreation and Park District Government 27.70 60,172 0.40 Tahoe Forest Hospital Hospital 15.33 53,612 0.36 Tahoe Truckee Unified School District Schools, K-12 18.35 46,304 0.31 Private company housing development 12.82 42,704 0.29 Town of Truckee Government 4.60 39,172 0.26 Private company Housing development 7.79 37,160 0.25 Private company Housing development 3.18 32,421 0.22 Total 370.15 $696,226 4.66% 0) Reflects unaudited actual Fiscal Year 2021 results. Source: District. These customers collectively accounted for approximately 4.7% of total Water System sales revenues and service charges of $14,950,899 in Fiscal Year 2021. Water System Rates and Charges General. The Water System's rates and charges are set by the Board and are not subject to the jurisdiction of, or regulation by, the State Public Utilities Commission or any other regulatory body. The District is, however, required to comply with the notice, hearing and majority protest provisions of Article XIIID of the State Constitution ("Article XHID"), which is popularly known as Proposition 218, as to Water System rates and charges. See the caption "CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES —Proposition 218" for further information with respect to Proposition 218. The District annually determines the adequacy of the charge structure for water service in the service area after full consideration of expected operations, maintenance, capital costs and capital repayment obligations of the Water System. The Board sets water rates and charges at a level that it determines is sufficient to pay all Operation and Maintenance Costs of the Water System, to make debt service payments and to maintain appropriate reserves for the Water System. In December 2020, the Board adopted rates for Fiscal Years 2021 through 2025 (the "Rate Plan") in accordance with the provisions of Proposition 218. The adopted Rate Plan remains in place as of the date hereof. There can be no assurance that the Board will not repeal or modify the rates that are set forth in the Rate Plan in 27 4892-6277-7113v6/022925-0110 the future or that the District's ratepayers will not approve an initiative to repeal or modify any increase in water rates and charges approved by the Board. The projected operating results which are set forth under the caption "FINANCIAL INFORMATION - Projected Operating Results and Debt Service Coverage" assume Water System rate increases in accordance with the rate plan, as well as a rate increase of approximately 3% in Fiscal Year 2026 which has not yet been approved. There can be no assurance that Fiscal Year 2026 Water System rates will be increased as projected herein. In the event that the Board does not adopt a rate increase in Fiscal Year 2026 as currently contemplated, or in the event that the Rate Plan is repealed or modified, Water System operating results could be materially different from the projections in this Official Statement. The District is subject to certain covenants with respect to the Certificates which require the District to set Water System rates and charges in amounts that it expects to be sufficient to pay the Certificates from Net Revenues. See the caption "SECURITY FOR THE CERTIFICATES -Rate Covenant." Adopted Rates and Charges. The District's water rates and charges include: (1) fixed monthly meter charges; (2) a consumption charge per thousand gallons, with two usage tiers to encourage conservation; and (3) zone -based pumping charges which reflect the District's additional costs to pump water to higher elevations within its mountainous service area. Adopted rates and charges pursuant to the Rate Plan, including those which were in effect in Fiscal Year 2021, are as follows: Table 6 Truckee Donner Public Utility District Residential Water Rates and Charges Rate or Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Charge Type 2021 2022 2023 2024 2025 5/8" x 3/4" $75.74 $82.55 $ 89.16 $ 96.29 $103.03 Meter Charge 3/4" 75.74 82.55 89.16 96.29 103.03 V 90.34 98.47 106.35 114.85 122.89 Consumption 0-8,000 gallons 0.99 1.08 1.16 1.26 1.34 Charge $/1,000 gal 8,000+ gallons 1.40 1.53 1.65 1.78 1.91 Zone 1 0.00 0.00 0.00 0.00 0.00 Zone 2 0.75 0.82 0.89 0.96 1.03 Zone 3 1.50 1.64 1.77 1.91 2.04 Pump Zone Zone 4 2.25 2.45 2.65 2.86 3.06 Charge Zone 5 3.00 3.27 3.53 3.81 4.08 Zone 6 3.75 4.09 4.42 4.77 5.10 Zone 7 4.50 4.91 5.30 5.72 6.12 Source: District. 28 4892-6277-7113v6/022925-0110 Table 7 Truckee Donner Public Utility District Commercial Water Rates and Charges Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year 2021 2022 2023 2024 2025 5/8" x 3/4" $ 75.74 $ 82.55 $ 89.16 $ 96.29 $ 103.03 3/4" 75.74 82.55 89.16 96.29 103.03 1" 90.34 98.47 106.35 114.85 122.89 1 1/2" 126.99 138.42 149.49 161.45 172.75 Meter Charge 2" 174.59 190.30 205.52 221.97 237.50 3" 292.26 318.56 344.05 371.57 397.58 4" 418.17 455.80 492.27 531.65 568.87 6" 627.25 683.71 738.40 797.45 853.30 8" 784.07 854.63 923.00 996.84 1,066.62 Consumption $/1,000 gallon 1.37 1.49 1.61 1.74 1.86 Charge Zone 1 0.00 0.00 0.00 0.00 0.00 Zone 2 0.75 0.82 0.89 0.96 1.03 Zone 3 1.50 1.64 1.77 1.91 2.04 Pump Zone Zone 4 2.25 2.45 2.65 2.86 3.06 Charge Zone 5 3.00 3.27 3.53 3.81 4.08 Zone 6 3.75 4.09 4.42 4.77 5.10 Zone 7 4.50 4.91 5.30 5.72 6.12 Source: District Standby Water Availability Charges. Any local agency in the State which is authorized by law to provide water service and which is providing such service within its jurisdiction may fix, pursuant to Government Code Section 54984 et seq., a standby charge on land to which water services are available, whether or not the water services are actually used. Since 1975, the District has levied a standby charge for the availability of water service to undeveloped property (the "Standby Charge"). The current standby charge was fixed in 1991 at $80 annually per undeveloped parcel. The Standby Charge does not apply to the Glenshire and Donner Lake portions of the service area. The revenues from the Standby Charge made up approximately 1 % in any given year. Connection and Facilities Fees. The District collects connection fees to reimburse the District for actual administrative, material and labor costs of connecting to the Water System. Current connection fees are: (i) $1,290 for 5/8" by 3/4" meters; (ii) $1,330 for 3/4" meters; (iii) $1,430 for 1" meters; and (iv) at cost for larger diameters. In addition to connection fees, the District charges facilities fees to customers developing property within the Water System's service area in order to cover the pro rata share of the cost of water supply facilities which are required to serve such customers (the "Facilities Fees"). The cost of future source and storage facilities are included in the Facilities Fees in order to maintain an equitable distribution of benefits received between present and future service connections. The Facilities Fees include cost allowances for domestic water and residential fire protection, rated at 750 gpm for two hours. Iu the event that a service requires greater or less than the allotted fireflow of 750 gpm, the fee may be adjusted accordingly. Facilities Fees are a highly variable revenue source for the District as they are based on the level of development activity within the boundaries of the Water System during each Fiscal Year. However, the Facilities Fees make up only a small percentage of Water System Revenues (generally less than 2% of total Revenues). Facilities Fees are adjusted annually to reflect the rate of inflation set forth in the Engineering News - Record 20-City Construction Cost Index. Current Facilities Fees: (i) are $2.06 per square foot for residential 29 4892-6277-7113v6/022925-0110 customers; and (ii) vary by meter size for commercial customers, currently ranging between $5,634 for a 5/8" water meter and $281,779 for an 8" water meter. Comparison to Nearby Service Providers. The table below sets forth a comparison of the District's typical water bill for a single family residential user to those of certain nearby water purveyors in 2021. Table 8 Truckee Donner Public Utility District Water Rate Comparison Water Service Provider Monthly Charge South Tahoe Public Utility District $ 60.13 San Francisco Public Utility Commission 80.10 Donner Summit Public Utility District 86.25 Truckee Donner Public Utility District(') 86.97 Alpine Springs County Water District 87.60 Tahoe City Public Utility District 99.82 Olympic Valley Public Service District 114.52 0) Includes pump zone charge, reflecting a weighted average of the District's 7 pump zones. Excluding the pump zone charge, the typical monthly bill is $80.69. Source: District. Water System Collection Procedures The District is on a monthly billing cycle for Water System customers. The water bill is consolidated with the electric bill, with separate sections for electricity and water, and a total of the two amounts combined. All accounts with charges for services that are at least 60 days past due are subject to discontinuation of service proceedings upon notice to the accountholder. Accounts for which service is discontinued will not be reinstated until all charges, including a reconnection fee of $40, have been paid. Standby Charges are collected twice annually through the ad valorem property tax bills collected by the County and Placer County, as applicable. Each of the counties allocates Standby Charges using the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the "Teeter Plan"), as provided for in State Revenue and Taxation Code Section 4701 et seq. Under the Teeter Plan, the District receives 100% of Standby Charges levied without regard to delinquencies, with penalties and late charges collected by the applicable county. As of December 31, 2021, less than 4% of the District's customers were delinquent (30 or more days past due) in the payment of their bills, which is slightly higher than historical averages of less than approximately 2%. The higher delinquencies are the result of the COVID-19 pandemic and the suspension of water shutoffs during the outbreak. The amount of delinquencies reflects an aging report and includes the total of all bills not paid during prior Fiscal Years, including amounts shown as delinquent prior to the COVID-19 outbreak. The District reports that most customers pay their bills in full, including late charges, prior to shutoff. See the caption "THE DISTRICT—COVID-19 Pandemic" for a discussion of the suspension of water shutoffs through December 31, 2021. The suspension prevented the District from shutting off delinquent accounts as described in this section. Considering the continuing potential impacts of the pandemic, the District anticipates that its allowance for the write-off of uncollectible accounts will be approximately $25,000 for Fiscal Year 2022, representing approximately 0.15% of projected Water System Revenues. The District plans to offer delinquent customers longer -term payment arrangements and to apply grant funds to cover write-offs, including additional grant funds under the CWWAPP, if any. Seethe caption "THE DISTRICT—COVID-19 Pandemic" for a discussion of the CWWAPP. 30 4892-6277-7113v6/022925-0110 Future Water System Improvements The District projects total capital improvements to the Water System of approximately $44.7 million during Fiscal Years 2022 through 2026, including: (i) the 2022 Project (as discussed under the caption "THE 2022 PROJECT"); and (ii) the following additional projects, among others: pipeline replacements and construction of new pipelines, pump stations and water tanks. Such capital improvements are expected to be financed by a combination of the Certificates, Water System capital facility reserves accumulated in prior years and Revenues remaining after the payment of the Series 2022 Installment payments. The District does not currently anticipate that it will issue additional Bonds or Contracts to finance such capital improvements in Fiscal Years 2022 through 2026. Projected Water System Supply The following table shows the sources of supply for the Water System that are projected by the District for the current and next four Fiscal Years. Table 9 Truckee Donner Public Utility District Projected Water Supply in Millions of Gallons — Production Percentage Increase/ Fiscal Year Ending December 31 Groundwater Production (Decrease) 20220) 1,613 (5.95)% 2023 1,624 0.68 2024 1,635 0.68 2025 1,647 0.73 2026 Ar 1,658 0.67 0) Production baseline for Fiscal Year 2022 is based on a 5-year historical average, thereafter increasing for customer growth. Source: District. 31 4892-6277-7113v6/022925-0110 Projected Water System Deliveries The following table shows water deliveries to District customers that are projected by the District for the current and next four Fiscal Years. Table 10 Truckee Donner Public Utility District Projected Water System Deliveries in Millions of GallonsM Fiscal Year Percentage Ending Residential Other Potable Non -Potable Water Increase/ December 31 Customers Water Customers Customers Total (Decrease) 2022 731 304 214 1,249 (5.24)% 2023 737 306 214 1,257 0.64 2024 743 309 214 1,266 0.72 2025 749 311 214 1,274 0.63 2026 754 314 214 1,282 0.63 Differences between the above projected water deliveries and the projected water supplies set forth under the caption "— Projected Water System Supply" reflect unaccounted for water, including water losses and inaccuracies in water meter readings. Source: District. Water System deliveries can be affected by a number of factors, including connections to the Water System, State mandates and weather conditions. See the caption "—Projected Water System Accounts" below. Projected Water System Accounts The following table shows the average number of Water System accounts that are projected by the District for the current and next four Fiscal Years. Table 11 Truckee Donner Public Utility District Projected Water System Accounts (Year Average) Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Connection Type 2022 2023 2024 2025 2026 Residential 12,735 12,800 12,900 13,005 13,110 Commercial/Other 770 775 780 785 790 TOTAL 13,505 13,575 13,680 13,790 13,900 Percentage Increase/(Decrease) 1.90% 0.52% 0.77% 0.80% 0.80% Source: District. Projected Water System Sales Revenues The following table shows the sales revenues of the Water System that are projected by the District for the current and next four Fiscal Years. The projections: (i) are based on the increases in projected water deliveries that are described under the caption "—Projected Water System Deliveries;" and (ii) assume Water System rate increases in accordance with the Rate Plan through Fiscal Year 2025, as well as a projected rate increase of 3% in Fiscal Year 2026 which has not yet been adopted. All rate increases are subject to the notice, hearing and protest provisions of Proposition 218, and there can be no assurance that the Fiscal Year 2026 rate 32 4892-6277-7113v6/022925-0110 increase which is projected herein will be approved. See the caption "CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES —Proposition 218." Table 12 Truckee Donner Public Utility District Projected Water System Sales Revenues Fiscal Year Residential Commercial Percentage Increase/ Ended December 31 Customers Customers Total (Decrease) 2022 $14,169,000 $1,818,000 $15,987,000 6.93% 2023 15,379,000 1,974,000 17,353,000 8.54 2024 16,686,000 2,142,000 18,828,000 8.50 2025 17,937,000 2,303,000 20,240,000 7.50 2026 18,565,000 2,383,000 20,948,000 3.50 Source: District. FINANCIAL INFORMATION Available Cash As of December 31, 2021, the Water System enterprise fund had approximately $10,498,126 in available cash and investments, including $3,412,710 in restricted cash. Historical Operating Results and Debt Service Coverage The following table is a summary of operating results of the Water System for the last five Fiscal Years. These results have been derived from the audited financial statements of the District but exclude certain receipts which are not included as Revenues under the Installment Purchase Agreement and certain non -cash items and include certain other adjustments. 33 4892-6277-7113v6/022925-0110 Table 13 Truckee Donner Public Utility District Historical Operating Results and Debt Service Coverage Fiscal Year Ended December 31 Revenues Sales to Customers(') Standby Charges Investment Income(') Facilities Fees(3) Connection Fees(')( ) Others) Total Revenues Operation and Maintenance Costs Operations and Maintenance Administration and General Customer Services Pension Expense - GASB 68 OPEB Expense Total Operation and Maintenance Costs Net Revenues Debt Service(') 2020 2021 2017 2018 2019 [CONFIRM] $ 11,801,888 $ 12,440,975 $ 12,789,947 $ 13,536,058 $ 14,950,899 133,440 123,280 118,320 114,800 106,680 84,678 113,664 201,306 117,113 40,042 338,461 539,946 840,685 814,776 865,892 144,722 245,393 169,920 167,517 314,442 405,521 306,260 299,159 355,999 361,831 $ 12,908,711 $ 13,769,518 $ 14,419,337 $ 15,106,262 $ 16,639,786 $ 4,835,623 $ 5,409,637 $ 5,779,099 $ 5,821,270 $ 5,789,587 2,231,453 2,489,625 2,884,293 3,036,681 3,145,900 640,793 762,962 888,927 740,606 800,994 907,844 - - - - 158,940 $ 8,774,653 $ 8,662,224 $ 9,552,319 $ 9,598,556 $ 9,736,481 $ 4,134,058 $ 5,107,294 $ 4,867,018 $ 5,507,706 $ 6,903,305 DWR Proposition 55 Loan $ 306,481 $ 306,481 $ 306,481 $ 306,481 $ 153,241 2015 Bonds 1,721,629 1,717,072 1,720,600 1,721,471 1,704,807 Less Interest on Reserve Funds (4,301) (7,436) (9,287) (4,166) (1,044) Total Debt Service $ 2,023,808 $ 2,016,117 $ 2,017,794 $ 2,023,786 $ 1,857,004 Debt Service Coverage 2.04 2.53 2.41 2.72 3.72 Remaining Revenues $ 2,110 550 $ 3,091, 777 $ 2,849, 224 $ 3,483,920 $ 5,046,301 0) Differences between these amounts and the total Water System sales revenues in Table 4 under the caption "THE WATER SYSTEM - Historical Water System Sales Revenues" reflect the inclusion of unbilled accrued amounts in the above table. (2) Excludes interest on land -based assessments which were applied to pay certain subordinate debt obligations. Also excludes interest on debt service reserve funds shown in the Debt Service rows below. 0) Labeled "Contributed Capital" in the District's audited financial statements. 0) Connection fees were historically recognized in the year in which the connection to the Water System was brought online, rather than the year in which the connection fee was received. 0) Includes interdepartmental sales. (e) Debt service shown on an accrual basis. Source: District. Projected Operating Results and Debt Service Coverage Projected operating results for the Water System for the current and next four Fiscal Years, reflecting certain significant assumptions concerning future events and circumstances (including those set forth in the footnotes to the table and the projected impacts of the COVID-19 pandemic as discussed under the caption "THE DISTRICT-COVID-19 Pandemic"), are set forth below. All of such assumptions are material in the development of the District's financial projections, and variations in the assumptions may produce substantially different financial results. Actual operating results achieved during the projection period may vary from those presented in the forecast and such variations may be material. 34 4892-6277-7113v6/022925-0110 Table 14 Truckee Donner Public Utility District Projected Operating Results and Debt Service Coverage Fiscal Year Ending December 31 2022(') 2023 2024 2025 2026 Revenues Sales to Customers() $ 15,987,000 $ 17,353,000 $ 18,828,000 $ 20,240,000 $ 20,948,000 Standby Charges(3) 104,700 102,600 100,000 98,000 96,000 Investment Income(4) 14,000 22,000 32,000 45,000 50,000 Facilities Fees(5) 400,000 400,000 400,000 400,000 400,000 Connection Fees(5) 150,000 150,000 150,000 150,000 150,000 Other(6) 341600 328,300 330,000 335,000 340,000 Total Revenues $ 16,997,300 $ 18,355,900 $ 19,840,000 $ 21,268,000 $ 21,984,000 Operation and Maintenance Costs Operations and Maintenance(') $ 6,799,500 $ 7,213,100 $ 7,429,000 $ 7,652,000 $ 7,882,000 Administration and General(') 3,480,500 3,692,100 3,803,000 3,917,000 4,035,000 Customer Services(') 964,800 1,023,500 1,054,000 1,086,000 1,119,000 Total Operation and Maintenance Costs $ 11,244,800 $ 11,928,700 $ 12,286,000 $ 12,655,000 $ 13,036,000 Net Revenues $ 5,752,500 $ 6,427,200 $ 7,554,000 $ 8,613,000 $ 8,948,000 Debt Service* 2015 Bonds $ 1,033,938 $ 1,033,738 $ 1,032,538 $ 1,035,338 $ 1,031,938 2022 Installment Purchase Agreement' 261,807 980,625 978,125 980,125 981,375 Less Interest on Reserve Funds (100) A (100)ARMh (100) (100) (,100) Total Debt Service $ 1,295,645 $ 2,014,263 $ 2,010,563 $ 2,015,363 $ 2,013,213 Debt Service Coverage' 4.44 3.19 3.76 4.27 4.44 Remaining Revenues' S 4,456, 555 S 4,412,938 S 5,543,438 $ 6,597,638 $ 6,934,788 0) Reflects budgeted amounts with certain adjustments. (2) Reflects Water System rate increases in accordance with the Rate Plan through Fiscal Year 2025, as well as a projected rate increase of 3% in Fiscal Year 2026 which has not yet been adopted. See the caption "THE WATER SYSTEM —Water System Rates and Charges —General." All rate increases are subject to the notice, hearing and protest provisions of Proposition 218, and there can be no assurance that the Fiscal Year 2026 rate increase which is projected herein will be approved. See the caption "CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES —Proposition 218." 0) Reflects no change to current Standby Charge. See the caption "THE WATER SYSTEM —Water System Rates and Charges —Standby Water Availability Charges." 0) Reflects District projections. �5 Reflects District projections of development within the District. This amount is difficult to forecast, so a conservatively low estimate is listed for all five years. 0) Includes interdepartmental sales. Reflects District projections. 0 Projected to increase by approximately 6.1% in Fiscal Year 2023 and by approximately 3% per annum thereafter. Source: District. Employee Benefits Pension Obligations. Accounting and financial reporting by state and local government employers for defined benefit pension plans is governed by Governmental Accounting Standards Board Statement No. 68 ("GASB 68"). GASB 68 includes the following components: (i) unfunded pension liabilities are included on the employer's balance sheet; (ii) pension expense incorporates rapid recognition of actuarial experience and investment returns and is not based on the employer's actual contribution amounts; (iii) lower actuarial discount rates are required to be used for underfunded plans in certain cases for purposes of the financial statements; (iv) closed amortization periods for unfunded liabilities are required to be used for certain purposes of the financial statements; and (v) the difference between expected and actual investment returns will be recognized over a closed five-year smoothing period. GASB 68 affects the District's accounting and reporting requirements, but it does not change the District's pension plan funding obligations. Preliminary; subject to change. 35 4892-6277-7113v6/022925-0110 The District participates in a Miscellaneous Plan to fund pension benefits for employees that serve the Water System. The District's pension plan is administered by the California Public Employees Retirement System ("Ca1PERS"). Ca1PERS administers agent multiple -employer public employee defined benefit pension plans for all qualified permanent and probationary employees of the District. Ca1PERS provides retirement, disability and death benefits to plan members and beneficiaries and acts as a common investment and administrative agent for participating public entities within the State, including the District. Ca1PERS plan benefit provisions and all other requirements are established by State statute and the Board. Water System employees are subject to different benefit levels based on their hire date. Current benefit provisions for Water System employees are set forth below. Table 15 Truckee Donner Public Utility District Ca1PERS Miscellaneous Plan — Summary of Benefit Provisions Employees Hired Employees Hired On or Before After January 1, 2013 (Not January 1, 2013 Prior CaIPERS Members) Benefit Formula 2.7% @ age 55 2.0% @ age 62 Benefit Vesting 5 years of service 5 years of service Benefit Payments Monthly for life Monthly for life Minimum Retirement Age 50+ 52+ Monthly Benefits as % of 2.0% — 2.7% 1.0% — 2.5% Eligible Compensation Employee Normal Cost [8.0]%0) [6.75]%0) Employer Normal Cost Rate [13.35]% [7.59]% [CONFIRM] [Employees are required to make the full employee contribution themselves. The District does not make any portion of the employee contribution.] Source: District. Contributions to the District's pension plan consist of (a) contributions from plan participants (i.e., employees); and (b) contributions by the District. The District's contributions constitute an Operation and Maintenance Cost of the Water System that is payable prior to the Series 2022 Installment Payments. District employees who were hired on or after January 1, 2013 and who were not previously Ca1PERS members receive benefits based on 2.0% at age 62 formula. Such employees are required to make the full amount of required employee contributions themselves under the California Public Employees' Pension Reform Act of 2013 ("AB 340"), which was signed by the State Governor on September 12, 2012. AB 340 established a new pension tier for such employees. Benefits for such participants are calculated on the highest average annual compensation over a consecutive 36-month period. Employees are required to pay at least 50% of the total normal cost rate. AB 340 also capped pensionable income. Amounts are set annually, subject to Consumer Price Index increases, and retroactive benefits increases are prohibited, as are contribution holidays and purchases of additional non -qualified service credit. Additional employee contributions, limits on pensionable compensation and higher retirement ages for new members as a result of the passage of AB 340 are expected to reduce the District's unfunded pension lability and potentially reduce District contribution levels in the long term. The District is also required to contribute the actuarially determined remaining amounts necessary to fund benefits for its members. Employer contribution rates for all public employers are determined on an annual basis by the Ca1PERS actuary and are effective on the July 1 following notice of a change in the rate. Total plan contributions are determined through the Ca1PERS annual actuarial valuation process. The total minimum required employer contribution is the sum of. (i) the plan's employer normal cost rate, which funds pension 36 4892-6277-7113v6/022925-0110 benefits for current employees for the upcoming Fiscal Year (expressed as a percentage of payroll); plus (ii) the employer unfunded accrued liability contribution amount, which funds pension benefits that were previously earned by current and former employees (billed monthly). Employer contribution rates and unfunded liability payments For Fiscal Year 2021, required employer normal cost rates as a percentage of payroll were 13.515% for non -AB 340 employees and 7.732% for AB 340 employees. For Fiscal Year 2022, required employer normal cost rates as a percentage of payroll are 13.35% for non -AB 340 employees and 7.59% for AB 340 employees. For Fiscal Year 2021, the total required employer payment of the unfunded accrued liability for the District's Miscellaneous Plan was $921,640, of which $[__1 was allocable to the Water System. For Fiscal Year 2022, the total required employer payment of the unfunded accrued liability for the District's Miscellaneous Plan is $1,086,728, of which $[ 1 is allocable to the Water System. The District's required contributions to CalPERS fluctuate each year. Many assumptions are used to estimate the ultimate liability of pensions and the contributions that will be required to meet those obligations. The CalPERS Board of Administration has adjusted and may in the future further adjust certain assumptions used in the CalPERS actuarial valuations, which adjustments may increase the District's required contributions to CalPERS in future years. Accordingly, the District cannot provide any assurances that the District's required contributions to CalPERS in future years will not significantly increase (or otherwise vary) from any past or current projected levels of contributions. CalPERS earnings reports for Fiscal Years 2011 through 2021 report investment gains of approximately 21.7%, 0.1%, 13.2%, 18.4%, 2.4%, 0.6%, 11.2%, 8.6%, 6.7%, 4.7% and 21.3%, respectively. Future earnings performance may increase or decrease future contribution rates for plan participants, including the District. The announcement on July 12, 2021 that CalPERS achieved investment returns of 21.3% in Fiscal Year 2021 caused the CalPERS Board of Administration to lower Ca1PERS' discount rate from 7.00% to 6.80% in fall 2021 in accordance with a risk mitigation policy that was adopted in 2015, which calls for the discount rate to be lowered if returns exceed the then -current discount rate by two or more percentage points. Lowering the discount rate means that employers that contract with CalPERS to administer their pension plans will see increases in their normal costs and unfunded actuarial liabilities. Table 16 Truckee Donner Public Utility District Funding Status of CalPERS Miscellaneous Plan June 30 Actuarial UAAL as a Actuarial Accrued % of Valuation Liability Market Value Unfunded Funded Covered Covered Date (AAL) of Assets AAL (UAAL) Ratio Payroll Payroll 2016 $42,998,933 $31,481,007 $11,517,926 73.2% $6,838,854 168.4% 2017 46,567,451 35,129,407 11,438,044 75.4 7,124,806 160.5 2018 51,694,097 38,354,255 13,339,842 74.2 7,254,827 183.9 2019 56,009,055 41,883,355 14,125,700 74.8 7,255,884 194.7 2020 59,555,640 43,986,286 15,569,354 73.9 7,319,112 212.7 Source: Ca1PERS. Portions of the above disclosures are primarily derived from information that has been produced by CalPERS, its independent accountants and its actuaries. The District has not independently verified such information and neither makes any representations nor expresses any opinion as to the accuracy of the information that has been provided by CaIPERS. 37 4892-6277-7113v6/022925-0110 The comprehensive annual financial reports of CalPERS are available on CalPERS' Internet website at www.calpers.ca.gov. The CalPERS website also contains CalPERS' most recent actuarial valuation reports and other information that concerns benefits and other matters. The textual reference to such Internet website is provided for convenience only. None of the information on such Internet website is incorporated by reference herein. The District, the Corporation and the Underwriter cannot guarantee the accuracy of such information. Actuarial assessments are `forward -looking" statements that reflect the judgment of the fiduciaries of the pension plans, and are based upon a variety of assumptions, one or more of which may not materialize or be changed in the future. The District's projections of Operation and Maintenance Costs under the caption "—Projected Operating Results and Debt Service Coverage" do not reflect additional increases in Ca1PERS normal cost contributions in the future, as the District is unable to quantify the magnitude of any such increases at this time. The District does not expect that any increased funding of pension benefits will have a material adverse effect on the ability of the District to pay the Series 2022 Installment Payments. For additional information relating to the District's Ca1PERS Miscellaneous pension plan, see Note 9 to the District's audited financial statements set forth in Appendix A. Other Post -Employment Benefits. The District administers a single employer defined benefit healthcare plan which provides medical and prescription drug coverage to eligible retirees and their spouses. As of December 31, 2021, 65 District retirees and covered dependents received such post -employment benefits and 64 active employees met the eligibility requirements for such post -employment benefits. For the measurement periods ended December 31, 2021 and December 31, 2020, the District contributed $113,300 and $110,006, respectively, to pay post -employment benefits for eligible retirees. District contributions are made on a pay-as-you-go basis and include an implied subsidy as determined by an actuary (as discussed below). The District has elected to fund its OPEB contributions through the California Employers' Retiree Benefit Trust Fund ("CERBT"), an irrevocable agent, multiple -employer plan administered by Ca1PERS, which acts as a common investment and administrative agent for participating public employers. Governmental Accounting Standards Board Statement No. 75 ("GASB 75") requires governmental agencies that fund post -employment benefits on a pay-as-you-go basis, such as the District, to account for and report such outstanding obligations and commitments in essentially the same manner as for pensions. While requiring the District to disclose the unfunded actuarial accrued liability and the annual required contribution (the actuarial value of benefits earned during a Fiscal Year plus costs to amortize the unfunded actuarial accrued liability, or "OPEB ARC") in its financial statements, GASB 75 does not require the District to fund the OPEB ARC. In 2021, the District engaged an actuarial consultant (the "Consultant") to calculate the District's post - employment benefits current funding status. The Consultant's report concluded that: (i) the District's actuarial accrued liability for post -employment benefits based upon a 6.61 % discount rate was $8,478,479 as of December 31, 2021; and (ii) the unfunded actuarial accrued liability was $5,273,457 as of December 31, 2021. GASB 75 requires that a valuation of the District's post -employment benefit liability include the value of the "implied subsidy" of older retired participants by a younger active workforce in a pooled rate medical plan. For Fiscal Year 2021, the actuarially determined value of the implied subsidy was $4,274,217. 38 4892-6277-7113v6/022925-0110 Changes in the net liability for the District's post -employment benefit plan were as follows. Balance at December 31, 2019 Balance at December 31, 2020 Net Changes for period from January 1, 2020 through December 31, 2020 Source: District. Truckee Donner Public Utility District Changes in Post -Employment Benefit Plan Liability Total Post -Employment Benefit Plan Liability $ 6,473,886 8,693,052 $ 2,219,166 Increase/(Decrease) Post -Employment Benefit Plan Fiduciary Net Position $2,145,534 2,717,465 $ 571,931 Net Post - Employment Benefit Plan Funded Liability/(Asset) Percentage $4,328,352 33.14% 5,975,587 31.26 $ 1,647,235 The following table presents the net liability of the District's post -employment benefits plan, calculated using the discount rate applicable to Fiscal 2020 (7.33%), as well as what the net post -employment benefit liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.33%) or 1 percentage point higher (8.33%) than the Fiscal Year 2020 rate: Truckee Donner Public Utility District Sensitivity of the Post -Employment Benefit Plan Net Liability to Changes in the Discount Rate Net Liability/(Asset) Source: District. Discount Rate — I % Applicable Discount Discount Rate + I % Decrease (6.33 %) Rate (7.33 %) Increase (8.33 %) $6,700,987 $5,975,587 $5,341,808 Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The District's projections of Operation and Maintenance Costs under the caption "—Projected Operating Results and Debt Service Coverage" do not assume unusual increases in post -employment benefit funding expenses in the future. However, future changes in funding policies and assumptions, including those related to assumed rates of investment return and healthcare cost inflation, could trigger increases in the District's annual required contributions, and such increases could be material to the finances of the District. No assurance can be provided that such expenses will not increase significantly in the future. The District does not expect that any increased funding of post -employment benefits will have a material adverse effect on the ability of the District to pay the Series 2022 Installment Payments. See Note 9 to the District's Financial Statements set forth in Appendix A for further information with respect to post -employment benefits. 39 4892-6277-7113v6/022925-0110 RISK FACTORS The following information, in addition to the other matters that are described in this Official Statement, should be considered by prospective investors in evaluating the Certificates. However, the following does not purport to be comprehensive, definitive or an exhaustive listing of risks and other considerations that may be relevant to making an investment decision with respect to the Certificates. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks. If any risk factor materializes to a sufficient degree, it alone could delay or preclude payment of principal or interest with respect to the Certificates. Accuracy of Assumptions To estimate the Net Revenues which will be available to pay the Series 2022 Installment Payments, the District has made certain assumptions with regard to various matters, including but not limited to future development within the District, the effect of the COVID-19 pandemic, the rates and charges to be imposed in future years pursuant to the Rate Plan, the expenses associated with operating the Water System and the interest rate at which funds will be invested. The District believes these assumptions to be reasonable, but to the extent that any of such assumptions fail to materialize, the Net Revenues available to pay the Series 2022 Installment Payments will, in all likelihood, be less than those projected herein. See the captions "FINANCIAL INFORMATION —Projected Operating Results and Debt Service Coverage." In particular, if the Rate Plan is changed, or if Fiscal Year 2026 rates and charges are not adopted as currently projected, Net Revenues will differ materially from those shown herein. See the captions "THE WATER SYSTEM —Water System Rates and Charges" and "CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES —Proposition 218." The District may choose, however, to maintain compliance with the rate covenant set forth in the Installment Purchase Agreement in part by means of contributions from available reserves or resources. In such event, Net Revenues may generate amounts which are less than 1.25 times Debt Service in any given Fiscal Year. See the caption "SECURITY FOR THE CERTIFICATES —Rate Covenant." System Demand There can be no assurance that the demand for Water Service will occur as described in this Official Statement. Reduction in levels of demand could require an increase in rates or charges in order to comply with the rate covenant. See the caption "SECURITY FOR THE CERTIFICATES —Rate Covenant." Demand for Water Service could be reduced or may not occur as projected by the District as a result of reduced levels of development in the District's service area, hydrological conditions, conservation efforts, an economic downturn, mandatory State conservation orders and other factors. System Expenses There can be no assurance that the District's expenses will be consistent with the descriptions in this Official Statement. Operation and Maintenance Costs may vary with treatment costs, regulatory compliance costs, labor costs (including costs related to pension and other post -employment benefits) and other factors. Increases in Operation and Maintenance Costs could require an increase in rates or charges in order to comply with the rate covenant. See the caption "SECURITY FOR THE CERTIFICATES —Rate Covenant." Limited Recourse on Default If the District defaults on its obligation to pay the Series 2022 Installment Payments, the Trustee, as assignee of the Corporation, has the right to declare the total unpaid principal amount of the Series 2022 Installment Payments, together with the accrued interest thereon, to be immediately due and payable. However, 40 4892-6277-7113v6/022925-0110 in the event of a default and such acceleration, there can be no assurance that the District will have sufficient funds to pay such accelerated amounts from Net Revenues. Natural Disasters General. The District, like all State communities, is subject to unpredictable seismic activity, wildfires, floods, high winds, landslides, drought or other natural disasters. A severe natural disaster, such as an earthquake, wildfire, flood, high wind event or landslide, could result in substantial damage to the District, including the Water System. Although the District maintains insurance for damage to the Water System, including limited earthquake insurance, as described under the caption "THE DISTRICT —District Insurance," there can be no assurance that specific losses will be covered by insurance or, if covered, that claims will be paid in full by the applicable insurers. Furthermore, significant portions of the Water System, including water pipelines that are not in the vicinity of above -ground assets, are not covered by property casualty insurance. Damage to such portions of the Water System as a result of natural disasters could result in uninsured losses to the District. The District maintains earthquake insurance on Water System facilities. See the caption "THE DISTRICT —District Insurance." See the caption "THE WATER SYSTEM —Drought Declarations" for a discussion of Statewide drought declarations and the District's plan to address a drought. Fire. The District is located in a Tier 3 fire threat area, as determined by the California Public Utilities Commission, and wildfires have occurred in recent years in different regions of the State, including in areas in and near the District's service area. [To date, none of such fires have affected the Water System infrastructure]. However, there can be no assurance that fires will not occur within the boundaries of the District in the future, leading to the destruction of the property of District customers, decreased usage of the District's Water System and a decline in Net Revenues. The District carries property insurance for fire damage to Water System facilities. In the event of an unusual or sustained heat wave in Northern California, the District's electric system may elect to shut off electric power to District facilities (and other customers) with little or no advance warning in order to prevent electrical distribution facilities from sparking a wildfire. Such an event, known as a Public Safety Power Shutoff, would be coordinated with the Water System under the District's Wildfire Mitigation Plan, but there can be no assurance that Water System operations and Revenues would not be affected. See the caption "—Climate Change" for a detailed discussion of the District's Wildfire Mitigation Plan. Limitations on Remedies Available; Bankruptcy The enforceability of the rights and remedies of the Owners and the obligations of the District may become subject to the following: the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect; equitable principles which may limit the specific enforcement under State law of certain remedies; the exercise by the United States of America of the powers delegated to it by the federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State and its governmental bodies in the interest of a significant and legitimate public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or State government, if initiated, could subject the Owners to judicial discretion and interpretation of their rights in bankruptcy or otherwise and consequently may entail risks of delay, limitation or modification of their rights. The opinion to be delivered by Special Counsel concurrently with the execution and delivery of the Certificates will be subject to such limitations and the various other legal opinions to be delivered concurrently 41 4892-6277-7113v6/022925-0110 with the execution and delivery of the Certificates will be similarly qualified. See Appendix C. In the event that the District fails to comply with its covenants under the Installment Purchase Agreement or fails to pay the Series 2022 Installment Payments, which secure the payments of principal and interest with respect to the Certificates, there can be no assurance of the availability of remedies adequate to protect the interest of the Owners of the Certificates. Limited Obligations The Installment Purchase Agreement is a limited obligation of the District payable solely from Net Revenues and secured solely by the Revenues pledged in the Installment Purchase Agreement. If for any reason, the District does not collect sufficient Revenues to pay the Series 2022 Installment Payments, the District will not be obligated to utilize any other of its funds, other than certain amounts on deposit in the funds and accounts established under the Trust Agreement, to pay the Certificates. The District has no taxing power. The obligation of the District does not constitute an indebtedness in contravention of any constitutional or statutory debt limitation or restriction. Statutory and Regulatory Compliance Laws and regulations governing the extraction, treatment and delivery of potable water are enacted and promulgated by federal, State and local government agencies. Compliance with these laws and regulations is and will continue to be costly, and, as more stringent standards are developed, such costs will likely increase. Claims against the Water System for failure to comply with applicable laws and regulations could be significant. Such claims may be payable from assets of the Water System and constitute Operation and Maintenance Costs or from other legally available sources. In addition to claims by private parties, changes in the scope and standards for municipal water systems such as that operated by the District may also lead to administrative orders issued by federal or State regulators. Future compliance with such orders could also impose substantial additional costs on the District. In addition to the other limitations described herein, the State electorate or Legislature could adopt a Constitutional amendment, legislation or an initiative with the effect of reducing revenues payable to or collected by the District. No assurance can be given that the cost of compliance with such laws, regulations and orders would not adversely affect the ability of the District to generate Net Revenues in amounts that are sufficient to pay the Series 2022 Installment Payments. Parity Obligations The Installment Purchase Agreement permits the District to enter into Bonds and Contracts payable from Net Revenues on a parity with the Series 2022 Installment Payments, which secure the Certificates, subject to the terms and conditions set forth therein. The entry into of additional Bonds and Contracts could result in reduced Net Revenues available to pay the Series 2022 Installment Payments. The District has covenanted to maintain coverage of at least 125% of Debt Service, as further described under the caption "SECURITY FOR THE CERTIFICATES —Limitations on Parity and Superior Obligations; Subordinate Obligations —Additional Obligations on a Parity with the Installment Payments." Loss of Tax Exemption Interest with respect to the Certificates could become includable in gross income for purposes of federal income taxation retroactive to the date that the Certificates were executed and delivered as a result of future acts or omissions of the District in violation of its covenants in the Installment Purchase Agreement and Trust Agreement. In addition, current and future legislative proposals, if enacted into law, may cause interest with respect to the Certificates to be subject, directly or indirectly, to federal income taxation by, for example, changing the current exclusion or deduction rules to limit the aggregate amount of interest on state and local government bonds that maybe treated as tax exempt by individuals. Seethe caption "TAX MATTERS." Should such an event of taxability occur, the Certificates are not subject to a special prepayment or increased interest rate and will remain outstanding until maturity. 42 4892-6277-7113v6/022925-0110 Secondary Market for the Certificates There can be no guarantee that there will be a secondary market for the Certificates or, if a secondary market exists, that any Certificates can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then -prevailing circumstances, including the availability of continuing disclosures from the District. Such prices could be substantially different from the original purchase price. Cybersecurity The District relies on computers and technology to conduct its operations. The District and its departments face cyber threats from time to time including, but not limited to, hacking, viruses, malware and other forms of technology attacks. Recently, there have been significant cyber security incidents affecting municipal agencies, including a freeze affecting computer systems of the City of Atlanta, an attack on the City of Baltimore's 911 system, an attack on the Colorado Department of Transportation's computers, an attack that resulted in the temporary closure of the Port of Los Angeles' largest terminal, and an attack on a water treatment facility in Oldsmar, Florida. The District undertakes certain cybersecurity functions internally and contracts with third party vendors for certain aspects of its cybersecurity program. The District regularly monitors its network and server, undertakes desktop and server virus scanning and security and maintains a firewall. Where compliance monitoring, reporting or internal audits reveal any concerns, remedial action is swiftly taken. Systems and controls are regularly tested and reviewed to ensure they are in line with technological developments and regulatory practice. District staff is regularly trained to spot potential scams or inconsistencies in network performance which may indicate system vulnerability. Since implementation of its cybersecurity program, the District has not experienced a successful attack against its network or servers leading to any data exposure or loss or service downtime. However, there can be no assurance that a future attack or attempted attack would not result in disruption of District operations. The District expects that any such disruptions would be temporary in nature due to its backup/restore procedures, which includes offsite/offline storage and disaster recovery planning. Climate Change The State has historically been susceptible to wildfires and hydrologic variability. As greenhouse gas emissions continue to accumulate in the atmosphere as a result of economic activity, climate change is expected to intensify, increasing the frequency, severity and timing of extreme weather events such as coastal storm surges, drought, wildfires, floods, thunderstorms and heat waves, and raising sea levels. The future fiscal impact of climate change on the District is difficult to predict, but it could be significant and it could have a material adverse effect on the Water System's finances by requiring greater expenditures to counteract the effects of climate change, by changing the business and activities of Water System customers or by increasing the cost or decreasing the availability of water supplies from the Basin. See the captions "—System Expenses" and "THE WATER SYSTEM —Drought Declarations." The District is located in a Tier 3 fire threat area, as determined by the California Public Utilities Commission, meaning that there is an extreme risk (including likelihood and potential impacts on people and property) from utility -related wildfires. In order to mitigate such risk, the District has adopted a Wildfire Mitigation Plan, the goals of which are to minimize the probability of the District's electric system igniting a wildfire, improve the resiliency of the District's electric system and measure the effectiveness of District mitigation strategies. Coordination between the District's Water System and electric system during wildfire events is embedded in the plan. 43 4892-6277-7113v6/022925-0110 Among other matters, the Wildfire Mitigation Plan establishes: (i) procedures to monitor weather conditions; (ii) construction and design standards that foster resiliency against wildfire events; (iii) vegetation management and equipment inspection practices to reduce fire ignition risks; (iv) standards for power shutoffs during times of high wildfire risk; and (v) an employee training program. See the caption "—Natural Disasters" for additional information relating to the potential effect of wildfires on the District and the Water System. CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES Article XHIB Article XIIIB of the State Constitution ("Article XIIIB") limits the annual appropriations of the State and of any city, county, school district, authority, special district or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living and population. The "base year" for establishing such appropriation limit is the 1978-79 State fiscal year and the limit is to be adjusted annually to reflect changes in population and consumer prices. Adjustments in the appropriations limit of an entity may also be made if. (a) the financial responsibility for a service is transferred to another public entity or to a private entity; (b) the financial source for the provision of services is transferred from taxes to other revenues; or (c) the voters of the entity approve a change in the limit for a period of time not to exceed four years. Appropriations that are subject to Article XIIIB generally include the proceeds of taxes levied by or for the State or other entity of local government, exclusive of certain State subventions, refunds of taxes and benefit payments from retirement, unemployment, insurance and disability insurance funds. "Proceeds of taxes" include, but are not limited to, all tax revenues and the proceeds to an entity of government from: (i) regulatory licenses, user charges, and user fees (but only to the extent that such proceeds exceed the cost reasonably borne by the entity in providing the service or regulation); and (ii) the investment of tax revenues. Article XIIIB includes a requirement that if an entity's revenues in any year exceed the amounts that are permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years. Certain expenditures are excluded from the appropriations limit, including payments of indebtedness that were existing or legally authorized as of January 1, 1979, or of bonded indebtedness thereafter approved by the voters, and payments that are required to comply with court or federal mandates which without discretion require an expenditure for additional services or which unavoidably make the provision of existing services more costly. The District is of the opinion that its charges for Water Service do not exceed the costs that it reasonably bears in providing such services and therefore are not subject to the limits of Article XIIIB. See the caption "SECURITY FOR THE CERTIFICATES —Rate Covenant" for a description of the District's covenant to set rates and charges for the Water Service. Proposition 218 General. An initiative measure (Proposition 218) entitled the "Right to Vote on Taxes Act" (the "Initiative") was approved by the voters of the State at the November 5, 1996 general election. The Initiative added Articles XIIIC and XIIID to the State Constitution. According to the "Title and Summary" of the Initiative prepared by the State Attorney General, the Initiative limits "the authority of local governments to impose taxes and property -related assessments, fees and charges." Article XIIID. Article XIIID defines the terms "fee" and "charge" to mean "any levy other than an ad valorem tax, a special tax or an assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership, including user fees or charges for a property -related service." A "property -related 44 4892-6277-7113v6/022925-0110 service" is defined as "a public service having a direct relationship to property ownership." Article XIIID further provides that reliance by an agency on any parcel map (including an assessor's parcel map) may be considered a significant factor in determining whether a fee or charge is imposed as an incident of property ownership. Article XIIID requires that any agency which imposes or increases any property -related fee or charge must provide written notice thereof to the record owner of each identified parcel upon which such fee or charge is to be imposed, by including it in the regular billing statement for the fee or charge or by any other mailing to the address to which billing statements are customarily mailed, and must conduct a public hearing with respect thereto. The proposed fee or charge may not be imposed or increased if a majority of owners of the identified parcels file written protests against it. As a result, because fees for water service and wastewater service are a "fee" or "charge" as defined in Article XIIID, the local government's ability to increase such fees or charges may be limited by a majority protest. In addition, Article XIIID includes a number of limitations that are applicable to existing fees and charges, including provisions to the effect that: (a) revenues that are derived from the fee or charge may not exceed the funds which are required to provide the property -related service; (b) such revenues may not be used for any purpose other than that for which the fee or charge was imposed; (c) the amount of a fee or charge that is imposed upon any parcel or person as an incident of property ownership may not exceed the proportional cost of the service attributable to the parcel; and (d) no such fee or charge may be imposed for a service unless that service is actually used by, or immediately available to, the owner of the property in question. Property -related fees or charges based on potential or future use of a service are not permitted. Based upon the State Court of Appeal decision in Howard Jarvis Taxpayers Association v. City of Los Angeles, 85 Cal. App. 4th 79 (2000), which was denied review by the State Supreme Court, it was generally believed that Article XIIID did not apply to charges for water and wastewater services that are "primarily based on the amount consumed" (i.e., metered water or wastewater rates), which had been held to be commodity charges related to consumption of the service, not property ownership. The State Supreme Court ruled in Bighorn -Desert View Water Agency v. Verjil, 39 Cal. 4th 205 (2006) (the "Bighorn Case"), however, that fees for ongoing water service through an existing connection were property -related fees and charges. The State Supreme Court specifically disapproved the holding in Howard Jarvis Taxpayers Association v. City of Los Angeles that metered water rates are not subject to Proposition 218. The District complies with the notice, hearing and protest procedures of Article XIIID when considering rate increases. On April 20, 2015, the State Court of Appeal, Fourth District, issued an opinion in Capistrano Taxpayers Association, Inc. v. City of San Juan Capistrano, 235 Cal. App. 4th 1493 (2015) (the "SJC Case") upholding tiered water rates under Proposition 218 provided that the tiers correspond to the actual cost of furnishing service at a given level of usage, including the capital costs of improvements to provide additional increments of water. The opinion included a finding that the City of San Juan Capistrano did not make any attempt to calculate the actual costs of providing water at various tier levels. The District's current residential water rate structure includes tiered rates based on usage. The District has reviewed the SJC Case decision and does not expect the decision to affect its rate structure. The District believes that its current water rates comply with the requirements of Proposition 218 because they are tied to the cost of service and capital improvements, and expects that any future water rate increases will comply with Proposition 218's procedural and substantive requirements to the extent applicable thereto. Article XIIIC. Article XIIIC of the State Constitution ("Article XIIIC") provides that the initiative power may not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge and that the power of initiative to affect local taxes, assessments, fees and charges is applicable to all local governments. Article XIIIC does not define the terms "local tax," "assessment," "fee" or "charge," so it was unclear whether the definitions set forth in Article XIIID referred to above are applicable to Article XIIIC. Moreover, the provisions of Article XIIIC are not expressly limited to local taxes, assessments, fees and charges imposed after November 6, 1996. On July 24, 2006, the State Supreme Court held in the Bighorn Case that the provisions of Article XIIIC applied to rates and fees charged for domestic water use. In the decision, the Court 45 4892-6277-7113v6/022925-0110 noted that the decision did not address whether an initiative to reduce fees and charges could override statutory rate setting obligations. On August 3, 2020, the State Supreme Court issued an opinion in Wilde v. City ofDunsmuir (9 Cal. 5th 1105 (2020)) holding that taxpayers do not have the right under Proposition 218 to challenge water rates by referendum, and the District does not believe that Article XIIIC grants to the voters within the District the power (whether by initiative under Article XIIIC or otherwise, or by referendum, which is not authorized under Article XIIIC) to repeal or reduce rates and charges for the Water Service in a manner that would interfere with the contractual obligations of the District or the obligation of the District to maintain and operate the Water System. Government Code Section 5854 states: "Section 3 of Article XIIIC of the State Constitution, as adopted at the November 5, 1996, general election, shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after that date, assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights protected by Section 10 of Article I of the United States Constitution." However, no court has yet applied that statute and there can be no assurance as to the availability of particular remedies adequate to protect the Beneficial Owners of the Certificates. Remedies that are available to Beneficial Owners of the Certificates in the event of a default by the District are dependent upon judicial actions which are often subject to discretion and delay and could prove both expensive and time-consuming to obtain. So long as the Certificates are held in book -entry form, DTC (or its nominee) will be the sole registered owner of the Certificates and the rights and remedies of the Certificate Owners will be exercised through the procedures of DTC. In addition to the specific limitations on remedies which are contained in the applicable documents themselves, the rights and obligations with respect to the Certificates, the Trust Agreement and the Installment Purchase Agreement are subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors' rights, to the application of equitable principles if equitable remedies are sought and to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public agencies in the State. The various opinions of counsel to be delivered with respect to such documents, including the opinion of Special Counsel (the form of which is attached as Appendix C), will be similarly qualified. Proposition 26 On November 2, 2010, voters in the State approved Proposition 26. Proposition 26 amends Article XIIIC to expand the definition of "tax" to include "any levy, charge, or exaction of any kind imposed by a local government" except the following: (1) a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege; (2) a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product; (3) a charge imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof; (4) a charge imposed for entrance to or use of local government property, or the purchase, rental, or lease of local government property; (5) a fine, penalty, or other monetary charge imposed by the judicial branch of government or a local government, as a result of a violation of law; (6) a charge imposed as a condition of property development; and (7) assessments and property -related fees imposed in accordance with the provisions of Article XIIID. Proposition 26 provides that the local government bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor's burdens on, or benefits received from, the governmental activity. The District does not believe that the enactment of Proposition 26 affects its ability to charge for services provided by its Water System. 46 4892-6277-7113v6/022925-0110 Future Initiatives Articles XIIIB, XIIIC and XIIID were adopted as measures that qualified for the ballot pursuant to the State's initiative process. From time to time other initiatives could be proposed and adopted affecting the District's revenues or ability to increase revenues. THE CORPORATION The Corporation was organized on April 24, 1986 pursuant to the Nonprofit Public Benefit Corporation Law of the State (Title 1, Division 2, Part 2 of the Corporations Code), for the purpose of providing financial assistance to the District by acquiring, constructing and financing various public facilities, land and equipment, and the leasing of facilities, land and equipment for the use, benefit and enjoyment of the public. The Corporation was formed at the request of the District to assist in financings such as the installment purchase that is described in this Official Statement. The members of the District Board serve as the Board of Directors of the Corporation. The Corporation has no liability to the Owners, and has pledged none of its moneys, funds or assets to any Series 2022 Installment Payments or any payments under the Certificates. TAX MATTERS In the opinion of Special Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) with respect to the Certificates is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. In the further opinion of Special Counsel, interest (and original issue discount) with respect to the Certificates is exempt from State personal income tax. Special Counsel's opinion as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) with respect to the Certificates is based upon certain representations of fact and certifications made by the Corporation, the District and others and is subject to the condition that the Corporation and the District comply with all requirements of the Internal Revenue Code of 1986, as amended (the "Code") that must be satisfied subsequent to the issuance of the Certificates to assure that interest (and original issue discount) with respect to the Certificates will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) with respect to the Certificates to be included in gross income for federal income tax purposes retroactive to the date of execution and delivery of the Certificates. The Corporation and the District have covenanted to comply with all such requirements. In the opinion of Special Counsel, the difference between the issue price of a Certificate (the first price at which a substantial amount of the Certificates of a maturity is to be sold to the public) and the stated prepayment price at maturity of such Certificate constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Beneficial Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Beneficial Owner will increase the Beneficial Owner's basis in the applicable Certificate. The amount of original issue discount that accrues to the Beneficial Owner of a Certificate is excluded from the gross income of such Beneficial Owner for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals. The amount by which a Certificate Owner's original basis for determining loss on sale or exchange in the applicable Certificate (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable premium, which must be amortized under Section 171 of the Code; such amortizable premium reduces the Certificate Owner's basis in the applicable Certificate (and the amount of tax- exempt interest received with respect to the Certificates), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Certificate premium may result in a Certificate Owner 47 4892-6277-7113v6/022925-0110 realizing a taxable gain when a Certificate is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Certificate to the Owner. Purchasers of the Certificates should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable Certificate premium. The Internal Revenue Service (the "IRS") has initiated an expanded program for the auditing of tax-exempt obligations, including both random and targeted audits. It is possible that the Certificates will be selected for audit by the IRS. It is also possible that the market value of the Certificates might be affected as a result of such an audit of the Certificates (or by an audit of similar municipal obligations). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof) subsequent to the execution and delivery of the Certificates to the extent that it adversely affects the exclusion from gross income of interest (and original issue discount) with respect to the Certificates or their market value. SUBSEQUENT TO THE EXECUTION AND DELIVERY OF THE CERTIFICATES THERE MIGHT BE FEDERAL, STATE OR LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY CHANGES TO OR INTERPRETATIONS OF FEDERAL, STATE OR LOCAL LAW) THAT AFFECT THE FEDERAL, STATE OR LOCAL TAX TREATMENT OF THE CERTIFICATES, INCLUDING THE IMPOSITION OF ADDITIONAL FEDERAL INCOME OR STATE TAXES ON OWNERS OF TAX- EXEMPT STATE OR LOCAL OBLIGATIONS, SUCH AS THE CERTIFICATES. THESE CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE CERTIFICATES. NO ASSURANCE CAN BE GIVEN THAT SUBSEQUENT TO THE ISSUANCE OF THE CERTIFICATES STATUTORY CHANGES WILL NOT BE INTRODUCED OR ENACTED OR JUDICIAL OR REGULATORY INTERPRETATIONS WILL NOT OCCUR HAVING THE EFFECTS DESCRIBED ABOVE. BEFORE PURCHASING ANY OF THE CERTIFICATES, ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING POSSIBLE STATUTORY CHANGES OR JUDICIAL OR REGULATORY CHANGES OR INTERPRETATIONS, AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE CERTIFICATES. Special Counsel's opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Special Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Trust Agreement, the Installment Purchase Agreement and the Tax Certificate relating to the Certificates permit certain actions to be taken or to be omitted if a favorable opinion of Special Counsel is provided with respect thereto. Special Counsel expresses no opinion as to the effect on the exclusion from gross income of interest (and original issue discount) for federal income tax purposes with respect to any Certificate if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation. Although Special Counsel has rendered an opinion that interest (and original issue discount) with respect to the Certificates is excluded from gross income for federal income tax purposes provided that the Corporation and the District continue to comply with certain requirements of the Code, the ownership of the Certificates and the accrual or receipt of interest (and original issue discount) with respect to the Certificates may otherwise affect the tax liability of certain persons. Special Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Certificates, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Certificates. Should interest (and original issue discount) with respect to the Certificates become includable in gross income for federal income tax purposes, the Certificates are not subject to early prepayment and will remain outstanding until maturity or until prepayment in accordance with the Trust Agreement. A copy of the proposed form of opinion of Special Counsel is set forth in Appendix C. 48 4892-6277-7113v6/022925-0110 CERTAIN LEGAL MATTERS The validity of the Installment Purchase Agreement and the Trust Agreement are subject to the approval of Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, acting as Special Counsel. The form of such legal opinion is set forth in Appendix C and such legal opinion will be attached to each Certificate. Certain legal matters will be passed upon for the District and the Corporation by Porter Simon, Truckee, California, as General Counsel to the District and the Corporation. Stradling Yocca Carlson & Rauth, a Professional Corporation, San Francisco, California, is acting as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by its counsel Kutak Rock LLP, Irvine, California, and for the Trustee by its counsel. Payment of the fees of Special Counsel is contingent upon execution and delivery of the Certificates. MUNICIPAL ADVISOR The District has retained Fieldman, Rolapp & Associates, Inc., Irvine, California, as its Municipal Advisor in connection with the execution and delivery of the Certificates. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or assume responsibility for the accuracy, completeness, or fairness of the information contained in this Official Statement. The Municipal Advisor is an independent financial advisory firm and is not engaged in the business of underwriting, trading or distributing municipal securities or other public securities. The payment of the fees of the Municipal Advisor is contingent upon the execution and delivery of the Certificates. LITIGATION Except as otherwise described in this Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body, pending or, to the knowledge of the District or the Corporation, threatened against the District or the Corporation affecting the existence of the District or the Corporation or the titles of their officers to their respective offices or seeking to restrain or to enjoin the sale or delivery of the Certificates, the application of the proceeds thereof in accordance with the Trust Agreement, or in any way contesting or affecting the action of the District or the Corporation contemplated by any of said documents, or in any way contesting the completeness or accuracy of this Official Statement or any amendment or supplement thereto, or contesting the powers of the District or the Corporation or their respective authority with respect to the Certificates or any action of the District or the Corporation contemplated by any of said documents. RATING S&P Global Ratings, a Standard & Poor's Financial Services LLC business ("S&P"), has assigned the Certificates the rating of Future events, including the impacts of the COVID-19 pandemic that is described under the caption "THE DISTRICT—COVID-19 Pandemic," could have an adverse impact on the rating of the Certificates, and there is no assurance that any credit rating that is given to the Certificates will be maintained for any period of time or that a rating may not be qualified, downgraded, lowered or withdrawn entirely by a rating agency if, in the judgment of such rating agency, circumstances so warrant, nor can there be any assurance that the criteria required to achieve a rating on the Certificates will not change during the period that the Certificates remain outstanding. Any such qualification, downgrade, lowering or withdrawal of the rating may have an adverse effect on the market price of the Certificates. The rating reflects only the current views and current rating criteria of S&P (which views and criteria could change at any time), and an explanation of the significance of such rating may be obtained from S&P. Generally, rating agencies base their ratings on information and materials furnished 49 4892-6277-7113v6/022925-0110 to them (which may include information and material from the District that is not included in this Official Statement) and on investigations, studies and assumptions by the rating agencies. The District has covenanted in the Continuing Disclosure Certificate to file notices of any rating changes on the Certificates with EMMA. See the caption "CONTINUING DISCLOSURE UNDERTAKING" and Appendix E. Notwithstanding such covenant, information relating to rating changes on the Certificates may be publicly available from S&P prior to such information being provided to the District and prior to the date by which the District is obligated to file a notice of rating change. Purchasers of the Certificates are directed to S&P and their respective websites and official media outlets for the most current rating with respect to the Certificates after the initial execution and delivery thereof. In providing a rating on the Certificates, S&P may have performed independent calculations of coverage ratios using its own internal formulas and methodology, which may not reflect the provisions of the Trust Agreement or the Installment Purchase Agreement. The District makes no representations as to any such calculations, and such calculations should not be construed as a representation by the District as to past or future compliance with any financial covenants, the availability of particular revenues for the payment of debt service or for any other purpose. UNDERWRITING The Certificates are being purchased by Oppenheimer & Co., Inc. (the "Underwriter") pursuant to a purchase agreement, dated the date hereof (the "Purchase Agreement"), by and between the District and the Underwriter. The Underwriter will purchase the Certificates at an aggregate purchase price of $ , representing the principal amount of the Certificates, plus/less $ of net original issue premium/discount and less $ of Underwriter's discount. The Purchase Agreement provides that the Underwriter will purchase all of the Certificates if any are purchased, the obligation to make such a purchase being subject to certain terms and conditions set forth in the Purchase Agreement, the approval of certain legal matters by counsel and certain other conditions Under certain circumstances, the initial public offering yields stated on the page immediately following the cover of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell the Certificates to certain dealers (including dealers depositing the Certificates into investment trusts), dealer banks, banks acting as agent and others at yields higher than said public offering yields. CONTINUING DISCLOSURE UNDERTAKING The District has covenanted in a Continuing Disclosure Certificate, dated the date of execution and delivery of the Certificates (the "Continuing Disclosure Certificate"), to provide annually certain financial information and operating data relating to the Water System of the District by not later than 270 days following the end of its Fiscal Year, including the audited financial statements of the District for each such Fiscal Year (together, the "Annual Report"), commencing September 27, 2022 with the Annual Report for Fiscal Year 2021 (which, for Fiscal Year 2021, will consist solely of this Official Statement), and to provide notices of the occurrence of certain enumerated events. The specific nature of the information to be contained in the Annual Report and the notices of enumerated events is set forth in Appendix E. These covenants have been made in order to assist the Underwriter in complying with Section (b)(5) of Rule 15c2-12 adopted by the Securities and Exchange Commission. [DISCLOSURE REGARDING PAST COMPLIANCE TO COME]. MISCELLANEOUS Insofar as any statements made in this Official Statement involve matters of opinion or of estimates, whether or not expressly stated, they are set forth as such and not as representations of fact. No representation 50 4892-6277-7113v6/022925-0110 is made that any of the statements will be realized. Neither this Official Statement nor any statement which may have been made verbally or in writing is to be construed as a contract with the Owners of the Certificates. The execution and delivery of this Official Statement have been duly authorized by the District. TRUCKEE DONNER PUBLIC UTILITY DISTRICT General Manager I� 51 4892-6277-7113v6/022925-0110 APPENDIX A AUDITED FINANCIAL STATEMENTS J A-1 4892-6277-7113v6/022925-0110 APPENDIX B SUMMARY OF PRINCIPAL LEGAL DOCUMENTS The following is a summary of certain provisions of the Installment Purchase Agreement and the Trust Agreement which are not described elsewhere. This summary does not purport to be comprehensive and reference should be made to the respective agreement for a full and complete statement of the provisions thereof [TO COME FROM STRADLING] B-1 4892-6277-7113v6/022925-0110 APPENDIX C FORM OF LEGAL OPINION Upon execution and delivery of the Certificates, Stradling Yocca Carlson & Rauth, a Professional Corporation, Special Counsel, proposes to render its final approving opinion in substantially thefollowingform: July _, 2022 Truckee Donner Public Utility District Truckee, California Re: $ Truckee Donner Public Utility District Water System Revenue Certificates of Participation, Series 2022A Members of the Board of Directors: We have acted as Special Counsel to the Truckee Donner Public Utility District (the "District") in connection with the execution and delivery of $ aggregate principal amount of the Truckee Donner Public Utility District Water System Revenue Certificates of Participation, Series 2022A (the "Certificates"), dated the date hereof, evidencing and representing an interest of the registered owner thereof in the right to receive a portion of certain Installment Payments (as that term is defined in the Trust Agreement hereinafter mentioned) under and pursuant to an Installment Purchase Agreement, dated as of July 1, 2022 (the "Agreement'), by and between the District and the Truckee Donner Public Utility District Financing Corporation (the "Corporation"), which right to receive such Installment Payments has been assigned by the Corporation to The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"), pursuant to an Assignment Agreement, dated as of July 1, 2022, by and between the Trustee and the Corporation. The Certificates have been executed by the Trustee pursuant to the terms of a Trust Agreement, dated as of July 1, 2022 (the "Trust Agreement'), by and among the District, the Corporation and the Trustee. In connection with our representation we have examined a certified copy of the proceedings relating to the Certificates. As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigations. Based upon the foregoing and after examination of such questions of law as we have deemed relevant in the circumstances, but subject to the limitations set forth herein, we are of the opinion that: 1. The proceedings show lawful authority for the execution and delivery by the District of the Agreement and the Trust Agreement under the laws of the State of California now in force, the Agreement and the Trust Agreement have been duly authorized, executed and delivered by the District, and, assuming due authorization, execution and delivery by the Trustee and the Corporation, as appropriate, are valid and binding obligations of the District enforceable against the District in accordance with their respective terms. 2. The Certificates, assuming due execution and delivery by the Trustee, are entitled to the benefits of the Trust Agreement. 3. The obligation of the District to make the Installment Payments from Net Revenues (as defined in the Agreement) is an enforceable obligation of the District and does not constitute a debt of the District, or of the State of California or of any political subdivision thereof in contravention of any constitutional or statutory debt limit or restriction, and does not constitute an obligation for which the District is obligated to levy or pledge any form of taxation or for which the District has levied or pledged any form of taxation. C-1 4892-6277-7113v6/022925-0110 4. Under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, the portion of each Installment Payment constituting interest (and original issue discount) with respect to the Certificates is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. 5. The portion of each Installment Payment constituting interest (and original issue discount) is exempt from State of California personal income tax. 6. The difference between the issue price of a Certificate (the first price at which a substantial amount of the Certificates of a maturity is to be sold to the public) and the stated prepayment price at maturity with respect to such Certificate constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Certificate Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Certificate Owner will increase the Certificate Owner's basis in the applicable Certificate. In the opinion of Special Counsel, the amount of original issue discount that accrues to the Owner of a Certificate is excluded from the gross income of such Owner for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations. 7. The amount by which a Certificate Owner's original basis for determining loss on sale or exchange in the applicable Certificate (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable premium, which must be amortized under Section 171 of the Internal Revenue Code of 1986, as amended (the "Code"); such amortizable premium reduces the Certificate Owner's basis in the applicable Certificate (and the amount of tax-exempt interest received with respect thereto), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Certificate premium may result in a Certificate Owner realizing a taxable gain when a Certificate is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Certificates to the Owner. Purchasers of the Certificates should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable Certificate premium. The opinions expressed herein as to the exclusion from gross income of the portion of each Installment Payment constituting interest with respect to the Certificates are based upon certain representations of fact and certifications made by the District and others and are subject to the condition that the District and complies with all requirements of the Code that must be satisfied subsequent to the execution and delivery of the Certificates to assure that such portion of each Installment Payment constituting interest with respect to the Certificates will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause the portion of each Installment Payment with respect to the Certificates constituting interest to be included in gross income for federal income tax purposes retroactive to the date of execution and delivery of the Certificates. The District has covenanted to comply with all such requirements. The opinions expressed herein may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. Our engagement with respect to the Certificates terminates on the date of their execution and delivery. The Trust Agreement, the Agreement and the Tax Certificate relating to the Certificates permit certain actions to be taken or to be omitted if a favorable opinion of Special Counsel is provided with respect thereto. No opinion is expressed herein as to the effect on the exclusion from gross income of the portion of each Installment Payment constituting interest (and original issue discount) with respect to the Certificates for federal income tax purposes with respect to any Certificate if any such action is taken or omitted based upon the opinion or advice of counsel other than ourselves. Other than expressly stated herein, we express no other opinion regarding tax consequences with respect to the Certificates. The opinions expressed herein are based upon our analysis and interpretation of existing laws, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities. C-2 4892-6277-7113v6/022925-0110 We call attention to the fact that the rights and obligations under the Trust Agreement, the Agreement and the Certificates are subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors' rights, to the application of equitable principles if equitable remedies are sought, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public agencies in the State of California. Our opinion is limited to matters governed by the laws of the State of California and federal law. We assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction. We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Certificates and expressly disclaim any duty to advise the Owners of the Certificates with respect to matters contained in the Official Statement. Respectfully submitted, VA C-3 4892-6277-7113v6/022925-0110 APPENDIX D DTC AND BOOK -ENTRY ONLY SYSTEM The information in this section concerning DTC and DTC's book -entry only system has been obtained from sources that the District and the Underwriter believe to be reliable, but neither the District nor the Underwriter takes any responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the Certificates, payment of principal, premium, if any, accreted value, if any, and interest with respect to the Certificates to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Certificates and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Certificates. The Certificates will be issued as fully -registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered certificate will be issued for each annual maturity of the Certificates, each in the aggregate principal amount of such annual maturity, and will be deposited with DTC. DTC, the world's largest securities depository, is a limited -purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post -trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book -entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly -owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor's rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of Certificates under the DTC system must be made by or through Direct Participants, which will receive a credit for the Certificates on DTC's records. The ownership interest of each actual purchaser of each Certificates (`Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Certificates are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Certificates, except in the event that use of the book -entry system for the Certificates is discontinued. To facilitate subsequent transfers, all Certificates deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Certificates with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Certificates; DTC's records reflect only the identity of the Direct Participants to whose accounts such D-1 4892-6277-7113v6/022925-0110 Certificates are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Certificates may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Certificates, such as prepayments, tenders, defaults, and proposed amendments to the Certificate documents. For example, Beneficial Owners of Certificates may wish to ascertain that the nominee holding the Certificates for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Prepayment notices shall be sent to DTC. If less than all of the Certificates within a maturity are being prepaid, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be prepaid. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Certificates unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Certificates are credited on the record date (identified in a listing attached to the Omnibus Proxy). Prepayment proceeds, distributions, and dividend payments with respect to the Certificates will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the District or the Trustee, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Trustee, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of prepayment proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. A Certificate Owner shall give notice to elect to have its Certificates purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such Certificates by causing the Direct Participant to transfer the Participant's interest in the Certificates, on DTC's records, to the Trustee. The requirement for physical delivery of Certificates in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Certificates are transferred by Direct Participants on DTC's records and followed by a book - entry credit of tendered Certificates to the Trustee's DTC account. DTC may discontinue providing its services as depository with respect to the Certificates at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered. The District may decide to discontinue use of the system of book -entry only transfers through DTC (or a successor securities depository). In that event, certificates will be printed and delivered to DTC. THE TRUSTEE, AS LONG AS A BOOK -ENTRY ONLY SYSTEM IS USED FOR THE CERTIFICATES, WILL SEND ANY NOTICE OF PREPAYMENT OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE PREPAYMENT OF THE CERTIFICATES CALLED FOR PREPAYMENT OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. D-2 4892-6277-7113v6/022925-0110 APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE Upon the execution and delivery of the Certificates, the District proposes to enter into a Continuing Disclosure Certificate in substantially the following form: This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered by the Truckee Donner Public Utility District (the "District") in connection with the execution and delivery of the Truckee Donner Public Utility District Water System Revenue Certificates of Participation, Series 2022A (the "Certificates") pursuant to a Trust Agreement, dated as of July 1, 2022 (the "Trust Agreement"), by and among the District, the Truckee Donner Public Utility District Financing Corporation (the "Corporation") and The Bank of New York Mellon Trust Company, N.A., as trustee. The District covenants and agrees as follows: 1. Purpose of this Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the District for the benefit of the Holders and Beneficial Owners of the Certificates and in order to assist the Participating Underwriter in complying with the Rule. 2. Definitions. In addition to the definitions set forth in the Trust Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: Annual Report. The term "Annual Report" means any Annual Report provided by the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. Beneficial Owner. The term "Beneficial Owner" means any person which: (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Certificates (including persons holding Certificates through nominees, depositories or other intermediaries); or (b) is treated as the owner of any Certificates for federal income tax purposes. EMMA. The term "EMMA" means the Municipal Securities Rulemaking Board's Electronic Municipal Market Access System for municipal securities disclosures, maintained on the Internet at http://emma.msrb.org/. Financial Obligation. The term "Financial Obligation" means a: (A) debt obligation; (B) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (C) guarantee of (A) or (B). The term "Financial Obligation" does not include municipal securities as to which a final official statement has been provided to the Municipal Securities Rulemaking Board consistent with the Rule. Fiscal Year. The term "Fiscal Year" means the one-year period ending on the last day of December of each year. Holder. The term "Holder" means a registered owner of the Certificates. Listed Events. The term "Listed Events" means any of the events listed in Sections 5(a) and (b) of this Disclosure Certificate. Official Statement. The term "Official Statement" means the Official Statement relating to the Certificates dated June _, 2022 delivered in connection with the execution and delivery of the Certificates. Participating Underwriter. The term "Participating Underwriter" means the original underwriters of the Certificates required to comply with the Rule in connection with offering of the Certificates. E-1 4892-6277-7113v6/022925-0110 Rule. The term "Rule" means Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. 3. Provision of Annual Reports. (a) The District shall provide not later than 270 days following the end of its Fiscal Year (commencing September 27, 2022 with the Annual Report for Fiscal Year 2021) to EMMA an Annual Report relating to the immediately preceding Fiscal Year which is consistent with the requirements of Section 4 of this Disclosure Certificate, which Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate. Notwithstanding the foregoing, the filing of the first Annual Report due September 27, 2022 shall be satisfied by the filing of the Official Statement on EMMA. (b) If the District is unable to provide to EMMA an Annual Report by the date required in subsection (a), the District shall send to EMMA a notice in substantially the manner prescribed by the Municipal Securities Rulemaking Board. 4. Content of Annual Reports. The Annual Report shall contain or incorporate by rcfcrcncc the following: (a) The audited financial statements of the District for the prior Fiscal Year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If such audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Principal amount of the Certificates outstanding as of the last day of the prior Fiscal Year. (c) To the extent not contained in the audited financial statements filed under the preceding clause (a), the Annual Report shall contain information showing the following information for the most recently completed Fiscal Year: (i) an update of the information in Tables 1, 3, 4 and 5 under the caption "THE WATER SYSTEM" in the Official Statement; (ii) an update of the information in Table 13 under the caption "FINANCIAL INFORMATION" in the Official Statement; and (iii) a description of additional Contracts or Bonds (as such terms are defined in the Installment Purchase Agreement) executed or issued by the District during the most recently completed Fiscal Year. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which have been submitted to EMMA or the Securities and Exchange Commission; provided that if any document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board; and provided further that the District shall clearly identify each such document so included by reference. 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Certificates in a timely manner not more than ten (10) Business Days after the event: principal and interest payment delinquencies; E-2 4892-6277-7113v6/022925-0110 2. unscheduled draws on debt service reserves reflecting financial difficulties; unscheduled draws on credit enhancements reflecting financial difficulties; 4. substitution of credit or liquidity providers, or their failure to perform; 5. issuance by the Internal Revenue Service of proposed or final determination of taxability or of a Notice of Proposed Issue (IRS Form 5701 TEB); 6. tender offers; defeasances; 8. ratings changes; 9. bankruptcy, insolvency, receivership or similar proceedings; Note: For the purposes of the event identified in subparagraph (9), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person; and 10. default, event of acceleration, termination event, modification of terms or other similar events under the terms of a Financial Obligation of the District, any of which reflect financial difficulties. (b) Pursuant to the provisions of this Section 5, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Certificates, if material, in a timely manner not more than ten (10) Business Days after the event: 1. unless described in Section 5(a)(5), other notices or determinations by the Internal Revenue Service with respect to the tax status of the Certificates or other events affecting the tax status of the Certific 2. modifications to the rights of Certificate holders; 3. optional, unscheduled or contingent Certificate calls; 4. release, substitution or sale of property securing repayment of the Certificates; non-payment related defaults; 6. the consummation of a merger, consolidation, or acquisition involving the District or the sale of all or substantially all of the assets of the District, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms; appointment of a successor or additional trustee or the change of the name of a trustee; and 8. incurrence of a Financial Obligation of the District, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the District, any of which affect security holders. E-3 4892-6277-7113v6/022925-0110 (c) If the District determines that knowledge of the occurrence of a Listed Event under Section 5(b) would be material under applicable federal securities laws, the District shall file a notice of such occurrence with EMMA in a timely manner not more than ten (10) Business Days after the event. 6. Customarily Prepared and Public Information. Upon request, the District shall provide to any person financial information and operating data regarding the District which is customarily prepared by the District and is publicly available. 7. Termination of Obligation. The District's obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior prepayment or payment in full of all of the Certificates. If such termination occurs prior to the final maturity of the Certificates, the District shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the District may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that, in the opinion of nationally recognized bond counsel, such amendment or waiver is permitted by the Rule. 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the District chooses to include any information in any notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the District shall not thereby have any obligation under this Disclosure Certificate to update such information or include it in any future notice of occurrence of a Listed Event. 10. Default. In the event of a failure of the District to comply with any provision of this Disclosure Certificate, any Holders or Beneficial Owners of the Certificates may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the District to comply with this Disclosure Certificate shall be an action to compel performance. No Holder or Beneficial Owner of the Certificates may institute such action, suit or proceeding to compel performance unless they shall have first delivered to the District satisfactory written evidence of their status as such, and a written notice of and request to cure such failure, and the District shall have refused to comply therewith within a reasonable time. 11. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Corporation, the District, the Participating Underwriter and Holders and Beneficial Owners from time to time of the Certificates, and shall create no rights in any other person or entity. Dated: July_, 2022 TRUCKEE DONNER PUBLIC UTILITY DISTRICT By: Its: General Manager E-4 4892-6277-7113v6/022925-0110