This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold, nor may offers to buy them be accepted, prior to the time the Official Statement is delivered
in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any jurisdiction in which such offer, solicitation or
sale would be unlawful.
PRELIMINARY OFFICIAL STATEMENT DATED JUNE 7, 2016
NEW ISSUE ‑ BOOK-ENTRY-ONLY
Ratings: Fitch: “AAA”
Moody’s: “Aaa”
S&P: “AAA”
(See “RATINGS” herein.)
In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to IBank, based upon an analysis of existing laws, regulations, rulings and
court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, interest on the
Series 2016A Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is
exempt from State of California personal income taxes. In the further opinion of Bond Counsel, interest on the Series 2016A Bonds is not a specific
preference item for purposes of the federal individual or corporate alternative minimum taxes, although Bond Counsel observes that such interest is
included in adjusted current earnings when calculating corporate alternative minimum taxable income. Bond Counsel expresses no opinion regarding
any other tax consequences related to the ownership or disposition of, or the amount, accrual or receipt of interest on, the Series 2016A Bonds. See
“TAX MATTERS.”
$138,405,000*
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
INFRASTRUCTURE STATE REVOLVING FUND REVENUE BONDS
SERIES 2016A
Dated: Date of Delivery
Due: October 1, as shown on the inside front cover
The Infrastructure State Revolving Fund Revenue Bonds, Series 2016A (the “Series 2016A Bonds”) are being issued by the California Infrastructure and
Economic Development Bank (“IBank”), a public instrumentality of the State of California (the “State”), to provide funds, together with other available funds
of IBank, to (i) finance and refinance Loans (as defined herein) to eligible borrowers, including local governments, state agencies, and certain non-profit
organizations for infrastructure and economic expansion projects pursuant to the Infrastructure State Revolving Fund Program, (ii) make a deposit to the
Common Reserve Fund (as defined herein), and (iii) pay costs of issuance of the Series 2016A Bonds. Interest on the Series 2016A Bonds will be payable on
each April 1 and October 1, commencing on October 1, 2016.
The Series 2016A Bonds will be issued in book-entry form only, in the denomination of $5,000 or integral multiples thereof and, when delivered, will be
registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), which will act as securities depository for
the Series 2016A Bonds. Individual purchases of the Series 2016A Bonds will be made in book-entry form only. Purchasers of the Series 2016A Bonds will not
receive certificates representing their ownership interests in Series 2016A Bonds purchased. Principal and interest payments on the Series 2016A Bonds are
payable directly to DTC by the Trustee (as defined below). Upon receipt of payments of principal and interest, DTC will in turn distribute such payments to
the beneficial owners of the Series 2016A Bonds. See “THE SERIES 2016A BONDS” and APPENDIX F - “BOOK-ENTRY-ONLY SYSTEM.”
The Series 2016A Bonds will be issued and secured pursuant to (i) an Indenture, dated as of February 1, 2014 (the “Master Indenture”), between IBank and
U.S. Bank National Association, as trustee (the “Trustee”), as supplemented and amended, including as supplemented and amended by a Third Supplemental
Indenture, dated as of June 1, 2016, between IBank and the Trustee (the “Third Supplemental Indenture”). The Master Indenture as supplemented and
amended is referred to herein as the “Indenture.”
The Series 2016A Bonds are limited obligations of IBank, payable solely from and secured by a pledge and assignment of the Collateral as provided in the
Indenture. “Collateral” means all of IBank’s right, title, and interest in and to (a) the Pledged Loans (other than the Issuer Retained Rights), including all Pledged
Loan Repayments, (b) the Pledged Funds and Accounts and all money, instruments, investment property, and other property from time to time credited to or
on deposit in the Pledged Funds and Accounts and (c) all other Revenues credited to or on deposit in the Pledged Funds and Accounts. See “SECURITY AND
SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS.” The Indenture permits the issuance of additional Bonds and the incurrence of other obligations
secured by the Collateral and payable on a parity with the Series 2016A Bonds (the “Parity Obligations”). See “SECURITY AND SOURCE OF PAYMENT FOR
THE SERIES 2016A BONDS – Conditions to Issuing Additional Bonds and Parity Obligations.” The Indenture also permits the issuance of obligations secured
by the Collateral and payable on a subordinate basis to the Series 2016A Bonds. IBank has previously issued its Infrastructure State Revolving Fund Revenue
Bonds Series 2014A (the “Series 2014A Bonds”) pursuant to the Indenture, currently outstanding in the principal amount of $89,805,000 and its Infrastructure
State Revolving Fund Revenue Bonds Series 2015A (the “Series 2015A Bonds”), currently outstanding in the principal amount of $87,590,000. The Series 2016A
Bonds are secured on a parity with the Series 2014A Bonds and the Series 2015A Bonds and constitute “Bonds” under the Indenture.
For a general description of the terms of the Pledged Loans pledged under the Indenture and provisions permitting the release, substitution, addition,
and amendment of Pledged Loans, see “THE INFRASTRUCTURE STATE REVOLVING FUND PROGRAM— Basic Terms of the Loans” and “SECURITY AND
SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS— Release, Substitution, Addition and Amendment of Pledged Loans.” For a general description
of the conditions under which Loans will be made with the proceeds of the Series 2016A Bonds after the issuance of the Series 2016A Bonds, see “THE
INFRASTRUCTURE STATE REVOLVING FUND PROGRAM – Eligibility Criteria.”
The Series 2016A Bonds are subject to mandatory sinking account redemption, optional redemption and extraordinary redemption as described herein.
See “THE SERIES 2016A BONDS – Redemption.”
The Series 2016A Bonds are limited obligations of IBank and are not a lien or charge upon the funds or property of IBank, except to the
extent of the pledge and assignment provided for in the Indenture. Neither the State of California nor IBank shall be obligated to pay the
principal of the Series 2016A Bonds or the interest thereon, except from the Collateral as provided in the Indenture. Neither the full faith and
credit nor the taxing power of the State of California nor any agency thereof is pledged to the payment of the principal of or interest on the
Series 2016A Bonds. IBank has no taxing power.
This cover page contains information for general reference only. It is not a summary of this issue. Potential purchasers must read the entire Official
Statement to obtain information essential to making an informed investment decision.
The Series 2016A Bonds are offered when, as and if issued by IBank and received by the Underwriters subject to prior sale and to the approval of their
validity by Orrick, Herrington & Sutcliffe LLP, Bond Counsel to IBank, and certain other conditions. Certain legal matters will be passed upon for IBank by its
Counsel, and by Stradling Yocca Carlson & Rauth, a Professional Corporation, Disclosure Counsel to IBank. Certain legal matters will be passed upon for the
Underwriters by their counsel, Schiff Hardin LLP. It is expected that the Series 2016A Bonds, in book-entry only form, will be available for delivery to DTC,
on or about June 28, 2016.
J.P. Morgan
Blaylock Beal Van, LLC
Loop Capital Markets LLC
Fidelity Capital Markets
The Williams Capital Group, L.P.
June _, 2016
* Preliminary; subject to change.
Stifel
Piper Jaffray & Co.
BNY Mellon Capital Markets, LLC
Mischler Financial Group, Inc.
RH Investment Corporation
Wells Fargo Securities
$138,405,000*
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
INFRASTRUCTURE STATE REVOLVING FUND REVENUE BONDS
SERIES 2016A
Base CUSIP No.: 13034A†
$_______________ Serial Bonds
Maturity Date
(October 1)
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
Principal
Amount*
$470,000
2,220,000
2,290,000
2,385,000
2,355,000
2,590,000
2,720,000
2,855,000
3,000,000
3,155,000
3,315,000
3,485,000
3,660,000
3,835,000
4,955,000
5,275,000
5,540,000
5,810,000
6,100,000
6,230,000
6,390,000
6,705,000
7,030,000
7,385,000
7,755,000
6,975,000
7,325,000
8,320,000
8,275,000
Interest Rate
Yield
CUSIP† Suffix
$__________ ____% Term Bonds due October 1, 20__ – Priced to Yield:____%* -- CUSIP Suffix† ___
$__________ ____% Term Bonds due October 1, 20__ – Priced to Yield:____%*-- CUSIP Suffix† ___
** Priced to October 1, 20__ call date at par.
*
†
Preliminary; subject to change.
Copyright 2016, American Bankers Association. CUSIP® is a registered trademark of the American Bankers Association. CUSIP
data herein is provided by the CUSIP Service Bureau, managed on behalf of the American Bankers Association by Standard & Poor’s.
This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services Bureau. CUSIP
numbers have been assigned by an independent company not affiliated with IBank and are included solely for the convenience of the
registered owners of the applicable Series 2016A Bonds. Neither IBank nor the Underwriters are responsible for the selection or uses
of these CUSIP numbers, and no representation is made as to their correctness on the applicable Series 2016A Bonds or as included
herein.
This Official Statement, which includes the cover page, inside cover page and the appendices
hereto, does not constitute an offer to sell the Series 2016A Bonds in any jurisdiction in which or to
any person to whom it is unlawful to make such an offer. No dealer, salesperson, or other person has
been authorized by IBank or the Underwriters to give any information or to make any
representations, other than those contained herein, in connection with the offering of the Series
2016A Bonds and, if given or made, such information or representations must not be relied upon.
The information set forth herein has been obtained from IBank and other sources that are
believed to be current and reliable, but the accuracy or completeness of such information is not
guaranteed by, and is not to be construed as a representation by, IBank. Estimates and opinions are
included and should not be interpreted as statements of fact. Summaries of documents do not purport
to be complete statements of their provisions. The information and expressions of opinion herein are
subject to change without notice, and neither the delivery of this Official Statement nor any sale
made pursuant hereto shall, under any circumstances, create any implication that there has been no
change in the affairs of IBank or the information herein pertaining to the Infrastructure State
Revolving Fund Program since the date hereof.
The Underwriters have provided the following sentence for inclusion in this Official
Statement: The Underwriters have reviewed the information in this Official Statement in accordance
with, and as part of, their responsibilities to investors under the federal securities laws as applied to
the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or
completeness of such information.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY
OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE
MARKET PRICE OF THE SERIES 2016A BONDS AT A LEVEL ABOVE THAT WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
Certain statements included or incorporated by reference in this Official Statement constitute
projections or “forward-looking statements.” Such statements are generally identifiable by the
terminology used such as “plan,” “expect,” “estimate,” “budget,” or other similar words. Such
statements include, but are not limited to, certain statements contained in the information under the
captions “INTRODUCTION,” “THE INFRASTRUCTURE STATE REVOLVING FUND
PROGRAM,” “SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS,”
and “PRO FORMA CASH FLOW TABLE.” The achievement of certain results or other
expectations contained in such projections or forward-looking statements involves known and
unknown risks, uncertainties and other factors that may cause actual results, performance, or
achievements described to be materially different from any future results, performance, or
achievements expressed or implied by such projections or forward-looking statements. IBank takes
no responsibility for, and IBank does not plan to issue, any updates or revisions to those projections
or forward-looking statements if or when its expectations, or events, conditions, or circumstances on
which such statements are based, change.
IBank maintains a website. The information therein is not incorporated by reference and
should not be relied upon when making an investment decision.
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
BOARD OF DIRECTORS
Panorea Avdis
Director, Governor’s Office of Business & Economic Development, Chair
John Chiang
Treasurer of the State of California, Member
Brian P. Kelly
Secretary, California State Transportation Agency, Member
Michael Cohen
Director, Department of Finance, Member
Peter Luchetti
Governor's Appointee, Member
ADMINISTRATION
Teveia R. Barnes
Executive Director
Nancee Trombley
Chief Deputy Executive Director
William D. Pahland, Jr.
Counsel
Diane Cummings
Deputy Director of Credit, Chief Credit Officer
Alice Scott
Deputy Director of External Affairs
Diane Nanik
Fiscal Unit Manager
Fariba Khoie
Bond Unit Manager
SPECIAL SERVICES
BOND COUNSEL
Orrick, Herrington & Sutcliffe LLP
DISCLOSURE COUNSEL
Stradling Yocca Carlson & Rauth, a Professional Corporation
AGENT FOR SALE
Office of the State Treasurer
FINANCIAL ADVISOR
Lamont Financial Services Corporation
TRUSTEE
U.S. Bank National Association
TABLE OF CONTENTS
PAGE
INTRODUCTION ....................................................................................................................................................... 1
THE SERIES 2016A BONDS ........................................................................................................................................ 1
OUTSTANDING BONDS ............................................................................................................................................... 2
BOOK-ENTRY ONLY SYSTEM..................................................................................................................................... 2
IBANK........................................................................................................................................................................ 2
THE ISRF PROGRAM.................................................................................................................................................. 2
SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS ...................................................................... 3
ADDITIONAL BONDS AND PARITY OBLIGATIONS ....................................................................................................... 3
COMMON RESERVE FUND .......................................................................................................................................... 4
REDEMPTION ............................................................................................................................................................. 5
CONTINUING DISCLOSURE ......................................................................................................................................... 5
MISCELLANEOUS ....................................................................................................................................................... 5
THE SERIES 2016A BONDS ..................................................................................................................................... 5
GENERAL ................................................................................................................................................................... 5
REDEMPTION ............................................................................................................................................................. 6
DEBT SERVICE SCHEDULE ................................................................................................................................. 12
IBANK ........................................................................................................................................................................ 13
THE INFRASTRUCTURE STATE REVOLVING FUND PROGRAM ............................................................. 13
OVERVIEW OF THE ISRF PROGRAM ......................................................................................................................... 13
SOURCES OF FUNDING FOR LOANS .......................................................................................................................... 14
ELIGIBILITY CRITERIA ............................................................................................................................................. 14
BASIC TERMS OF THE LOANS ................................................................................................................................... 15
LOAN MONITORING AND SURVEILLANCE ................................................................................................................ 16
OUTSTANDING LOANS ......................................................................................................................................... 16
PLEDGED LOANS...................................................................................................................................................... 16
PLAN OF FINANCE................................................................................................................................................. 18
ESTIMATED SOURCES AND USES OF FUNDS ................................................................................................ 20
SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS ............................................. 20
LIMITED OBLIGATIONS OF IBANK ............................................................................................................................ 20
OVERVIEW OF SOURCES OF REPAYMENT ................................................................................................................. 21
RELEASE, SUBSTITUTION, ADDITION AND AMENDMENT OF PLEDGED LOANS ......................................................... 22
OUTSTANDING BONDS ............................................................................................................................................. 22
COMMON RESERVE FUND ........................................................................................................................................ 22
CONDITIONS TO ISSUING ADDITIONAL BONDS AND PARITY OBLIGATIONS.............................................................. 24
SUMMARY OF FLOW OF FUNDS UNDER THE INDENTURE .......................................................................................... 26
SUPPLEMENTAL REVENUE FUND ............................................................................................................................. 30
PRIOR OUTSTANDING BONDS .................................................................................................................................. 31
FLOW OF FUNDS DIAGRAM ...................................................................................................................................... 31
PRO FORMA CASH FLOW TABLE ..................................................................................................................... 35
INVESTMENT CONSIDERATIONS ..................................................................................................................... 38
LIMITED OBLIGATION; COVENANTS PURSUANT TO INDENTURE DO NOT CONSTITUTE A GUARANTEE ................... 38
CONSIDERATIONS RELATING TO PLEDGED LOANS AND BORROWERS ...................................................................... 38
BANKRUPTCY OF A BORROWER ............................................................................................................................... 39
RELIANCE ON PROJECTIONS ..................................................................................................................................... 40
i
TAX MATTERS ........................................................................................................................................................ 40
RATINGS ................................................................................................................................................................... 42
UNDERWRITING .................................................................................................................................................... 43
NO LITIGATION...................................................................................................................................................... 43
LEGAL MATTERS .................................................................................................................................................. 43
FINANCIAL STATEMENTS .................................................................................................................................. 43
FINANCIAL ADVISOR ........................................................................................................................................... 44
CONTINUING DISCLOSURE ................................................................................................................................ 44
MISCELLANEOUS .................................................................................................................................................. 45
APPENDIX A – PLEDGED LOANS ..................................................................................................................... A-1
APPENDIX B – COMPREHENSIVE ANNUAL FINANCIAL REPORT OF IBANK FOR
THE FISCAL YEAR ENDED JUNE 30, 2015 ........................................................................... B-1
APPENDIX C – SUMMARY OF THE INDENTURE ........................................................................................... C-1
APPENDIX D – FORM OF CONTINUING DISCLOSURE AGREEMENT ....................................................... D-1
APPENDIX E – PROPOSED FORM OF OPINION OF BOND COUNSEL ......................................................... E-1
APPENDIX F – BOOK-ENTRY ONLY SYSTEM ................................................................................................. F-1
APPENDIX G – LETTERS FROM CERTAIN UNDERWRITERS ....................................................................... G-1
ii
OFFICIAL STATEMENT
$138,405,000*
California Infrastructure and Economic Development Bank
Infrastructure State Revolving Fund Revenue Bonds
Series 2016A
INTRODUCTION
This Official Statement, including the cover page, inside cover page and the appendices
hereto, provides certain information concerning $138,405,000* aggregate principal amount of
Infrastructure State Revolving Fund Revenue Bonds, Series 2016A (the “Series 2016A Bonds”),
issued by the California Infrastructure and Economic Development Bank (the “IBank”), a public
instrumentality of the State of California (the “State”). IBank is organized and existing under
Division 1 of Title 6.7 of the California Government Code, as amended (commencing with Section
63000) (the “Act”), and is authorized pursuant to the Act and a resolution adopted by the IBank
Board of Directors on May 24, 2016 (the “Resolution”) to issue the Series 2016A Bonds. All
capitalized terms used in this Official Statement and not otherwise defined herein have the same
meanings as in the Indenture (as such terms are defined below). See APPENDIX C – “SUMMARY
OF THE INDENTURE – Definitions” for definitions of certain terms used but not otherwise defined
herein.
The Series 2016A Bonds
The Series 2016A Bonds will be issued and secured pursuant to (i) an Indenture, dated as of
February 1, 2014 (the “Master Indenture”), between IBank and U.S. Bank National Association, as
trustee (the “Trustee”), as supplemented and amended, including as supplemented and amended by a
Third Supplemental Indenture, dated as of June 1, 2016, between IBank and the Trustee (the “Third
Supplemental Indenture”). The Master Indenture as supplemented and amended by the First
Supplemental Indenture (defined herein), the Second Supplemental Indenture (defined herein), and
the Third Supplemental Indenture is referred to herein as the “Indenture.”
The Series 2016A Bonds, the Series 2015A Bonds (defined herein), and the Series 2014A
Bonds (defined herein), together with any additional series of bonds secured under the Indenture
(each a “Series”), are collectively referred to herein as the “Bonds.” Each Series secured by the
Indenture will be issued under a supplemental indenture (a “Supplemental Indenture”).
For a description of the conditions under the Indenture to issuing additional Series of Bonds
and other obligations secured by the Collateral (defined herein) and payable on a parity with the
Bonds (“Parity Obligations”), see “SECURITY AND SOURCE OF PAYMENT FOR THE SERIES
2016A BONDS – Conditions to Issuing Additional Bonds and Parity Obligations.”
The Series 2016A Bonds are being issued by IBank to provide funds, together with other
available funds of IBank, to (i) finance and refinance Loans (as defined herein) to eligible borrowers,
including local governments, state agencies, and certain non-profit organizations (“Borrowers”) for
infrastructure and economic expansion projects pursuant to the Infrastructure State Revolving Fund
Program, (ii) make a deposit to the Common Reserve Fund (defined herein), and (iii) pay costs of
issuance of the Series 2016A Bonds. Interest on the Series 2016A Bonds will be payable on each
April 1 and October 1, commencing on October 1, 2016.
*
Preliminary; subject to change.
1
Outstanding Bonds
IBank has previously issued its Infrastructure State Revolving Fund Revenue Bonds, Series
2014A (the “Series 2014A Bonds”), currently outstanding in the principal amount of $89,805,000,
and its Infrastructure State Revolving Fund Revenue Bonds, Series 2015A (the “Series 2015A
Bonds”), currently outstanding in the principal amount of $87,590,000. The Series 2014A Bonds
were issued pursuant to the Master Indenture, as supplemented by a First Supplemental Indenture,
dated as of February 1, 2014, between IBank and the Trustee (the “First Supplemental Indenture”).
The Series 2015A Bonds were issued pursuant to the Master Indenture, as supplemented by the
Second Supplemental Indenture, dated as of June 1, 2015, between IBank and the Trustee (the
“Second Supplemental Indenture”). The Series 2014A Bonds and the Series 2015A Bonds are
“Bonds” under the Indenture, payable from Collateral on a parity with the Series 2016A Bonds.
Book-Entry Only System
The Series 2016A Bonds will be issued in fully registered form only and, when issued and
delivered, will be registered in the name of Cede & Co., as nominee of the Depository Trust
Company, New York, New York (“DTC”). DTC will act as the securities depository for the Series
2016A Bonds and all payments due on the Series 2016A Bonds will be made to DTC or its nominee.
Ownership interests in the Series 2016A Bonds may be purchased in book-entry form only. See
“THE SERIES 2016A BONDS” and APPENDIX F - “BOOK-ENTRY ONLY SYSTEM.”
IBank
IBank is a public instrumentality of the State, organized and existing pursuant to the Act.
IBank has broad powers to provide financing for a wide array of infrastructure and economic
expansion projects that promote economic growth, revitalize communities, and enhance quality of
life for Californians. IBank is authorized to issue the Series 2016A Bonds and to make the proceeds
thereof available to Borrowers.
In addition to administering the ISRF Program described below, IBank also finances
infrastructure and economic development through the issuance of conduit revenue bonds, loans, and
commercial paper. Each of these other obligations is a limited obligation of IBank payable solely
from the revenues pledged thereto. IBank does not have taxing powers. See “IBANK.”
The ISRF Program
The ISRF Program provides financing to Borrowers for a wide range of infrastructure and
economic expansion projects permitted under the Act. To evidence such financing, IBank enters into
separate financing agreements (collectively, the “Loans”) with the Borrowers. (The financing
agreements are typically in the form of loan agreements, installment sale agreements or lease
agreements.) The Series 2016A Bonds will provide money to finance and refinance certain Loans.
Certain Loans will be pledged under the Indenture for the benefit of holders of Bonds and Parity
Obligations (“Pledged Loans”). See “THE INFRASTRUCTURE STATE REVOLVING FUND
PROGRAM – Basic Terms of the Loans” for a general description of the terms and conditions of the
Loans. See “THE INFRASTRUCTURE STATE REVOLVING FUND PROGRAM – Eligibility
Criteria” for a general description of the conditions under which Loans will be made with proceeds
of the Series 2016A Bonds after issuance of the Series 2016A Bonds.
The ISRF Program is separate and distinct from other revolving fund programs in the State
for which the IBank serves as bond issuer, including the Clean Water State Revolving Fund Program,
the Safe Drinking Water State Revolving Fund Program and the California Lending for Energy and
2
Environmental Needs Center, and revenues from those programs are not available for payment of
Bonds, including the Series 2016A Bonds. Loans made pursuant to the Clean Water State Revolving
Fund Program and the Safe Drinking Water State Revolving Fund Program are administered by the
California Water Resources Control Board.
Security and Source of Payment for the Series 2016A Bonds
The Series 2016A Bonds are limited obligations of IBank, payable solely from and secured
by a pledge and assignment of the Collateral as provided in the Indenture. “Collateral” means all of
IBank’s right, title, and interest in and to (a) the Pledged Loans (other than the Issuer Retained
Rights), including all Pledged Loan Repayments, (b) the Pledged Funds and Accounts and all money,
instruments, investment property, and other property from time to time credited to or on deposit in
the Pledged Funds and Accounts, and (c) all other Revenues credited to or on deposit in the Pledged
Funds and Accounts. See “SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A
BONDS.”
As described herein, pursuant to the Indenture IBank may from time to time add, release,
substitute, or amend the Pledged Loans. See “SECURITY AND SOURCE OF PAYMENT FOR
THE SERIES 2016A BONDS – Release, Substitution, Addition and Amendment of Pledged Loans.”
For a general description of the terms of the Pledged Loans, see “THE INFRASTRUCTURE
STATE REVOLVING FUND PROGRAM – Basic Terms of the Loans.”
The Series 2016A Bonds are limited obligations of IBank and are not a lien or charge
upon the funds or property of IBank, except to the extent of the pledge and assignment
provided for in the Indenture. Neither the State of California nor IBank shall be obligated to
pay the principal of the Series 2016A Bonds or the interest thereon, except from the Collateral
as provided in the Indenture. Neither the full faith and credit nor the taxing power of the State
of California nor any agency thereof is pledged to the payment of the principal of or interest on
the Series 2016A Bonds. IBank has no taxing power.
Additional Bonds and Parity Obligations
The Indenture provides for the issuance of additional Bonds and the incurrence of Parity
Obligations secured by the Collateral and payable on a parity with the Series 2016A Bonds, the
Series 2015A Bonds, and the Series 2014A Bonds. In order to issue additional Bonds or incur Parity
Obligations under the Indenture, IBank is required to meet certain conditions specified in the
Indenture, including delivery of a certificate that demonstrates compliance with the Coverage Test;
provided, however, that demonstration of compliance with the Coverage Test is not required if
Annual Debt Service will not be increased in any Bond Year after taking into account the issuance or
incurrence of such additional Bonds or Parity Obligations. “Coverage Test” means, as of any date of
calculation, that the Revenues (excluding any Subsidy Payments) (assuming that the Pledged Loan
Repayments are paid at the times and in the amounts required by the Loan Agreements, unless a
payment default has occurred and is continuing under such Loan Agreement) for each Bond Year in
which any Bonds are scheduled to be Outstanding, are projected to be at least 1.20 times Annual
Debt Service in each such Bond Year. For the purpose of demonstrating compliance with the
Coverage Test in accordance with the Indenture, IBank may use and rely on any assumptions IBank
deems reasonable under then-existing circumstances, including, but not limited to, assumptions
concerning (1) the making of additional Pledged Loans at projected times and interest rates and in
projected amounts, (2) realization of additional Pledged Loan Repayments from such additional
Pledged Loans at projected times and in projected amounts, and (3) realization of earnings from the
investment of projected amounts in the Pledged Funds and Accounts at projected times and interest
3
rates. (Although, as described above, the making of additional Pledged Loans may be included in the
assumptions utilized in connection with a demonstration of compliance with the Coverage Test, the
Indenture does not require that any additional Pledged Loans subsequently be added as Collateral.)
See “SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS – Conditions
to Issuing Additional Bonds and Parity Obligations” and “INVESTMENT CONSIDERATIONS –
Reliance on Projections.” The requirements of the Indenture described above are being met in
connection with the issuance of the Series 2016A Bonds. See “PRO FORMA CASH FLOW
TABLE.”
The Indenture also permits the issuance of obligations secured by the Collateral and payable
on a subordinate basis to Bonds and any Parity Obligations.
Common Reserve Fund
A common reserve fund (the “Common Reserve Fund”) in an amount equal to the Common
Reserve Requirement will be held by the Trustee pursuant to the Indenture to secure the payment of
principal of and interest on the Series 2014A Bonds, the Series 2015A Bonds, the Series 2016A
Bonds and any other Common Reserve Fund Participating Bonds. “Common Reserve Fund
Participating Bonds” means the Bonds of each Series which, pursuant to the terms of the Indenture
and the Supplemental Indenture relating to such Series, are secured by amounts in the Common
Reserve Fund. The Series 2016A Bonds are Common Reserve Fund Participating Bonds.
“Common Reserve Requirement” means, as of any date of calculation, an amount equal to
the least of (a) 10% of the initial offering price to the public of the Common Reserve Fund
Participating Bonds as determined under the Code, or (b) the greatest amount of Debt Service for the
Common Reserve Fund Participating Bonds in any Bond Year during the period commencing with
the Bond Year in which the determination is being made and terminating with the last Bond Year in
which any Common Reserve Fund Participating Bond is due, or (c) 125% of the sum of the Debt
Service for the Common Reserve Fund Participating Bonds for all Bond Years during the period
commencing with the Bond Year in which such calculation is made (or if appropriate, the first full
Bond Year following the issuance of any Common Reserve Fund Participating Bonds) and
terminating with the last Bond Year in which any Debt Service for the Common Reserve Fund
Participating Bonds is due, divided by the number of such Bond Years, all as computed and
determined by IBank and specified in writing to the Trustee; provided, that with respect to the
issuance of additional Common Reserve Fund Participating Bonds, if the amount on deposit in the
Common Reserve Fund would have to be increased by an amount greater than ten percent (10%) of
the stated principal amount of such additional Common Reserve Fund Participating Bonds (or, if the
issue has more than a de minimus amount of original issue discount or premium, of the issue price of
such Common Reserve Fund Participating Bonds) then the Common Reserve Requirement shall be
such lesser amount as is determined by a deposit of such ten percent (10%). In lieu of or in addition
to funding the Common Reserve Fund with the proceeds of Bonds, IBank may fund the Common
Reserve Fund with transfers from the Equity Fund in an amount equal to or greater than the Common
Bonds Reserve Requirement.
The Indenture provides that, in lieu of maintaining and depositing moneys in the Common
Reserve Fund, IBank may provide an insurance policy, letter of credit, or surety bond to satisfy all or
a portion of the Common Reserve Requirement, subject to the requirements of the Indenture. See
“SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS – Common
Reserve Fund.”
4
Redemption
The Series 2016A Bonds are subject to mandatory sinking account redemption, optional
redemption, and extraordinary redemption as described herein. See “THE SERIES 2016A BONDS –
Redemption.”
Continuing Disclosure
IBank has agreed to provide or cause to be provided, to the Municipal Securities Rulemaking
Board, through its Electronic Municipal Market Access System (“EMMA”) certain annual financial
information and operating data and, in a timely manner, notice of certain events. These covenants
have been made in order to assist the Underwriters in complying with Rule 15c2-12(b)(5) adopted by
the Securities and Exchange Commission. See “CONTINUING DISCLOSURE” for a description of
the specific nature of the annual report and notices of events and a summary description of the
criteria for determining whether any financial information relating to specific Borrowers will be
included in such annual report.
Miscellaneous
The Series 2016A Bonds are offered when, as, and if issued by IBank and received by the
Underwriters subject to prior sale and to the approval of their validity by Orrick, Herrington &
Sutcliffe LLP, Bond Counsel to IBank and certain other conditions. It is anticipated that the Series
2016A Bonds in definitive form will be available for delivery to DTC on or about June 28, 2016.
The description herein of the Indenture, the Continuing Disclosure Agreement, and any other
agreements relating to the Series 2016A Bonds are qualified in their entirety by reference to such
documents, and the descriptions of the Series 2016A Bonds are qualified in their entirety by the form
thereof and the information thereon included in the aforementioned documents. See APPENDIX C –
“SUMMARY OF THE INDENTURE” and APPENDIX D – “FORM OF CONTINUING
DISCLOSURE AGREEMENT.” Copies of the Indenture are available upon request to IBank, 1325 J
Street, Suite 1823, Sacramento, California 95814, Attention: Bond Unit Manager.
THE SERIES 2016A BONDS
General
The Series 2016A Bonds will be issued in fully registered form, without coupons, in
denominations of $5,000 or any integral multiple thereof (each, an “Authorized Denomination”), will
be dated their date of delivery, and will bear interest from such date at the rates set forth on the inside
cover of this Official Statement, payable on April 1 and October 1 of each year, commencing on
October 1, 2016 (each, an “Interest Payment Date”). Interest on the Series 2016A Bonds will be
computed on the basis of a 360-day year, comprised of twelve 30-day months.
The Series 2016A Bonds will be registered in the name of Cede & Co., as registered owner
and nominee of The Depository Trust Company, New York, New York (“DTC,” and, together with
any successor securities depository, the “Depository”). DTC will act as Depository for the Series
2016A Bonds. Individual purchases will be made in book-entry form. Purchasers will not receive a
bond certificate representing their beneficial ownership interest in Series 2016A Bonds. So long as
Cede & Co. is the registered owner of the Series 2016A Bonds, as nominee of DTC, references
herein to Bondholders, Holders, or owners of the Series 2016A Bonds will mean Cede & Co. and
will not mean the Beneficial Owners of Series 2016A Bonds.
5
So long as Cede & Co. is the registered owner of the Series 2016A Bonds, principal of and
interest on the Series 2016A Bonds will be payable by wire transfer of same day funds by the Trustee
to Cede & Co., as nominee for DTC. DTC is obligated, in turn, to remit such amounts to the DTC
Participants for subsequent disbursement to Beneficial Owners of the Series 2016A Bonds. See
APPENDIX F – “BOOK-ENTRY ONLY SYSTEM.”
If the use of the book-entry system is discontinued, then principal of the Series 2016A Bonds
will be payable upon surrender thereof at the designated office of the Trustee. If the use of the bookentry system is discontinued, all interest payable on the Series 2016A Bonds will be paid by check
mailed by first-class mail on each Interest Payment Date to the person in whose name each 2016A
Bond is registered in the registration books maintained by the Trustee as of the close of business on
the 15th day of the calendar month immediately preceding the Interest Payment Date (whether or not
the 15th day is a business day) (each, a “Record Date”), provided that registered owners of
$1,000,000 or more in aggregate principal amount of Series 2016A Bonds may request payment by
wire transfer to an account within the United States, such request to be submitted in writing and
received by the Trustee on or before the applicable Record Date for such Interest Payment Date, in
accordance with the provisions set forth in the Indenture.
Redemption
Optional Redemption. The Series 2016A Bonds maturing on and before October 1, 20__ are
not subject to optional redemption prior to their respective stated maturities. The Series 2016A Bonds
maturing on or after October 1, 20__ are subject to redemption prior to their respective stated
maturities, at the option of IBank, from any source of available funds, on any date on or after October
1, 20__, as a whole or in part, by such maturity or maturities as may be specified by Request of
IBank (and by lot within a maturity), at a Redemption Price equal to 100% of the aggregate principal
amount thereof called for redemption, plus interest accrued thereon to the date fixed for redemption,
without premium.
Mandatory Sinking Account Redemption. The Series 2016A Bonds maturing on October
1, 20__ and October 1, 20__ are subject to mandatory redemption from Mandatory Sinking Account
Payments for such Series 2016A Bonds, on each date a Mandatory Sinking Account Payment for
such Series 2016A Bonds is due, and in the principal amount equal to the Mandatory Sinking
Account Payment due on such date at a Redemption Price equal to the principal amount thereof, plus
accrued interest to the redemption date, without premium.
Mandatory Sinking Account Payments for the Series 2016A Bonds maturing on October 1,
20__ shall be due in such amounts and on such dates as follows (except that if any of such Series
2016A Bonds shall have been redeemed pursuant to an optional redemption, the amounts of the
remaining Mandatory Sinking Account Payments for such Series 2016A Bonds shall be revised as
directed in writing by IBank):
Series 2016A Bonds Maturing October 1, 20__
Mandatory Sinking
Account Payment Date
(October 1)
†
Mandatory Sinking
Account Payment
Maturity
6
Mandatory Sinking Account Payments for the Series 2016A Bonds maturing on October 1,
20__ shall be due in such amounts and on such dates as follows (except that if any of such Series
2016A Bonds shall have been redeemed pursuant to an optional redemption, the amounts of the
remaining Mandatory Sinking Account Payments for such Series 2016A Bonds shall be revised as
directed in writing by IBank):
Series 2016A Bonds Maturing October 1, 20__
Mandatory Sinking
Account Payment Date
(October 1)
†
Mandatory Sinking
Account Payment
Maturity
Extraordinary Redemption. The federal Tax Increase Prevention and Reconciliation Act of
2005 (“TIPRA”) imposes additional requirements and conditions for the interest on bonds, such as
the Series 2016A Bonds, issued for pooled financing programs to be and remain exempt from federal
income taxation. Among those requirements are provisions requiring the redemption of bonds if
certain amounts of the bond proceeds are not used for loans within certain prescribed periods. In
particular, the Code requires:
i.
the issuer to reasonably expect to (1) use within the one-year period
beginning on the date of issue, at least 30% of the net proceeds of the issue to make loans;
and (2) use within the three-year period beginning on the date of issue, at least 95% of the net
proceeds of the issue; and
ii.
the issuer to redeem outstanding bonds within 90 days after the end of such
one-year period and three-year period, as applicable, to the extent of, and in an amount equal
to the unused proceeds; i.e. the difference between the amount actually used and an amount
equal to such applicable percentage.
At closing of the Series 2016A Bonds, IBank will use approximately $5.6 million of net bond
proceeds to reimburse itself for prior loan disbursements funded with ISRF equity and will deposit
such amount in the Equity Fund. In addition to this reimbursement, IBank has approved 5 additional
loans totaling approximately $55.4 million, which are in the process of being originated. When the 5
additional loans are completed/originated IBank will have satisfied requirement in i(1) above. IBank
expects to use at least 30% of the net proceeds within one year of the date of issuance and at least
95% of the net proceeds within three years of the date of issuance and does not expect that it will be
necessary to call any Series 2016A Bonds for redemption. However, such redemption feature has
been included because of applicable tax requirements and IBank cannot give any absolute assurance
that a change in circumstances will not occur necessitating the exercise of such redemption feature.
The Series 2016A Bonds maturing on and after October 1, 20__, are subject to extraordinary
mandatory redemption prior to their respective stated maturities, on September __, 2017 (the “OneYear Extraordinary Mandatory Redemption Date”) in part, in an amount equal to the One-Year
Computation Amount (as defined below), at the redemption prices set forth below (approximately
__% of the amortized issue price for the selected maturities of the Series 2016A Bonds), expressed as
percentages of the principal amount of each maturity of the Series 2016A Bonds so redeemed, plus
accrued interest to the One-Year Extraordinary Mandatory Redemption Date.
7
Maturity Date
Interest Rate
Base CUSIP No.
13034A
Redemption Price
CUSIP Suffix
*Term Bonds
“One-Year Computation Amount” means the surplus proceeds (rounded to the next higher
integral multiple of $5,000) equal to thirty percent (30%) of the Net Proceeds (defined to mean the
amounts received from the sale of the Series 2016A Bonds and deposited into the Series 2016A Bond
Proceeds Fund), less the aggregate amount withdrawn from the Series 2016A Bond Proceeds Fund
by June _, 2017.
The Series 2016A Bonds maturing on and after October 1, 20__, are subject to extraordinary
mandatory redemption prior to their respective stated maturities, on September __, 2019 (the
“Three-Year Extraordinary Mandatory Redemption Date”) in part, in an amount equal to the ThreeYear Computation Amount, at the redemption prices set forth below (approximately ___% of the
amortized issue price for the selected maturities of the Series 2016A Bonds), expressed as
percentages of the principal amount of each maturity of the Series 2016A Bonds so redeemed, plus
accrued interest to the Three Year Extraordinary Mandatory Redemption Date.
8
Base CUSIP No. 13034A
Maturity Date
Interest Rate
CUSIP Suffix:
Redemption Price
*Term Bonds
“Three-Year Computation Amount” means the surplus proceeds (rounded to the next higher
integral multiple of $5,000) equal to ninety-five percent (95%) of the Net Proceeds (defined to mean
the amounts received from the sale of the Series 2016A Bonds and deposited into the Series 2016A
Bond Proceeds Fund), less the aggregate amount withdrawn from the Series 2016A Bond Proceeds
Fund by June __, 2019.
The foregoing notwithstanding, the Series 2016A Bonds shall not be subject to any such
extraordinary mandatory redemption if IBank obtains an Opinion of Bond Counsel to the effect that
the failure by IBank to cause any such extraordinary mandatory redemption to occur will not, in and
of itself, result in the inclusion of interest on the Series 2016A Bonds in gross income for federal
income tax purposes.
For purposes of the One Year Extraordinary Mandatory Redemption and the Three-Year
Extraordinary Mandatory Redemption of the Series 2016A Bonds, the Series 2016A Bonds subject to
such redemption shall be selected by the Trustee as directed in a written direction of IBank in
authorized denominations in inverse order of maturity.
The Redemption Price with respect to any required extraordinary mandatory redemption of
any Series 2016A Bond shall be paid from funds on deposit in the Series 2016A Bond Proceeds
Fund, together with other legally available funds, as provided in Indenture.
Selection of Series 2016A Bonds for Redemption. IBank shall designate which maturities of
any Series 2016A Bonds are to be called for optional redemption. If not all Series 2016A Bonds
maturing by their terms on any one date will be redeemed at any one time, the Trustee shall select by
lot the Series 2016A Bonds of such maturity date to be redeemed and shall promptly notify IBank in
writing of the numbers of the Series 2016A Bonds so selected for redemption. For purposes of such
selection, Series 2016A Bonds shall be deemed to be composed of multiples of minimum Authorized
Denominations and any such multiple may be separately redeemed.
Notice of Redemption. Each notice of redemption shall be mailed by the Trustee, not less
than twenty (20) nor more than sixty (60) days prior to the redemption date. Notice of redemption
shall be given by first class mail. Each notice of redemption shall state the date of such notice, the
date of issue of the Series 2016A Bonds to which such notice relates, the redemption date, the
9
Redemption Price, the place or places of redemption (including the name and appropriate address or
addresses of the Trustee), the CUSIP number (if any) of the maturity or maturities, and, in the case of
Series 2016A Bonds to be redeemed in part only, the respective portions of the principal amount
thereof to be redeemed. Each such notice shall also state that on said date there will become due and
payable on each of said Series 2016A Bonds the Redemption Price thereof or of said specified
portion of the principal amount thereof in the case of a Series 2016A Bond to be redeemed in part
only, together with interest accrued thereon to the date fixed for redemption, and that from and after
such redemption date interest thereon shall cease to accrue, and shall require that such Series 2016A
Bonds be then surrendered at the address or addresses of the Trustee specified in the redemption
notice. Neither IBank nor the Trustee shall have any responsibility for any defect in the CUSIP
number that appears on any Bond or in any redemption notice with respect thereto, and any such
redemption notice may contain a statement to the effect that CUSIP numbers have been assigned by
an independent service for convenience of reference and that neither IBank nor the Trustee shall be
liable for any inaccuracy in such CUSIP numbers.
Failure of any Holder to receive notice or any defect in any such notice shall not affect the
sufficiency or validity of the proceedings for redemption.
With respect to any notice of optional redemption of Series 2016A Bonds, unless, upon the
giving of such notice, such Series 2016A Bonds shall be deemed to have been paid within the
meaning of the Indenture, such notice shall state that such redemption shall be conditional upon the
receipt by the Trustee on or prior to the date fixed for such redemption of amounts sufficient to pay
the Redemption Price of and interest on such Series 2016A Bonds to be redeemed, and that if such
amounts are not so received said notice shall be of no force and effect and IBank shall not be
required to redeem such Series 2016A Bonds. IBank may also instruct the Trustee to provide
conditional notice of optional redemption, which may be conditioned on the occurrence of any other
event if such notice states that if such event does not occur said notice shall be of no force and effect
and IBank shall not be required to redeem such Series 2016A Bonds. If such notice of optional
redemption contains such a condition and such amounts are not so received or such event does not
occur, the optional redemption shall not be made and the Trustee shall within a reasonable time
thereafter give notice to the Holders to the effect that such amounts were not so received or such
event did not occur and such redemption was not made, such notice to be given by the Trustee in the
manner in which the notice of redemption was given. Such failure to optionally redeem such Series
2016A Bonds shall not constitute an Event of Default under the Indenture.
Any notice of optional redemption may be rescinded by written notice given to the Trustee
by IBank no later than five (5) Business Days prior to the date specified for redemption. The Trustee
shall give notice of such rescission as soon thereafter as practicable in the same manner, and to the
same Persons, as notice of such redemption was given.
Partial Redemption of Bonds. Upon surrender of any Series 2016A Bond redeemed in part
only, IBank shall execute and the Trustee shall authenticate and deliver to the Holder thereof, at the
expense of IBank, a new Series 2016A Bond or Series 2016A Bonds of authorized denominations of
the same maturity equal in aggregate principal amount to the unredeemed portion of the Series
2016A Bond surrendered.
Effect of Redemption. Notice of redemption having been duly given as provided in the
Indenture, and moneys for payment of the Redemption Price of, together with interest accrued to the
redemption date on, the Series 2016A Bonds (or portions thereof) so called for redemption being
held by the Trustee, on the redemption date designated in such notice, the Series 2016A Bonds (or
portions thereof) so called for redemption shall become due and payable at the Redemption Price
10
specified in such notice together with interest accrued thereon to the redemption date, interest on the
Series 2016A Bonds so called for redemption shall cease to accrue, said Series 2016A Bonds (or
portions thereof) shall cease to be entitled to any benefit or security under the Indenture and the
Holders of said Series 2016A Bonds shall have no rights in respect thereof except to receive payment
of said Redemption Price and accrued interest to the date fixed for redemption from funds held by the
Trustee for such payment and such funds are hereby pledged to such payment.
11
DEBT SERVICE SCHEDULE
The following table shows scheduled debt service on the Series 2014A Bonds, the Series
2015A Bonds, and the Series 2016A Bonds, and total debt service without regard to any optional
redemption.
Series 2014A Bonds
Period
Ending
October 1
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
Total
Principal
$3,630,000
3,705,000
3,860,000
4,065,000
4,275,000
4,470,000
4,480,000
4,165,000
4,365,000
4,605,000
4,845,000
5,075,000
5,310,000
5,490,000
5,735,000
4,330,000
3,720,000
2,785,000
2,250,000
2,080,000
1,810,000
1,410,000
1,420,000
550,000
525,000
470,000
285,000
95,000
Interest
$4,399,593.76
4,254,393.76
4,106,193.76
3,913,193.76
3,709,943.76
3,496,193.76
3,272,693.76
3,048,693.76
2,840,443.76
2,622,193.76
2,391,943.76
2,149,693.76
1,895,943.76
1,630,443.76
1,355,943.76
1,069,193.76
853,318.76
667,318.76
528,068.76
417,218.76
314,218.76
225,250.00
155,843.76
85,718.76
58,437.50
36,125.00
16,150.00
4,037.50
$89,805,000
$49,518,406.48
Series 2015A Bonds
Principal
$3,810,000
4,095,000
4,245,000
4,425,000
4,655,000
4,750,000
4,835,000
4,830,000
4,705,000
3,790,000
3,870,000
3,710,000
3,750,000
3,930,000
3,880,000
3,825,000
3,415,000
3,195,000
3,105,000
2,290,000
1,915,000
1,835,000
1,370,000
825,000
635,000
650,000
640,000
610,000
$87,590,000
12
Interest
$4,137,081.26
4,022,781.26
3,858,981.26
3,689,181.26
3,467,931.26
3,235,181.26
2,997,681.26
2,755,931.26
2,514,431.26
2,279,181.26
2,089,681.26
1,896,181.26
1,710,681.26
1,523,181.26
1,326,681.26
1,132,681.26
941,431.26
770,681.26
642,281.26
487,031.26
401,106.26
328,250.00
236,500.00
168,000.00
126,750.00
95,000.00
62,500.00
30,500.00
$46,927,481.46
Series 2016A Bonds
Principal
Interest
Total
Debt
Service
IBANK
IBank is a public instrumentality of the State, organized and existing pursuant to the Act.
IBank has broad powers to provide financing for a wide array of public infrastructure and economic
development projects. IBank is authorized to issue the Series 2016A Bonds and to make the proceeds
thereof available to eligible Borrowers.
The general mission of IBank is to finance infrastructure and economic development projects
that promote economic growth, revitalize communities and enhance the quality of life throughout the
State. IBank provides financing to eligible borrowers for a variety of infrastructure and economic
expansion projects through the ISRF Program. In addition to administering the ISRF Program,
IBank serves as a conduit issuer of revenue bonds, industrial development bonds, loans and
commercial paper. Each of these obligations is a limited obligation of IBank payable solely from the
revenues pledged thereto. Further, IBank administers the State’s Small Business Loan Guarantee
Program which guarantees certain business loans made by commercial lenders to small businesses
that experience capital access barriers. IBank has no taxing power.
In 2015, IBank established the California Lending for Energy and Environmental Needs
Center (“CLEEN”), which IBank will administer and pursuant to which it expects to issue loans to
municipalities, and public universities, schools and hospitals for energy efficiency and other projects
with environmental benefits. Loans made through the CLEEN Center will not constitute Loans
pursuant to the Indenture.
Pursuant to the Act, IBank is governed by a five-member board of directors consisting of (1)
the Director of the Governor’s Office of Business and Economic Development or his or her designee,
who shall serve as chair of the board, (2) the Director of Finance or his or her designee, (3) the
Treasurer or his or her designee, (4) the Secretary of Transportation or his or her designee, (5) an
appointee of the Governor. The directors serve without compensation; provided, however, that the
directors may be reimbursed for actual and necessary expenses incurred in the performance of their
duties.
The Act provides that an Executive Director manages and conducts the business and affairs
of IBank. The Act further authorizes the Board of Directors to delegate certain duties to the
Executive Director. The Executive Director is appointed by the Governor subject to confirmation by
the State Senate. Currently, IBank has an authorized staff of 41.
The office of IBank is located at 1325 J Street, Suite 1823, Sacramento, California 95814. Its
telephone number is (916) 341-6600.
THE INFRASTRUCTURE STATE REVOLVING FUND PROGRAM
Overview of the ISRF Program
Effective as of February 23, 2016 the Board approved Resolution No. 16-01 amending the
Criteria, Priorities and Guidelines for the Selection of Projects for Financing Under the ISRF
Program (the “Criteria”). (The Criteria were initially adopted in 1999 and were amended several
times before the most recent amendments.) The Criteria provides general guidance as to the types of
projects for which Loans may be made and general eligibility standards for Borrowers. The Criteria
also includes standards for evaluation of creditworthiness. The February 23 amendment incorporated
statutory changes resulting from Assembly Bill 1533 (“AB 1533”), which was approved and signed
by the Governor on September 30, 2015. AB 1533 added “goods movement-related infrastructure”
as an eligible project category, clarified the definitions of certain other eligible projects, and updated
13
the definition of “Military infrastructure” projects that require the endorsement of the Office of
Planning and Research. IBank may amend the Criteria from time to time and there can be no
assurance that the Criteria will not be substantially amended in the future.
Sources of Funding for Loans
Prior to the issuance of the Series 2014 Bonds, IBank utilized the proceeds of prior issues of
bonds (“Prior Bonds”) to fund loans made under the ISRF Program, fund reserves, and pay costs of
issuance of the respective bonds. IBank expects to fund future Loans from Loan repayments,
investment earnings, income from fees charged by IBank on Loans and the proceeds of Bonds
(including the Series 2016A Bonds) and from any other moneys available to IBank for such purpose,
including repayments from Pledged Loans not required to be applied to the payment of debt service
on Bonds or Parity Obligations or held as security therefor, and repayments of Loans which are not
Pledged Loans.
Eligibility Criteria
Eligible Borrowers. Cities, counties, State agencies, special districts, assessment districts,
joint powers authorities, and Non-Profit Entities are eligible to receive Loans for Infrastructure
Projects (defined below) under the ISRF Program. In addition, Non-Profit Entities that apply in
conjunction with a city, county, State agency, special district, assessment districts, or joint powers
authority are eligible to receive Loans for Economic Expansion Projects (defined below). However,
such city, county, State agency, special district, assessment districts, or joint powers authority is not
obligated under the Criteria to guarantee or otherwise assume any responsibility for a Loan to the
Non-Profit Entity.
Eligible Projects. The ISRF Program provides financing for a wide range of infrastructure
projects: city streets; county highways; state highways; drainage, water supply and flood control;
educational facilities; environmental mitigation measures; parks and recreational facilities; port
facilities; public transit; sewage collection and treatment; solid waste collection and disposal; water
treatment and distribution; defense conversion; public safety facilities; power and communications
facilities; military infrastructure; and goods movement-related infrastructure (collectively,
“Infrastructure Projects”). Additionally, as amended in October 2013, the Criteria authorizes
financings for facilities that are used for industrial, utility, commercial, cultural, recreational,
research, community, or educational purposes as well as facilities which service enterprise facilities
and social welfare facilities (“Economic Expansion Projects” and, together with Infrastructure
Projects, “Eligible Projects”).
Other Selection Criteria. The Criteria also addresses other ISRF Program parameters,
including coordination with the State’s promulgated environmental goals and policies and growth
management strategies; Eligible Project costs; and findings to be made by Borrowers in their
authorizing resolutions.
The Criteria currently provides that, if the immediate financing needs of projects applying for
ISRF Program financing exceed the lending capacity of the ISRF Program, IBank will give priority
to Infrastructure Projects over Economic Expansion Projects. Further, at such times, IBank will give
priority to Infrastructure Projects located in, or adjacent to or directly affecting, areas with high
unemployment rates, low median household income, declining or slow growth in labor force
employment, or high poverty rates.
14
Basic Terms of the Loans
Each Loan is negotiated between IBank and the particular Borrower. While many of the
provisions of the Loans are similar, certain terms under specific Loan Agreements may differ to
reflect the basic structure of the particular Loan, specific financial requirements, and other matters.
Basic Terms of Loans. The term of any Loan may not exceed the lesser of the Eligible
Project’s useful life or 30 years. Interest rates on Loans are established through a rate-setting
methodology for determining interest rate subsidies that takes various factors into account, including
the strength of the pledge securing Loan repayment, published ratings (if any) for the potential
Borrower, the median household income for the community where the project is located, the
unemployment rate for the community where the project is located and tax law limitations.
The Criteria generally provides for loans in amounts from $50,000 to $25,000,000, but larger
loans may be authorized with the approval of IBank’s Board of Directors. (Between September 2001
and October 2013, Loans were capped at $10 million per Borrower, with an aggregate annual
maximum financing amount of $20 million for all eligible Borrowers within the applicable city or
county. The majority of the existing Pledged Loans as of the date of issuance of the Series 2016A
Bonds were made in accordance with these prior limits.) Loans generally are amortized on a level
repayment basis.
IBank disburses the proceeds of Loans to the Borrowers periodically upon the submittal of
appropriate documentation of the payment or incurrence of eligible costs. IBank charges interest to
Borrowers based on the full authorized amount of their respective Loans (regardless of the amount
actually disbursed). Borrowers receive a credit against their interest payments for investment
earnings received by IBank on the investment of undisbursed Loan proceeds, calculated at the rate
earned by IBank on the undisbursed funds or at the Loan interest rate, whichever is less.
Additional Terms of Loans. Several terms of a particular Loan depend on the repayment
sources which dictate whether such Loan is structured as a lease, loan, or installment sale, and on
various credit factors. All Loans, regardless of structure, include, among other things, provisions
concerning: (i) the principal amount; (ii) the interest rate; (iii) the financing repayment schedule; (iv)
the right of IBank to assign, grant a security interest in, or otherwise encumber the Loan including
any payments thereunder; and (v) the right of IBank to terminate and (except for leases) accelerate
the unpaid balance of the Loan upon material breach by the Borrower. Loan agreements generally
provide that the Borrower must maintain the project in good condition and maintain casualty and
other insurance at specified levels.
Loans payable from the general funds of a Borrower are generally structured as leases, and
provide that in the event there is substantial interference with the Borrower’s use and occupancy of
any portion of the leased facility, rental payments due under the Loan agreement shall be abated to
the extent that the annual fair rental value of the portion of the leased asset to which there is no
substantial interference is less than the scheduled annual rental payments. Agreements for Loans
subject to such “abatement risk” provide that the Borrower is obligated to obtain and maintain rental
interruption insurance in an amount typically equal to a period of at least six months beyond the
estimated period required to rebuild the leased facility. Loans structured as lease agreements
generally prohibit the acceleration of amounts due thereunder upon default of the Borrower.
Loans payable from particular enterprise or special fund revenues of the Borrower (as
opposed to its general funds) are structured as installment sales. These types of Loan agreements
generally include a covenant by the Borrower to maintain enterprise rates and charges or to comply
with specific requirements associated with special funds so as to provide sufficient revenues to meet
15
all payment requirements pursuant to the Loan. Agreements for Loans payable from particular
enterprise revenues of the Borrower typically require that rates and charges imposed by the Borrower
be maintained such that net revenues exceed debt service by a specified percentage (i.e., a
“coverage” requirement).
Loans secured by tax increments or other duly approved taxes or assessments are generally
structured as true loans. Loans payable from enterprise revenues or from tax increments also place
conditions on the ability of Borrowers to incur additional debt secured by the revenues or taxes
which secure the Loan.
Prepayment Provisions of Loans. The Loan agreements generally prohibit prepayment for
the first ten years following the initial date of the Loan, and generally require that Borrowers pay a
prepayment premium for prepayments between the tenth and twelfth anniversary of the initial date of
the Loan.
The ability of the Borrowers to make timely payments due on their respective Pledged
Loans depends on various economic and financial circumstances and legal requirements and
restrictions applicable to individual Borrowers, and could be adversely affected by a variety of
factors, including but not limited to natural disasters (such as earthquakes or floods) and
general economic conditions in the particular jurisdiction or service areas of the Borrowers or
in the State generally. See “INVESTMENT CONSIDERATIONS – Considerations Relating to
Pledged Loans and Borrowers.”
Loan Monitoring and Surveillance
IBank regularly monitors the status of Loans and undertakes annual Loan portfolio
surveillance. The surveillance includes a review of project status, annual Borrower budgets, and
confirmation of Borrower compliance with reserve, coverage and insurance requirements.
OUTSTANDING LOANS
Pledged Loans
Generally. As of the date of issuance of the Series 2016A Bonds, there will be 88 Pledged
Loans with an outstanding aggregate principal amount of approximately $281.2 million.
For certain information concerning the Pledged Loans, see APPENDIX A – “PLEDGED
LOANS.” Under the Indenture, IBank may release Pledged Loans, subject to satisfaction of the
conditions set forth in the Indenture. See “SECURITY AND SOURCE OF PAYMENT FOR THE
SERIES 2016A BONDS – Release, Substitution, Addition and Amendment of Pledged Loans.”
As of June 1, 2016, Borrowers under all Loans that will be Pledged Loans have made all
payments as required (other than a very small number of brief delinquencies due to delayed mail
delivery or incorrect wiring instructions, which were immediately corrected by the particular
Borrowers, after notification by IBank).
The maturity dates and payment amounts of each of the Pledged Loans vary. Most of the
Pledged Loans mature prior to the maturity of the Series 2016A Bonds. In addition, individual
Pledged Loans may be prepaid from time to time in accordance with their terms. Any such
prepayments will constitute “Revenues” pursuant to the Indenture and will be applied in accordance
with the flow of funds set forth therein. Pledged Loan prepayments are not required to be used to
prepay Series 2016A Bonds, and subject to the requirements of the Indenture, including those
16
relating to required deposits to the Supplemental Revenue Fund, may ultimately be deposited in the
Unrestricted Assets Account or the Restricted Assets Account and used by IBank for the authorized
purposes of moneys on deposit in those accounts. See “SECURITY AND SOURCE OF PAYMENT
FOR THE SERIES 2016A BONDS - Summary of Flow of Funds under the Indenture.” Therefore,
the portfolio of Pledged Loans will change over the term of the Series 2016A Bonds, including but
not limited to: the number of Pledged Loans then currently outstanding; the Borrowers responsible
for payment of the then current Pledged Loans and the credit quality of such Borrowers; the source of
payment of the Pledged Loans (i.e., general fund, enterprise funds or other sources); and the
geographic diversity of the Borrowers. See “PRO FORMA CASH FLOW TABLE” for certain
assumptions concerning the expected prepayment of certain loans to the City of San Bernardino.
A significant portion of the proceeds of the Series 2016A Bonds will be used to make Loans
after the issuance of the Series 2016A Bonds. See “PRO FORMA CASH FLOW TABLE” for
certain assumptions concerning the amount and timing of these Loans (referred to as “New Loans” in
the Pro Forma Cash Flow Table).
Particular Pledged Loans. The following is a description of certain aspects of particular
Pledged Loans:
Pledged Loans Secured by Water Enterprise Revenues. As of the date of issuance of the
Series 2016A Bonds, the Borrowers with respect to 32 Pledged Loans (with an aggregate outstanding
principal amount of approximately $135.9 million) are payable in whole or in part from revenues of
the water enterprise of the respective Borrowers. The State is currently experiencing a severe
drought. Due to these record-dry conditions, in 2014 and 2015 Governor Edmund G. Brown took a
variety of conservation actions generally requiring reductions of 25% or more in water consumption
throughout the state. Depending on the particular circumstances of a Borrower with a Loan payable
from water enterprise revenues, reduced consumption could result in decreased revenues and
potentially, financial stress with respect to its respective water enterprise. As described herein, Loans
secured by revenues of enterprises (including water enterprises) generally include a covenant by the
Borrower to maintain enterprise rates and charges or to comply with specific requirements associated
with special funds so as to provide sufficient revenues to meet all payment requirements pursuant to
its respective Loan.
Pledged Loans to Redevelopment “Successor Agencies.” As of the date of issuance of the
Series 2016A Bonds, the Borrowers with respect to 14 Pledged Loans (with an aggregate outstanding
principal amount of approximately $32.5 million) are “successor agencies” to redevelopment
agencies. Pursuant to Assembly Bill No. 1x 26 (“AB 26”), which was enacted in June 2011, most
redevelopment agency activities in California were suspended and redevelopment agencies were
prohibited from incurring additional indebtedness, making loans or grants, or entering into contracts
after June 29, 2011. AB 26 also dissolved all existing redevelopment agencies (effective February 1,
2012) and specified procedures for establishment of “successor agencies” and “oversight boards” to
ensure that payments be made for indebtedness determined to be “enforceable obligations” of the
dissolved redevelopment agencies, and to administer the dissolution and wind down of the dissolved
redevelopment agencies. The determination of “enforceable obligations” is made by the State
Department of Finance (“DOF”) in accordance with procedures and standards established in AB 26.
IBank has confirmed with the Borrowers that are “successor agencies” that all of the Pledged Loans
with such Borrowers have been recognized as “enforceable obligations” under AB 26. Further,
payments due to IBank have appeared on each recognized obligation payment schedule (“ROPS”)
approved by DOF to date. (The ROPS is the mechanism that enables each “successor agency” to
make payments out of tax increment revenues allocated to it pursuant to AB 26.) However, there can
be no assurance that DOF will continue to approve the inclusion of payments due to IBank on each
17
future ROPS through to the maturity date of each Pledged Loan to a “successor agency” Borrower.
As of June 1, 2016, all of the Borrowers which constitute “successor agencies” have made all
payments due on their Loans in a timely manner.
Pledged Loans to the City of San Bernardino. IBank previously made six Pledged Loans to
the City of San Bernardino, which made a bankruptcy filing under Chapter 9 of the U.S. Bankruptcy
Code in August, 2012. Two of these Pledged Loans were paid in full. Four Pledged Loans remain
outstanding. One of the outstanding Pledged Loans (with an outstanding principal amount of
approximately $0.8 million) was structured as a lease payable from the City of San Bernardino’s
general fund. The other three outstanding Pledged Loans (with an outstanding principal amount of
approximately $19.4 million) were made to the City of San Bernardino Municipal Water Department
and structured as installment sale arrangements payable from the City’s water enterprise fund. To
date, the City of San Bernardino and the City of San Bernardino Municipal Water Department have
made all payments in a timely manner.
The City of San Bernardino filed its Plan for the Adjustment of Debts of the City of San
Bernardino, California (the “Plan of Adjustment”) on May 29, 2015, with the United States
Bankruptcy Court for the Central District of California (the “Bankruptcy Court”). The Plan of
Adjustment provides for the treatment of the IBank obligations as secured claims that are unimpaired
and are expected to be paid in full. The Plan of Adjustment is currently under consideration before
the Bankruptcy Court. There can be no assurances that the Plan of Adjustment or the final resolution
of the City of San Bernardino’s bankruptcy filing in the future will not ultimately result in nonpayment of all or a portion of the amount owed by the City of San Bernardino and the City of San
Bernardino Municipal Water Department pursuant to the Loans. In particular, there can be no
assurances that the City of San Bernardino will not reject the leases between the City and IBank
which are payable from the City’s general fund. While IBank may have certain remedies available to
it in such circumstances, including the ability to relet the properties which are the subjects of the
leases, there can be no assurances that the exercise of such remedies will result in the recovery of
principal and interest with respect to the outstanding Loans. Projected payments relating to the
Pledged Loans to the City of San Bernardino are separately set forth in the Pro Forma Cash Flow
Table in the column titled “Watch List Loan Payments.”
The City of San Bernardino has notified IBank that it intends to prepay all of the remaining
outstanding Pledged Loans made to the City of San Bernardino Municipal Water Department in the
next few months. Prepayment of those Pledged Loans to the City of San Bernardino therefore are
reflected in the Pro Forma Cash Flow Table as prepayments. The outstanding Pledged Loan payable
from the City of San Bernardino’s general fund is expected to remain outstanding. See “PRO
FORMA CASH FLOW TABLE.” Although the City of San Bernardino has notified IBank of its
intent to prepay the Loans described above, as of the date of issuance of the Series 2016A Bonds, the
City of San Bernardino is not obligated to make such prepayment, and there can be no assurances
that the Pledged Loans will be prepaid.
Approved Loans. In addition to the Pledged Loans set forth in Appendix A, as of June 1,
2016, IBank has approved five loan applications with an aggregate principal amount of
approximately $55.4 million, and, completed preliminary review of an additional application with an
aggregate principal amount of approximately $25.5 million. There can be no assurances that any loan
applicants will ultimately execute additional Pledged Loans.
PLAN OF FINANCE
As described in “ESTIMATED SOURCES AND USES OF FUNDS,” the proceeds of the
sale of the Series 2016A Bonds will be used to (i) finance and refinance Loans (as defined herein) to
18
eligible borrowers, including local governments, state agencies and certain non-profit organizations
for infrastructure and economic expansion projects pursuant to the Infrastructure State Revolving
Fund Program, (ii) make a deposit to the Common Reserve Fund and (iii) pay costs of issuance of the
Series 2016A Bonds.
Financing of Loans. Approximately $______ million of the proceeds of the Series 2016A
Bonds will be deposited by IBank in the Series 2016A Bond Proceeds Fund and will be used by
IBank to make new loans pursuant to the ISRF Program. The Pro Forma Cash Flow Table includes
payments which IBank expects to receive with respect to new Loans that IBank expects to make after
the issuance of the Series 2016A Bonds. See the column titled “New Loans” in the Pro Forma Cash
Flow Table. See also “THE SERIES 2016A BONDS – Redemption – Extraordinary Redemption.”
Refinancing of Loans. Approximately $_______ million of the proceeds of the Bonds will be
used to refinance Loans which IBank has previously made from the Equity Fund. The amounts of
the proceeds of the Series 2016A Bonds that are used to refinance Loans are expected to be deposited
into the Series 2016A Bond Proceeds Fund and then transferred into the Restricted Assets Account or
the Unrestricted Assets Account established pursuant to the Indenture. Payments with respect to
these refinanced Loans are reflected in the Pro Forma Cash Flow Table in the column titled “Existing
Pledged Loan Repayments.”
All of the Loans which are being refinanced, and all of the Loans to be funded from the
proceeds of the Series 2016A Bonds will be to governmental borrowers for projects which qualify for
tax-exempt financing pursuant to the Internal Revenue Code.
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ESTIMATED SOURCES AND USES OF FUNDS
The estimated sources and uses of funds with respect to the Series 2016A Bonds are as
follows:
Sources:
Series 2016A Bonds Principal Amount
Net Original Issue Premium
Other Available Moneys(1)
Total:
$
Uses:
Common Reserve Fund(2)
Series 2016A Bond Proceeds Fund(3)
Costs of Issuance(4)
Total:
$
_______________________________
(1) Consists of amounts to be provided by IBank from the Equity Fund.
(2) Consists of amount necessary to be added to the Common Reserve Fund upon the issuance of the 2016A
Bonds to cause the amount on deposit to be at least equal to the Common Reserve Requirement.
(3) Consists of $_________ which will be used to make new Loans and $_______ which will be immediately
transferred to Restricted Assets Account or Unrestricted Assets Account of the Equity Fund as
reimbursement for Loans previously funded from the Equity Fund.
(4) Includes legal, financial advisory, and rating agency fees, Underwriters’ discount, and other miscellaneous
costs of issuance.
SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS
Limited Obligations of IBank
The Bonds, including the Series 2016A Bonds, are limited obligations of IBank and are
not a lien or charge upon the funds or property of IBank, except to the extent of the pledge and
assignment provided for in the Indenture. Neither the State of California nor IBank shall be
obligated to pay the principal of the Bonds or the interest thereon, except from the Collateral
as provided in the Indenture. Neither the full faith and credit nor the taxing power of the State
of California nor any agency thereof is pledged to the payment of the principal of or interest on
the Bonds. IBank has no taxing power.
Payment of debt service on the Series 2014A Bonds, the Series 2015A Bonds, the Series
2016A Bonds and any other Series of Bonds or Parity Obligations payable on a parity from
Collateral when due depends on the availability of the Collateral for such purpose. As described
herein, the Collateral consists primarily of payments made by Borrowers pursuant to Pledged Loans,
and available amounts in certain funds and accounts established pursuant to the Indenture, subject to
the application thereof on the terms and conditions set forth in the Indenture.
In the event that a significant amount of payments required to be paid by Borrowers pursuant
to Pledged Loans are not paid, there can be no assurance that such circumstances will not have a
material adverse impact on IBank’s ability to pay debt service on the Series 2014A Bonds, the Series
2015A Bonds, the Series 2016A Bonds and other Bonds and Parity Obligations when due.
20
Overview of Sources of Repayment
The Bonds are limited obligations of IBank, payable solely from and secured by a pledge and
assignment of the Collateral as provided in the Indenture. “Collateral” means all of IBank’s right,
title, and interest in and to (a) the Pledged Loans (other than the Issuer Retained Rights), including all
Pledged Loan Repayments, (b) the Pledged Funds and Accounts and all money, instruments,
investment property, and other property from time to time credited to or on deposit in the Pledged
Funds and Accounts and (c) all other Revenues credited to or on deposit in the Pledged Funds and
Accounts.
“Pledged Loans” are Loans that are pledged pursuant to the Indenture. The Pledged Loans as
of the date of issuance of the Series 2016A Bonds are described herein in “THE
INFRASTRUCTURE STATE REVOLVING FUND PROGRAM” and in Appendix A. “Pledged
Loan Repayments” means all payments of principal, interest or premiums on a Pledged Loan,
whether as a result of scheduled payments or prepayments or remedial proceedings taken in the event
of a default thereon. See “PLAN OF FINANCE.” A significant portion of the proceeds of the Series
2016A Bonds will be used to make Loans after the issuance of the Series 2016A Bonds. See “PRO
FORMA CASH FLOW TABLE” for certain assumptions concerning the amount and timing of these
Loans (referred to as “New Loans” in the Pro Forma Cash Flow Table).
As described herein, IBank may from time to time add, release, substitute or amend the
Pledged Loans, subject to the requirements of the Indenture. See “– Release, Substitution, Addition
and Amendment of Pledged Loans.” For a general description of the general terms of the Loans, see
“THE INFRASTRUCTURE STATE REVOLVING FUND PROGRAM –Basic Terms of the
Loans.”
“Borrowers” are entities that receive financial assistance under the ISRF Program, and
generally consist of cities, counties, special districts, assessment districts, joint powers authorities,
non-profit public benefit corporations formed by local government entities and certain other nonprofit entities. “Borrowers” also include successor agencies to redevelopment agencies, which were
dissolved pursuant to State law in 2012.
“Issuer Retained Rights” means (a) the right to receive Pledged Loan Fees and Expenses; (b)
any right of IBank to indemnification; (c) the right of IBank to receive notices, certificates, opinions
or similar documentation; and (d) the right of IBank to enforce the obligations of any Borrower
contained in the Pledged Loans, including, but not limited to, default remedies.
“Pledged Funds and Accounts” means the Revenue Fund, the Interest Fund, the Principal
Fund (including all Sinking Accounts therein), the Reserve Funds, the Subordinate Obligations Fund,
the Fees and Expenses Fund, the Supplemental Revenue Fund, the Equity Fund, and any accounts or
subaccounts therein (excluding the Unrestricted Assets Account and excluding any Borrower’s Loan
Subaccount) and any other funds or accounts established pursuant to this Indenture and designated as
such by IBank. “Pledged Funds and Accounts” includes the Series 2016A Bond Proceeds Fund
established pursuant to the Third Supplemental Indenture but does not include any Borrower’s Loan
Subaccount established within the Series 2016A Bond Proceeds Fund.
“Revenues” means: (i) all Pledged Loan Repayments; (ii) all investment earnings on amounts
held by the Trustee in the Pledged Funds and Accounts; (iii) all Swap Revenues; and (iv) all Subsidy
Payments.
See “SECURITY AND SOURCE OF PAYMENT FOR THE SERIES 2016A BONDS –
Summary of Flow of Funds under the Indenture.”
21
The Indenture provides that any Bonds secured under the Indenture, including the Series
2016A Bonds, are not subject to acceleration upon the occurrence of an event of default except that
any Liquidity Facility Bonds may be subject to acceleration as set forth in the related Liquidity
Facility. There currently are no Liquidity Facility Bonds or Liquidity Facilities outstanding.
The Indenture provides that moneys held by the Trustee in each of the funds and accounts
under the Indenture shall be invested in “Permitted Investments,” as defined in the Indenture. See
APPENDIX C – “SUMMARY OF THE INDENTURE –Investment of Funds and Accounts.”
Release, Substitution, Addition and Amendment of Pledged Loans
IBank may release any Pledged Loan from the lien of the Indenture, substitute Loans for
existing Pledged Loans or add additional Pledged Loans, in each case, by delivering to the Trustee
the following: (i) a revised Exhibit A to the Indenture identifying the Pledged Loans following such
release, substitution, or addition; (ii) a certificate of IBank identifying the Loans that are to become
Pledged Loans and/or the Pledged Loans that are to be released; and (iii) a certificate of IBank that
demonstrates compliance with the Coverage Test without taking into account the amount then on
deposit in the Supplemental Revenue Fund and after taking into effect such release, substitution or
addition. Upon delivery of such certificates to the Trustee, (1) the Loans substituted for existing
Pledged Loans or added in such certificate shall become Pledged Loans and be subject to the lien of
the Indenture, and (2) the Loans released or for which other Pledge Loans are substituted in such
certificate shall no longer be Pledged Loans and shall be released from the lien of the Indenture.
For the purpose of demonstrating compliance with the Coverage Test in connection with the
release or addition of Pledged Loans, IBank may use and rely on any assumptions IBank deems
reasonable under then-existing circumstances, including, but not limited to, assumptions concerning
(1) the making of additional Pledged Loans at projected times and interest rates and in projected
amounts, (2) realization of additional Pledged Loan Repayments from such additional Pledged Loans
at projected times and in projected amounts and (3) realization of earnings from the investment of
projected amounts in the Pledged Funds and Accounts at projected times and interest rates.
(Although, as described above, the making of additional Pledged Loans may be included in the
assumptions utilized in connection with a demonstration of compliance with the Coverage Test, the
Indenture does not require that any additional Pledged Loans subsequently be added as Collateral.)
IBank may amend the Pledged Loan Repayment provisions of any Pledged Loan if, prior to
such amendment, IBank delivers to the Trustee and each Rating Agency a certificate of IBank that
demonstrates compliance with the Coverage Test, without taking into account the amount then on
deposit in the Supplemental Revenue Fund, after taking into effect the amendment. IBank may
amend any of the other provisions of any Loan Agreement related to a Pledged Loan in its discretion
without delivery of a certificate of IBank pursuant to the Indenture.
Outstanding Bonds
IBank has previously issued the Series 2014A Bonds, currently outstanding in the principal
amount of $89,805,000 and the Series 2015A Bonds, currently outstanding in the principal amount of
$87,590,000. The Series 2014A Bonds and the Series 2015A Bonds are “Bonds” under the
Indenture, payable from Collateral on a parity with the Series 2016A Bonds.
Common Reserve Fund
The Common Reserve Fund in an amount equal to the Common Reserve Requirement will be
held by the Trustee pursuant to the Indenture to secure the payment of principal of and interest on the
22
Series 2014A Bonds, the Series 2015A Bonds, the Series 2016A Bonds and any other Common
Reserve Fund Participating Bonds. “Common Reserve Fund Participating Bonds” means the Bonds
of each Series which, pursuant to the terms of the Indenture and the Supplemental Indenture relating
to such Series, are secured by amounts in the Common Reserve Fund. The Series 2016A Bonds are
Common Reserve Fund Participating Bonds.
“Common Reserve Requirement” means, as of any date of calculation, an amount equal to
the least of (a) 10% of the initial offering price to the public of the Common Reserve Fund
Participating Bonds as determined under the Code, or (b) the greatest amount of Debt Service for the
Common Reserve Fund Participating Bonds in any Bond Year during the period commencing with
the Bond Year in which the determination is being made and terminating with the last Bond Year in
which any Common Reserve Fund Participating Bond is due, or (c) 125% of the sum of the Debt
Service for the Common Reserve Fund Participating Bonds for all Bond Years during the period
commencing with the Bond Year in which such calculation is made (or if appropriate, the first full
Bond Year following the issuance of any Common Reserve Fund Participating Bonds) and
terminating with the last Bond Year in which any Debt Service for the Common Reserve Fund
Participating Bonds is due, divided by the number of such Bond Years, all as computed and
determined by IBank and specified in writing to the Trustee; provided, that with respect to the
issuance of additional Common Reserve Fund Participating Bonds, if the amount on deposit in the
Common Reserve Fund would have to be increased by an amount greater than ten percent (10%) of
the stated principal amount of such additional Common Reserve Fund Participating Bonds (or, if the
issue has more than a de minimus amount of original issue discount or premium, of the issue price of
such Common Reserve Fund Participating Bonds) then the Common Reserve Requirement shall be
such lesser amount as is determined by a deposit of such ten percent (10%). In lieu of or in addition
to funding the Common Reserve Fund with the proceeds of Bonds, IBank may fund the Common
Reserve Fund with transfers from the Equity Fund in an amount equal to or greater than the Common
Bonds Reserve Requirement.
Amounts in the Common Reserve Fund (including all amounts which may be obtained from
a Reserve Facility on deposit in the Common Reserve Fund) shall be used and withdrawn by the
Trustee, for the following purposes: (i) after the application of any amounts held in the Supplemental
Revenue Fund as provided in the Indenture, for the purpose of making up any deficiency in the
Interest Fund or the Principal Fund relating to the Common Reserve Fund Participating Bonds; or (ii)
together with any other moneys available therefor, (x) for the payment or redemption of all Common
Reserve Fund Participating Bonds then Outstanding, (y) for the defeasance or redemption of all or a
portion of the Common Reserve Fund Participating Bonds then Outstanding, provided, however, that
if funds on deposit in the Common Reserve Fund are applied to the defeasance or redemption of a
portion of the Common Reserve Fund Participating Bonds, the amount on deposit in the Common
Reserve Fund immediately subsequent to such partial defeasance or redemption shall equal the
Common Reserve Requirement applicable to all Common Reserve Fund Participating Bonds
Outstanding immediately subsequent to such partial defeasance or redemption, or (z) for the payment
of the final principal and interest payment of the Common Reserve Fund Participating Bonds.
Amounts on deposit in the Common Reserve Fund in excess of the Common Reserve
Requirement many also be transferred out of the Common Reserve Fund for purposes other than
those described in the preceding paragraph. See “SUMMARY OF THE INDENTURE –
Establishment, Funding and Application of Common Reserve Fund.”
The Indenture provides that, in lieu of maintaining and depositing moneys in the Common
Reserve Fund, IBank may provide an insurance policy, letter of credit or surety bond to satisfy the
23
Common Reserve Requirement, subject to the requirements of the Indenture. See “SUMMARY OF
THE INDENTURE – Establishment, Funding and Application of Common Reserve Fund.”
Conditions to Issuing Additional Bonds and Parity Obligations
Additional Series of Bonds, secured by the Collateral and payable on a parity with the Series
2014A Bonds, the Series 2015A Bonds and the Series 2016A Bonds, may be issued by IBank upon
delivery of the following to the Trustee:
(A)
a Supplemental Indenture authorizing such Series executed by IBank;
(B)
a certificate of IBank certifying that no Event of Default has occurred and is then
continuing (or the issuance of such additional Series of Bonds will cure any such Event of Default);
(C)
a certificate of IBank demonstrating either (i) compliance with the Coverage Test
after taking into account the issuance of such additional Series of Bonds but without taking into
account amounts on deposit or expected to be on deposit in the Supplemental Revenue Fund or (ii)
that Annual Debt Service will not be increased in any Bond Year after taking into account the
issuance of such additional Series of Bonds;
(D)
an Opinion of Bond Counsel to the effect that the Supplemental Indenture is being
entered into in accordance with the Indenture and that such Series of Bonds, when duly executed by
IBank and authenticated and delivered by the Trustee, will be valid and binding obligations of IBank.
For the purpose of demonstrating compliance with the Coverage Test in connection with the
issuance of additional Bonds, IBank shall not take into account amounts on deposit or expected to be
on deposit in the Supplemental Revenue Fund but IBank may use and rely on any other assumptions
IBank deems reasonable under then-existing circumstances, including, but not limited to,
assumptions concerning (1) the making of additional Pledged Loans at projected times and interest
rates and in projected amounts, (2) realization of additional Pledged Loan Repayments from such
additional Pledged Loans at projected times and in projected amounts and (3) realization of earnings
from the investment of projected amounts in the Pledged Funds and Accounts at projected times and
interest rates. (Although, as described above, the making of additional Pledged Loans may be
included in the assumptions utilized in connection with a demonstration of compliance with the
Coverage Test, the Indenture does not require that any additional Pledged Loans subsequently be
added as Collateral.)
The requirements of the Indenture described above are required to be met in connection with
the issuance of the Series 2016A Bonds. See “PRO FORMA CASH FLOW TABLE.”
If a Supplemental Indenture providing for the issuance of such Series requires either (i) the
establishment of a Reserve Fund to provide additional security for such Series of Bonds, or (ii) that
the balance on deposit in an existing Reserve Fund be increased, forthwith upon the receipt of the
proceeds of the sale of such Series, to an amount at least equal to the Bond Reserve Requirement
with respect to such Series of Bonds and all other Bonds secured by such Reserve Fund to be
considered Outstanding upon the issuance of such additional Series of Bonds, then the Supplemental
Indenture providing for the issuance of such additional Series of Bonds shall require deposit of the
amount necessary. Said deposit may be made from the proceeds of the sale of such Series of Bonds
or from other funds of IBank or from both such sources or, subject to the terms of the Indenture and
any Supplemental Indenture governing such Reserve Fund, may be made in the form of a Reserve
Facility. As described above, the Series 2016A Bonds are secured by an existing Reserve Fund
referred to herein as the Common Reserve Fund.
24
In addition, the Indenture permits the issuance or incurrence of additional obligations, other
than Bonds, secured by the Collateral and payable on a parity with Bonds (“Parity Obligations”),
upon satisfaction of certain requirements set forth in the Indenture, including the following:
(A)
Such Parity Obligations have been duly and legally authorized by IBank for
any lawful purpose;
(B)
No Event of Default shall have occurred and then be continuing (or the
issuance of such Parity Obligations will cure any such Event of Default), as evidenced by the
delivery to the Trustee of a certificate of IBank to that effect;
(C)
IBank shall have delivered to the Trustee a certificate of IBank demonstrating
either (i) compliance with the Coverage Test after taking into account the issuance or
incurrence of such Parity Obligations or (ii) that Annual Debt Service will not be increased in
any Bond Year after taking into account the issuance or incurrence of such Parity
Obligations; provided, however that if the Parity Obligation being issued or incurred consists
of an Interest Rate Swap Agreement (excluding fees and expenses and termination payments
on such Interest Rate Swap Agreement), IBank shall be deemed to have complied with the
requirements of this paragraph to the extent that the Series of Bonds to which the Interest
Rate Swap Agreement relates (x) satisfies the requirements of the Indenture for the issuance
of additional Bonds described above after taking into account the adjustment of Debt Service
on the Bonds to reflect the impact of the Interest Rate Swap Agreement (in the case of
Interest Rate Swap Agreements entered into concurrently with, or subsequent to, the issuance
of such Bonds), or (y) is expected to satisfy the requirements of the Indenture for the issuance
of additional Bonds described above after taking into account the adjustment of Debt Service
on the Bonds to reflect the impact of the Interest Rate Swap Agreement (in the case of
Interest Rate Swap Agreements entered into in advance of the issuance of such Bonds), each
as evidenced by a certificate of IBank delivered to the Trustee; and
(D)
As and to the extent applicable, the Trustee is designated as paying agent or
trustee for such Parity Obligations and IBank delivers to the Trustee a transcript of the
proceedings providing for the issuance of such Parity Obligations (but the Trustee shall not
be responsible for the validity or sufficiency of such proceedings or such Parity Obligations).
For the purpose of demonstrating compliance with the Coverage Test in connection
with the issuance or incurrence of Parity Obligations, IBank may use and rely on any other
assumptions the IBank deems reasonable under then-existing circumstances, including, but
not limited to, assumptions concerning (1) the making of additional Pledged Loans at
projected times and interest rates and in projected amounts, (2) realization of additional
Pledged Loan Repayments from such additional Pledged Loans at projected times and in
projected amounts and (3) realization of earnings from the investment of projected amounts
in the Pledged Funds and Accounts at projected times and interest rates. (Although, as
described above, the making of additional Pledged Loans may be included in the assumptions
utilized in connection with a demonstration of compliance with the Coverage Test, the
Indenture does not require that any additional Pledged Loans subsequently be added as
Collateral.)
In addition, the Indenture permits the issuance or incurrence of Subordinate Obligations and
Fee and Expense Obligations without demonstrating compliance with the Coverage Test. There are
no Parity Obligations, Subordinate Obligations or Fee and Expense Obligations currently
outstanding.
25
Summary of Flow of Funds under the Indenture
The following summary descriptions of the provisions of the Indenture concerning the
Revenue Fund and the deposit of moneys to various funds thereunder are only brief summaries of
those provisions and are not intended to be a complete or definitive description of the flow of funds.
For a more complete description, see APPENDIX C – “SUMMARY OF THE INDENTURE.”
So long as any Bonds are Outstanding or Parity Obligations, Subordinate Obligations, Fee
and Expense Obligations or any other amounts payable under the Indenture remain unpaid, IBank
covenants and agrees to: (a) direct the Borrower for each Pledged Loan to transfer Pledged Loan
Repayments directly to the Trustee and (b) promptly transfer Pledged Loan Repayments received by
it from any Borrower to the Trustee. The Trustee will deposit in a trust fund, designated as the
“Revenue Fund,” all Pledged Loan Repayments transferred to the Trustee, when and as received by
the Trustee. Subject to the terms of the Indenture, all other Revenues will also be deposited in the
Revenue Fund. Notwithstanding anything to the contrary contained in the Indenture, amounts
transferred to or received by the Trustee that constitute Pledged Loan Fees and Expenses will not be
deposited in the Revenue Fund by the Trustee but will be transferred by the Trustee directly to the
Pledged Loan Fees and Expenses Subaccount of the Unrestricted Assets Account when and as
received.
Revenue Fund. So long as any Bonds are Outstanding or Parity Obligations, Subordinate
Obligations, Fee and Expense Obligations or any other amounts payable under the Indenture remain
unpaid, the Trustee shall set aside the moneys in the Revenue Fund in the following respective funds
(each of which the Trustee shall establish, maintain and hold in trust for the benefit of the Holders of
the Bonds and, as and to the extent applicable, the holders of Parity Obligations, Subordinate
Obligations and Fee and Expense Obligations), on the following respective dates, in the following
amounts, in the following order of priority, the requirements of each such fund (including the making
up of any deficiencies in any such fund resulting from lack of Revenues sufficient to make any
earlier required deposit) at the time of deposit to be satisfied before any deposit is made to any fund
subsequent in priority; provided that (i) on a parity with such deposits the Trustee may set aside or
transfer amounts with respect to any outstanding Parity Obligations as provided in the proceedings
for such Parity Obligations delivered to the Trustee pursuant to the Indenture (which shall be
proportionate if such amounts are insufficient to provide for all deposits required as of any date to be
made with respect to the Bonds and such Parity Obligations), (ii) payments on Interest Rate Swap
Agreements that constitute Parity Obligations shall be payable from the Interest Fund and the
required deposits below shall be adjusted to include payments on such Interest Rate Swap
Agreements during the applicable Transfer Calculation Period (which shall be proportionate in the
event such amounts are insufficient to provide for all deposits required as of any date to be made
with respect to the Bonds and such Parity Obligations) and (iii) if any of the deposits or transfers
requires more than one such deposit or transfer and there are not then on deposit in the Revenue Fund
sufficient moneys to make all such deposits and transfers, then such deposits and transfers shall be
made pro rata (based on the total amount of such deposits and payments then due) to the extent of
available moneys.
“Transfer Calculation Period” means (i) with respect to each Transfer Date during the period
commencing on, and including, each day that is two (2) Business Days prior to any April 1 and
ending on, but excluding, the day that is two (2) Business Days prior to the next succeeding October
1, the period commencing on, and including, such April 1 and ending on, and including, the next
succeeding October 1 and (ii) with respect to each Transfer Date during the period commencing on,
and including, each day that is two (2) Business Days prior to any October 1 and ending on, but
excluding, the day that is two (2) Business Days prior to the next succeeding April 1, the period
26
commencing on, but excluding, such October 1 and ending on, but excluding, the next succeeding
April 1.
“Transfer Date” means, initially, each day that is two (2) Business Days prior to each April 1
and October 1, commencing with October 1, 2016 and, upon delivery of a certificate of IBank to the
Trustee specifying additional dates, each additional date specified in the certificate of IBank.
(1)
Interest Fund. On each Transfer Date, the Trustee shall set aside in the
Interest Fund amounts then on deposit in the Revenue Fund until the amount on deposit in the
Interest Fund is equal to the Interest Fund Requirement for the Transfer Calculation Period
applicable to such Transfer Date; provided that with respect to a newly issued Series of
Bonds having one or more Interest Payment Dates scheduled to occur during the Transfer
Calculation Period in which such Series of Bonds is issued and prior to the next Transfer
Date for such Transfer Calculation Period, the Trustee shall, no later than the first Interest
Payment Date for such Series of Bonds, set aside in the Interest Fund the amount of interest
becoming due on said Series of Bonds on said Interest Payment Dates. The Trustee need not
make any deposit into the Interest Fund with respect to any Bonds on any Transfer Date if the
amount contained therein on such Transfer Date is at least equal to the Interest Fund
Requirement for the Transfer Calculation Period applicable to such Transfer Date. On
October 1 of each year, any excess amounts in the Interest Fund not needed to pay interest on
such date (and not held to pay interest on Bonds during the immediately following Transfer
Calculation Period) shall be transferred to the Revenue Fund (but excluding, in each case,
any moneys on deposit in the Interest Fund from the proceeds of any Series of Bonds or other
source and reserved as capitalized interest to pay interest on any future Interest Payment
Dates).
“Interest Fund Requirement” means, for any Transfer Calculation Period, (i) the
aggregate amount of interest becoming due and payable on the Outstanding Current Interest
Bonds (except for Bonds constituting Variable Rate Indebtedness which shall be governed by
clause (ii) below) during such Transfer Calculation Period (excluding any interest for which
there are moneys deposited in the Interest Fund from the proceeds of any Series of Bonds or
other source and reserved as capitalized interest to pay such interest during said Transfer
Calculation Period) plus (ii) the aggregate amount of interest becoming due and payable on
Outstanding Current Interest Bonds constituting Variable Rate Indebtedness during the such
Transfer Calculation Period, calculated, if the actual rate of interest is not known, at the
interest rate specified in writing by IBank, or if IBank has not specified an interest rate in
writing, calculated at the maximum interest rate borne by such Variable Rate Indebtedness
during the month prior to the month of deposit plus one hundred (100) basis points. If there
are Liquidity Facility Bonds outstanding during any Transfer Calculation Period, the Interest
Fund Requirement shall take into account and include the Liquidity Facility Rate on
Liquidity Facility Bonds required by the Liquidity Facility then in effect with respect to such
Bonds.
All amounts in the Interest Fund shall be used and withdrawn by the Trustee solely
for the purposes of: (a) paying interest on the Bonds as it shall become due and payable
(including accrued interest on any Bonds purchased or redeemed prior to maturity pursuant to
the Indenture), or for reimbursing the Credit Enhancement Provider for a drawing for such
purposes made on Credit Enhancement provided in the form of an irrevocable, direct-pay
letter of credit, and (b) making periodic payments on Interest Rate Swap Agreements, as
provided in the Indenture. If amounts on deposit in the Interest Fund are not sufficient to pay
27
in full all amounts payable from the Interest Fund, such amounts shall be applied pro rata
(based on the total amount on deposit in the Interest Fund and payments then due).
(2)
Principal Fund; Sinking Accounts. On each Transfer Date, the Trustee shall
set aside in the Principal Fund amounts then on deposit in the Revenue Fund until the amount
on deposit in the Principal Fund is equal to the Principal Fund Requirement for the Transfer
Calculation Period applicable to such Transfer Date; provided that with respect to a newly
issued Series of Bonds having Bond Obligation or Mandatory Sinking Account Payments
scheduled to be due and payable during the Transfer Calculation Period in which such Series
of Bonds is issued and prior to the next Transfer Date for such Transfer Calculation Period,
the Trustee shall, no later than the first such payment date for such Series of Bonds, set aside
in the Principal Fund the amount of Bond Obligation or Mandatory Sinking Account
Payments due and payable on said Series of Bonds on said payment dates. All of the
aforesaid deposits made in connection with future Mandatory Sinking Account Payments
shall be made without priority of any payment over any other such payment. The Trustee
need not make a deposit into the Principal Fund with respect to any Bonds on any Transfer
Date if the amount contained therein on such Transfer Date is at least equal to the Principal
Fund Requirement for the Transfer Calculation Period applicable to such Transfer Date. On
October 1 of each year, any excess amounts in the Principal Fund not needed to pay principal
on such date (and not held to pay principal on Bonds during the immediately following
Transfer Calculation Period) shall be transferred to the Revenue Fund.
“Principal Fund Requirement” means, with respect to any Transfer Calculation
Period, (i) the aggregate amount of Bond Obligation becoming due and payable on the
Outstanding Serial Bonds of all Series during such Transfer Calculation Period, plus (ii) the
aggregate of the Mandatory Sinking Account Payments to be paid during such Transfer
Calculation Period into the respective Sinking Accounts for the Term Bonds of all Series for
which Sinking Accounts have been created and for which mandatory redemption is required
from said Sinking Accounts; provided that if IBank certifies to the Trustee that any principal
payments during such Transfer Calculation Period are expected to be refunded on or prior to
their respective due dates or paid from amounts on deposit in a Reserve Fund that would be
in excess of the Bond Reserve Requirement applicable to such Reserve Fund upon such
payment, the Principal Fund Requirement for such Transfer Calculation Period need not
include such principal to be so refunded or paid. Not later than the Transfer Date
immediately preceding the beginning of each Bond Year, the Trustee shall request from
IBank a certificate of IBank setting forth the principal payments that will not be included in
the Principal Fund Requirement pursuant to the preceding sentence and the reason therefor.
If there are any Liquidity Facility Bonds outstanding during a Transfer Calculation Period
then the Principal Fund Requirement shall take into account and include any amortizations or
redemptions of any Liquidity Facility Bonds required by the Liquidity Facility then in effect
with respect to such Bonds. For purposes of the Principal Fund Requirement, Liquidity
Facility Bonds shall be treated as Serial Bonds with maturity dates on the payment dates of
any amortization or redemptions.
All amounts in the Principal Fund shall be used and withdrawn by the Trustee solely
for the purposes of paying the Bond Obligation of the Bonds when due and payable, except
that all amounts in the Sinking Accounts shall be used and withdrawn by the Trustee solely to
purchase or redeem or pay at maturity Term Bonds, as provided in the Indenture, or for
reimbursing the Credit Provider for a drawing for such purposes made on Credit
Enhancement provided in the form of an irrevocable, direct-pay letter of credit. If amounts
on deposit in the Principal Fund are not sufficient to pay in full all amounts payable from the
28
Principal Fund, such amounts shall be applied pro rata (based on the total amount on deposit
in the Principal Fund and payments then due).
(3)
Reserve Funds. On each Transfer Date, after the transfers described in (1)
and (2) above have been made, the Trustee shall deposit to any Reserve Fund the amounts, if
any, required make up any deficiency therein.
(4)
Rebate Fund. On each Transfer Date, after the transfers described in (1), (2)
and (3) above have been made, the Trustee shall deposit in the Rebate Fund any amounts
required to be deposited therein pursuant to any tax certificate executed by IBank in
connection with the issuance of Bonds or otherwise.
(5)
Subordinate Obligations Fund. On each Transfer Date, after the transfers
described in (1), (2), (3) and (4) above have been made, the Trustee shall deposit in the
Subordinate Obligations Fund amounts then on deposit in the Revenue Fund until the amount
on deposit in the Subordinate Obligations Fund is equal to the amount necessary to make
payments due and payable with respect to Subordinate Obligations during the Transfer
Calculation Period applicable to such Transfer Date.
(6)
Fees and Expenses Fund. On each Transfer Date, after the transfers described
in (1), (2), (3), (4) and (5) above have been made, the Trustee shall deposit in the Fees and
Expenses Fund such amount as IBank shall specify in writing is necessary for the payment of
Fee and Expense Obligations then owing by IBank.
(7)
Administrative Expense Fund. On each Transfer Date, after the transfers
described in (1), (2), (3), (4), (5) and (6) above have been made, the Trustee shall deposit in
the Administrative Expense Account, the amount of Administrative Expenses budgeted for
such period, as specified in writing to the Trustee by IBank.
(8)
Supplemental Revenue Fund. On each Transfer Date, after the transfers
described in (1), (2), (3), (4), (5), (6) and (7) above have been made, the Trustee shall deposit
in the Supplemental Revenue Fund, the amount, if any, required pursuant to the Indenture.
(9)
Other Funds. On each Transfer Date, after the transfers described in (1), (2),
(3), (4), (5), (6), (7) and (8) above have been made, the Trustee shall deposit in any other
fund or account established with respect to Parity Obligations, Subordinate Obligations or
Fee and Expense Obligations such amount as may be specified in or determined under the
provisions of the Supplemental Indenture or other instrument providing for the issuance or
incurrence of such Parity Obligations, Subordinate Obligations or Fee and Expense
Obligations to be transferred to such fund or account pursuant to the provisions of the
Indenture described in this paragraph.
(10) Equity Fund. On each Transfer Date, after the transfers described in (1), (2),
(3), (4), (5), (6), (7), (8) and (9) above have been made, the Trustee shall deposit in the
Equity Fund, all amounts remaining in the Revenue Fund on such Transfer Date. Unless
otherwise specified by IBank, all amounts transferred to the Equity Fund shall first be
deposited by the Trustee in the Unrestricted Assets Account until the amount so transferred to
the Unrestricted Assets Account in such Fiscal Year is equal to IBank’s projected operating
expenses for such Fiscal Year plus for one-half of the following Fiscal Year (or such lesser
amount as may be determined in the sole discretion of IBank). After making the transfers to
the Unrestricted Assets Account described in the preceding sentence, all amounts transferred
to the Equity Fund in the Fiscal Year shall be deposited by the Trustee in the Restricted
29
Assets Account. Subject to compliance with any applicable provisions of any Tax
Certificate, all amounts on deposit in the Restricted Assets Account shall be used and
withdrawn by the Trustee as directed by IBank for any lawful purpose of the Program. If, on
any date, IBank delivers to the Trustee a certificate of IBank demonstrating compliance with
the Coverage Test without taking into account the amount then on deposit in the
Supplemental Revenue Fund and requesting that the amount on deposit in the Restricted
Assets Account (or portion thereof) be released from the Restricted Assets Account, then the
amount (or such portion thereof) on deposit in the Restricted Assets Account shall be
withdrawn by the Trustee and deposited, transferred, or utilized pursuant to the instructions
of IBank (which may include an instruction to deposit amounts in the Unrestricted Assets
Account).
For the purpose of demonstrating compliance with the Coverage Test in accordance
with the Indenture, IBank may use and rely on any assumptions IBank deems reasonable
under then-existing circumstances, including, but not limited to, assumptions concerning (1)
the making of additional Pledged Loans at projected times and interest rates and in projected
amounts, (2) realization of additional Pledged Loan Repayments from such additional
Pledged Loans at projected times and in projected amounts and (3) realization of earnings
from the investment of projected amounts in the Pledged Funds and Accounts at projected
times and interest rates. (Although, as described above, the making of additional Pledged
Loans may be included in the assumptions utilized in connection with a demonstration of
compliance with the Coverage Test, the Indenture does not require that any additional
Pledged Loans subsequently be added as Collateral.)
The Unrestricted Assets Account shall be maintained by the Trustee for the benefit of
IBank, shall be controlled by IBank, is not part of the Collateral and shall not be subject to
the lien of the Indenture. Subject to compliance with any applicable provisions of any Tax
Certificate, all amounts on deposit in the Unrestricted Assets Account may be used,
transferred or withdrawn by IBank at any time for any lawful purpose of IBank and without
demonstrating compliance with the Coverage Test.
Amounts in the Restricted Assets Account or the Unrestricted Assets Account, may
also be transferred to separate subaccounts for the funding of Loans. Moneys on deposit in
each Borrower’s Loan Subaccount within the Restricted Assets Account and the Unrestricted
Assets Account will be disbursed to the particular Borrower (or to IBank to reimburse IBank
for any disbursements made to such Borrower on its Loan prior to the date the Trustee
created such Borrower’s Loan Subaccount); provided, however, that interest, profits and
other income received from the investment of moneys in such Borrower’s Loan Subaccount
shall be transferred by the Trustee at the direction of IBank. IBank may direct the Trustee to
transfer the amount of funds then held in a Borrower’s Loan Subaccount that IBank has
decided will not be disbursed to the Borrower to the Restricted Assets Account or the
Unrestricted Assets Account, as applicable.
Supplemental Revenue Fund
The Indenture provides that the Trustee shall not transfer amounts on deposit in the Revenue
Fund to any fund or account subordinate in priority to the Supplemental Revenue Fund until IBank
has delivered to the Trustee a certificate of IBank calculating the Coverage Test (taking into account
amounts already on deposit in the Supplemental Revenue Fund). If, based on such calculation, the
Coverage Test will not be satisfied as of the date of calculation, then IBank shall also specify, in the
certificate of IBank delivered to the Trustee, the amount required to be deposited in the Supplemental
30
Revenue Fund to pay any projected shortfalls in the scheduled payment of Bonds or Parity
Obligations and to satisfy the Coverage Test as of the date of calculation. Pursuant to the certificate
of IBank and with the priority set forth in the Indenture, the Trustee shall transfer funds from the
Revenue Fund to the Supplemental Revenue Fund. The Trustee shall also deposit in the
Supplemental Revenue Fund any other amounts transferred to it by IBank and designated by IBank
in writing for such purpose.
All amounts on deposit in the Supplemental Revenue Fund shall be used and withdrawn by
the Trustee on any payment date for Bonds or Parity Obligations for the purpose of making up any
deficiency in the payment of Bonds or Parity Obligations prior to the use of any Reserve Fund for
such purpose.
If, on any date, IBank delivers to the Trustee a certificate of IBank demonstrating compliance
with the Coverage Test without taking into account the amount (or a portion thereof) then on deposit
in the Supplemental Revenue Fund and requesting that such amount (or portion thereof) be released
from the Supplemental Revenue Fund, then the amount (or such portion thereof) on deposit in the
Supplemental Revenue Fund shall be withdrawn by the Trustee and deposited, transferred or utilized
pursuant to written instructions of IBank, which instructions may direct the Trustee to deposit such
amount (or portion thereof) in the Unrestricted Assets Account free and clear of the lien of the
Indenture.
For the purpose of demonstrating compliance with the Coverage Test in accordance with the
Indenture, IBank may use and rely on any assumptions IBank deems reasonable under then-existing
circumstances, including, but not limited to, assumptions concerning (1) the making of additional
Pledged Loans at projected times and interest rates and in projected amounts, (2) realization of
additional Pledged Loan Repayments from such additional Pledged Loans at projected times and in
projected amounts and (3) realization of earnings from the investment of projected amounts in the
Pledged Funds and Accounts at projected times and interest rates. (Although, as described above, the
making of additional Pledged Loans may be included in the assumptions utilized in connection with a
demonstration of compliance with the Coverage Test, the Indenture does not require that any
additional Pledged Loans subsequently be added as Collateral.)
Prior Outstanding Bonds
Pursuant to the Indenture, IBank previously issued its 2014A Bonds, which are currently
outstanding in the principal amount of $89,805,000 and its 2015A Bonds, which are currently
outstanding in the principal amount of $87,590,000.
Flow of Funds Diagram
The following diagram illustrates in a summary fashion the flow of funds pursuant to the
Indenture and is not intended to be a complete or definitive description of the flow of funds. For a
more complete description of the flow of funds, see APPENDIX C – “SUMMARY OF THE
INDENTURE.”
31
32
*
This chart reflects a simplified version of the flow of funds. See “SECURITY AND SOURCE OF
PAYMENT FOR THE SERIES 2016A BONDS – Summary of Flow of Funds under the Indenture” for a more
complete discussion.
(1)
Revenues are continuously deposited into the Revenue Fund.
(2)
On each Transfer Date the Trustee will transfer amounts from the Revenue Fund to the Interest
Fund until the amount on deposit in the Interest Fund is equal to the Interest Fund Requirement for the Transfer
Calculation Period applicable to such Transfer Date.
(3)
On each Transfer Date, the Trustee will transfer amounts from the Revenue Fund to the Principal
Fund until the amount on deposit in the Principal Fund is equal to the Principal Fund Requirement for the Transfer
Calculation Period applicable to such Transfer Date.
(4)
On each Transfer Date, the Trustee will transfer amounts from the Revenue Fund to the Reserve
Fund required to make up any deficiency in the Reserve Fund. As described in “SECURITY AND SOURCE OF
PAYMENT FOR THE SERIES 2016A BONDS,” the Series 2016A Bonds are secured by the Common Reserve
Fund.
(5)
On each Transfer Date, the Trustee will transfer from the Revenue Fund to the Rebate Fund any
amounts required to be deposited in the Rebate Fund pursuant to any tax certificate executed by IBank in connection
with the issuance of Bonds or otherwise.
(6)
On each Transfer Date the Trustee will transfer amounts from the Revenue Fund to the
Subordinate Obligations Fund until the amount on deposit in the Subordinate Obligations Fund is equal to the
amount necessary to make payments due and payable with respect to Subordinate Obligations during the Transfer
Calculation Period applicable to such Transfer Date.
(7)
On each Transfer Date, the Trustee shall transfer from the Revenue Fund to the Fees and Expenses
Fund the amount necessary for the payment of Fee and Expense Obligations then owing by IBank.
(8)
On each Transfer Date, the Trustee shall transfer from the Revenue Fund to the Administrative
Expense Account the amount of Administrative Expenses budgeted for such period specified by IBank.
(9)
Before any amounts on deposit in the Revenue Fund can be transferred to the Equity Fund (or any
fund or account subordinate in priority to the Supplemental Revenue Fund), IBank must calculate the Coverage
Test. If, based on such calculation, the Coverage Test will not be satisfied as of the date of calculation, then the
amount of money that IBank determines to be necessary in order for the Coverage Test to be satisfied as of the date
of calculation shall be transferred to the Supplemental Revenue Fund.
(10)
Unless otherwise specified by IBank, all amounts transferred to the Equity Fund shall first be
deposited by the Trustee in the Unrestricted Assets Account until the amount so transferred to the Unrestricted
Assets Account in such Fiscal Year is equal to IBank’s projected operating expenses for such Fiscal Year plus for
one-half of the following Fiscal Year (or such lesser amount as may be determined in the sole discretion of IBank).
After making the transfers to the Unrestricted Assets Account described in the preceding sentence, all amounts
transferred to the Equity Fund in the Fiscal Year shall be deposited by the Trustee in the Restricted Assets Account.
(10)(a) Subject to compliance with any applicable provisions of any Tax Certificate, all amounts on
deposit in the Restricted Assets Account shall be used and withdrawn by the Trustee as directed by IBank for any
lawful purpose of the Program. If, on any date, IBank delivers to the Trustee a certificate of IBank demonstrating
compliance with the Coverage Test without taking into account the amount then on deposit in the Supplemental
Revenue Fund and requesting that the amount on deposit in the Restricted Assets Account (or portion thereof) be
released from the Restricted Assets Account, then the amount (or such portion thereof) on deposit in the Restricted
Assets Account shall be withdrawn by the Trustee and deposited, transferred, or utilized pursuant to the instructions
of IBank (which may include an instruction to deposit amounts in the Unrestricted Assets Account).
(10)(b) Subject to compliance with any applicable provisions of any Tax Certificate, all amounts on
deposit in the Unrestricted Assets Account may be used, transferred or withdrawn by IBank at any time for any
lawful purpose of IBank.
(11)
All amounts on deposit in the Supplemental Revenue Fund shall be used and withdrawn by the
Trustee on any payment date for Bonds or Parity Obligations for the purpose of making up any deficiency in the
payment of Bonds or Parity Obligations prior to the use of any Reserve Fund for such purpose.
33
(12)
Amounts on deposit in the Reserve Fund shall be used to make up any deficiency in the Interest
Fund or the Principal Fund relating to the Bonds of the Series to which the Reserve Fund relate.
Note: For the purpose of demonstrating compliance with the Coverage Test in accordance with the
Indenture, IBank may use and rely on any assumptions IBank deems reasonable under then-existing circumstances,
including, but not limited to, assumptions concerning (1) the making of additional Pledged Loans at projected times
and interest rates and in projected amounts, (2) realization of additional Pledged Loan Repayments from such
additional Pledged Loans at projected times and in projected amounts and (3) realization of earnings from the
investment of projected amounts in the Pledged Funds and Accounts at projected times and interest rates. (Although,
as described above, the making of additional Pledged Loans may be included in the assumptions utilized in
connection with a demonstration of compliance with the Coverage Test, the Indenture does not require that any
additional Pledged Loans subsequently be added as Collateral.)
34
PRO FORMA CASH FLOW TABLE
The following Pro Forma Cash Flow Table sets forth the pro forma annual Revenues,
existing debt service on the Series 2014A Bonds and the Series 2015A Bonds, debt service on the
Series 2016A Bonds, and pro forma debt service coverage (as determined in accordance with the
Indenture).
The amounts set forth in the Pro Forma Cash Flow Table are based upon a variety of
assumptions, including that debt service on all Pledged Loans is paid when due in accordance with
scheduled repayment amounts and that there are no prepayments of such amounts. In addition, the
Pro Forma Cash Flow Table assumes that there is no substitution, addition, amendment or release of
Pledged Loans. Any release, substitution or amendment of a Pledged Loan must satisfy the
conditions set forth in the Indenture. Any release, substitution or amendment of a Pledged Loan
could result in a reduction in the projected debt service coverage set forth in the tables. See
“SECURITY AND SOURCE OF PAYMENT FOR BONDS – Release, Substitution, Addition and
Amendment of Pledged Loans.” The Pro Forma Cash Flow Table also assumes that new Pledged
Loans will be made in the times and amounts set forth in the footnotes to the table.
The Pro Forma Cash Flow Table does not reflect the issuance of any Additional Bonds,
although the Indenture permits the issuance of such Additional Bonds. The IBank intends to
continue to solicit applications for Loans and to issue additional Bonds in the future to fund Loans as
necessary or desirable to achieve the goals of the Infrastructure State Revolving Fund Program. As a
result, actual conditions with respect to the payment of Existing Loans, the execution of New
Pledged Loans, the issuance of Additional Bonds and other matters may differ from those assumed in
the Pro Forma Cash Flow Table, and therefore actual cash flow and debt service coverage may differ
from the cash flow and debt service coverage set forth in the Pro Forma Cash Flow Table.
35
Pro Forma Cash Flow Table
Bond
Year
(Oct 1)
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
Pledged
Loan
Payments
(1)
$35,734,462
23,066,168
23,096,282
23,114,709
23,132,383
23,096,687
22,893,447
21,836,407
21,329,673
19,819,499
19,678,761
19,182,836
18,959,880
18,825,394
18,432,715
17,076,165
15,269,233
13,254,393
12,056,454
10,387,707
9,045,739
7,983,532
7,154,209
5,079,019
4,701,753
4,572,170
4,238,751
3,891,590
3,740,386
3,120,462
Estimated
Earnings
(2)
$474,856
656,620
502,282
519,808
530,323
193,918
210,182
225,619
240,767
255,879
269,423
283,691
297,441
311,223
324,949
338,331
350,514
359,844
369,432
378,249
386,190
393,022
399,761
405,412
409,937
415,165
419,422
422,466
426,187
430,498
Existing
Debt
Service
(3)
$15,976,675
16,077,175
16,070,175
16,092,375
16,107,875
15,951,375
15,585,375
14,799,625
14,424,875
13,296,375
13,196,625
12,830,875
12,666,625
12,573,625
12,297,625
10,356,875
8,929,750
7,418,000
6,525,350
5,274,250
4,440,325
3,798,500
3,182,344
1,628,719
1,345,188
1,251,125
1,003,650
739,538
Coverage
1
(4)
2.27
1.48
1.47
1.47
1.47
1.46
1.48
1.49
1.50
1.51
1.51
1.52
1.52
1.52
1.53
1.68
1.75
1.84
1.90
2.04
2.12
2.21
2.37
3.37
3.80
3.99
4.64
5.83
Watch List
Loan
Payments
(5)
$22,406,309
146,122
145,549
144,960
144,354
143,732
Coverage
2
(6)
3.67
1.48
1.48
1.48
1.48
1.47
1.48
1.49
1.50
1.51
1.51
1.52
1.52
1.52
1.53
1.68
1.75
1.84
1.90
2.04
2.12
2.21
2.37
3.37
3.80
3.99
4.64
5.83
36
New Pledged
Loan
Payments
(7)
$7,098,307
9,516,237
9,516,237
9,516,237
9,516,237
9,516,237
9,516,237
9,516,237
9,516,237
9,516,237
9,516,237
9,516,237
9,516,237
9,516,237
9,516,237
9,516,237
9,516,237
9,516,237
9,516,237
9,516,237
9,516,237
9,516,237
9,516,237
9,516,237
9,516,237
7,966,719
7,966,719
7,966,719
7,966,719
2016A
Debt
Service
(8)
$1,760,542
7,285,000
9,025,600
9,029,000
9,032,400
8,907,000
9,024,250
9,024,750
9,023,750
9,026,000
9,031,000
9,033,250
9,037,500
9,038,250
9,030,250
9,958,500
10,030,750
10,032,000
10,025,000
10,024,500
9,849,500
9,698,000
9,693,500
9,683,250
9,686,750
9,687,500
8,519,750
8,521,000
9,149,750
8,688,750
Coverage
3
(9)
3.30
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
1.33
Reserve
Releases
(10)
$364,620
383,842
418,014
440,852
466,724
463,988
487,734
463,225
510,123
544,760
603,125
679,949
756,053
750,672
725,202
673,290
687,179
647,913
641,656
671,303
737,990
538,956
627,225
849,976
841,706
7,514,297
Supplemental
Revenue
Fund
(11)
-
Excess after
Debt
Service
(12)
$40,878,410
7,605,042
8,164,574
8,538,959
8,566,864
8,510,212
8,451,093
8,220,611
8,102,040
7,756,974
7,700,020
7,628,761
7,614,192
7,644,104
7,625,974
7,371,411
6,926,156
6,405,675
6,065,062
5,670,621
5,306,254
5,037,946
4,865,666
4,426,689
4,134,945
4,192,171
3,951,467
3,861,944
2,983,542
10,343,225
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
Assumes all Pledged Loans existing as of date of the issuance of the Series 2016A Bonds are paid in a timely manner through maturity of such Pledged
Loans. Bond Year 2016 includes actual and expected prepayments totaling $14,412,794. Excludes scheduled payments and prepayments with respect to
Watch List Loans.
Assumes (i) investment earnings of 1.85% on the Series 2014A and Series 2015A contributions to the Common Reserve Fund through October 1, 2020,
(ii) investment earnings of 0.25% on amounts on the remainder on deposit in the Common Reserve Fund through October 1, 2020, (iii) investment
earnings of 0.25% on amounts on deposit in the Common Reserve Fund from October 1, 2020, (iv) investment earnings of 0.25% on amounts on deposit
in the Revenue Fund and the Restricted Assets Account of the Equity Fund (assuming repayment of all currently Pledged Loans), (v) the first $1.5 million
in excess amounts after payment of debt service will be transferred to the Unrestricted Assets Account of the Equity Fund and the remainder will be
retained in the Restricted Assets Account of the Equity Fund, and (vi) no new Pledged Loans are made.
Includes debt service on the Series 2014A and Series 2015A Bonds.
Calculated in accordance with Indenture using Existing Pledged Loan Repayments (excluding payments on Watch List Loans) plus Estimated Earnings.
“Watch List Loans” include four loans with the City of San Bernardino, three of which are expected to be prepaid by October 1, 2016.
Calculated in accordance with Indenture using Existing Pledged Loan and Watch List Loan Repayments plus Estimated Earnings.
Assumes that $154,078,267 additional Loans will be made and designated as Pledged Loans by August 1, 2018.
Reflects scheduled debt service on the Series 2016A Bonds, assuming no prepayments.
Calculated in accordance with Indenture using Existing Pledged Loans, Watch List Loan, and New Pledged Loan Repayments plus Estimated Earnings.
Represents amounts released from Common Reserve Fund as the Common Reserve Requirement is reduced following principal payments on maturing
Series 2014A Bonds, Series 2015A Bonds, and Series 2016A Bonds.
Assumes that excess revenue will not need to be retained within the Supplemental Revenue Account.
Excess amounts are subject to application in accordance with the flow of funds established in the Indenture. See “SECURITY AND SOURCE OF
PAYMENT FOR THE SERIES 2016A BONDS – Summary of Flow of Funds under the Indenture.”
37
INVESTMENT CONSIDERATIONS
The following information should be considered by prospective investors, in addition to the
other matters set forth in this Official Statement in evaluating the Series 2016A Bonds. However, it
does not purport to be a comprehensive or exhaustive discussion of risks or other considerations
which may be relevant to an investment in the Series 2016A Bonds. In addition, the order in which
the following information is presented is not intended to reflect the relative importance of any such
risks. There can be no assurance that other considerations not discussed herein will not become
material in the future.
Limited Obligation; Covenants Pursuant to Indenture Do Not Constitute a Guarantee
The Series 2016A Bonds are limited obligations of IBank, payable solely from and secured
by a pledge and assignment of the Collateral as provided in the Indenture. Although the Indenture
contains provisions intended to result in the availability of sufficient Collateral to pay debt service on
the Series 2016A Bonds when due, the covenants and agreements of IBank pursuant to the Indenture
do not constitute a guarantee that sufficient Collateral will be available to make debt service
payments on the Series 2016A Bonds when due.
Considerations Relating to Pledged Loans and Borrowers
The largest source of Collateral is expected to consist of Pledged Loan Repayments from
Borrowers. See “PRO FORMA CASH FLOW TABLE.” Failure of one or more Borrowers to pay
debt service on Pledged Loans when due could materially adversely affect payment of debt service
on the Series 2016A Bonds. Borrowers are not obligated to pay any amounts in excess of the
amounts originally agreed to pursuant to their Pledged Loan agreements to make up shortfalls by
other Borrowers under their respective Loan Agreements.
As shown in Appendix A, Borrowers for the Pledged Loans generally consist of cities,
counties, successor agencies to redevelopment agencies, special districts, assessment districts and
joint powers authorities. (As described herein, Loans to Non-Profit Entities are authorized, but none
have been approved as of the date hereof.) The Criteria utilized by IBank to select Borrowers and
establish amounts available for borrowing under Pledged Loans generally does not specify particular
financial requirements or minimum credit standards. In addition, a number of specific and general
legal restraints may adversely affect the ability of Borrowers to repay their Pledged Loans, including
but not limited to, the ability of Borrowers to raise new or additional taxes, utility rates and charges,
or other revenues necessary to pay debt service on Pledged Loans.
As described herein in “THE INFRASTRUCTURE STATE REVOLVING FUND
PROGRAM - Basic Terms of the Loans,” the structure of a particular Loan generally depends on its
repayment source, and the circumstances which could adversely affect the ability of particular
Borrowers to make timely payments with respect to their Loans may vary. For instance, Borrowers
with Loans payable from their general funds generally have limited ability to raise general fund
revenues, and their ability to repay the Loans may be adversely affected by increases in other
amounts payable from their general fund (including but not limited to employee salaries and benefits
and retirement related payments). As another example, with respect to Borrowers with Loans
payable from the revenues of an enterprise fund (such as a water or wastewater enterprise),
increasing regulatory requirements may significantly increase their operating costs, resulting in
financial stress. Loans to Borrowers which are “successor agencies” to redevelopment agencies are
payable solely from specific real estate tax increments and are subject to further review and approval
by the State Department of Finance as “enforceable obligations” under State law. See
“OUTSTANDING LOANS – Pledged Loans.” Loans to “successor agencies” are also subject to the
38
risks generally incident to loans secured by real estate, including potential declines in the market
value of real property within and in the vicinity of the respective project areas. The ability of the
Borrowers to make timely payments due on their respective Pledged Loans depends on various
economic and financial circumstances and legal requirements and restrictions applicable to individual
Borrowers, and could be adversely affected by a variety of factors and circumstances, including but
not limited to the factors and circumstances described in the preceding paragraph, natural disasters
(such as earthquakes or floods) and general economic conditions in the particular jurisdictions or
service areas of the Borrowers or in the State generally.
Four of the Pledged Loans are with the City of San Bernardino, which is currently in
bankruptcy proceedings. See “OUTSTANDING LOANS - Pledged Loans - Particular Pledged
Loans - Pledged Loans to the City of San Bernardino.” (Three of the Pledged Loans with the City of
San Bernardino are payable solely from revenues of the City’s water system, and are expected to be
prepaid in the next few months.) Projected payments relating to the Pledged Loans to the City of San
Bernardino are set forth in the Pro Forma Cash Flow Table in the column titled “Projected Payments
on Watch List Loans.”
Bankruptcy of a Borrower
Borrowers generally are authorized to file for bankruptcy under certain circumstances.
(Future Borrowers which are Non-Profit Entities, if any, may also be subject to involuntary
bankruptcy petitions.) Borrowers under Loans previously made by IBank under the ISRF Program
have filed for bankruptcy in the past. The City of San Bernardino, which is the Borrower with
respect to four Pledged Loans, is currently in bankruptcy proceedings. See – “OUTSTANDING
LOANS - Pledged Loans - Particular Pledged Loans - Pledged Loans to the City of San Bernardino”
for a description of the Loans to the City of San Bernardino.)
If a Borrower is in bankruptcy, IBank may be prohibited from taking any action to collect
any amount from the Borrower or to enforce any obligation of the Borrower, unless the permission of
the bankruptcy court is obtained. Further, the Borrower may be able, without the consent and over
the objection of IBank, to alter the priority, interest rate, payment terms, maturity dates, payment
sources, covenants, and other terms or provisions of Loans (which may include Pledged Loans), as
long as the bankruptcy court determines that the alterations are fair and equitable.
With respect to Pledged Loans that are payable from revenues of enterprise funds of the
Borrowers (such as water or wastewater system revenues), such revenues may be deemed to be
“special revenues” under the Bankruptcy Code, and thus may be protected by the provisions of the
Bankruptcy Code providing that such “special revenues” continue to be subject to the lien granted to
IBank by the Borrower pursuant to the Pledged Loan agreement (subject to potential reduction for
the necessary operating expenses of such system). However, no assurance can be given that a court
would not hold that such revenues are not “special revenues” and are thus not subject to the lien
granted pursuant to the Pledged Loan agreement.
There may be other possible effects of a bankruptcy of one or more Borrowers that could
result in delays or reductions in payments of principal of and interest on the Series 2016A Bonds, or
result in losses to the Holders or Beneficial Owners of the Series 2016A Bonds. Regardless of any
specific adverse determinations in a Borrower bankruptcy proceeding, the fact of a Borrower
bankruptcy proceeding could have an adverse effect on the liquidity and value of the Series 2016A
Bonds.
Although the City of San Bernardino has continued to pay amounts owed to IBank with
respect to Pledged Loans on a timely basis, there can be no assurances that it will not seek to delay,
39
reduce or discontinue payments, or otherwise avail itself of the provisions of the Bankruptcy Code
described above, in the future.
In addition, the enforceability of the rights and remedies of the Holders of the Series 2016A
Bonds under the Indenture are subject to a number of limitations, including bankruptcy, moratorium,
insolvency or other laws affecting creditor’s rights or remedies and is subject to general principles of
equity (regardless of whether such enforceability is considered in equity or at law), to the exercise of
judicial discretion in appropriate cases and to the limitations on legal remedies against governmental
entities in the State.
Reliance on Projections
In order to issue additional Series of Bonds (such as the Series 2016A Bonds) or Parity
Obligations secured by the Indenture, to release Pledged Loans from the lien of the Indenture and to
take certain other actions under the Indenture (including the release of funds from the Supplemental
Revenue Fund or the Restricted Assets Account), IBank is required to meet certain conditions
specified in the Indenture, including delivery of a certificate that demonstrates compliance with the
Coverage Test.
For the purpose of demonstrating compliance with the Coverage Test IBank may use and rely
on any other assumptions the IBank deems reasonable under then-existing circumstances, including,
but not limited to, assumptions concerning (1) the making of additional Pledged Loans at projected
times and interest rates and in projected amounts, (2) realization of additional Pledged Loan
Repayments from such additional Pledged Loans at projected times and in projected amounts and (3)
realization of earnings from the investment of projected amounts in the Pledged Funds and Accounts
at projected times and interest rates. There can be no assurances that actual results will not differ
from assumptions made by IBank. In addition, although the making of additional Pledged Loans may
be included in the assumptions utilized in connection with a demonstration of compliance with the
Coverage Test, the Indenture does not require that any additional Pledged Loans subsequently be
added as Collateral. If actual conditions differ materially from assumptions, such circumstances
could have a material adverse impact on the availability of Collateral in amounts sufficient to pay
debt service on all outstanding Bonds and Parity Obligations, including the Series 2016A Bonds.
TAX MATTERS
In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to IBank (“Bond
Counsel”), based upon an analysis of existing laws, regulations, rulings and court decisions, and
assuming, among other matters, the accuracy of certain representations and compliance with certain
covenants, interest on the Series 2016A Bonds is excluded from gross income for federal income tax
purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”) and is exempt from
State of California personal income taxes. Bond Counsel is of the further opinion that interest on the
Series 2016A Bonds is not a specific preference item for purposes of the federal individual or
corporate alternative minimum taxes, although Bond Counsel observes that such interest is included
in adjusted current earnings when calculating corporate alternative minimum taxable income. A
complete copy of the proposed form of opinion of Bond Counsel is set forth in Appendix E hereto.
To the extent the issue price of any maturity of the Series 2016A Bonds is less than the
amount to be paid at maturity of such Series 2016A Bonds (excluding amounts stated to be interest
and payable at least annually over the term of such Series 2016A Bonds), the difference constitutes
“original issue discount,” the accrual of which, to the extent properly allocable to each Beneficial
Owner thereof, is treated as interest on the Series 2016A Bonds which is excluded from gross income
for federal income tax purposes and State of California personal income taxes. For this purpose, the
40
issue price of a particular maturity of the Series 2016A Bonds is the first price at which a substantial
amount of such maturity of the Series 2016A Bonds is sold to the public (excluding bond houses,
brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents
or wholesalers). The original issue discount with respect to any maturity of the Series 2016A Bonds
accrues daily over the term to maturity of such Series 2016A Bonds on the basis of a constant interest
rate compounded semiannually (with straight-line interpolations between compounding dates). The
accruing original issue discount is added to the adjusted basis of such Series 2016A Bonds to
determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity)
of such Series 2016A Bonds. Beneficial Owners of the Series 2016A Bonds should consult their
own tax advisors with respect to the tax consequences of ownership of Series 2016A Bonds with
original issue discount, including the treatment of Beneficial Owners who do not purchase such
Series 2016A Bonds in the original offering to the public at the first price at which a substantial
amount of such Series 2016A Bonds is sold to the public.
Series 2016A Bonds purchased, whether at original issuance or otherwise, for an amount
higher than their principal amount payable at maturity (or, in some cases, at their earlier call date)
(“Premium Series 2016A Bonds”) will be treated as having amortizable bond premium. No
deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium
Series 2016A Bonds, the interest on which is excluded from gross income for federal income tax
purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner’s basis in a
Premium Series 2016A Bond, will be reduced by the amount of amortizable bond premium properly
allocable to such Beneficial Owner. Beneficial Owners of Premium Series 2016A Bonds should
consult their own tax advisors with respect to the proper treatment of amortizable bond premium in
their particular circumstances.
The Code imposes various restrictions, conditions and requirements relating to the exclusion
from gross income for federal income tax purposes of interest on obligations such as the Series
2016A Bonds. IBank has made certain representations and covenanted to comply with certain
restrictions, conditions and requirements designed to ensure that interest on the Series 2016A Bonds
will not be included in federal gross income. Inaccuracy of these representations or failure to comply
with these covenants may result in interest on the Series 2016A Bonds being included in gross
income for federal income tax purposes, possibly from the date of original issuance of the Series
2016A Bonds. The opinion of Bond Counsel assumes the accuracy of these representations and
compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any
person) whether any actions taken (or not taken), or events occurring (or not occurring), or any other
matters coming to Bond Counsel’s attention after the date of issuance of the Series 2016A Bonds
may adversely affect the value of, or the tax status of interest on, the Series 2016A Bonds.
Accordingly, the opinion of Bond Counsel is not intended to, and may not, be relied upon in
connection with any such actions, events or matters.
Although Bond Counsel is of the opinion that interest on the Series 2016A Bonds is excluded
from gross income for federal income tax purposes and is exempt from State of California personal
income taxes, the ownership or disposition of, or the accrual or receipt of amounts treated as interest
on, the Series 2016A Bonds may otherwise affect a Beneficial Owner’s federal, state or local tax
liability. The nature and extent of these other tax consequences depends upon the particular tax
status of the Beneficial Owner or the Beneficial Owner’s other items of income or deduction. Bond
Counsel expresses no opinion regarding any such other tax consequences.
Current and future legislative proposals, if enacted into law, clarification of the Code or court
decisions may cause interest on the Series 2016A Bonds to be subject, directly or indirectly, in whole
or in part, to federal income taxation or to be subject to or exempted from state income taxation, or
41
otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such
interest. For example, the Obama Administration’s budget proposals in recent years have proposed
legislation that would limit the exclusion from gross income of interest on the Series 2016A Bonds to
some extent for high income individuals. The introduction or enactment of any such legislative
proposals or clarification of the Code or court decisions may also affect, perhaps significantly, the
market price for, or marketability of, the Series 2016A Bonds. Prospective purchasers of the Series
2016A Bonds should consult their own tax advisors regarding the potential impact of any pending or
proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel is
expected to express no opinion.
The opinion of Bond Counsel is based on current legal authority, covers certain matters not
directly addressed by such authorities, and represents Bond Counsel’s judgment as to the proper
treatment of the Series 2016A Bonds for federal income tax purposes. It is not binding on the
Internal Revenue Service (“IRS”) or the courts. Furthermore, Bond Counsel cannot give and has not
given any opinion or assurance about the future activities of IBank or the Borrowers under any Loans
funded with proceeds of the Series 2016A Bonds, or about the effect of future changes in the Code,
the applicable regulations, the interpretation thereof or the enforcement thereof by the IRS. IBank
has covenanted, however, to comply with the requirements of the Code.
Bond Counsel’s engagement with respect to the Series 2016A Bonds ends with the issuance
of the Series 2016A Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend
IBank or the Beneficial Owners regarding the tax-exempt status of the Series 2016A Bonds in the
event of an audit examination by the IRS. Under current procedures, parties other than IBank and its
appointed counsel, including the Beneficial Owners, would have little, if any, right to participate in
the audit examination process. Moreover, because achieving judicial review in connection with an
audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS positions
with which IBank legitimately disagrees, may not be practicable. Any action of the IRS, including
but not limited to selection of the Series 2016A Bonds for audit, or the course or result of such audit,
or an audit of bonds presenting similar tax issues may affect the market price for, or the marketability
of, the Series 2016A Bonds, and may cause IBank or the Beneficial Owners to incur significant
expense.
RATINGS
Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business,
(“S&P”), Fitch Ratings (“Fitch”), and Moody’s Investors Service, Inc. (“Moody’s,” and together
with S&P and Fitch, the “Rating Agencies”) have assigned the Series 2016A Bonds ratings of
“AAA,” “AAA” and “Aaa,” respectively. Such ratings reflect only the views of the Rating Agencies,
and an explanation of the significance of such ratings may be obtained from the respective Rating
Agencies. The Rating Agencies are independent of any investment banking firm, bank or similar
institution.
Generally, rating agencies base their ratings on materials and information furnished to the
rating agencies and on investigations, studies and assumptions by the Rating Agencies. The debt
ratings are not a recommendation to purchase, sell or hold a security, inasmuch as they do not
comment as to market price or suitability for a particular investor. There can be no assurance that
such ratings will continue for any given period of time or that they will not be lowered, suspended or
withdrawn entirely by the Rating Agencies. Any such downward changes in or suspension or
withdrawal of such ratings may have an adverse effect on the marketability of and secondary market
price for the Series 2016A Bonds.
42
UNDERWRITING
The Series 2016A Bonds offered hereby are being purchased from IBank by the Underwriters
named on the cover page of this Official Statement (collectively, the “Underwriters”) at a purchase
price of $___________ (being the principal amount of the Bonds of $__________, less an
Underwriters’ discount of $____________, and plus a net original issue premium of $__________).
The bond purchase agreement for the Series 2016A Bonds provides that the Underwriters shall
purchase all of the Series 2016A Bonds offered hereby if any are purchased, and that the obligation
to make such purchase is subject to the approval of certain legal matters by Bond Counsel and certain
other conditions. The initial public offering price may be changed from time to time by the
Underwriters.
Several of the Underwriters have provided letters to the State Treasurer relating to their
distribution practices or other affiliations for inclusion in this Official Statement, which are set forth
in Appendix G. IBank and the State Treasurer do not guarantee the accuracy or completeness of the
information contained in such letters and the information therein is not to be construed as a
representation of IBank, the State Treasurer or of any Underwriter other than the Underwriter
providing such representation.
NO LITIGATION
No litigation or other proceedings are pending or, to the knowledge of IBank, threatened in
any agency, court or tribunal restraining or enjoining or seeking to restrain or enjoin the issuance,
sale, execution or delivery of any of the Series 2016A Bonds, in any way questioning or affecting the
validity of any provision of the Series 2016A Bonds, the Indenture, in any way questioning or
affecting the validity of any of the proceedings or authority for the authorization, sale, execution or
delivery of the Series 2016A Bonds, or of any provision made or authorized for their payment, or
questioning or affecting the organization or existence of IBank or the title of any of its officers to
their respective offices.
LEGAL MATTERS
The validity of the Series 2016A Bonds and certain other legal matters are subject to the
approving opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to IBank. A complete copy
of the proposed form of Bond Counsel opinion is contained in Appendix E. Certain legal matters will
be passed upon for IBank by its Counsel, and by Stradling Yocca Carlson & Rauth, a Professional
Corporation, Disclosure Counsel to IBank. Certain legal matters will be passed upon for the
Underwriters by their counsel, Schiff Hardin LLP, Underwriters’ Counsel. Bond Counsel, Disclosure
Counsel and Underwriters’ Counsel undertake no responsibility for the accuracy, completeness or
fairness of this Official Statement.
FINANCIAL STATEMENTS
IBank’s Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2015,
included in Appendix B hereto, have been audited by Macias, Gini & O’Connell LLP, as stated in
their report appearing in Appendix B hereto. No opinion is expressed by Macias, Gini & O’Connell
LLP with respect to any event subsequent to its report dated October 5, 2015. Macias, Gini &
O’Connell LLP was not required to provide its consent to the inclusion of IBank’s financial report in
the Official Statement and has not undertaken any review of the Official Statement. IBank’s
Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2015 includes other
activities and funds of IBank separate from the ISRF Program and the Collateral. Such other funds
are not available for payments of the Series 2016A Bonds. The Series 2016A Bonds are secured
43
solely by the Collateral, and the inclusion of the audited financial statements of IBank should not
create any implication that any other assets of IBank are available for payment of the Series 2016A
Bonds.
FINANCIAL ADVISOR
IBank has utilized the services of Lamont Financial Services Corporation, Walnut Creek,
California, as independent financial advisor in connection with the issuance of the Series 2016A
Bonds. The Financial Advisor is a financial advisory firm and is not engaged in the business of
underwriting or distributing municipal securities or other public securities. The Financial Advisor
assumes no responsibility for the accuracy, completeness or fairness of this Official Statement.
CONTINUING DISCLOSURE
IBank has covenanted for the benefit of the holders and Beneficial Owners of the Series
2016A Bonds to provide certain financial information and operating data relating to IBank by not
later than 240 days following the end of the IBank’s fiscal year commencing with fiscal year 2015-16
(which fiscal year as of the date hereof ends June 30) (the “Annual Report”), and to provide notices
of the occurrence of certain enumerated events (“Listed Events”). The Annual Report will be filed by
IBank with the Municipal Securities Rulemaking Board, through its Electronic Municipal Market
(“EMMA”) website. Any notices of Listed Events will be filed by IBank with EMMA. The specific
information to be contained in the Annual Report or the notices of Listed Events is set forth in
APPENDIX D – “FORM OF CONTINUING DISCLOSURE AGREEMENT.” Failure of IBank to
comply with its obligations under the Continuing Disclosure Agreement will not be considered an
event of default under the Indenture. However, the Trustee or any holder or Beneficial Owner may
take such actions as may be necessary and appropriate, including seeking mandate or specific
performance by court order, to cause IBank to comply with its obligations under the Continuing
Disclosure Agreement.
The Continuing Disclosure Agreement requires certain financial and operating information
relating to Significant Borrowers to be included in the Annual Report filing. “Significant Borrower”
means a Borrower under a Pledged Loan that has an aggregate unpaid principal amount equal to or
greater than twenty percent (20%) of the aggregate unpaid principal amount of all Pledged Loans.
Borrowers which meet this threshold may vary over time. As of the date of issuance, no Borrowers
with respect to Pledged Loans are Significant Borrowers pursuant to the Continuing Disclosure
Agreement. While each Borrower has covenanted in the respective Loan Agreement for the Pledged
Loan to provide certain information, there can be no assurances that IBank will be successful in
obtaining such information from any Significant Borrower.
For the last 5 years, IBank has regularly filed annual reports and notices of specified events
in accordance with its continuing disclosure undertakings. With respect to a continuing disclosure
undertaking of IBank relating to IBank’s State School Fund Apportionment Lease Revenue Bonds,
notices of certain rating upgrades relating to such bonds (which generally correspond to ratings on
obligations payable from the State’s General Fund) were not filed in a timely manner. Notices of
contemporaneous upgrades to the ratings on other obligations payable from the State’s General Fund
(not issued by IBank) were posted on EMMA in a timely manner.
In addition, with respect to the IBank’s annual report relating to an issue of Prior Bonds for
the fiscal year ended June 30, 2014, neither audited nor unaudited financial statements for such fiscal
year for a Significant Borrower were made available to IBank, and therefore were not included in the
report.
44
MISCELLANEOUS
This Official Statement speaks only as of its date, and the information contained herein is
subject to change. This Official Statement contains descriptions of, and information regarding IBank,
the ISRF Program and the security and sources of payment for the Series 2016A Bonds. Certain
information in this Official Statement involves projections and assumptions which are not
represented as fact and such projections and assumptions may not prove to be accurate. Such
descriptions and information do not purport to be comprehensive and the descriptions of documents
contained herein are qualified in their entirety by reference to such documents.
This Official Statement has been approved by IBank.
CALIFORNIA INFRASTRUCTURE AND
ECONOMIC DEVELOPMENT BANK
By:
Teveia R. Barnes
Executive Director
45
[THIS PAGE INTENTIONALLY LEFT BLANK]
APPENDIX A
PLEDGED LOANS
Except as noted below, the following table sets forth the Pledged Loans and certain other information related thereto as of June 1, 2016.
“Outstanding Balance” reflects Loan amount outstanding as of June 1, 2016; all or a portion of such amount may not have been disbursed.
IBank
Loan
#
01-003
01-008
01-011
01-013
01-016
01-017
01-018
01-019
01-020
02-022
02-023
02-026
02-029
Borrower
Source of Repayment
Loan Structure
City of Monterey Park
Fresno Metropolitan Flood
Control District
City of Clovis
City of Kingsburg (RDA
Successor)
City of San Luis Obispo
City of Brawley
Stockton Port District
City of Tehachapi
Moulton Niguel Water District
Water Revenues
Voter Approved Tax Levy
Installment Sale
Loan
General Fund
Tax Increment
Lease
Loan
Parking Revenues
Wastewater Revenues
Port Revenues
General Fund
Water/Wastewater/Recycled Water
Revenue
Water Revenues
Tax Increment
Installment Sale
Installment Sale
Installment Sale
Lease
Installment Sale
City of Westminster
County of Sacramento (RDA
Successor)
Moulton Niguel Water District
02-038
City of Lawndale (RDA
Successor)
City of Hanford
County of Siskiyou
Phelan Piñon Hills Community
Services District
Hidden Valley Lake Community
Services District
City of Perris
County of Tulare (RDA
Successor)
Southwest Transportation Agency
02-039
02-040
02-041
Trinity Public Utilities District
City of El Centro
City of El Centro
02-030
02-031
02-033
02-034
02-035
02-037
Leased Asset
Outstanding
Interest
Maturity
Balance
Rate
Date
$1,234,715.62
$13,180,323.24
4.07%
3.73%
8/1/2030
8/1/2030
$240,554.43
$109,590.72
3.06%
2.84%
8/1/2020
9/15/2016
$5,101,221.91
$1,066,544.53
$6,914,338.68
$731,006.24
$633,319.37
3.07%
2.62%
3.21%
3.21%
2.73%
8/1/2031
8/1/2021
7/1/2031
8/1/2031
3/1/2022
Installment Sale
Loan
$1,342,384.24
$6,851,561.50
3.52%
3.52%
8/1/2031
12/1/2031
Water/Wastewater/Recycled
Water Revenue
Tax Increment
Installment Sale
$424,260.37
3.17%
3/1/2022
$1,378,043.24
3.65%
8/1/2031
Wastewater Revenues
General Fund
Water Revenues
Installment Sale
Lease
Installment Sale
$6,845,590.03
$1,341,125.85
$2,312,552.30
3.50%
3.50%
3.50%
8/1/2031
2/1/2032
2/1/2032
Water Revenues
Installment Sale
$2,009,799.20
3.48%
2/1/2032
Wastewater Revenues
Tax Increment
Installment Sale
Loan
$931,762.97
$1,253,693.20
3.42%
3.07%
2/1/2032
8/1/2032
General Fund
Lease & SubLease
Installment Sale
Installment Sale
Installment Sale
$1,830,330.87
2.84%
2/1/2022
$5,688,751.77
$1,754,760.06
$559,347.46
3.39%
3.00%
3.00%
8/1/2032
8/1/2022
6/1/2022
Electric Revenues
Wastewater Revenues
Water Revenues
Civic Center Building B
City Hall & Public Works
Loan
A-1
The Old Hospital Building
Transportation Center
IBank
Loan
#
Interest
Maturity
Balance
Rate
Date
Borrower
Source of Repayment
Loan Structure
02-042
03-043
City of Novato (RDA Successor)
City of Merced
Loan
Installment Sale
$2,520,673.35
$6,752,209.43
3.39%
3.17%
2/1/2032
8/1/2033
03-044
Bear Valley Community Services
District
Bear Valley Community Services
District
City of Yuba City (RDA
Successor)
City of Fresno
City of Fresno (RDA Successor)
County of San Bernardino, Area
70, Zone J
Squaw Valley Public Service
District
City of Laguna Beach
City of Porterville
City of Kingsburg
Del Norte County
Tax Increment
Water/Wastewater Facility
Fees
Water Revenues
Installment Sale
$2,095,369.45
2.93%
8/1/2032
Wastewater Revenues
Installment Sale
$438,002.55
2.93%
8/1/2032
Tax Increment
Loan Agreement
$1,418,848.06
2.93%
9/1/2034
General Fund
Tax Increment
Water Revenues
Lease
Loan
Installment Sale
City Hall Annex
$1,787,287.42
$1,550,725.06
$1,510,576.17
3.53%
3.53%
3.09%
8/1/2033
8/1/2033
8/1/2033
General Fund
Lease
Fire Station #1
$1,273,962.36
3.33%
8/1/2028
Wastewater Revenues
Wastewater Revenues
Water Revenues
General Fund
Installment Sale
Installment Sale
Installment Sale
Lease
$3,531,806.03
$3,922,819.68
$2,257,495.58
$2,597,871.77
2.73%
2.98%
2.98%
3.07%
8/1/2023
3/16/2034
8/1/2034
8/1/2033
General Fund
Wastewater Revenues
Lease
Installment Sale
$1,474,581.44
$486,114.49
3.22%
3.05%
8/1/2034
8/1/2034
Tax Increment
Water Revenues
Loan
Installment Sale
$233,334.96
$3,823,235.37
3.05%
3.05%
8/1/2034
8/1/2034
Water Revenues
General Fund
Tax Increment
Installment Sale
Lease
Loan
$3,820,667.05
$7,719,589.78
$3,273,778.18
3.03%
2.87%
3.01%
8/1/2034
8/1/2035
12/1/2035
Tax Increment
Loan
$2,735,331.87
2.87%
12/1/2035
Wastewater Revenues
Tax Increment
Water Revenues
General Fund
General Fund
Water Revenues
Wastewater Revenues
Installment Sale
Loan
Installment Sale
Lease
Lease
Installment Sale
Installment Sale
$7,931,049.81
$1,187,171.29
$851,489.96
$788,784.99
$1,568,792.24
$2,755,029.75
$1,904,225.81
3.01%
2.94%
2.68%
3.09%
3.15%
3.15%
3.15%
8/1/2035
8/1/2035
8/1/2020
8/1/2036
8/1/2036
8/1/2036
8/1/2036
03-045
03-046
03-047
04-048
03-049
B04-050
B04-052
B04-053
B04-054
04-055
B04-057
B04-058
B04-059
B04-060
B04-061
B04-062
B05-063
B05-065
B05-066
B05-067
B05-068
BC04-069
B05-071
B05-072
B05-073
County of Siskiyou
Mendocino City Community
Services District
Placer County (RDA Successor)
Los Osos Community Services
District
City of Shasta Lake
City of El Segundo
City of Sacramento (RDA
Successor)
City of Sacramento (RDA
Successor)
City of Madera
Placer County (RDA Successor)
City of Monterey Park
City of Anderson
City of Redlands
City of Greenfield
City of Greenfield
A-2
Leased Asset
Outstanding
Solid Waste Transfer
Station
The Old Hospital Building
City Hall
City Hall
Community Center
IBank
Loan
#
Outstanding
Interest
Maturity
Rate
Date
Borrower
Source of Repayment
Loan Structure
Leased Asset
Balance
B05-074
County of Kern
General Fund
Lease
County Fire Department
Maintenance and Admin.
Building
$4,568,005.79
2.66%
8/1/2026
BC08-077
C07-078
BC08-079
Paradise Irrigation District
Placer County (RDA Successor)
County of Shasta
Water Revenues
Tax Increment
General Fund
Installment Sale
Loan
Lease
$1,328,005.53
$397,592.86
$1,036,899.37
2.77%
2.91%
2.81%
8/1/2027
8/1/2037
8/1/2022
B08-080
B08-081
City of Eureka (RDA Successor)
Montara Water and Sanitary
District
County of Marin
City of Bakersfield (RDA
Successor)
City of Sacramento
Tax Increment
Wastewater Revenues
Loan
Installment Sale
$1,233,420.27
$839,924.20
2.83%
3.05%
11/1/2024
8/1/2037
Assessments
Tax Increment
Loan
Loan
$473,526.11
$8,328,751.19
2.99%
3.11%
8/1/2027
8/1/2037
Storm Drainage Revenues
$2,449,930.37
3.17%
8/1/2037
Water Revenues
Installment
Payment
Installment Sale
$565,640.97
3.17%
8/1/2027
Wastewater Revenues
Wastewater Revenues
Water Revenues
Installment Sale
Installment Sale
Installment Sale
$1,098,778.97
$8,358,053.63
$211,582.48
3.25%
3.25%
3.82%
8/1/2037
12/1/2037
8/1/2033
General Fund
Water Revenues
Water Revenues
Water Revenues
Water Revenues
General Fund
Lease
Installment Sale
Installment Sale
Installment Sale
Installment Sale
Lease
Four Fire Stations
$635,584.35
$6,009,181.54
$8,747,698.60
$1,331,183.46
$4,881,006.01
$9,007,524.29
3.35%
3.59%
4.00%
3.31%
3.31%
3.02%
8/1/2029
8/1/2038
8/1/2038
8/1/2039
8/1/2039
8/1/2038
General Fund
Lease
Four Fire Stations
$2,230,403.26
3.24%
8/1/2040
Water Revenues
Installment Sale
$801,513.52
3.37%
8/1/2030
Water Revenues
Water Revenues
Installment Sale
Installment Sale
$6,143,789.36
$6,957,899.63
2.54%
2.04%
8/1/2041
8/1/2042
Wastewater Revenues
General Fund
Tax Increment
Installment Sale
Lease
Tax Allocation
$3,095,883.33
$1,261,176.40
$553,653.42
2.07%
2.26%
2.77%
8/1/2043
8/1/2033
10/1/2033
Solid Waste Revenues
Installment Sale
$2,936,607.50
3.01%
8/1/2034
B04-082
B08-083
B08-084
B08-085
TC08-086
B08-087
BC14-089
BC04-090
BC14-092
B08-093
BC05-094
BC08-095
BC14-096
BC04-097
B08-098
BC14-099
BC14-101
B14-102
BC15-103
BC15-104
B15-105
Valley of the Moon Water
District
City of Mt. Shasta
City of San Luis Obispo
Fieldbrook Glendale Community
Services District
City of Lawndale
City of Porterville
City of Davis
City of Porterville
City of Paramount
North Tahoe Fire Protection
District
El Dorado County Fire Protection
District
McKinleyville Community
Services District
Coastside County Water District
Phelan Piñon Hills Community
Services District
City of Ione
City of Capitola
Capitol Area Development
Authority
City of Redlands
A-3
County Departments of
Resource Management and
Public Works Facility
Maintenance Office
Public Works
IBank
Loan
#
B15-106
B15-107
B15-108
B15-109
B15-110
16-111
Borrower
Source of Repayment
Loan Structure
City of Pittsburg
City of Santa Cruz
City of San Gabriel
City of Alameda Financing Auth
City of Del Mar
Coastside County Water District*
Water Revenues
General Fund
Measure R
General Fund
Sewer Revenues
Water Revenues
Installment Sale
Lease
Installment Sale
Lease
Installment Sale
Installment Sale
Leased Asset
Borrower
Source of Repayment
Loan Structure
Leased Asset
City of San Bernardino
City of San Bernardino, Water**
City of San Bernardino, Water**
City of San Bernardino, Water**
General Fund
Water Revenues
Water Revenues
Water Revenues
Lease
Installment Sale
Installment Sale
Installment Sale
Community Center
Civic Auditorium
Fire Station
Outstanding
Interest
Maturity
Balance
Rate
Date
$11,167,171.71
$12,823,544.70
$3,800,000.00
$3,000,000.00
$3,535,354.00
$5,628,000.00
3.51%
1.73%
3.50%
2.29%
2.17%
3.44%
8/1/2044
8/1/2024
8/1/2029
8/1/2034
8/1/2035
8/1/2045
Outstanding
Balance
Interest
Rate
Maturity
Date
$780,059.04
$4,007,580.32
$6,386,614.11
$8,727,580.53
2.81%
3.34%
2.71%
2.61%
8/1/2021
2/1/2022
8/1/2026
8/1/2031
Watch Loans
Loan
#
01-015
02-027
BC05-076
C12-100
* Loan will be designated as a Pledged Loan on the date of issuance of the Series 2016A Bonds.
** Assumed to be prepaid prior to October 1, 2016. See “PRO FORMA CASH FLOW TABLE” and “OUTSTANDING LOANS – Pledged Loans - Particular Pledged
Loans - Pledged Loans to the City of San Bernardino.”
A-4
APPENDIX B
COMPREHENSIVE ANNUAL FINANCIAL REPORT OF IBANK
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
[THIS PAGE INTENTIONALLY LEFT BLANK]
COMPREHENSIVE ANNUAL
FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND AND CALIFORNIA
INFRASTRUCTURE GUARANTEE TRUST FUND, ENTERPRISE FUNDS OF THECALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK (A Component Unit of the State of
California)
CALIFORNIA INFRASTRUCTURE AND
ECONOMIC DEVELOPMENT BANK FUND AND
CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE
CALIFORNIA INFRASTRUCTURE AND
ECONOMIC DEVELOPMENT BANK
(A Component Unit of the State of California)
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
Diane J. Nanik, Manager Fiscal Unit
California Infrastructure and Economic Development Bank
This page has been intentionally left blank.
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
TABLE OF CONTENTS
PAGE
INTRODUCTORY SECTION
Letter of Transmittal
3
Organization Chart
6
Principal Officials
7
GFOA Certificate of Achievement
8
FINANCIAL SECTION
Independent Auditor’s Report
9
Management’s Discussion and Analysis
12
Fund Financial Statements
Statement of Net Position
Statement of Revenues, Expenses, and Changes in Fund Net Position
Statement of Cash Flows
Notes to the Financial Statements
20
21
22
23
Required Supplementary Information
Schedule of the Funds’ Proportionate Share of the Net Pension Liability
Schedule of Funds’ Contributions
43
44
STATISTICAL SECTION
Financial Trends
Schedule of Net Position
Schedule of Revenues, Expenses, and Changes in Fund Net Position
Infrastructure State Revolving Fund (ISRF) Program Ten Largest Borrowers
46
48
50
Revenue Capacity
Schedule of ISRF Program Loans Receivable and Interest Rates
51
Debt Capacity
Schedule of Statutory Debt Limit Capacity
Schedule of Outstanding ISRF Program Bonds and Related Debt Ratio
Schedule of Aggregate Pledged Resources Coverage for ISRF Program Bonds
53
55
57
Demographics and Economic Information
California Demographic and Economic Indicators
California Employment by Industry
58
60
Operating Information
Number of Employees by Identifiable Activity
Major Program Activity
61
62
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INTRODUCTORY SECTION
This page has been intentionally left blank.
CALIFORNIA INFRASTRUCTURE AND
ECONOMIC DEVELOPMENT BANK
October 5, 2015
To the Board of Directors:
I am pleased to submit for the fiscal year ended June 30, 2015 the Comprehensive Annual Financial
Report (CAFR) of the California Infrastructure and Economic Development Bank Fund and the
California Infrastructure Guarantee Trust Fund, enterprise funds of the California Infrastructure and
Economic Development Bank (IBank), a component unit of the State of California. The CAFR includes
the financial activities of IBank’s Infrastructure State Revolving Fund (ISRF) Program and Conduit Bond
Program included in the California Infrastructure and Economic Development Bank Fund (CIEDB Fund)
and the California Infrastructure Guarantee Trust Fund (Guarantee Trust Fund) (collectively, the CIEDB
Fund and the Guarantee Trust Fund are the Funds). The continuing disclosure agreements related to
IBank’s revenue bonds that provided funding for the ISRF Program (ISRF Program Bonds) require
annual audited financial statements and this CAFR fulfills that requirement.
The net position of the Funds was $280,291,840 as of June 30, 2015, all of which was restricted. Net
position increased by $2,161,889 over the previous fiscal year directly as a result of positive earnings
from operating and nonoperating activities, but decreased by $3,565,810 for the cumulative effect of
change in accounting principles for the implementation of Government Accounting Standards Board
Statement No. 68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement
No. 27 and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the
Measurement Date – an amendment of GASB Statement No. 68. This year IBank has experienced
renewed demand for its current programs and is near completion of its new clean energy and
environmental programs and financing instruments to confront the infrastructure, economic development,
clean energy and environmental funding requirements of a wider spectrum of State and local
governments and communities within the State. IBank has taken notice that the State and local
governments continue to delay much-needed infrastructure, economic development, clean energy and
environmental projects vital to fueling the State’s economic engine. The limits on available funds and
financings continue to restrict the infrastructure, economic development, clean energy and environmental
projects that are needed to improve the quality of life throughout the State and are vital to the continued
preservation of California’s infrastructure and environment. IBank is uniquely positioned to be a major
contributor to the success of the State’s economic revitalization.
Management assumes full responsibility for the completeness and reliability of the information contained
in this report, based upon a comprehensive framework of internal control that is established for this
purpose. Because the cost of internal control should not exceed anticipated benefits, the objective is to
provide reasonable, rather than absolute, assurance that the financial statements are free of any material
misstatements.
Macias Gini & O’Connell LLP has issued an unmodified (“clean”) opinion on the Funds’ financial
statements for the fiscal year ended June 30, 2015. The independent auditor’s report is located at the front
of the financial section of this report. Management’s discussion and analysis (MD&A) immediately
follows the independent auditor’s report and provides a narrative introduction, overview and analysis of
the financial statements. The MD&A complements this letter of transmittal and should be read in
conjunction with it.
3
CALIFORNIA INFRASTRUCTURE AND
ECONOMIC DEVELOPMENT BANK
Profile of IBank
IBank was established in 1994 to promote economic revitalization, enable future development, and
encourage a healthy climate for jobs in California. IBank operates pursuant to the Bergeson-Peace
Infrastructure and Economic Development Bank Act contained in the California Government Code
section 63000 et seq. IBank is a component unit of the State of California located within the Governor’s
Office of Business and Economic Development (GO-Biz) and is governed by a five-member Board of
Directors.
IBank has broad authority to issue tax-exempt and taxable revenue bonds, provide financing to public
agencies and certain tax-exempt non-profit organizations that are sponsored by public agencies, provide
credit enhancements, including guarantees, acquire or lease facilities, and leverage State and Federal
funds. IBank's current programs include the ISRF Program, 501(c)(3) Revenue Bond Program, Industrial
Development Revenue Bond Program, Exempt Facility Revenue Bond Program, Public Agency Revenue
Bond Program and the newly formed California Lending for Energy and Environmental Needs (CLEEN)
Center programs. No financial activity occurred in the CLEEN Center programs during the fiscal year
ended June 30, 2015. The Small Business Loan Guarantee Program (SBLGP) became a program of
IBANK during the 2013-14 fiscal year; however, the SBLGP’s financial activities are not included in this
report.
With the exception of funds for program support and the SBLGP administration, which must be annually
appropriated by the State Legislature, all IBank funds are continuously appropriated without regard to
fiscal year. Continuous appropriation authority means that no further appropriations are necessary to
expend funds held in either the CIEDB Fund or the Guarantee Trust Fund.
Economic Condition
California’s economy has rebounded well adding over 1.8 million jobs to recover all of the jobs lost
during the recession. In 2014, California’s job growth has outpaced the national average and the
unemployment rate declined to the lowest point in over 5 years. Job growth has been led by strong gains
in construction, trade and transport, retail, agriculture and high tech. Industries that have traditionally
struggled in California are seeing gains. The manufacturing industry has added jobs for the fourth year in
a row. Governor Brown this month signed a balanced, on-time 2015-2016 budget that saves billions of
dollars and pays down debt. California’s gross state product is over $2.3 trillion and the State is the 8th
largest economy in the world, having surpassed Russia and Italy.
Interest in the ISRF Program continues to grow with stronger borrowers and more diverse projects. All
required repayments were made by the borrowers on ISRF Program Loans during the fiscal year and
continued timely repayment is expected.
We anticipate continued demand for IBank’s programs as the economy continues to grow and prospective
borrowers are better positioned to finance public infrastructure and private development projects. I am
pleased to report that both Fitch Ratings and Standard & Poor’s assigned their respective “AAA” longterm rating to the California Infrastructure and Economic Development Bank ISRF Program Bonds and
noted that the outlook is stable. Moody’s Investors Service assigned a rating of Aa1 to the ISRF 2015A
Bonds and noted that the outlook is positive. These strong ratings reflect the ISRF Program’s extremely
strong financial risk score and very strong enterprise risk score.
4
CALIFORNIA INFRASTRUCTURE AND
ECONOMIC DEVELOPMENT BANK
Long-term Financial Planning
IBank’s priorities for the upcoming years include but are not limited to the following: providing funding
priority to infrastructure, clean energy, environmental and economic development projects, creating
sector-specific financing instruments and funds, developing public-private investment opportunities, and
facilitating state-wide outreach to potential customers for all of IBank’s programs. These priorities will
provide access to more affordable funds for California infrastructure, clean energy, environmental and
economic development projects, while maintaining the Funds’ positive net position.
Awards and Acknowledgements
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a
Certificate of Achievement for Excellence in Financial Reporting to the California Infrastructure and
Economic Development Bank for its comprehensive annual financial report for the fiscal year ended
June 30, 2014. This was the fourth consecutive year that the California Infrastructure and Economic
Development Bank has achieved this prestigious award. In order to be awarded a Certificate of
Achievement, a governmental entity must publish an easily readable and efficiently organized
comprehensive annual financial report. This year’s CAFR must satisfy both generally accepted
accounting principles and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe that our current
comprehensive annual financial report continues to meet the Certificate of Achievement Program’s
requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.
I wish to acknowledge the staff of the California Infrastructure and Economic Development Bank for
their consistent dedication and contribution to the success of the organization. In particular, I wish to
acknowledge the Fiscal Unit staff for the preparation of this Comprehensive Annual Financial Report.
Respectfully submitted,
Teveia R. Barnes
Executive Director
5
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
ORGANIZATION CHART
Board of Directors
Executive Office
Administrative Unit
Bond Unit
Compliance Unit
External Affairs Unit
Fiscal Unit
Legal / Legislation Unit
Loan Unit
Small Business Finance Center
6
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
PRINCIPAL OFFICIALS
IBank Board of Directors
Michael E. Rossi, Chair, Senior Advisor for Jobs and Business to the Governor of
California, Delegate of the Director, Governor’s Office of Business and Economic
Development
John Chiang, State Treasurer
Brian P. Kelly, Secretary of the California State Transportation Agency
Michael Cohen, Director of the Department of Finance
Peter Luchetti, Governor’s Appointee
IBank Executive Office and Management Staff
Teveia R. Barnes, Executive Director
Ruben R. Rojas, Deputy Executive Director
Diane J. Nanik, Fiscal Unit Manager
Diane Cummings, Deputy Director of Credit and Chief Credit Officer
Marilyn Muñoz, Deputy Director of Legislative Affairs and General Counsel
Nancee Trombley, Deputy Director of Compliance and Chief Compliance Officer
Alice Scott, Deputy Director of External Affairs
Tad Thomas, Loan Unit Manager
Fariba Khoie, Bond Unit Manager
7
8
FINANCIAL SECTION
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A new breed
of professional
services firm
Sacramento
Walnut Creek
Oakland
Independent Auditor’s Report
Los Angeles
To the Board of Directors of the
California Infrastructure and Economic Development Bank
Sacramento, California
Report on the Financial Statements
Century City
Newport Beach
San Diego
We have audited the accompanying financial statements of the California Infrastructure and Economic
Development Bank Fund and California Infrastructure Guarantee Trust Fund (collectively, the Funds),
enterprise funds of the California Infrastructure and Economic Development Bank (IBank), a component
unit of the State of California, as of and for the fiscal year ended June 30, 2015, and the related notes to
the financial statements, as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. Accordingly, we express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of significant accounting estimates
made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of the Funds of IBank, as of June 30, 2015, and the changes in their financial position
and their cash flows for the fiscal year then ended in accordance with accounting principles generally
accepted in the United States of America.
9
Macias Gini & O’Connell LLP
3000 S Street, Suite 300
Sacramento, CA 95816
www.mgocpa.com
Emphasis of Matters
Basis of Presentation
As discussed in Note 2.A, the financial statements present only the Funds and do not purport to, and do
not, present fairly the financial position of IBank as of June 30, 2015, the changes in its financial position,
or, where applicable, its cash flows for the fiscal year then ended in accordance with accounting
principles generally accepted in the United States of America. IBank’s California Small Business
Expansion Fund, its only other fund, is included in and subject to the audit of the State of California’s
financial statements. Our opinion is not modified with respect to this matter.
Change in Accounting Principles
As discussed in Note 2.B, for the fiscal year ended June 30, 2015, IBank implemented Governmental
Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for
Pensions – An Amendment of GASB Statement No. 27 and GASB Statement No. 71, Pension Transition
for Contributions Made Subsequent to the Measurement Date – an amendment of GASB Statement No.
68. Our opinion is not modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s
discussion and analysis, schedule of the Funds’ proportionate share of the net pension liability, and the
schedule of Funds’ contributions, as listed in the table of contents, be presented to supplement the fund
financial statements. Such information, although not a part of the fund financial statements, is required
by the Governmental Accounting Standards Board who considers it to be an essential part of financial
reporting for placing the fund financial statements in an appropriate operational, economic, or historical
context. We have applied certain limited procedures to the required supplementary information in
accordance with auditing standards generally accepted in the United States of America, which consisted
of inquiries of management about the methods of preparing the information and comparing the
information for consistency with management’s responses to our inquiries, the fund financial statements,
and other knowledge we obtained during our audit of the fund financial statements. We do not express an
opinion or provide any assurance on the information because the limited procedures do not provide us
with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming an opinion on the fund financial statements. The
introductory and statistical sections are presented for purposes of additional analysis and are not required
parts of the fund financial statements.
The introductory and statistical sections have not been subjected to the auditing procedures applied in the
audit of the fund financial statements, and accordingly, we do not express an opinion or provide any
assurance on them.
10
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated October 5,
2015, on our consideration of IBank’s internal control over financial reporting as it relates to the Funds
and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant
agreements and other matters. The purpose of that report is to describe the scope of our testing of internal
control over financial reporting and compliance and the results of that testing, and not to provide an
opinion on internal control over financial reporting or on compliance. That report is an integral part of an
audit performed in accordance with Government Auditing Standards in considering IBank’s internal
control over financial reporting and compliance as it relates to the Funds.
Sacramento, California
October 5, 2015
11
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
Introduction
The following Management’s Discussion and Analysis (MD&A) provides an overview to the financial
statements of the California Infrastructure and Economic Development Bank Fund (CIEDB Fund)and
California Infrastructure Guarantee Trust Fund (Guarantee Trust Fund), enterprise funds of the California
Infrastructure and Economic Development Bank (IBank), a component unit of the State of California
(State), a description of its activities, and an analysis of the financial position of the CIEDB Fund and the
Guarantee Trust Fund for the fiscal year ended June 30, 2015 (collectively, the CIEDB Fund and the
Guarantee Trust Fund are the Funds). The Funds do not receive any State General Fund support. The
Funds’ programs continue to provide revenues sufficient to support all operating expenses.
The information presented in this section should be read in conjunction with the information in our letter
of transmittal on pages 3-5 of this report and the financial statements and notes that follow this section.
IBank and Current Programs
IBank is a State of California financing authority whose mission is to finance public infrastructure and
private development that promote a healthy climate for jobs, contribute to a strong California economy,
and improve the quality of life in California communities. IBank has broad authority to issue tax-exempt
and taxable revenue bonds, provide financing to public agencies, provide credit enhancements, including
guarantees, acquire or lease facilities, and leverage State and Federal funds.
The Funds’ current
operations are funded solely from fees, interest earnings, and Infrastructure State Revolving Fund
Program loan1 repayments. IBank is a component unit of the State of California (State) and the Funds’
financial statements are included in the State’s Comprehensive Annual Financial Report.
IBank’s major programs include the Infrastructure State Revolving Fund (ISRF) Program, which is a
revolving loan program that provides financing to local government entities for eighteen categories of
public infrastructure and economic expansion projects, and a variety of conduit revenue bond financing
programs, including the Industrial Development Bond Program for manufacturing and processing
companies, the 501(c)(3) Revenue Bond Program for nonprofit public benefit corporations, State School
Fund Bond Program and the Public Agency Revenue Bond Program for governmental entities. Conduit
bonds issued by IBank are a limited obligation of IBank payable solely from the revenues generated by
the underlying borrower. The Small Business Loan Guarantee Program (SBLGP), which issues
guarantees to lenders of loans to small businesses having difficulty securing financing on their own, was
established as a program of IBank in October 2013. However, the SBLGP program’s financial activities
and position are not included in this report.
1
“Loan” is generically used to refer to a loan, a lease or an installment sale agreement.
12
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
Financial Highlights 2014-15
x
The net position of the Funds was $280,291,840 as of June 30, 2015, all of which was restricted.
Net position increased by $2,161,889 over the previous fiscal year directly as a result of positive
earnings from operating and nonoperating activities, but decreased by $3,565,810 for the
cumulative effect of change in accounting principles for the implementation of Government
Accounting Standards Board Statement No. 68 (GASB 68), Accounting and Financial Reporting
for Pensions – an amendment of GASB Statement No. 27 and GASB Statement No. 71
(GASB 71), Pension Transition for Contributions Made Subsequent to the Measurement Date –
an amendment of GASB Statement No. 68 (collectively, the Statements). The primary objective
of the Statements is to improve accounting and financial reporting by state and local governments
for pensions by establishing standards for measuring and recognizing liabilities, deferred outflows
of resources, deferred inflows of resources, and expenses/expenditures. It requires employers to
report a net pension liability for the difference between the present value of projected pension
benefits for past service and restricted resources held in trust for the payment of benefits. The
Statements identify the methods and assumptions that should be used to project benefit payments,
discount projected benefit payments to their actuarial present value, and attribute that present
value to periods of employee service.
x
Total cash, cash equivalents, and investments increased during the fiscal year by $71,264,218 or
50% primarily as a result of proceeds received from the issuance of the 2015A ISRF Program
Bonds and loan repayments exceeding loan disbursements and bond debt service payments.
x
Total pledged and non-pledged loans receivable increased during the fiscal year by $18,645,006
because new loans closed exceeded loan repayments during the fiscal year.
x
The revenue bonds payable increased by $61,783,091 or 42% primarily due to the issuance of
$90,070,000 in ISRF Program Bonds on June 17, 2015. A portion of the proceeds, $39,285,137,
was used to advance refund $35,435,000 of outstanding 2008 ISRF Program Bonds.
x
The net pension liability as of June 30, 2015 was $3,200,240 as a result of the implementation of
GASB 68.
x
Deferred outflows of resources increased by $3,853,971 primarily as a result of the reacquisition price
(amount placed in escrow to repay the 2008 ISRF Program Bonds) exceeding the net carrying amount
of those bonds by $3,587,747.
x
Undisbursed loan commitments increased by $31,103,488 due to an increased amount of
undisbursed amounts of pledged loans receivable available to be drawn by the borrowers and
draws submitted for payment but unpaid at year-end.
x
Total operating revenues were $10,759,416 for the fiscal year, a decrease of $1,388,328 or 11%
over the previous fiscal year due to a decrease in the interest on loans receivables as loans were
repaid and a decrease in bond issuance fees due to a reduction in the par amounts of the total
conduit bonds issued.
13
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
Overview of the Financial Statements
The financial section of this annual financial report consists of this MD&A, the financial statements, and
the notes to the financial statements. This MD&A is a discussion of many aspects of the Funds’
operations and financial status and its information was compiled from the Funds’ financial statements and
accompanying notes.
The financial statements have been prepared using the economic resources measurement focus and
accrual basis of accounting in accordance with generally accepted accounting principles and include the
following three statements:
x
The Statement of Net Position presents information on the assets, liabilities and deferred
inflows/outflows of resources of the Funds, with the difference reported as net position. Over
time, increases or decreases in net position are expected to serve as a useful indicator of whether
the financial position of the Funds are improving or deteriorating.
x
The Statement of Revenues, Expenses, and Changes in Net Position presents information
reflecting how the net position of the Funds changed during the fiscal year. All changes in net
position are reported as soon as the underlying event giving rise to the change occurs, regardless
of the timing of the cash flows. Thus, revenues and expenses are reported in the statement for
some items that will only result in cash flows in future fiscal periods.
x
The Statement of Cash Flows reports the cash flows from operating activities, noncapital
financing activities and investing activities, and the resulting impacts to cash and cash equivalents
for the fiscal year.
The financial statements included in this annual financial report are those of IBank’s CIEDB Fund and
Guarantee Trust Fund. As discussed in Note 1, The Financial Reporting Entity, the financial statements
herein are intended to present the financial position, change in financial position and cash flows of only
IBank’s ISRF Program and Conduit Bond Program. The financial statements do not purport to present
the financial position of the Small Business Loan Guarantee Program or any other reporting entity.
The Notes to the Financial Statements provide additional information that is essential to a full
understanding of the data provided in the financial statements. These notes can be found immediately
following the financial statements.
Statement of Net Position
The net position of the Funds was $280,291,840 as of June 30, 2015, all of which was restricted. Net
position increased by $2,161,889 over the previous fiscal year directly as a result of positive earnings
from operating and nonoperating activities, but decreased by $3,565,810 for the cumulative effect of
change in accounting principles for the implementation of the Statements.
14
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
The following table presents a condensed, combined Statement of Net Position as of June 30, 2015 and
2014, and the dollar and percentage change from the prior year.
Cash, cash equivalents, and investments--restricted
Program loans receivable
Other assets
Total Assets
Total Deferred Outflows of Resources
Total Assets and Deferred Outflows of Resources
Revenue bonds payable
2015
2014
$
Change
$ 214,344,782
$ 143,080,564
$ 71,264,218
49.81%
310,513,224
291,868,218
18,645,006
6.39%
3,765,003
3,747,020
17,983
0.48%
528,623,009
438,695,802
89,927,207
20.50%
4,718,881
$ 533,341,890
864,910
$ 439,560,712
3,853,971
$ 93,781,178
445.59%
21.34%
$ 208,290,797
$ 146,507,706
$ 61,783,091
42.17%
3,200,240
100.00%
(1,498,130)
-31.25%
Net pension liability
3,200,240
Other liabilities
3,296,412
Undisbursed loan commitments
Total Liabilities
Total Deferred Inflows of Resources
Net Position - Restricted - Expendable by Statute
Total Liabilities, Deferred Inflows of Resources and Net
Position
4,794,542
%
Change
37,666,191
6,562,703
31,103,488
473.94%
252,453,640
157,864,951
94,588,689
59.92%
596,410
100.00%
(1,403,921)
-0.50%
596,410
-
280,291,840
281,695,761
$ 533,341,890
$ 439,560,712
$ 93,781,178
21.34%
Assets
Total assets increased by $89.9 million over the prior year. Cash, cash equivalents, and investments-restricted increased as a result of cash received from the issuance of the 2015A ISRF Program Bonds
whose proceeds were used to refund previously outstanding 2008 ISRF Program Bonds and to refinance
existing bond anticipation loans.
ISRF Program loans receivable (both pledged and non-pledged) totaled $310.5 million as of
June 30, 2015, increase of $18.6 million because new loans closed exceeded loan repayments during the
fiscal year.
Deferred Outflows of Resources
Deferred outflows of resources increased by $3.9 million primarily as a result of the reacquisition price
(amount placed in escrow to repay the 2008 ISRF Program Bonds) exceeding the net carrying amount of those
bonds by $3.6 million. This amount will be amortized over the remaining life of the refunded bonds.
15
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
Liabilities
Total liabilities were $252.5 million as of June 30, 2015, an increase of 60% over the prior fiscal year.
The largest liability is revenue bonds payable, which consists of two series of ISRF Program Bonds, one
issued in February 2014 and one issued in June 2015. Revenue bonds payable increased by $61.8 million
primarily due to the issuance of $90.1 million in 2015A ISRF Program Bonds on June 17, 2015. A
portion of the proceeds, $39.3 million, was used to advance refund $35.4 million of outstanding 2008
ISRF Program Bonds. The net pension liability as of June 30, 2015 was $3.2 million as a result of the
implementation of GASB 68.
Deferred Inflows of Resources
Deferred inflows of resources were $0.6 million as of June 30, 2015 as result of the implementation of
GASB 68.
Statement of Revenues, Expenses, and Changes in Net Position
Operating income was $1,920,654 for the fiscal year ended June 30, 2015. The following table presents
the condensed, combined Statement of Revenues, Expenses, and Changes in Net Position for the
2014-2015 and 2013-2014 fiscal years.
2014-2015
Interest on loans receivable
$
Administration fees
Total operating revenues
Total operating expenses
Operating income
Nonoperating revenue
Changes in net position
Net Position, Beginning of year *
Net Position, End of year $
9,206,557
2013-2014
$
$
Change
10,421,447
$ (1,214,890)
-11.66%
1,552,859
1,726,297
(173,438)
-10.05%
10,759,416
12,147,744
(1,388,328)
-11.43%
8,838,762
9,189,187
(350,425)
-3.81%
1,920,654
2,958,557
(1,037,903)
-35.08%
241,235
218,580
2,161,889
3,177,137
278,129,951
280,291,840
$
22,655
(1,015,248)
10.36%
-31.95%
278,518,624
(388,673)
-0.14%
281,695,761
$ (1,403,921)
-0.50%
* Restated 2014-2015 for implementation of GASB 68
16
%
Change
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
Revenues
The following chart presents operating and nonoperating revenues by source:
RevenuebySource
Revenues
by Source
Fiscal
Year
2014-2015
FiscalYear20142015
$241,235,2%
$10,421,447
$1,552,859,14%
$1,726,297
14%
84%
Interestonloansreceivable
$218,580
$9,206,557,84%
Administrativefees
2%
Investmentincome
Interest on loans receivable
Administration fees
Investment Income
Total operating revenues were $10.8 million for the fiscal year, a decrease of $1.4 million over the
previous fiscal year due to a decrease in the interest on loans receivables as loans were repaid and a
decrease in bond issuance fees due to a reduction in the par amounts of the total conduit bonds issued.
17
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
Operating Expenses
The following chart presents operating expenses by category:
OperatingExpensesbyCategory
FiscalYear20142015
$4,206,661,48%
$4,632,101,52%
Interestonrevenuebonddebt
Programsupport
Total operating expenses were $8.8 million during the fiscal year compared to $9.2 million for the prior
fiscal year, a decrease of 4%.
Budgetary Information
With the exception of funds for program support, which must be annually appropriated by the State
Legislature, all other IBank funds in the Funds are continuously appropriated without regard to fiscal
year. Continuous appropriation authority means that no further appropriations are necessary to expend
funds held in either the CIEDB Fund or the Guarantee Trust Fund.
Debt Administration
IBank administers the ISRF Program, a leveraged revolving loan program. Initial ISRF Program Loans
were funded with previous State General Fund appropriations. IBank issued $51.37 million in ISRF
Program Revenue Bonds in March 2004, $52.80 million in December 2005, $48.37 million in September
2008, $95.96 million in February 2014 and $90.1 million in June 2015 (collectively, ISRF Program
Bonds) to provide additional funding for ISRF Program Loans. The 2014A ISRF Program Bonds were
issued to refund the 2004 and 2005 ISRF Program Bonds and to refinance existing bond anticipation
18
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
loans. The 2015A ISRF Program Bonds were issued to refund the 2008 ISRF Program Bonds and to
refinance existing bond anticipation loans. The ISRF Program Bonds were sold without a credit
enhancement, and in 2004 and 2005, were initially rated AA, Aa2, and AA by Standard & Poor’s,
Moody’s Investors Service, and Fitch Ratings, respectively. Upon the issuance of the 2008 ISRF
Program Bonds, Standard & Poor’s and Fitch Ratings raised the ratings on the ISRF Program Bonds to
AA+, citing proactive and strong program oversight and management, and thorough ongoing surveillance
of existing Loans as key factors to the high credit ratings on the bonds. The 2014A and 2015A ISRF
Program Bonds were assigned a rating of AAA, Aa1, and AAA by Standard & Poor’s (S&P), Moody’s
Investors Service (Moody’s), and Fitch Ratings (Fitch), respectively. S&P and Fitch assigned a stable
outlook to the 2014A and 2015A ISRF Program Bonds. Moody’s assigned a stable outlook to the 2014A
ISRF Program Bonds and a positive outlook to the 2015A ISRF Program Bonds. These strong ratings
reflect the ISRF Program’s extremely strong financial risk score and very strong enterprise risk score. In
addition, these strong ratings reflect the ISRF Program’s ability to withstand defaults by the ISRF
Program’s borrowers while the ISRF Program could continue to pay the ISRF Program’s bondholders.
Existing ISRF Program Loans are either funded from previous State General Fund appropriations, interest
earned on the ISRF Program Loans, the repayment of principal on ISRF Program loans receivable,
investment earnings, administration fee revenue, or the proceeds of ISRF Program Bonds. The 2014A
and 2015A ISRF Program Bonds are structured under an open-indenture model. Both are limited
obligations of IBank payable solely from and secured solely by pledged ISRF Program Loan repayments,
reserves, and reserve account interest earnings. Note 4 of the Notes to the Financial Statements contains
additional information about the outstanding ISRF Program Bonds.
IBank also issues conduit revenue bonds including Industrial Development Bonds for certain privatelyowned manufacturing and processing businesses, 501(c)(3) Revenue Bonds for nonprofit entities, State
School Fund Bonds for financially troubled public school districts, and Public Agency Revenue Bonds for
other state and local governmental entities. During the fiscal year, IBank served as the issuer for
$270,300,000 of conduit revenue bonds. Conduit bonds are a limited obligation of IBank payable solely
from the pledged revenues of the conduit borrower. As such, except for administration fee revenue
related to the conduit bond programs, conduit bond financial information is not reflected in the Funds’
financial statements.
Requests for Information
This financial report is designed to provide interested parties with a general overview of the finances of
the Funds. Questions concerning the information provided in this report or requests for additional
information should be addressed to Teveia Barnes, Executive Director, California Infrastructure and
Economic Development Bank, P.O. Box 2830, Sacramento, California 95812-2830.
19
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
STATEMENT OF NET POSITION
JUNE 30, 2015
California
Infrastructure and
Economic
Development Bank
Fund
ASSETS AND DEFERRED OUTFLOWS OF RESOURCES
CURRENT ASSETS
Cash and equivalents - restricted
Pledged loans receivable - disbursed
Non-pledged loans receivable - disbursed
Interest and other receivables
Total current assets
NON-CURRENT ASSETS
Pledged loans receivable - disbursed
Pledged loans receivable - undisbursed
Non-pledged loans receivable - disbursed
Total non-current assets
Total assets
DEFERRED OUTFLOWS OF RESOURCES
Deferred outflows of resources related to pensions
Loss on refunding debt
Total deferred outflows of resources
TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES
$ 189,644,894
15,271,138
250,198
3,747,608
208,913,838
$ 214,344,782
15,271,138
250,198
3,765,003
233,631,121
252,625,423
37,666,191
4,700,274
294,991,888
-
252,625,423
37,666,191
4,700,274
294,991,888
503,905,726
24,717,283
528,623,009
356,434
4,362,447
4,718,881
-
356,434
4,362,447
4,718,881
$
24,717,283
$ 533,341,890
$
-
$ 508,624,607
Total liabilities
DEFERRED INFLOWS OF RESOURCES
Deferred inflows of resources related to pensions
Total deferred inflows of resources
NET POSITION
Restricted - Expendable:
Statute
Total net position
TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES
AND NET POSITION
20
$
Total
24,699,888
17,395
24,717,283
LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION
CURRENT LIABILITIES
Accounts payable
$
563,558
Other liabilities
4,653
Revenue bond interest payable
1,126,261
Revenue bonds payable
5,995,000
Undisbursed loan commitments
20,407,220
Total current liabilities
28,096,692
NON-CURRENT LIABILITIES
Compensated absences payable
Net other postemployment benefit obligation
Net pension liability
Undisbursed loan commitments
Revenue bonds payable
Total non-current liabilities
California
Infrastructure
Guarantee Trust
Fund
$
563,558
4,653
1,126,261
5,995,000
20,407,220
28,096,692
314,940
1,287,000
3,200,240
17,258,971
202,295,797
224,356,948
-
314,940
1,287,000
3,200,240
17,258,971
202,295,797
224,356,948
252,453,640
-
252,453,640
596,410
596,410
-
596,410
596,410
255,574,557
255,574,557
24,717,283
24,717,283
280,291,840
280,291,840
24,717,283
$ 533,341,890
$ 508,624,607
$
The accompanying notes are an integral part of these financial statements.
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
California
Infrastructure and
Economic
Development Bank
Fund
OPERATING REVENUES
Interest on loans receivable
Administration fees
$
9,206,557
1,552,859
California
Infrastructure
Guarantee Trust
Fund
$
-
Total
$
9,206,557
1,552,859
Total operating revenues
10,759,416
-
10,759,416
OPERATING EXPENSES
Interest on revenue bond debt
Program support
4,632,101
4,206,661
-
4,632,101
4,206,661
Total operating expenses
8,838,762
-
8,838,762
1,920,654
-
1,920,654
178,619
62,616
241,235
178,619
62,616
241,235
2,099,273
62,616
2,161,889
257,041,094
24,654,667
281,695,761
OPERATING INCOME
NONOPERATING REVENUE
Investment earnings
Total nonoperating revenue
Changes in net position
NET POSITION, Beginning of year - as previously reported
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLES
NET POSITION, Beginning of year - as restated
NET POSITION, End of year
-
(3,565,810)
253,475,284
$ 255,574,557
$
(3,565,810)
24,654,667
278,129,951
24,717,283
$ 280,291,840
The accompanying notes are an integral part of these financial statements.
21
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
STATEMENT OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
California
Infrastructure and
Economic
Development Bank
Fund
CASH FLOWS FROM OPERATING ACTIVITIES
Receipt of interest on loans receivable
Receipt of administration fees
Receipt of principal on loans receivable
Payment of outstanding loan commitments
Payment of program support
Net cash provided by operating activities
$
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Receipt of revenue bond proceeds
Payment to advance refund escrow agent
Payment of principal on revenue bond debt
Payment of interest on revenue bond debt
Net cash provided by noncapital financing activities
CHANGE IN CASH AND EQUIVALENTS
CASH AND EQUIVALENTS, Beginning of year
RECONCILIATION OF OPERATING INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Operating income
Adjustments to reconcile operating income to net cash
provided by operating activities:
Interest on revenue bond debt
Underwriter's discount paid directly from bond proceeds
Changes in assets and liabilities:
Loans receivable
Accounts payable
Other liabilities
Compensated absences payable
Net other postemployment benefit obligation
Net pension liability and related deferred inflows/outflows
Undisbursed loan commitments
NET CASH PROVIDED BY OPERATING ACTIVITIES
NONCASH FINANCING AND INVESTING ACTIVITIES
Amortization of revenue bond premiums
Amortization of deferred outflow of resources
Bond proceeds paid directly to advance refund escrow agent
Accrued interest on refunded revenue bonds
22
$
68,978,608
(4,910,468)
(5,000,000)
(6,841,787)
52,226,353
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of investments
Receipt of interest on investments
Net cash provided by investing activities
CASH AND EQUIVALENTS, End of year
9,206,557
1,541,552
16,722,390
(4,263,908)
(4,391,978)
18,814,613
California
Infrastructure
Guarantee Trust
Fund
-
Total
$
-
9,206,557
1,541,552
16,722,390
(4,263,908)
(4,391,978)
18,814,613
68,978,608
(4,910,468)
(5,000,000)
(6,841,787)
52,226,353
9,415,000
334,924
9,749,924
59,210
59,210
9,415,000
394,134
9,809,134
80,790,890
59,210
80,850,100
108,854,004
24,640,678
133,494,682
$ 214,344,782
$ 189,644,894
$
24,699,888
$
$
-
1,920,654
$
1,920,654
4,632,101
302,262
-
4,632,101
302,262
(18,645,006)
(569,243)
(11,307)
138,258
69,000
(125,594)
31,103,488
-
(18,645,006)
(569,243)
(11,307)
138,258
69,000
(125,594)
31,103,488
$
18,814,613
$
-
$
18,814,613
$
1,502,712
90,211
34,374,669
327,653
$
-
$
1,502,712
90,211
34,374,669
327,653
The accompanying notes are an integral part of these financial statements.
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
1.
THE FINANCIAL REPORTING ENTITY
The California Infrastructure and Economic Development Bank, a component unit of the State of
California (State), is a public instrumentality of the State, organized and existing pursuant to the
Bergeson-Peace Infrastructure and Economic Development Bank Act, constituting Division 1 of
Title 6.7 of the California Government Code commencing with Section 63000 (Act). The California
Infrastructure and Economic Development Bank has broad authority to issue tax-exempt and
taxable revenue bonds, provide financing to public agencies, provide credit enhancements,
including guarantees, acquire or lease facilities, and leverage State and Federal funds. The mission
of the California Infrastructure and Economic Development Bank is to finance public infrastructure,
clean energy, environmental and economic development projects that promote a healthy climate for job
creation and retention, contribute to a strong California economy, and a healthy environment, and
improve the quality of life in California communities. The California Infrastructure and Economic
Development Bank is governed by a five-member Board of Directors (Board) consisting of a delegate
of the Director of the Governor’s Office of Business and Economic Development, who serves as the
chair, the Director of the Department of Finance, the State Treasurer, the Secretary of the State
Transportation Agency, and an appointee of the Governor.
The California Infrastructure and Economic Development Bank (IBank) issues loans to municipal
entities pursuant to the Infrastructure State Revolving Fund (ISRF) Program, the activities of which are
accounted for in the California Infrastructure and Economic Development Bank Fund (CIEDB Fund)
and the California Infrastructure Guarantee Trust Fund (Guarantee Trust Fund) (collectively, the CIEDB
Fund and the Guarantee Trust Fund are the Funds), enterprise funds of IBank. The ISRF Program
provides financing to local government entities for a wide variety of infrastructure projects throughout
the State. Eligible ISRF Program borrowers include cities, counties, special districts, assessment
districts, joint power authorities, non-profit corporations formed by local government entities, and nonprofit organizations sponsored by a governmental entity. IBank issues revenue bonds (ISRF Program
Bonds) to provide additional funding for the ISRF Program. The ISRF Program Bond indentures
require an independent audit of the ISRF Programs. IBank also serves as a conduit issuer of revenue
bonds, loans, and commercial paper for private, nonprofit and other governmental entities (Conduit
Bond Programs), the activities of which are also accounted for in the Funds. Legislation requires an
audit of IBank’s activities under the Conduit Bond Program.
Effective October 4, 2013, the Small Business Financial Assistance Act of 2013 transferred the
California Small Business Expansion Fund, which accounts for the activities of the California
Small Business Loan Guarantee Program (SBLGP), to the California Infrastructure and Economic
Development Bank. The SBLGP provides repayment guarantees to lenders of loans to small
businesses having difficulty securing financing on their own. The guarantees are issued by nonprofit financial development corporations, on behalf of the California Infrastructure and Economic
Development Bank, to banks and other lenders to help small business owners finance their business
plans, including expanding operations, purchasing new equipment and infusing small businesses
with working capital. Guarantees may also be issued on loans for start-up costs. The California
Small Business Expansion Fund is not included in these financial statements.
23
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A.
BASIS OF PRESENTATION / FUND FINANCIAL STATEMENTS
The financial statements presented in this report include only the financial activities of the
Funds and do not purport to, and do not present fairly the financial position of IBank as of
June 30, 2015, the changes in its financial position, or, where applicable, its cash flows for
the fiscal year then ended in accordance with accounting principles generally accepted in the
United States of America. IBank’s California Small Business Expansion Fund, its only other
fund, is included in and subject to the audit of the State of California’s financial statements.
Monies in the Funds are held within the California State Treasury or by the bond trustees for
the ISRF Program Bonds (Trustees).
CIEDB Fund – With the exception of amounts spent for program support that require an
annual appropriation by the State Legislature, the CIEDB Fund is continuously appropriated
without regard to fiscal year and is available for expenditure for the program related purposes
stated in the Act. The CIEDB Fund is an enterprise fund.
Guarantee Trust Fund – The Guarantee Trust Fund is continuously appropriated to IBank
without regard to fiscal year for the purpose of insuring all or a portion of the accounts and
subaccounts within the CIEDB Fund, any contracts or obligations of IBank or a sponsor, as that
term is defined in the Act, and all or a part of any series of bonds issued by IBank, by a special
purpose trust or by a sponsor. Uncommitted monies may be transferred between the CIEDB
Fund and the Guarantee Trust Fund when appropriate to accomplish the financing objectives of
IBank. The Guarantee Trust Fund is an enterprise fund.
B.
ACCOUNTING PRINCIPLES
The accompanying financial statements have been prepared using the economic resources
measurement focus and accrual basis of accounting in accordance with accounting principles
generally accepted in the United States of America as applied to governmental agencies. The
Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for
establishing governmental accounting and financial reporting principles.
For the fiscal year ended June 30, 2015, IBank implemented GASB Statement No. 68 (GASB
68), Accounting and Financial Reporting for Pensions – an amendment of GASB Statement
No. 27 and GASB Statement No. 71 (GASB 71), Pension Transition for Contributions Made
Subsequent to the Measurement Date – an amendment of GASB Statement No. 68
(collectively, the Statements). The primary objective of the Statements is to improve
accounting and financial reporting by state and local governments for pensions by
establishing standards for measuring and recognizing liabilities, deferred outflows of
resources, deferred inflows of resources, and expenses/expenditures. It requires employers to
report a net pension liability for the difference between the present value of projected pension
benefits for past service and restricted resources held in trust for the payment of benefits. The
24
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
Statements identify the methods and assumptions that should be used to project benefit
payments, discount projected benefit payments to their actuarial present value, and attribute
that present value to periods of employee service.
Since the Statements require retroactive application, the net pension liability offset by the
related deferred outflow of resources as of June 30, 2014 reduces the beginning net position
for the fiscal year ended June 30, 2015. As a result, for the fiscal year ended June 30, 2015,
the beginning net position decreased by $3,565,810 as the cumulative effect of the change in
accounting principles.
The Funds distinguish operating revenues and expenses from nonoperating items. Operating
revenues and expenses generally result from providing financial services in connection with
principal ongoing operations. The primary operating revenue reported in the Funds is financing
income, representing interest on loans provided to ISRF Program borrowers. Also recognized
in the Funds as operating revenue are the fees charged to ISRF Program borrowers and Conduit
Bond Programs borrowers. Operating expenses primarily include interest expense on the ISRF
Program Bonds and program support expenses. Investment income is reported as nonoperating
revenue.
C.
CASH AND EQUIVALENTS
IBank considers all short-term investments with an original maturity of three months or less to be
cash equivalents. Cash and investments held in either the State’s Surplus Money Investment Fund
(SMIF), an internal investment pool, money market deposit accounts or funds held by the
Trustees are considered to be highly liquid and cash equivalents. All investments are stated
at fair value in the Statement of Net Position. All investment income, including changes in
the fair value of investments, is recognized as revenue in the Statement of Revenues,
Expenses, and Changes in Net Position.
In accordance with GASB Statement No. 40, Deposit and Investment Risk Disclosures
(Amendment of GASB No. 3), certain disclosure requirements, if applicable, for deposits and
investment risks are specified relating to the following risks: interest rate, credit, custodial
credit, concentrations of credit and foreign currency. In addition, other disclosures are specified
including, but not limited to, the use of certain methods to present deposits and investments,
highly sensitive investments and credit quality at year-end.
D.
LOANS RECEIVABLE
IBank enters into loan agreements, installment sale agreements and lease agreements (Loans) to
finance public infrastructure projects and projects for non-profit organizations sponsored by
governmental entities pursuant to the ISRF Program. A majority of the Loans are pledged to the
2014A ISRF Program Bonds and the 2015A ISRF Program Bonds (Series Pledged Loans). Loans
receivable includes pledged and non-pledged Loans. Pledged and non-pledged Loans receivable
consists of two components – the disbursed and the undisbursed amount of Loans. The
disbursed amount of pledged Loans receivable includes amounts drawn by the borrower for
25
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
reimbursement or payment of project costs. The undisbursed amount of pledged Loans
receivable includes the balance available to be drawn by the borrowers and draws submitted for
payment but unpaid at year-end, and is offset by a liability for outstanding undisbursed loan
commitments. The current portion of undisbursed pledged and non-pledged Loan commitments
is an estimate and is generally based upon projections provided by borrowers. These estimates
are subject to change due to unforeseen weather conditions, construction delays related to
change orders, delayed material shipment, subcontractor performance problems and other
factors that cannot be reasonably predicted.
Prior to the issuance of the ISRF Program Bonds, Loans were funded solely by General Fund
appropriations received from the State, Loan repayments, fee revenue, and investment income.
Since the issuance of the ISRF Program Bonds, Loans have been funded from the proceeds of the
ISRF Program Bonds and/or from proceeds of Loan repayments, fee revenue and investment
income. There is no provision for uncollectible accounts as all Loans are current and expected at
this time to be repaid according to the scheduled terms.
E.
ISSUANCE COSTS
Costs associated with the issuance of each series of the ISRF Program Bonds included bond
counsel fees, trustee fees, rating agency fees, underwriting costs, financial advisor fees and other
miscellaneous expenses. The ISRF Program bond issuance costs are recognized as an expense
when incurred.
F.
REVENUE BONDS PAYABLE
Revenue bonds payable are stated at their unpaid balance plus any remaining unamortized
premiums. Bond premiums are amortized using the effective-interest method over the terms of the
respective ISRF Program Bonds. The ISRF Program Bonds are subject to mandatory and optional
redemption prior to their stated maturity. The ISRF Program Bonds are not obligations of the
State, and the taxing power of the State is not pledged for their payments. The obligation of IBank
to make such payments is a limited obligation, payable solely from the ISRF Program Bonds
collateral pledged by IBank.
G.
LOAN AND CONDUIT BOND FEES
IBank charges an origination fee and an annual servicing fee to ISRF Program borrowers. The
origination fee is due upon execution of the Loan agreement and is collected no later than the date
of the borrower’s first disbursement. Loan origination fees are recognized as revenue when due.
The annual servicing fee is recognized as revenue when earned. IBank also charges application,
bond issuance and annual fees to Conduit Bond Programs borrowers. Conduit bond fees are
recognized as revenue when earned.
26
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
H.
COMPENSATED ABSENCES PAYABLE
Compensated absences payable represents employees’ earned but unused vacation, annual leave,
and other similar leave program balances which are eligible for payment upon separation from
state service. Unused sick-leave balances are not included as they are converted to additional
service credit used in the calculation of postemployment benefits. Compensated absences payable
is a long-term obligation because leave earned in the current period is considered to be used
before any unused leave from prior years (LIFO) and it is anticipated that employees will not
generally use more leave than the amount earned in the current period.
I.
PENSIONS
For purposes of measuring the net pension liability and deferred outflows/inflows of
resources related to pensions, and pension expense, information about the fiduciary net
position of the Funds’ portion of the California Public Employees’ Retirement System
(CalPERS) Miscellaneous Plan (Plan) and additions to/deductions from the Plan’s fiduciary
net position have been determined on the same basis as they are reported by CalPERS. For
this purpose, benefit payments (including refunds of employee contributions) are recognized
when due and payable in accordance with the benefit terms. Investments are reported at fair
value.
J.
CLASSIFICATION OF NET POSITION
Restricted net position represents amounts restricted due to external restrictions imposed by
creditors, laws or regulations of the government, and restrictions imposed by law through
constitutional provisions or enabling legislation. The net position reported in the Funds is
restricted by statute for programs established by IBank and for programs administered pursuant to
the Act.
K.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the reporting date and revenues and
expenses during the reporting period. Actual results could differ from those estimates.
3.
CASH AND EQUIVALENTS
IBank follows GASB Statement No. 40, Deposit and Investment Risk Disclosures. This statement
requires the disclosure of the interest rate, credit, custodial credit, concentration of credit and foreign
currency risks to the extent that they exist at the date of the Statement of Net Position. Additional
disclosure detail required by GASB Statement No. 40 for cash deposits, investments, and derivatives
within the State’s centralized treasury system can be found in the State’s Comprehensive Annual
Financial Report for the fiscal year ended June 30, 2014, which is the latest available.
27
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
Due to the specified nature of the activities reported in the Funds as established in the Act, all cash, cash
equivalents, and investments are considered restricted at June 30, 2015, since these funds cannot be
spent for any purpose other than as established in the Act.
Investments are made pursuant to an investment policy initially adopted by the Board in March 2006
and as amended by the Board on April 27, 2010. The Investment Policy was reviewed by the Board in
May 2013 with minor changes and again on February 24, 2015. The Investment Policy provides
guidelines for the prudent investment while maximizing efficiency and financial return in conformance
with all applicable State statutes governing the investment of public funds, with the foremost objectives
being safety and liquidity.
Pursuant to the Investment Policy, IBank may, from time to time, direct the State Treasurer (Treasurer)
to invest monies in the CIEDB Fund and Guarantee Trust Fund held within the State’s centralized
treasury system that are not required for its current needs, in any eligible securities specified in
Government Code Section 16430 as IBank shall designate. IBank may direct the Treasurer to invest
monies in the Guarantee Trust Fund in certain repurchase agreements, investment agreements and
subordinated securities as specified in Government Code Section 63062(a). IBank may direct the
Treasurer to deposit monies in the Funds in interest-bearing accounts in qualified public depositories as
established by State law, including any bank in the State or in any savings and loan association in the
State. IBank may alternatively require the transfer of monies in the Funds to the SMIF for investment.
Government Code Sections 63052(e), 63062(b) and 5922(d) provide that bond proceeds and monies set
aside and pledged to the repayment of bonds may be invested in securities or obligations described in the
indenture for those bonds. Monies held by the Trustees in each of the accounts under the 2014A ISRF
Program Bonds and 2015A ISRF Program Bonds Indenture shall be invested and reinvested by the
respective Trustees in permitted investments, as that term is defined in the respective indentures, which
mature or are subject to redemption by the owner thereof prior to the date such funds are expected to be
needed.
Investments Authorized by the California Government Code and the Investment Policy
The following table identifies the investment types that are authorized by Government Code sections
16430, 5922(d), 63052(d) and (e), and 63062(a) and (b) or the Investment Policy, where more
restrictive. The table below also identifies certain provisions of the California Government Code, or the
Investment Policy, where more restrictive, that address interest rate risk, credit risk, and concentration of
credit risk. This table does not address investments of debt proceeds and other monies held by the
Trustees that are governed by the provisions of the 2014A ISRF Program Bonds Indenture or the 2015A
ISRF Program Bonds Indenture, but rather the general provisions of the California Government Code or
the Investment Policy.
28
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
Authorized Investments
Authorized Investment Type
U.S. Treasury Securities
Federal Agency Securities
State of California Securities
Local Agency Securities
Commercial Paper
Bankers Acceptances
Negotiable Certificates of Deposit
U.S. SBA or U.S. FHA Securities
Export-Import Bank Securities
Guaranteed Student Loan Program
Securities
Development Bank Securities
Corporate Debt Securities
1
2
3
Maximum
Maturity1
Maximum
Percentage
of Portfolio
Maximum
Investment
in One Issuer
Credit
Rating3
5 Years
5 Years
5 Years
5 Years
180 Days
180 Days
5 Years
5 Years
5 Years
N/A2
N/A
30%
30%
30%
40%
30%
N/A
10%
N/A
40%
30%
5%
5%
5%
5%
40%
N/A
N/A
N/A
N/A
N/A
A1/P1/F1
N/A
N/A
N/A
N/A
5 Years
10%
N/A
N/A
5 Years
5 Years
30%
30%
5%
5%
N/A
A
Where the Investment Policy does not specify a maximum remaining maturity at the time of the investment,
no investment shall be made in any security, other than a collateral security underlying a repurchase
agreement or collateral for an investment agreement, which at the time of the investment has a term
remaining to maturity in excess of five years.
N/A means neither the Government Code nor the Investment Policy sets a limit.
A rating by any nationally recognized rating agency will meet this requirement. The nationally recognized
rating agencies include Standard & Poor’s (S&P), Moody’s Investors Services (Moody’s), and Fitch Ratings
(Fitch) (collectively, Rating Agencies).
29
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
Investments Authorized by the ISRF Program Bond Series Indentures or the Master Indenture
Investment of debt proceeds and Loan repayments that are held by the Trustees are governed by the
provisions of the 2014A and 2015A ISRF Program Bonds Indenture. Such investments are referenced in
the Investment Policy, which references Government Code sections 63052(e) and 5922(d).
Authorized Investments
Authorized Investment Type
U.S. Treasury Securities
Federal Agency Securities
Commercial Paper
Bankers Acceptances
Negotiable Certificates of Deposit
U.S. SBA or U.S. FHA Securities
Export-Import Bank Securities
Guaranteed Student Loan Program
Securities
Development Bank Securities
Corporate Debt Securities
Surplus Money Investment Fund
Repurchase Agreements
Guaranteed Investment Contract
Collateralized Forward Purchase
Agreements
Money Market Funds
1
2
3
Maximum
Maturity1
Maximum
Percentage
of Portfolio
Maximum
Investment
in One Issuer
Credit
Rating3
5 Years
5 Years
180 Days
180 Days
5 Years
5 Years
5 Years
N/A2
N/A
30%
N/A
N/A
N/A
N/A
N/A
30%
10%
N/A
N/A
N/A
N/A
N/A
N/A
A-2/P-2/F2
A-3/P-3/F3
A
N/A
N/A
5 Years
5 Years
5 Years
N/A
5 Years
5 Years
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
A
N/A
A
AA
5 Years
N/A
N/A
N/A
N/A
N/A
A
Am
The Investment Policy authorizes investing bond reserve funds and bond revenue funds beyond five years
if prudent in the opinion of the Executive Director.
N/A means neither the Government Code nor the Investment Policy sets a limit.
As rated by each of S&P, Moody’s and Fitch.
IBank has invested excess cash reported in the Funds held within the State’s centralized treasury system
in SMIF. All of the resources in SMIF are invested through the Pooled Money Investment Account
(PMIA). The PMIA investment program is overseen by the Pooled Money Investment Board and is
administered by the Treasurer.
Cash and equivalents at June 30, 2015 were as follows:
30
SMIF
Money Market Deposit Accounts
$ 52,380,398
161,964,384
Total Cash and Equivalents
$ 214,344,782
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
Deposit and Investment Risk Disclosures
Interest Rate Risk. Interest rate risk is the risk that the value of fixed income securities will decline
because of rising interest rates. The prices of fixed income securities with a longer time to maturity,
measured by weighted average to maturity, tend to be more sensitive to changes in interest rates and,
therefore, more volatile than those with a shorter duration. As of June 30, 2015, the weighted average
maturity of the investments contained in SMIF is approximately 239 days.
Credit Risk. Generally, credit risk is the risk that an issuer of an investment will not fulfill its
obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally
recognized statistical rating organization. SMIF does not have a rating provided by a nationally
recognized statistical rating organization.
Custodial Credit Risk. Custodial credit risk for deposits is the risk that, in the event of the failure of a
depository financial institution, IBank will not be able to recover its deposits or will not be able to
recover collateral securities that are in the possession of an outside party. As of June 30, 2015, the
Funds reported $161,964,384 in money market deposit accounts with U.S. Bank, a national depository
financial institution, $250,000 of which was covered by federal deposit insurance. The remainder was
uncollateralized.
The custodial risk for investments is the risk that, in the event of the failure of the counterparty (e.g.,
broker-dealer) to a transaction, IBank will not be able to recover the value of its investment or collateral
securities that are in the possession of another party. As of June 30, 2015, SMIF was not subject to
custodial credit risk.
4.
REVENUE BONDS PAYABLE
On February 6, 2014, IBank issued $95,960,000 in ISRF Program Bonds. A portion of the proceeds,
$82,184,703, was used to advance refund $78,440,000 of outstanding 2004 and 2005 ISRF Program
Bonds. These proceeds were deposited in an irrevocable trust with an escrow agent to pay the future
debt service on the refunded bonds. As a result, the 2004 and 2005 ISRF Program Bonds are considered
defeased and the liability for those bonds has been removed from the Statement of Net Position. The
remaining proceeds were used to fund ISRF Program Loans that were made in anticipation of the
issuance of the 2014 ISRF Program Bonds.
The reacquisition price (amount placed in escrow to repay the 2004 and 2005 ISRF Program Bonds)
exceeded the net carrying amount of those bonds by $896,045. This loss on the bond refunding is
reported as a deferred outflow of resources on the Statement of Net Position and will be amortized over
the remaining life of the refunded bonds. As of June 30, 2015 the balance of the loss on bond refunding
was $774,699.
On June 17, 2015, IBank issued $90,070,000 in ISRF Program Bonds. A portion of the proceeds,
$39,285,137, was used to advance refund $35,435,000 of outstanding 2008 ISRF Program Bonds.
These proceeds were deposited in an irrevocable trust with an escrow agent to pay the future debt
31
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
service on the refunded bonds. As a result, the 2008 ISRF Program Bonds are considered defeased and
the liability for those bonds has been removed from the Statement of Net Position. The remaining
proceeds were used to fund ISRF Program Loans that were made in anticipation of the issuance of the
2015 ISRF Program Bonds.
The reacquisition price (amount placed in escrow to repay the 2008 ISRF Program Bonds) exceeded the
net carrying amount of those bonds by $3,587,748. This loss on the bond refunding is reported as a
deferred outflow of resources on the Statement of Net Position and will be amortized over the remaining
life of the refunded bonds. As of June 30, 2015 the balance of the loss on bond refunding was
$3,587,748. IBank refunded the 2008 ISRF Program Bonds to reduce its debt service payments by
$8,246,654 over the next 22 years and to obtain an economic gain of $1,372,007 or 3.88% of the
refunded par outstanding. The economic gain is the difference between the present values of the debt
service payments on the old and new debt, discounted at 2.70%.
At June 30, 2015, the outstanding balance of the defeased 2008 ISRF Program Bonds was
$35,435,000. The bonds will be redeemed on their October 1, 2018 call date.
The principal and interest payments received during the fiscal year from the Series-Pledged Loans are
paid to the respective Trustees in amounts and at times sufficient to make the semi-annual debt service
payments on the ISRF Program Bonds as they become due. For the year ended June 30, 2015, Series
Pledged Loan repayments and reserve account earnings were $25,508,443. The debt service payments
on ISRF Program Bonds for the fiscal year was $11,841,797, resulting in a bond debt coverage ratio for
the fiscal year of 2.15 times.
The following is a summary of bonds payable at June 30, 2015:
Infrastructure State Revolving Fund Revenue Bonds, Series 2014A, issued
$95,960,000 bearing 2.00% to 5.00% interest payable semi-annually, final
maturity October 1, 2043 (2014 ISRF Program Bonds)
93,320,000
Infrastructure State Revolving Fund Revenue Bonds, Series 2015A, issued
$90,070,000 bearing 1.00% to 5.00% interest payable semi-annually, final
maturity October 1, 2043 (2015A ISRF Program Bonds)
90,070,000
Plus: Unamortized Net Premium
24,900,797
Net ISRF Program Bonds Payable
32
$
$ 208,290,797
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
The following is a schedule of the debt service requirements for the 2014 ISRF Program Bonds as of
June 30, 2015:
Year Ending
June 30
1
2
Principal
Interest
Total
Debt Service
2016
2017
2018
2019
2020
2021-2025
2026-2030
2031-2035
2036-2040
2041-2044
$
3,515,000
3,630,000
3,705,000
3,860,000
4,065,000
21,755,000
25,325,000
18,820,000
7,270,000 1
1,375,000 2
$
4,452,319
4,326,994
4,180,294
4,009,693
3,811,569
15,824,094
10,057,094
4,004,481
1,018,859
85,531
$
7,967,319
7,956,994
7,885,294
7,869,693
7,876,569
37,579,094
35,382,094
22,824,481
8,288,859
1,460,531
Total
$
93,320,000
$
51,770,928
$ 145,090,928
Principal payments in the amount of $4,739,000 will be made from sinking fund payments for the 2039 term bonds.
Principal payments in the amount of $1,375,000 will be made from sinking fund payments for the 2043 term bonds.
The following is a schedule of the debt service requirements for the 2015A ISRF Program Bonds as of
June 30, 2015:
Year Ending
June 30
3
4
Principal
Interest
Total
Debt Service
2016
2017
2018
2019
2020
2021-2025
2026-2030
2031-2035
2036-2040
2041-2044
$
2,480,000
3,810,000
4,095,000
4,245,000
4,425,000
23,775,000
19,050,000
17,420,000
3
8,235,000
2,535,0004
$
3,270,862
4,079,931
3,940,881
3,774,081
3,578,556
14,376,781
9,022,656
4,393,931
1,440,747
251,375
$
5,750,862
7,889,931
8,035,881
8,019,081
8,003,556
38,151,781
28,072,656
21,813,931
9,675,747
2,786,375
Total
$
90,070,000
$
48,129,801
$ 138,199,801
Principal payments in the amount of $4,030,000 will be made from sinking fund payments for the 2040 term bonds.
Principal payments in the amount of $635,000 and $1,900,000 will be made from sinking fund payments for the 2040 and
2043 term bonds, respectively.
33
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
5.
LONG-TERM OBLIGATIONS
The changes in long-term obligations for the fiscal year ended June 30, 2015 were as follows:
Restated
Balance
June 30, 2014
Increases
Balance
June 30, 2015
Decreases
Current
Portion
June 30, 2015
Revenue Bonds Payable:
2008 ISRF Program Bonds
$ 37,795,000 $
- $ 37,795,000 $
- $
-
2014A ISRF Program Bonds
95,960,000
-
2,640,000
93,320,000
3,515,000
2015A ISRF Program Bonds
-
90,070,000
-
90,070,000
2,480,000
Unamortized Net Premium
Total Revenue Bonds Payable
12,752,706
146,507,706
13,585,539
103,655,539
1,437,448
41,872,448
24,900,797
208,290,797
5,995,000
Net Pension Liability
3,839,409
230,840
870,009
3,200,240
-
Net Other Postemployment
Benefit Obligation
1,218,000
69,000
-
1,287,000
-
176,682
306,237
167,979
314,940
-
Compensated Absences
Payable
Total
$ 151,741,797 $104,261,616
$ 42,910,436 $ 213,092,977 $ 5,995,000
The June 30, 2014 balance has been increased by the $3,839,409 for the net pension liability as a result
of implementing the Statements (see Note 2.B).
34
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
6.
CONDUIT BOND INFORMATION AND DEBT OBLIGATIONS
IBank has served as the conduit bond issuer for many private, nonprofit and governmental entities.
Conduit bonds are a limited obligation of IBank payable solely from the pledged revenues of the conduit
borrower. As such, the balance of outstanding conduit bonds is not reflected in the financial statements
due to the conduit bond borrower’s repayment pledges for those bonds.
Conduit Bond information 1:
x
x
x
x
x
x
1
2
3
7.
Fees earned from 7/1/14 thru 6/30/15:
o Application Fees
o Issuance Fees
o Annual Fees
o Other
Conduit Bond Support Operating Expenses
Amount of conduit bonds authorized but unsold as of 6/30/15
Amount of conduit bond debt issued from 7/1/14-6/30/15
Amount of conduit bonds outstanding as of 6/30/15
Number of conduit bonds transactions outstanding as of 6/30/15
$
$
$
$
$
$
$
$
18,000
257,458
69,500
947
950,652 2
18,000,000
270,300,000
4 Billion 3
101
This information is provided pursuant to Government Code section 5872(a).
Conduit Bond Support Operating Expenses include expenses such as salaries and benefits, administrative services, rent,
utilities, travel, training, equipment and external services.
Includes bonds issued by the former California Economic Development Financing Authority, which were assumed by
IBank pursuant to Chapter 4, Statutes of 1998, bonds issued by the California Consumer Power and Conservation
Financing Authority, which were assumed by IBank pursuant to Resolution 04-37 adopted by the IBank Board on
September 28, 2004, and excludes conduit bonds that were issued by special purpose trusts created by IBank.
RETIREMENT PLAN
Plan Description
All of the employees of IBank participate in the California Public Employees’ Retirement System
(CalPERS), which is included in the State of California’s (State) Comprehensive Annual Financial
Report as a fiduciary component unit. CalPERS administers the Public Employees’ Retirement Fund
(PERF). PERF is an agent multiple-employer defined benefit retirement plan. Departments and
agencies within the State, including the Funds, are in a cost-sharing arrangement in which all risks and
costs are shared proportionately by participating State agencies. Since all State agencies and certain
related organizations, including the Funds, are considered collectively to be a single employer for
plan purposes, the actuarial present value of vested and non-vested accumulated plan benefits
attributable to the IBank employees cannot be determined. The significant actuarial assumptions
used to compute the actuarially determined State contribution requirements are the same as those
used to compute the State pension benefit obligation as defined by CalPERS. CalPERS issues a
publicly available financial report that includes financial statements and required supplementary
information for this plan. This report is available online at www.calpers.ca.gov.
35
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
The California Legislature passed and the Governor signed the “Public Employees’ Pension Reform Act
of 2013” (PEPRA) on September 12, 2012. PEPRA contained a number of provisions intended to reduce
future pension obligations. PEPRA primarily affects new pension plan members who are enrolled for the
first time after December 2012. Benefit provisions and other requirements are established by State
statute.
Benefits Provided
The benefits for the Plan are based on members’ years of service, age, final compensation, and benefit
formula. Benefits are provided for disability, death, and survivors of eligible members or beneficiaries.
Members become fully vested in their retirement benefits earned to date after five or ten years of credited
service.
The Plans’ provisions and benefits in effect at June 30, 2015, are summarized as follows:
First Tier:
Hire date
Benefit formula
Benefit vesting schedule
Benefit payments
Retirement age
Monthly benefits, as a % of eligible
compensation
Prior to
January 15, 2011
January 15, 2011 to
December 31, 2012
On or after
January 1, 2013
2% @ 55
5 years service
monthly for life
50 to 67
1.1 to 2.5%
2% @ 60
5 years service
monthly for life
50 to 67
1.092 to 2.418%
2% @ 62
5 years service
monthly for life
52 to 67
1.0 to 2.5%
Second Tier:
Hire date
Benefit formula
Benefit vesting schedule
Benefit payments
Retirement age
Monthly benefits, as a % of eligible
compensation
Prior to
January 1, 2013
1.25% @ 65
10 years service
monthly for life
50 to 67
0.5 to 1.25%
On or after
January 1, 2013
1.25% @ 67
10 years service
monthly for life
52 to 67
0.65 to 1.25%
Contributions
Section 20814(c) of the California Public Employees Retirement Law (PERL) requires that the employer
contribution rates for all public employers be determined on an annual basis by the actuary and shall be
effective on the July 1 following notice of a change in the rate. The total plan contributions are
determined through the CalPERS’ annual actuarial valuation process. The actuarially determined rate is
the estimated amount necessary to finance the costs of benefits earned by employees during the year, with
an additional amount to finance any unfunded accrued liability. IBank is required to contribute the
difference between the actuarially determined rate and the contribution rate of employees.
36
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
For the measurement period ended June 30, 2014 (the measurement date), the average active employee
contribution rate was 6.525% of annual pay and the employer’s contribution rate is 21.137% of annual
payroll.
These rates reflect Section 20683.2, which mandates that certain employees must contribute more as of
July 1, 2013. Furthermore, any reduction in employer contributions due to the increase in the employee
contributions must be paid by the employer towards the unfunded liability. It is the responsibility of the
employer to make necessary accounting adjustments to reflect the impact due to any Employer Paid
Member Contributions or situations where members are paying a portion of the employer contribution.
For the fiscal year ended June 30, 2015, the contributions recognized as part of pension expense was
$273,600.
Pension Liabilities, Pension Expense and Deferred Outflows/Inflows of Resources Related to
Pensions
As of June 30, 2015, the Funds reported net pension liabilities for their proportionate share of the
net pension liability of $3,200,240.
The Funds’ net pension liability for the Plan is measured as the proportionate share of the net
pension liability. The net pension liability of the Plan is measured as of June 30, 2014, and the total
pension liability for the Plan used to calculate the net pension liability was determined by an
actuarial valuation as of June 30, 2013 rolled forward to June 30, 2014 using standard update
procedures. The Funds’ proportion of the net pension liability was based on the State Controller’s
Office (SCO) projection for the Funds. The SCO identified a total of 29 entities that are reported in
the State’s CAFR which are proprietary funds (enterprise and internal service) and fiduciary funds
(pension and other employee benefit trust funds), component units (discretely presented and
fiduciary), and related organizations, that have State employees with pensionable compensation
(covered payroll). The SCO calculated and provided these funds/organizations with their allocated
pensionable compensation percentages by plan. The Funds’ proportionate share of the net pension
liability for the Plan as of June 30, 2014 was 0.01269%.
For the fiscal year ended June 30, 2015, the Funds’ recognized pension expense of $230,840. At
June 30, 2015, the Funds’ reported deferred outflows of resources and deferred inflows of resources
related to pensions from the following sources:
Deferred
Outflows of
Resources
IBank contributions subsequent to the
measurement date
Net difference between projected and actual
earnings on pension plan investments
Total
$
Deferred Inflows
of Resources
356,434
$
$
356,434
596,410
$
596,410
37
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
The $356,434 reported as deferred outflows of resources related to contributions subsequent to the
measurement date will be recognized as a reduction of the net pension liability in the fiscal year
ending June 30, 2016. Other amounts reported as deferred inflows of resources related to pensions
will be recognized as pension expense as follows:
Year Ended
June 30
2016
2017
2018
2019
$
(149,102)
(149,103)
(149,102)
(149,103)
Total
$
(596,410)
Actuarial Assumptions
For the measurement period ended June 30, 2014 (measurement date), the total pension liability was
determined by rolling forward the June 30, 2013 total pension liability. The June 30, 2013 and the
June 30, 2014 total pension liabilities were based on the following actuarial method and
assumptions:
Actuarial Cost Method
Actuarial Assumptions:
Discount Rate
Inflation
Salary Increases
Investment Rate of Return
Mortality(3)
Post Retirement Benefit Increase
Entry-Age Normal
7.5%
2.75%
Varies (1)
7.5% (2)
CalPERS’ Membership Data
Up to 2.75%(4)
(1)
Depending on age, service and type of employment
Net of pension plan investment and administrative expenses, including
inflation
(3)
The mortality table used was developed based on CalPERS specific data. The
table includes 20 years of mortality improvements using Society of Actuaries
Scale BB. For more details on this table, please refer to the 2014 experience
study report.
(4)
Contract COLA up to 2.75% until Purchasing Power Protection Allowance
Floor on Purchasing Power applies
(2)
All other actuarial assumptions used in the June 30, 2013 valuation were based on the results of an
actuarial experience study for the period from 1997 to 2011, including updates to salary increase,
mortality and retirement rates. The Experience Study report can be obtained at CalPERS website
under Forms and Publications.
38
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
Discount Rate
The discount rate used to measure the total pension liability was 7.50% for the Plan. To determine
whether the municipal bond rate should be used in the calculation of a discount rate for each plan,
CalPERS stress tested plans that would most likely result in a discount rate that would be different
from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of
assets. Therefore, the current 7.50% discount rate is adequate and the use of the municipal bond
rate calculation is not necessary. The stress test results are presented in a detailed report called
“GASB Crossover Testing Report” that can be obtained at CalPERS’ website under the GASB 68
section.
According to Paragraph 30 of GASB 68, the long-term discount rate should be determined without
reduction for pension plan administrative expense. The 7.50% investment return assumption used in
this accounting valuation is net of administrative expenses. Administrative expenses are assumed to
be 15 basis points. An investment return excluding administrative expenses would have been
7.65%. Using this lower discount rate has resulted in a slightly higher Total Pension Liability and
Net Pension Liability. CalPERS checked the materiality threshold for the difference in calculation
and did not find it to be a material difference.
CalPERS is scheduled to review all actuarial assumptions as part of its regular Asset Liability
Management (ALM) review cycle that is scheduled to be completed in February 2018. Any
changes to the discount rate will require CalPERS Board action and proper stakeholder outreach.
For these reasons, CalPERS expects to continue using a discount rate net of administrative
expenses for GASB 67 and 68 calculations through at least the 2017-18 fiscal year. CalPERS will
continue to check the materiality of the difference in calculation until such time when CalPERS
may change its methodology.
The long-term expected rate of return on pension plan investments was determined using a
building-block method in which best-estimate ranges of expected future real rates of return
(expected returns, net of pension plan investment expense and inflation) are developed for each
major asset class.
In determining the long-term expected rate of return, CalPERS took into account both short-term
and long-term market return expectations as well as the expected pension fund cash flows. Such
cash flows were developed assuming that both members and employers will make their required
contributions on time and as scheduled in all future years. Using historical returns of all the funds’
asset classes, expected compound returns were calculated over the short-term (first 10 years) and
the long-term (11-60 years) using a building-block approach. Using the expected nominal returns
for both short-term and long-term, the present value of benefits was calculated for each fund. The
expected rate of return was set by calculating the single equivalent expected return that arrived at
the same present value of benefits for cash flows as the one calculated using both short-term and
long-term returns. The expected rate of return was then set equivalent to the single equivalent rate
calculated above and rounded down to the nearest one quarter of one percent.
39
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
The table below reflects the long-term expected real rate of return by asset class. The rate of return
was calculated using the capital market assumptions applied to determine the discount rate and
asset allocation. These rates of return are net of administrative expenses.
New
Strategic
Allocation
47.0%
19.0%
6.0%
12.0%
11.0%
3.0%
2.0%
Asset Class
Global Equity
Global Fixed Income
Inflation Sensitive
Private Equity
Real Estate
Infrastructure and Forestland
Liquidity
Total
Real Return
Years 1 – 10
(a)
5.25%
0.99%
0.45%
6.83%
4.50%
4.50%
-0.55%
Real Return
Years 11+
(b)
5.71%
2.43%
3.36%
6.95%
5.13%
5.09%
-1.05%
100.0%
(a) An expected inflation of 2.5% used for this period.
(b) An expected inflation of 3.0% used for this period.
Sensitivity of the Funds’ Proportionate Share Net Pension Liability to Changes in the
Discount Rate
The following presents the Funds’ proportionate share of the net pension liability of the Plan as of
the measurement date, calculated using the discount rate of 7.50 percent, as well as what the Funds’
proportionate share of the net pension liability would be if it were calculated using a discount rate
that is 1 percentage-point lower (6.50 percent) or 1 percentage-point higher (8.50 percent) than the
current rate:
Current
Discount Rate
(7.50%)
Discount Rate –
1% (6.50%)
Funds’ Proportionate Share of
Plan’s Net Pension Liability
40
$
4,658,553
$
3,200,240
Discount Rate +
1% (8.50%)
$
1,979,470
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
8.
OTHER POSTEMPLOYMENT BENEFITS (OPEB)
The State also provides postemployment health care and dental benefits to its employees and their
spouses and dependents, when applicable, through a substantive single-employer defined benefit plan to
which the State contributes as an employer (State’s Substantive Plan). The design of health and dental
benefit plans can be amended by the CalPERS Board of Administration and the California Department
of Human Resources, respectively. Employer and retiree contributions are established and may be
amended by the Legislature. The employer contribution for health premiums maintains the average
100/90 percent contribution formula established in the Government Code. Under this formula, the State
averages the premiums of the four largest health benefit plans in order to calculate the maximum amount
the State will contribute toward the retiree’s health benefits. The State also contributes 90 percent of this
average for the health benefits of each of the retiree’s dependents. Employees vest for this benefit after
serving 10 years with the State. With 10 years of service credit, employees are entitled to 50 percent of
the State’s full contribution. This rate increases by 5% per year and with 20 years of service, the
employee is entitled to the full 100/90 formula. IBank participates in the State’s Substantive Plan on a
cost sharing basis. IBank recognizes the costs of providing health and dental insurance to annuitants
based on the required contribution, which is actuarially determined, and funded on a pay-as-you-go
basis. The State Controller’s Office obtains an annual actuarial valuation of the State’s Substantive Plan
which can be found on its website at www.sco.ca.gov.
A portion of the State’s postemployment benefit costs have been allocated to the CIEDB Fund as
follows:
Annual required contribution
Interest on net OPEB obligation
Adjustment to annual required contribution
Annual OPEB cost (expense)
Contributions made
Increase in net OPEB obligation
Net OPEB obligation – beginning of year
$
110,000
18,000
(17,000)
111,000
(42,000)
69,000
1,218,000
Net OPEB obligation – end of year
$
1,287,000
The annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB
obligation for the past three fiscal years, allocated to the CIEDB Fund, were as follows:
Year
Ended
Annual
OPEB Cost
Percentage of
Annual OPEB
Cost Contributed
Net OPEB
Obligation
6/30/13
6/30/14
6/30/15
$ 127,000
$ 418,000
$ 111,000
35%
35%
39%
$
948,000
$ 1,218,000
$ 1,287,000
41
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
Additional disclosure detail required by GASB Statement No. 45, regarding other postemployment
benefits is presented in the State’s Comprehensive Annual Financial Report for the year ended
June 30, 2014, which is the latest available on the State Controller’s Office website at www.sco.ca.gov.
9.
COMMITMENTS
In June 2003, the Board approved a preliminary loan guarantee commitment for the Imperial Irrigation
District (IID). The preliminary loan guarantee commitment established a conditional obligation to
guarantee a future issuance of revenue bonds by IID (IID Bonds) for the purpose of financing a water
supply project (IID Guarantee). During the 2003-2004 fiscal year, IBank transferred $20 million from
the CIEDB Fund to the Guarantee Trust Fund in conjunction with the preliminary loan guarantee
commitment for the IID. In October 2010, the State Legislature enacted Senate Bill 856 (SB 856) that
directed IBank to deposit a specified amount required for the IID Guarantee in a reserve account within
the Guarantee Trust Fund. SB 856 further directed that this IID Guarantee amount be held for the
benefit of bondholders of potential IID Bonds. At June 30, 2015, the required IID Guarantee amount
was on deposit in a reserve account within the Guarantee Trust Fund, and no IID Guarantee or IID
Bonds have been approved or issued.
As of June 30, 2015 the Board had conditionally approved two Loans totaling $11,935,354 that do not
yet have fully executed loan documentation. When IBank and the borrower execute the required loan
documentation, IBank will be obligated to fund the Loan.
10.
CONTINGENCIES
One borrower with three Loans pledged to the common pool of loans supporting the 2014 and 2015
ISRF Bonds declared a fiscal emergency on July 18, 2012, and filed a Chapter 9 bankruptcy
petition on August 1, 2012. On August 28, 2013, the federal bankruptcy court judge ruled that the
borrower was eligible for Chapter 9 bankruptcy protection. On May 29, 2015 the borrower filed a
plan of adjustment with the bankruptcy court reflecting an intent to continue routine debt service
payments to IBank. IBank filed a proof claim in bankruptcy court on June 17, 2015. As of
June 30, 2015, the bankruptcy case was still pending as the court awaits the results of negotiations
between the borrower and its largest creditors. The borrower made all scheduled Loan payments
during the fiscal year and the subsequent payments due on August 1, 2015; the borrower’s next
Loan payments are due February 1, 2016.
42
REQUIRED SUPPLEMENTARY INFORMATION
This page has been intentionally left blank.
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
REQUIRED SUPPLEMENTARY INFORMATION
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
SCHEDULE OF THE FUNDS’ PROPORTIONATE SHARE
OF THE NET PENSION LIABILITY
As of June 30, 2015
Last 10 Years*
2015
Funds’ proportion of the net pension liability
0.01269%
Funds’ proportionate share of the net pension liability
$
3,200,240
Funds’ covered-employee payroll
$
1,249,884
Fund’s proportionate share of the net pension liability as a percentage of their coveredemployee payroll
39.06%
Plan fiduciary net position as a percentage of the total pension liability
73.05%
Notes to Schedule:
Changes of benefit terms. In 2015, there were no changes to the benefit terms.
Changes in assumptions. In 2015, there were no changes in assumptions.
* - Fiscal year 2015 was the 1st year of implementation of GASB 68, therefore only one year is shown.
43
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
SCHEDULE OF FUNDS’ CONTRIBUTIONS
As of June 30, 2015
Last 10 Years*
2015
Contractually required contribution
Contributions in relation to the contractually required contribution
$
356,434
356,434
Contribution deficiency (excess)
$
-
Funds’ covered-employee payroll
$
1,615,972
Contributions as a percentage of covered-employee payroll
22.06%
Notes to Schedule:
The actuarial methods and assumptions used to determine contribution rates for fiscal year ended June 30,
2015 was from the June 30, 2013 Valuation Date.
Actuarial Cost Method
Actuarial Assumptions:
Inflation
Salary Increase
Payroll Growth
Investment Rate of Return
Retirement Age
Mortality
Entry-Age Normal
2.75%
Varies (1)
3.0%(2)
7.5%
2010 Experience Study(3)
2010 Experience Study(4)
(1)
Depending on age, service and type of employment
Net of pension plan investment and administrative expenses, including inflation
(3)
The probabilities of Retirement are based on the 2010 CalPERS Experience Study for
the period from 1997 to 2007.
(4)
The probabilities of mortality are based on the 2010 CalPERS Experience Study for the
period from 1997 to 2007. Pre-retirement and Post-retirement mortality rates include 5
years of projected mortality improvement using Scale AA published by the Society of
Actuaries.
(2)
* - Fiscal year 2015 was the 1st year of implementation of GASB 68, therefore only one year is shown
44
STATISTICAL SECTION
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CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
STATISTICAL SECTION
FOR THE FISCAL YEAR ENDED JUNE 30, 2015
This part of the comprehensive annual financial report presents detailed information as a context for
understanding the information in the financial statements and note disclosures as it relates to the financial
health.
CONTENTS
PAGE
Financial Trends
These schedules contain trend information to help the reader understand how the
financial performance has changed over time.
Schedule of Net Position
Schedule of Revenues, Expenses, and Changes in Fund Net Position
Infrastructure State Revolving Fund (ISRF) Program Ten Largest Borrowers
46
48
50
Revenue Capacity
This schedule contains information to help the reader assess the most significant
revenue source.
Schedule of ISRF Program Loans Receivable and Interest Rates
51
Debt Capacity
These schedules contain information to help the reader assess the current level of
outstanding debt and capacity to issue additional debt in the future.
Schedule of Statutory Debt Limit Capacity
Schedule of Outstanding ISRF Program Bonds and Related Debt Ratio
Schedule of Aggregate Pledged Resources Coverage for ISRF Program Bonds
53
55
57
Demographic and Economic Information
These schedules offer demographic and economic indicators to help the reader
understand the environment within which the financial activities take place.
California Demographic and Economic Indicators
California Employment by Industry
58
60
Operating Information
These schedules contain data to help the reader understand how the information
in the financial report relates to the programs provided and the activities
performed.
Number of Employees by Identifiable Activity
Major Program Activity
61
62
45
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND
SCHEDULE OF NET POSITION
1
FOR THE PAST TEN FISCAL YEARS
ASSETS AND DEFERRED OUTFLOWS
OF RESOURCES
ASSETS
Cash, cash equivalents, and investments
Program loans receivable
Other assets
Total assets
DEFERRED OUTFLOWS OF RESOURCES
Deferred outflows of resources related to
pensions 4
Loss on refunding debt
2
Total deferred outflows of resources
TOTAL ASSETS AND DEFERRED OUTFLOWS
OF RESOURCES
LIABILITIES. DEFERRED INFLOWS OF
RESOURCES AND NET POSITION
LIABILITIES
Revenue bonds payable
Undisbursed loan commitments
Net pension liability 4
Other liabilities 3
Total liabilities
2005-06
2006-07
2007-08
2008-09
2009-10
$ 153,613,453
269,294,242
4,991,913
$ 126,220,856
282,990,412
5,474,496
$ 108,852,319
305,749,937
5,371,504
$ 125,709,510
311,504,489
5,583,167
$ 113,447,173
331,209,650
5,938,389
427,899,608
414,685,764
419,973,760
442,797,166
450,595,212
-
-
-
-
-
-
-
-
-
-
$ 427,899,608
$ 414,685,764
$ 419,973,760
$ 442,797,166
$ 450,595,212
$ 106,816,821
75,791,904
$ 103,510,754
56,963,471
$ 100,432,424
57,012,908
$ 145,839,491
28,404,385
$ 140,710,150
37,639,398
3,430,607
3,762,184
4,080,853
5,164,622
5,434,308
186,039,332
164,236,409
161,526,185
179,408,498
183,783,856
-
-
-
-
-
-
-
-
-
-
241,860,276
250,449,355
258,447,575
263,388,668
266,811,356
241,860,276
250,449,355
258,447,575
263,388,668
266,811,356
$ 427,899,608
$ 414,685,764
$ 419,973,760
$ 442,797,166
$ 450,595,212
DEFERRED INFLOWS OF RESOURCES
Deferred inflows of resources related to
pensions 4
Total deferred inflows of resources
NET POSITION
Restricted - Expendable by statute
Total net position
TOTAL LIABILITIES, DEFERRED INFLOWS
OF RESOURCES AND NET POSITION
1
2
3
4
46
This schedule is condensed from its original format and combines the California Infrastructure and Economic Development Bank Fund
and the California Infrastructure Guarantee Trust Fund.
In fiscal year 2013-14 and 2015-16, Series 2014A and Series 2015A ISRF Program Bonds were issued in part to refund the Series 2004,
Series 2005 and Series 2008 ISRF Program Bonds. These advance refundings resulted in a loss that is amortized over the life of the
refunded bonds.
Beginning in fiscal year 2012-13, bond issuance costs were recognized as expense when incurred, loan origination fees were recognized as
revenue when due, and beginning of the year net position was restated to include prior year unamortized balances.
Beginning in fiscal year 2014-15, GASB 68 required the recognition of the net pension liability and the related deferred outflows of
resources, deferred inflows of resources, and pension expenses.
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND
SCHEDULE OF NET POSITION
1
FOR THE PAST TEN FISCAL YEARS
2010-11
2011-12
$ 103,701,676
320,958,196
5,493,189
430,153,061
$
2012-13
99,283,799
323,333,231
5,401,190
428,018,220
$
2013-14
2014-15
93,685,407
314,813,422
4,371,482
$ 143,080,564
291,868,218
3,747,020
$ 214,344,782
310,513,224
3,765,003
412,870,311
438,695,802
528,623,009
ASSETS AND DEFERRED OUTFLOWS
OF RESOURCES
ASSETS
Cash, cash equivalents, and investments
Program loans receivable
Other assets
Total assets
DEFERRED OUTFLOWS OF RESOURCES
Deferred outflows of resources related to
4
pensions
-
-
-
864,910
356,434
4,362,447
-
-
-
864,910
4,718,881
$ 430,153,061
$ 428,018,220
$ 412,870,311
$ 439,560,712
$ 533,341,890
TOTAL ASSETS AND DEFERRED OUTFLOWS
OF RESOURCES
LIABILITIES. DEFERRED INFLOWS OF
RESOURCES AND NET POSITION
LIABILITIES
Revenue bonds payable
Undisbursed loan commitments
4
Net pension liability
3
Other liabilities
$ 135,189,315
18,955,223
5,272,741
$ 129,526,688
19,307,372
5,415,247
$ 123,683,680
7,880,252
2,787,755
$ 146,507,706
6,562,703
4,794,542
$ 208,290,797
37,666,191
3,200,240
3,296,412
159,417,279
154,249,307
134,351,687
157,864,951
252,453,640
Loss on refunding debt
2
Total deferred outflows of resources
Total liabilities
DEFERRED INFLOWS OF RESOURCES
Deferred inflows of resources related to
-
-
-
-
596,410
-
-
-
-
596,410
270,735,782
273,768,913
278,518,624
281,695,761
280,291,840
270,735,782
273,768,913
278,518,624
281,695,761
280,291,840
$ 430,153,061
$ 428,018,220
$ 412,870,311
$ 439,560,712
$ 533,341,890
pensions 4
Total deferred inflows of resources
NET POSITION
Restricted - Expendable by statute
Total net position
TOTAL LIABILITIES, DEFERRED INFLOWS
OF RESOURCES AND NET POSITION
47
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND
SCHEDULE OF REVENUES, EXPENSES, AND CHANGES
IN FUND NET POSITION 1
FOR THE PAST TEN FISCAL YEARS
2005-06
2006-07
2007-08
2008-09
2009-10
OPERATING REVENUES
Interest on loans receivable
Investment income 2
$
8,206,839
$
9,021,323
$
9,530,573
$
10,192,579
$
10,694,987
2,978,175
1,136,241
4,694,661
1,918,934
3,789,063
1,721,640
1,956,453
1,830,283
12,321,255
15,634,918
15,041,276
12,149,032
12,525,270
Interest on bond debt
3,088,414
4,631,379
4,204,219
5,452,702
5,846,017
Amortization of bond issuance costs 3
74,009
2,783,542
88,639
2,325,821
86,010
2,752,827
99,690
3,620,774
99,620
3,545,456
5,945,965
7,045,839
7,043,056
9,173,166
9,491,093
6,375,290
8,589,079
7,998,220
2,975,866
3,034,177
-
-
-
1,965,227
388,511
-
-
-
1,965,227
388,511
6,375,290
8,589,079
7,998,220
4,941,093
3,422,688
235,484,986
241,860,276
250,449,355
258,447,575
263,388,668
$ 241,860,276
$ 250,449,355
$ 258,447,575
$ 263,388,668
$ 266,811,356
Administration fees
Total operating revenues
OPERATING EXPENSES
Program support
Total operating expenses
OPERATING INCOME
NONOPERATING REVENUE
Investment earnings 2
Total nonoperating revenue
Changes in net position
NET POSITION, Beginning of year 4
NET POSITION, End of year
1
2
3
4
This schedule combines the California Infrastructure and Economic Development Bank Fund and the California
Infrastructure Guarantee Trust Fund.
Beginning in fiscal year 2008-09, investment income was classified as nonoperating revenue.
Beginning in fiscal year 2012-13, bond issuance costs were recognized as expense when incurred and beginning of the year
net position was reduced by the unamortized balance.
Restated in fiscal years 2005-06, 2012-13 and 2014-15.
48
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND
SCHEDULE OF REVENUES, EXPENSES, AND CHANGES
IN FUND NET POSITION 1
FOR THE PAST TEN FISCAL YEARS
2010-11
2011-12
2012-13
2013-14
10,419,722
$ 10,270,967
$ 10,421,447
1,535,375
1,826,084
1,428,048
11,977,441
12,245,806
11,699,015
2014-15
OPERATING REVENUES
$
10,442,066
$
$
9,206,557
Interest on loans receivable
1,726,297
1,552,859
Investment income 2
12,147,744
10,759,416
Administration fees
Total operating revenues
OPERATING EXPENSES
5,708,393
5,552,600
5,379,682
5,031,074
4,632,101
Interest on bond debt
152,327
2,673,325
110,719
3,968,784
3,058,486
4,158,113
4,206,661
Amortization of bond issuance costs 3
8,534,045
9,632,103
8,438,168
9,189,187
8,838,762
3,443,396
2,613,703
3,260,847
2,958,557
1,920,654
481,030
419,428
212,302
218,580
241,235
481,030
419,428
212,302
218,580
241,235
3,924,426
3,033,131
3,473,149
3,177,137
2,161,889
266,811,356
270,735,782
275,045,475
278,518,624
278,129,951
$ 270,735,782
$ 273,768,913
$ 278,518,624
$ 281,695,761
$ 280,291,840
Program support
Total operating expenses
OPERATING INCOME
NONOPERATING REVENUE
Investment earnings 2
Total nonoperating revenue
Changes in net position
NET POSITION, Beginning of year 4
NET POSITION, End of year
49
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND
INFRASTRUCTURE STATE REVOLVING FUND (ISRF) PROGRAM
TEN LARGEST BORROWERS
AS OF JUNE 30, 2015 AND JUNE 30, 2006
City of San Bernardino Municipal
Water Department
City of Hawthorne
City of Santa Cruz
City of San Luis Obispo
Fresno Metropolitan Flood Control District
City of Porterville
City of Pittsburg
North Tahoe Fire Protection District
City of Davis
City of Bakersfield as successor agency to
the Bakersfield Redevelopment Agency 2
Orange County School of the Arts 3
City of El Segundo
City of San Bernardino
City of Madera
Stockton Port District
County of Sacramento Redevelopment
Agency Successor Agency 2
City of Hanford
Total of ten largest ISRF Program
borrowers
All other ISRF Program borrowers
Total ISRF Program Loans receivable
1
2
3
June 30, 2015
June 30, 2006
Percentage of
Total ISRF
ISRF Program
Program
Loans
Loans
Receivable 1
Rank Receivable
Percentage of
Total ISRF
ISRF Program
Program
Loans
Loans
Receivable 1
Rank Receivable
$ 20,644,105
1
6.65%
$
14,309,658
14,130,000
13,961,118
13,827,730
11,623,316
11,387,398
9,267,744
8,977,402
2
3
4
5
6
7
8
9
4.61%
4.55%
4.50%
4.45%
3.74%
3.67%
2.98%
2.89%
8,589,986
10
2.77%
9,157,873
10
3.40%
19,142,080
2
7.11%
18,701,193
3
6.95%
19,180,864
10,000,000
10,000,000
10,000,000
9,761,669
9,561,676
1
4
5
6
7
8
7.12%
3.71%
3.71%
3.71%
3.63%
3.55%
9,560,386
9
3.55%
126,718,457
40.81%
125,065,741
46.44%
183,794,767
59.19%
144,228,501
53.56%
$ 310,513,224
100.00%
$ 269,294,242
100.00%
These amounts represent the total ISRF Program Loans receivable from each borrower and may include one or more Loans and
may involve more than one type of revenue stream pledged to repay the Loans.
Effective February 1, 2012, California redevelopment agencies were dissolved and other governmental entities became successor
agencies. A successor agency assumed the obligations of the former redevelopment agency, including Loans.
Formerly Orange County High School of the Arts. The loan was paid in full during fiscal year 2013/14.
50
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CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND
SCHEDULE OF ISRF PROGRAM
LOANS RECEIVABLE AND INTEREST RATES
FOR THE PAST TEN FISCAL YEARS
Total ISRF Program Loans receivable
2005-06
2006-07
2007-08
2008-09
2009-10
$269,294,242
$282,990,412
$305,749,937
$311,504,489
$331,209,650
Weighted-average interest rate on total
ISRF Program Loans receivable 1
Number of new ISRF Program Loans 2
3.29%
7
3.27%
8
3.23%
10
3.24%
3
3.28%
6
Range of interest rate on
new ISRF Program Loans
2.37 - 3.03%
2.66 - 3.15%
2.71 - 3.17%
3.25 - 4.07%
3.27 - 4.00%
Range of loan term on
new ISRF Program Loans
10 - 30 years
15 - 30 years
15 - 30 years
25 - 30 years
20 - 30 years
1
2
The weighted-average interest rate on ISRF Program Loans receivable is calculated by multiplying each
loan's outstanding balance by its interest rate, then dividing the sum of those individual amounts by the
ISRF Program Loans receivable balance at June 30.
Determined based upon the effective date of the Loan agreement.
51
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND
SCHEDULE OF ISRF PROGRAM
LOANS RECEIVABLE AND INTEREST RATES
FOR THE PAST TEN FISCAL YEARS
2010-11
2011-12
2012-13
2013-14
2014-15
$320,958,196
$323,333,231
$314,813,422
$291,868,218
$310,513,224
3.29%
1
3.26%
3
3.25%
1
Weighted-average interest rate on total
3.17%
ISRF Program Loans receivable 1
3.18%
3
Total ISRF Program Loans receivable
5
Number of new ISRF Program Loans 2
3.24%
2.61 - 3.37%
2.29%
2.26 - 2.77%
Range of interest rate on
1.73 - 3.51%
new ISRF Program Loans
30 years
20 - 30 years
30 years
20 - 30 years
10 - 30 years
Range of loan term on
new ISRF Program Loans
52
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND
SCHEDULE OF STATUTORY DEBT LIMIT CAPACITY 1
FOR THE PAST TEN FISCAL YEARS
IBank's legal limit on public
development facility debt
Total amount outstanding on
bonds issued to finance public
development facilities 2
Remaining capacity for public
development facility debt
IBank's legal limit on rate
reduction bonds
Total amount outstanding on
rate reduction bonds 3
Remaining capacity for rate
reduction bonds
1
2
3
2005-06
2006-07
2007-08
2008-09
2009-10
$5.00 billion
$5.00 billion
$5.00 billion
$5.00 billion
$5.00 billion
$ 106,816,821
$ 103,510,754
$ 100,432,424
$ 145,839,491
$ 140,710,150
$4.89 billion
$4.90 billion
$4.90 billion
$4.85 billion
$4.86 billion
$10.00 billion
$10.00 billion
$10.00 billion
$10.00 billion
$10.00 billion
$ 921,758,121
$9.08 billion
$ 313,693,353
$9.69 billion
$
1,661,939
$9.998 billion
$
-
$10.00 billion
$
-
$10.00 billion
Pursuant to California Government Code section 63071(b) and pertains only to bonds issued to finance public development
facilities and for rate reduction bonds. There is no statutory debt limit on conduit revenue bonds issued for economic
development facilities.
The amount outstanding represents the ISRF Program Bonds shown in the Schedule of Outstanding ISRF Program
Bonds and Debt Ratio.
Rate reduction bonds are conduit revenue bonds.
53
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND
SCHEDULE OF STATUTORY DEBT LIMIT CAPACITY 1
FOR THE PAST TEN FISCAL YEARS
2010-11
2011-12
$5.00 billion
$ 135,189,315
$5.00 billion
$ 129,526,688
$4.86 billion
$10.00 billion
$
-
$10.00 billion
2012-13
$5.00 billion
$ 123,683,680
$4.87 billion
$10.00 billion
$
-
$10.00 billion
$
-
$10.00 billion
2014-15
$5.00 billion
IBank's legal limit on public
$5.00 billion development facility debt
$ 146,507,706
$4.88 billion
$10.00 billion
2013-14
$ 208,290,797
$4.85 billion
$10.00 billion
$
-
$10.00 billion
$4.79 billion
Total amount outstanding on
bonds issued to finance public
development facilities 2
Remaining capacity for public
development facility debt
IBank's legal limit on rate
$10.00 billion reduction bonds
$
-
Total amount outstanding on
rate reduction bonds 3
Remaining capacity for rate
$10.00 billion reduction bonds
54
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND
SCHEDULE OF OUTSTANDING ISRF PROGRAM BONDS AND RELATED DEBT RATIO
FOR THE PAST TEN FISCAL YEARS
2005-06
2006-07
2007-08
2008-09
2009-10
$ 50,225,000
52,800,000
3,791,821
$ 48,930,000
50,960,000
3,620,754
$ 47,615,000
49,530,000
3,287,424
$ 46,275,000
48,030,000
48,375,000
3,159,491
$ 44,910,000
46,470,000
46,605,000
2,725,150
Total ISRF Program Bonds outstanding $ 106,816,821
$ 103,510,754
$ 100,432,424
$ 145,839,491
$ 140,710,150
$ 154,295,885
$ 148,316,271
$ 143,622,194
$ 211,216,003
$ 203,348,112
0.69
0.70
0.70
0.69
0.69
Series 2004 ISRF Program Bonds 1
Series 2005 ISRF Program Bonds 1
Series 2008 ISRF Program Bonds 2
Series 2014A ISRF Program Bonds
Series 2015A ISRF Program Bonds
Unamortized Net Premium
Series-pledged ISRF Program Loans
receivable 3
Ratio of ISRF Program Bonds outstanding
to series-pledged ISRF Program Loans
receivable
1
2
3
The Series 2014A ISRF Program Bonds issued in fiscal year 2013-14 refunded the Series 2004 and Series 2005 ISRF
Program Bonds.
The Series 2015A ISRF Program Bonds issued in fiscal year 2014-15 refunded the Series 2008 Program Bonds.
Excludes non-pledged loans.
55
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND
SCHEDULE OF OUTSTANDING ISRF PROGRAM BONDS AND RELATED DEBT RATIO
FOR THE PAST TEN FISCAL YEARS
2010-11
2011-12
2012-13
2013-14
$ 43,515,000
44,835,000
44,500,000
2,339,315
$ 42,055,000
43,140,000
42,330,000
2,001,688
$ 40,525,000
41,360,000
40,095,000
1,703,680
$
$ 135,189,315
$ 129,526,688
$ 123,683,680
$ 146,507,706
37,795,000
95,960,000
12,752,706
2014-15
$
93,320,000
90,070,000
24,900,797
$ 208,290,797
Series 2004 ISRF Program Bonds 1
Series 2005 ISRF Program Bonds 1
Series 2008 ISRF Program Bonds 2
Series 2014A ISRF Program Bonds
Series 2015A ISRF Program Bonds
Unamortized Net Premium
Total ISRF Program Bonds outstanding
Series-pledged ISRF Program Loans
$ 195,160,107
0.69
$ 185,227,425
0.70
$ 189,272,085
0.65
$ 254,251,622
0.58
$ 305,562,752
0.68
receivable 3
Ratio of ISRF Program Bonds outstanding
to series-pledged ISRF Program Loans
receivable
56
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND
SCHEDULE OF AGGREGATE PLEDGED RESOURCES COVERAGE
FOR ISRF PROGRAM BONDS 1
FOR THE PAST TEN BOND YEARS 2
Bond
Year
Series-pledged
ISRF Program
Loan
Repayments 3
2004-05
$ 4,522,348
2005-06
11,033,439
2006-07
Reserve
Account
Earnings 4
$
6
136,247
Total Amount
Available for
Debt Service 5
$
4,658,595
ISRF Program Bonds Debt Service
Principal
Interest
Total
$
1,145,000
$
2,262,343
$
Debt Service
Coverage
Ratio
3,407,343
1.37
279,757
11,313,202
3,135,000
4,200,794
7,335,794
1.54
9,595,561
346,128
9,941,689
2,745,000
4,600,174
7,345,174
1.35
2007-08
9,591,891
335,755
9,927,646
2,840,000
4,516,674
7,356,674
1.35
2008-09
14,515,584
38,140
14,553,724
4,695,000
6,430,871
11,125,871
1.31
2009-10
14,863,784
3,005
14,866,789
5,135,000
6,242,953
11,377,953
1.31
2010-11
14,964,643
44,480
15,009,123
5,325,000
6,044,653
11,369,653
1.32
2011-12
14,716,041
70,085
14,786,126
5,545,000
5,838,753
11,383,753
1.30
2012-13
14,588,257
228,364
14,816,621
5,745,000
5,624,003
11,369,003
1.30
2013-14
25,441,134
67,309
25,508,443
5,000,000
6,841,787
11,841,787
2.15
1
2
3
4
5
6
Schedule reflects the aggregate of the ISRF Program Bond series outstanding in each bond year.
Bond year means the period of twelve consecutive months from October 2 through the following October 1.
Includes interest and principal paid on Series-Pledged Loans
Investment income includes only that amount received on funds pledged to ISRF Program Bonds debt service.
Excludes capitalized interest in bond year 2004-05.
Includes unscheduled full repayment of a Series-Pledged Loan.
57
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CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND
CALIFORNIA DEMOGRAPHIC AND ECONOMIC INDICATORS
FOR THE PAST TEN CALENDAR YEARS
2005
2006
2007
2008
2009
35,986
36,247
36,553
36,856
37,077
Personal income (in millions)
$ 1,396,173
$ 1,499,452
$ 1,564,441
$ 1,596,282
$ 1,536,430
Per capita personal income 1
$
$
$
$
$
State population (in thousands)
Labor force and employment
(in thousands)
Civilian labor force
Employed
Unemployed
Unemployment rate
38,798
17,545
16,592
953
5.4%
41,368
17,687
16,821
865
4.9%
42,799
17,921
16,961
960
5.4%
43,311
18,207
16,894
1,314
7.2%
41,439
18,220
16,155
2,065
11.3%
Sources: Population as of December 2014 - Demographic Research Unit, California Department of Finance
Personal income as of March 25, 2015 - Bureau of Economic Analysis, United States Department of Commerce
Labor force and employment as of August 21, 2015 - Labor Market Information Division, California
Employment Development Department
1
Calculated by dividing total personal income by population.
58
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND
CALIFORNIA DEMOGRAPHIC AND ECONOMIC INDICATORS
FOR THE PAST TEN CALENDAR YEARS
2010
2011
2012
2013
2014
37,309
37,570
37,872
38,205
38,499
$ 1,579,148
$ 1,683,204
$ 1,768,039
$ 1,817,010
$ 1,944,369
Personal income (in millions)
$
$
$
$
$
50,504
Per capita personal income 1
18,811
17,397
1,414
7.5%
Labor force and employment
(in thousands)
Civilian labor force
Employed
Unemployed
Unemployment rate
42,326
18,336
16,068
2,268
12.4%
44,802
18,418
16,250
2,168
11.8%
46,685
18,519
16,590
1,929
10.4%
47,559
18,597
16,933
1,664
8.9%
State population (in thousands)
59
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND
CALIFORNIA EMPLOYMENT BY INDUSTRY
FOR CALENDAR YEARS 2014 AND 2005
INDUSTRY
Farming
Mining and logging
Construction
Manufacturing
Trade, transportation & utilities
Information
Financial activities
Professional & business services
Educational & health services
Leisure and hospitality
Other services
Government
Federal
State
Local
TOTALS
2014
Percentage of
Total State
Employees Employment
2005
Percentage of
Total State
Employees
Employment
417,200
31,300
675,400
1,269,600
2,871,100
457,900
784,300
2,433,400
2,414,400
1,757,100
539,800
2.60%
0.19%
4.20%
7.90%
17.89%
2.85%
4.88%
15.15%
15.03%
10.94%
3.36%
378,200
23,600
905,300
1,505,200
2,820,000
473,600
920,300
2,162,000
1,802,300
1,475,200
505,500
2.46%
0.15%
5.88%
9.78%
18.32%
3.08%
5.98%
14.05%
11.71%
9.58%
3.28%
242,300
496,800
1,672,000
1.51%
3.09%
10.41%
250,400
463,300
1,706,400
1.63%
3.01%
11.09%
16,062,600
100.00%
15,391,300
100.00%
Sourc Labor Market Information Division, California Employment Development Department
Industry Employment and Labor Force - by Annual Average as of August 15, 2015
60
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND
NUMBER OF EMPLOYEES BY IDENTIFIABLE ACTIVITY 1
FOR THE PAST TEN FISCAL YEARS
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14 2 2014-15 2
Executive/
Administration/
Legal
6
5
5
7
7
7
7
7
9
5
Bond Programs
3
4
4
4
4
4
4
4
3
4
Compliance
2
External Affairs
2
Fiscal
3
Legal/Legislation
3
Loan Programs
11
11
11
14
14
13
13
12
11
6
Small Business
Finance Center
Total Employees
2
20
20
20
25
25
24
24
23
1
Data represents permanent, full-time positions.
2
For FY 2013-14 and FY 2014-15, IBank had two employees that were assigned to the Small Business
Loan Guarantee Program, the activities of which are not included in this report.
3
Beginning FY 2014-15, employee activity categories were broken out further to specifically identify
Compliance, External Affairs, Fiscal, Legal/Legislation and Small Business Finance Center.
4
Legal will be included in the title until FY 2013-14.
5
Beginning FY 2014-15, activity category title Conduit Financing Programs was changed to Bond Programs
and Infrastructure State Revolving Fund Program and Support was changed to Loan Programs.
23
27
61
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND
MAJOR PROGRAM ACTIVITY
FOR THE PAST TEN FISCAL YEARS
2005-06
2006-07
2007-08
2008-09
2009-10
Infrastructure State Revolving
Fund (ISRF) Program
Preliminary Applications: 1
Number of applications received
Financing amount requested
$
19
48,293,789
$
20
70,878,000
$
11
32,074,224
$
10
60,980,525
$
14
29,597,760
Financing Applications:
Number of applications received
Financing amount requested
$
12
44,910,000
$
8
29,110,000
$
7
26,450,000
$
4
14,297,000
$
4
6,020,000
Approved Loans:
Number of loans approved
Financing amount approved
$
11
44,916,000
$
6
23,800,000
$
8
29,751,600
$
6
22,847,500
$
3
17,000,000
Loan Disbursements:
Number of transactions
Total amount disbursed
$
110
37,889,135
$
87
38,909,915
$
67
30,764,260
$
62
43,879,185
$
39
21,146,788
Number of outstanding loans
59
67
76
79
85
Conduit Financing Programs
Preliminary Applications: 2
Number of applications received
Financing amount requested
$
Financing Applications:
Number of applications received
Financing amount requested
5
$ 177,300,000
18
$ 692,010,000
18
$1,559,380,000
13
$1,722,550,000
13
$ 814,310,000
Bonds Sold:
Number of bonds sold
Financing amount sold
10
$ 265,640,000
19
$ 814,422,774
20
$1,030,136,886
17
$1,248,990,000
17
$ 985,885,000
2
13,200,000
$
3
20,500,000
$
3
21,335,000
$
2
20,000,000
1
Beginning in fiscal year 2013-14, the ISRF Program no longer required Preliminary Applications.
2
Industrial development conduit revenue bonds are the only Conduit Bond Financing Program applicants that submit
a Preliminary Application. All other Conduit Bond Financing Program applicants submit only a Financing
Application.
62
$
2
9,850,000
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT
BANK FUND AND CALIFORNIA INFRASTRUCTURE GUARANTEE
TRUST FUND, ENTERPRISE FUNDS OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FUND
MAJOR PROGRAM ACTIVITY
FOR THE PAST TEN FISCAL YEARS
2010-11
2011-12
2012-13
2013-14
2014-15
Infrastructure State Revolving
Fund Program
$
9
49,887,500
$
2
7,737,500
$
2
3,500,000
$
44
19,861,726
86
$
2
5,470,231
$
1
10,000,000
$
2
16,756,500
$
38
16,151,949
88
$
8
27,908,700
$
6
18,722,500
$
3
12,122,500
$
27
18,927,120
-
$
7
48,243,460
$
3
12,050,000
$
14
6,540,050
88
-
Preliminary Applications: 1
Number of applications received
Financing amount requested
$
7
63,575,501
Financing Applications:
Number of applications received
Financing amount requested
$
7
56,356,772
Approved Loans:
Number of loans approved
Financing amount approved
$
16
4,263,908
90
94
Loan Disbursements:
Number of transactions
Total amount disbursed
Number of outstanding loans
Conduit Financing Programs
$
2
11,500,000
-
-
$
1
5,950,000
$
3
16,351,499
Preliminary Applications: 2
Number of applications received
Financing amount requested
13
$ 695,065,000
6
$ 753,925,000
7
$ 719,080,000
10
$ 481,250,000
14
$ 429,181,499
Financing Applications:
Number of applications received
Financing amount requested
10
$ 203,300,000
9
$ 851,100,000
5
$ 328,780,000
11
$ 735,423,063
10
$ 270,300,000
Bonds Sold:
Number of bonds sold
Financing amount sold
63
This Comprehensive Annual Financial Report was prepared by the California Infrastructure and
Economic Development Bank’s Fiscal Unit.
Diane J. Nanik
Manager
Betty Daquioag-Correa
Senior Accounting Officer
Tracey Thompson
Senior Accounting Officer
The Fiscal Unit was assisted by other IBank staff and the staff of the Governor’s Office of
Business and Economic Development, the California Department of General Service Contracted
Fiscal Services Unit, and the California Department of Resources Recycling and Recovery
Information Technology Services Branch.
To obtain copies of this report, please contact:
TEVEIA BARNES, EXECUTIVE DIRECTOR
California Infrastructure and Economic Development Bank
P.O. Box 2830
Sacramento, CA 95814
(916) 322-1399
This report is also available on IBank’s website at www.ibank.ca.gov.
[THIS PAGE INTENTIONALLY LEFT BLANK]
APPENDIX C
SUMMARY OF THE INDENTURE
The following is a summary of certain provisions of the Indenture, dated as of February 1, 2014
(the “Original Indenture”), between the California Infrastructure and Economic Development Bank
(the “Issuer”) and U.S. Bank National Association, as trustee (the “Trustee”), as supplemented by the
First Supplemental Indenture, dated as of February 1, 2014 (the “First Supplemental Indenture”) and the
Second Supplemental Indenture, dated as of June 1, 2015 (the “Second Supplemental Indenture”) and as
supplemented and amended by the Third Supplemental Indenture, dated as of June 1, 2016 (the “Third
Supplemental Indenture”; the Original Indenture, as supplemented and amended is referred to herein as
the “Indenture”), between the Issuer and the Trustee. Such summary is not intended to be complete or
definitive, is supplemental to the summary of other provisions of the Indenture contained elsewhere in
this Official Statement, and is qualified in its entirety by reference to the full terms of the Indenture. All
capitalized terms used and not otherwise defined in this Official Statement shall have the meanings
assigned to such terms in the Indenture.
Definitions
“Accreted Value” means, with respect to any Capital Appreciation Bond, the principal amount
thereof plus the interest accrued thereon, compounded at the approximate interest rate thereon on each
date specified therein. The Accreted Value at any date shall be the amounts set forth in the Accreted
Value Table as of such date, if such date is a compounding date, and if not, as of the immediately
preceding compounding date. For purposes of the Indenture, the term “principal of” shall also include
Accreted Value, if appropriate.
“Accreted Value Table” means the table denominated as such which appears as an exhibit to, and
to which reference is made in, a Supplemental Indenture providing for a Series of Capital Appreciation
Bonds issued pursuant to such Supplemental Indenture.
“Act” means the Bergeson-Peace Infrastructure and Economic Development Bank Act,
constituting Division 1 of Title 6.7 of the California Government Code (commencing at Section 63000
thereof) as now in effect and as it may from time to time hereafter be amended.
“Administrative Expenses” means (i) all reasonable fees, charges and expenses of the Trustee and
any authenticating agents, paying agents, registrars, dissemination agents, attorneys, accountants,
financial consultants, rebate analysts or other Person employed by the Trustee or the Issuer; (ii) all
administrative costs of the Issuer that are noted as Administrative Expenses in the Indenture and all
administrative costs that are charged directly or apportioned to the administration of the Pledged Loans,
any Series of Bonds or any Parity Obligations, Subordinate Obligations or Fee and Expense Obligations;
(iii) in the event the Issuer employs or hires attorneys or staff or incurs other fees, charges or expenses for
the collection of payments required by any Loan Agreement or Pledged Loan or the enforcement of
performance or observance of any obligation or agreement on the part of any Borrower contained in any
Loan Agreement or Pledged Loan, the reasonable fees, charges and expenses of such attorneys, staff and
such other fees, charges and expenses so incurred by the Issuer; and (iv) in the event the Trustee employs
attorneys or incurs other fees, charges or expenses for the collection of payments required by the
Indenture or the enforcement of performance or observance of any obligation or agreement on the part of
the Issuer contained in the Indenture, the reasonable fees, charges and expenses of such attorneys and
such other fees, charges and expenses so incurred by the Trustee, as well as the costs to indemnify the
Trustee and its respective members, directors, officers, employees and agents from and against, all costs,
expenses and charges, including reasonable counsel fees, incurred for the collection of payments due or
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for the enforcement or performance or observance of any covenant or agreement of the Issuer under the
Indenture; provided that such costs of enforcement shall be payable solely from the Revenues.
“Administrative Expense Fund” means the fund by that name established pursuant to the
Indenture.
“Alternate Credit Enhancement” means, with respect to a Series of Bonds, any Insurance, letter of
credit, line of credit, surety bond or other instrument, if any, which secures, enhances or guarantees the
payment of principal of and interest on a Series of Bonds, issued by an insurance company, commercial
bank, pension fund or other institution, and delivered or made available to the Trustee, as a replacement
or substitution for any Credit Enhancement then in effect.
“Alternate Liquidity Facility” means, with respect to a Series of Bonds, a line of credit, letter of
credit, standby purchase agreement or similar liquidity facility, which secures, enhances or guarantees the
payment of purchase price of such Series of Bonds under certain conditions specified therein, issued by a
commercial bank, insurance company, pension fund or other institution, and delivered or made available
to the Trustee, as a replacement or substitute for any Liquidity Facility then in effect.
“Annual Debt Service” means with respect to any Obligations and for any Bond Year, the
aggregate amount of Debt Service on Obligations becoming due and payable during such Bond Year.
“Assumed Debt Service” means for any Bond Year the aggregate amount of principal or similar
payments that would be payable on all Obligations if each Excluded Principal Payment were amortized
on a substantially level debt service basis or other amortization schedule provided by the Issuer for a
period commencing on the date of calculation of such Assumed Debt Service and ending on the date
specified by the Issuer not exceeding thirty (30) years from the date of calculation, such Assumed Debt
Service to be calculated on a level debt service basis or other amortization basis provided by the Issuer
based on a fixed interest rate equal to the rate at which the Issuer could borrow for such period, as set
forth in a certificate of a financial advisor or investment banker, delivered to the Trustee, who may rely
conclusively on such certificate, such certificate to be delivered within thirty (30) days of the date of
calculation.
“Authorized Representative” means the Executive Director of the Issuer and any assignee of the
Executive Director of the Issuer or such other person as may be designated to act on behalf of the Issuer
by resolution of the Board or by a written certificate delivered to the Trustee by an Authorized
Representative.
“Beneficial Owner” means any Person who has the power, directly or indirectly, to vote or
consent with respect to, or to dispose of ownership of any Bond, including, without limitation, any Person
holding Bonds through nominees or depositories, including the Securities Depository.
“Board” means the Board of Directors of the Issuer.
“Bond Obligation” means, as of any given date of calculation, (i) with respect to any Outstanding
Current Interest Bond, the principal amount of such Bond, and (ii) with respect to any Outstanding
Capital Appreciation Bond, the Accreted Value thereof.
“Bond Proceeds Fund” means a fund by that name established with respect to a Series of Bonds
pursuant to the Supplemental Indenture establishing the terms and provisions of such Series of Bonds.
“Bond Reserve Requirement” means, with respect to any Reserve Fund, the amount specified as
such in the Supplemental Indenture establishing such Reserve Fund.
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“Bond Year” means the period of twelve consecutive months ending on October 1 in any year in
which the Bonds are Outstanding.
“Bondholder” or “Holder” or “owner” whenever used with respect to a Bond, means the person in
whose name such Bond is registered.
“Bonds” means the California Infrastructure and Economic Development Bank Infrastructure
State Revolving Fund Revenue Bonds authorized by, and at any time Outstanding pursuant to, the
Indenture, which are secured by the lien of the Indenture and payable from the Revenues as provided
therein.
“Borrower” means each entity that receives financial assistance under a Loan Agreement.
“Borrower’s Loan Account” means an account by that name established with respect to a
Borrower within a Bond Proceeds Fund pursuant to a Supplemental Indenture establishing the terms and
provisions of a Series of Bonds.
“Borrower’s Loan Subaccount” means a subaccount by that name established within the
Restricted Assets Account or the Unrestricted Assets Account pursuant to the Indenture.
“Business Day” means, except as is otherwise provided in the Supplemental Indenture pursuant to
which a Series of Bonds are issued, any day other than (i) a Saturday, Sunday, State holiday, legal holiday
or a day on which banking institutions in the State or the State of New York or the jurisdiction in which
the Corporate Trust Office of the Trustee is located are authorized or obligated by law or executive order
to be closed; (ii) for purposes of payments and other actions relating to Bonds secured by a Credit
Enhancement or supported by a Liquidity Facility, a day upon which commercial banks in the city in
which is located the office of the issuing bank at which demands for payment under the Credit
Enhancement or Liquidity Facility, as applicable, are to be presented are authorized or obligated by law or
executive order to be closed; (iii) a day on which the New York Stock Exchange is closed; or (iv) a day
on which the payment system of the Federal Reserve System is not operational.
“Capital Appreciation Bonds” means the Bonds of any Series designated as Capital Appreciation
Bonds in the Supplemental Indenture providing for the issuance of such Series of Bonds and on which
interest is compounded and paid at maturity or on prior redemption.
“Certificate,” “Statement,” “Request,” “Requisition” and “Order” of the Issuer mean,
respectively, a written certificate, statement, request, requisition or order signed in the name of the Issuer
by an Authorized Representative. Any such instrument and supporting opinions or representations, if
any, may, but need not, be combined in a single instrument with any other instrument, opinion or
representation, and the two or more so combined shall be read and construed as a single instrument. If
and to the extent required by the Indenture, each such instrument shall include the statements provided for
in the Indenture.
“Code” means the Internal Revenue Code of 1986, and the regulations applicable thereto or
issued thereunder, or any successor to the Internal Revenue Code of 1986. Reference to any particular
Code section shall, in the event of such a successor Code, be deemed to be reference to the successor to
such Code section.
“Collateral” means all of the Issuer’s right, title, and interest, whether now owned or acquired, in
and to (a) the Pledged Loans (other than the Issuer Retained Rights), including all Pledged Loan
Repayments, (b) the Pledged Funds and Accounts and all money, instruments, investment property, and
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other property from time to time credited to or on deposit in the Pledged Funds and Accounts and (c) all
other Revenues credited to or on deposit in the Pledged Funds and Accounts.
“Common Bond Reserve Requirement” means, as of any date of calculation, an amount equal to
the least of (a) 10% of the initial offering price to the public of the Common Reserve Fund Participating
Bonds as determined under the Code, or (b) the greatest amount of Debt Service for the Common Reserve
Fund Participating Bonds in any Bond Year during the period commencing with the Bond Year in which
the determination is being made and terminating with the last Bond Year in which any Common Reserve
Fund Participating Bond is due, or (c) 125% of the sum of the Debt Service for the Common Reserve
Fund Participating Bonds for all Bond Years during the period commencing with the Bond Year in which
such calculation is made (or if appropriate, the first full Bond Year following the issuance of any
Common Reserve Fund Participating Bonds) and terminating with the last Bond Year in which any Debt
Service for the Common Reserve Fund Participating Bonds is due, divided by the number of such Bond
Years, all as computed and determined by the Issuer and specified in writing to the Trustee; provided, that
with respect to the issuance of additional Common Reserve Fund Participating Bonds, if the amount on
deposit in the Common Reserve Fund would have to be increased by an amount greater than ten percent
(10%) of the stated principal amount of such additional Common Reserve Fund Participating Bonds (or,
if the issue has more than a de minimis amount of original issue discount or premium, of the issue price of
such Common Reserve Fund Participating Bonds) then the Common Bond Reserve Requirement shall be
such lesser amount as is determined by a deposit of such ten percent (10%). In lieu of or in addition to
funding the Common Reserve Fund with the proceeds of Bonds, the Issuer may fund the Common
Reserve Fund with transfers from the Equity Fund in an amount equal to or greater than the Common
Bond Reserve Requirement. Under the Indenture, the term used for the “Common Bond Reserve Fund
Requirement” is “2014A Bond Reserve Requirement.”
“Common Reserve Fund” means the fund by that name established pursuant to the Indenture.
Under the Indenture, the term used for the “Common Reserve Fund” is “2014A Reserve Fund.”
“Common Reserve Fund Participating Bonds” means the Bonds of each Series which, pursuant to
the terms of the Indenture and the Supplemental Indenture relating to such Series, are secured by amounts
in the Common Reserve Fund. Under the Indenture, the term used for the “Common Reserve Fund
Participating Bonds” is “2014A Reserve Fund Participating Bonds.”
“Continuing Disclosure Agreement” means, with respect to each Series of Bonds requiring an
undertaking regarding disclosure under Rule 15c2-12, the continuing disclosure agreement or continuing
disclosure certificate, dated the date of issuance of such Series of Bonds, executed by the Issuer, as the
same may be supplemented, modified or amended in accordance with its terms.
“Corporate Trust Office” or corporate trust office means the corporate trust office of the Trustee
at U.S. Bank National Association, One California Street, Suite 1000, San Francisco, California 94111,
Attention: Global Corporate Trust Services, or such other or additional offices as may be designated by
the Trustee from time to time; provided, that for registration, transfer, exchange, surrender and payment
of the Bonds, Corporate Trust Office shall initially mean the corporate trust operations office of the
Trustee in Saint Paul, Minnesota.
“Costs of Issuance” means all items of expense directly or indirectly payable by or reimbursable
to the Issuer and related to the authorization, issuance, sale and delivery of a Series of Bonds, including
but not limited to underwriter’s spread (whether paid directly by the Issuer or derived through purchase of
a Series of Bonds at a discount below the price at which the Series of Bonds is expected to be sold to the
public), advertising and printing costs, costs of preparation and reproduction of documents, filing and
recording fees, travel expenses and costs relating to rating agency meetings and other meetings
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concerning such Series of Bonds, initial fees, expenses and charges of the Trustee, fees and expenses of
the Issuer, legal fees and charges, fees and disbursements of consultants and professionals, financial
advisor fees and expenses, rating agency fees, agent for sale fees, fees and charges for preparation,
execution, transportation and safekeeping of Bonds, surety, insurance, credit enhancement and liquidity
costs, fees payable in connection with the execution or termination of an Interest Rate Swap Agreement in
connection with the issuance of a Series of Bonds and any other cost, charge or fee incurred in connection
with the issuance of a Series of Bonds or any Parity Obligations delivered in connection with a Series of
Bonds.
“Costs of Issuance Fund” means a fund by that name established pursuant to the provisions of a
Supplemental Indenture to pay Costs of Issuance with respect to a Series of Bonds being issued pursuant
to such Supplemental Indenture.
“Counterparty” means an entity which has entered into an Interest Rate Swap Agreement with the
Issuer.
“Coverage Test” means, as of any date of calculation, that the Revenues (excluding any Subsidy
Payments) (assuming that the Pledged Loan Repayments are paid at the times and in the amounts required
by the Loan Agreements, unless a payment default has occurred and is continuing under such Loan
Agreement) for each Bond Year in which any Bonds are scheduled to be Outstanding, are projected to be
at least 1.20 times Annual Debt Service in each such Bond Year. For the purpose of demonstrating
compliance with the Coverage Test in accordance with the Indenture, the Issuer may use and rely on any
assumptions the Issuer deems reasonable under then-existing circumstances, including, but not limited to,
assumptions concerning (1) the making of additional Pledged Loans at projected times and interest rates
and in projected amounts, (2) realization of additional Pledged Loan Repayments from such additional
Pledged Loans at projected times and in projected amounts and (3) realization of earnings from the
investment of projected amounts in the Pledged Funds and Accounts at projected times and interest rates.
“Credit Enhancement” means, with respect to a Series of Bonds, any Insurance, letter of credit,
line of credit, surety bond or other instrument, if any, that secures, enhances or guarantees the payment of
principal of and interest on a Series of Bonds, issued by an insurance company, commercial bank, pension
fund or other institution, and delivered or made available to the Trustee, as from time to time
supplemented or amended pursuant to its terms, or, in the event of the delivery or availability of an
Alternate Credit Enhancement, such Alternate Credit Enhancement.
“Credit Enhancement Provider” means, with respect to a Series of Bonds, the Insurer, commercial
bank, pension fund or other institution issuing (or having primary obligation, or acting as agent for the
institutions obligated, under) a Credit Enhancement then in effect with respect to such Series of Bonds.
“Current Interest Bonds” means the Bonds of any Series designated as Current Interest Bonds in
the Supplemental Indenture providing for the issuance of such Series of Bonds and that pay interest to the
Holders thereof on a periodic basis prior to maturity.
“Debt Service”, when used with respect to any Obligations, means, as of any date of calculation
and with respect to any Bond Year, the sum of (i) the interest falling due on such Obligations during such
Bond Year, (ii) the principal or Mandatory Sinking Account Payments required to be paid with respect to
such Obligations during such Bond Year and (iii) any other regularly scheduled payments on such
Obligations during such Bond Year to the extent not included in clauses (i) and (ii) of this definition, all
of which are to be computed on the assumption that no portion of such Obligations shall cease to be
outstanding during such Bond Year except by reason of the application of such scheduled payments;
provided, however, that for purposes of such computation:
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(A)
Excluded Principal Payments (and the interest related thereto provided such interest is
being paid from the same source as the Excluded Principal Payments) shall be excluded from such
calculation and Assumed Debt Service shall be included in such calculation;
(B)
in determining the principal amount due in each Bond Year, payment shall (unless a
different subsection of this definition applies for purposes of determining principal maturities or
amortization) be assumed to be made in accordance with any amortization schedule established for such
Obligations, including any Mandatory Sinking Account Payments or any scheduled redemption or
payment of Obligations on the basis of Accreted Value, and for such purpose, the redemption payment or
payment of Accreted Value shall be deemed a principal payment and interest that is compounded and paid
as Accreted Value shall be deemed due on the scheduled redemption or payment date of such Capital
Appreciation Bond and any contingencies that may result in a request for earlier payment shall be
disregarded;
(C)
if any Obligations bear, or if any Obligations proposed to be issued will bear, interest at a
variable interest rate for which an Interest Rate Swap Agreement is not in place and the interest on which
is excluded or expected to be excluded from gross income for federal income tax purposes, the interest
rate on such Obligations for periods when the actual interest rate cannot yet be determined shall be
assumed to be equal to the average of the SIFMA Swap Index for the five (5) years preceding such date of
calculation (provided, however, that if such index is no longer published, the interest rate on such
Obligations shall be calculated based upon such similar index as the Issuer shall designate in writing to
the Trustee) or such higher rate as shall be specified in a Certificate of the Issuer delivered to the Trustee,
plus the applicable spread, if any, for such Obligations;
(D)
if any Obligations bear, or if any Obligations proposed to be issued will bear, interest at a
variable interest rate for which an Interest Rate Swap Agreement is not in place and the interest on which
is included or expected to be included in gross income for federal income tax purposes, the interest rate
on such Obligations shall be calculated at an interest rate equal to 100% of the average One Month USD
LIBOR Rate during the five (5) years preceding such date of calculation or such higher rate as shall be
specified in a Certificate of the Issuer delivered to the Trustee (provided, however, that if such index is no
longer published, the interest rate on such Obligations shall be calculated based upon such similar index
as the Issuer shall designate in writing to the Trustee) plus the applicable spread, if any, for such
Obligations;
(E)
with respect to any Obligations bearing interest, or expected to bear interest, at a variable
interest rate for which an Interest Rate Swap Agreement is in place providing for a fixed rate of interest to
maturity or for a specific term with respect to such Obligations, the interest rate on such Obligations shall
be assumed to be the fixed interest rate specified in such Interest Rate Swap Agreement for such term,
plus the applicable spread, if any, payable by the Issuer on such Obligations;
(F)
with respect to any Obligations bearing interest, or expected to bear interest, at a fixed
interest rate for which an Interest Rate Swap Agreement is in place providing for a net variable interest
rate with respect to such Obligations for a specific term, the interest rate on such Obligations shall be
assumed to be equal for such term to the sum of (i) the fixed interest rate or rates to be paid on the
Obligations, minus (ii) the fixed interest rate receivable by the Issuer under such Interest Rate Swap
Agreement, plus (iii) the average interest rate of the index on which the Interest Rate Swap Agreement is
based, as identified in a Certificate of the Issuer delivered to the Trustee, or, if not based on an identifiable
index, then the average of the SIFMA Swap Index, in each case, over the five (5) years preceding the date
of calculation or such higher rate as shall be specified in a Certificate of the Issuer delivered to the
Trustee, plus the applicable spread, if any, payable by the Issuer under such Interest Rate Swap
Agreement;
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(G)
if any Obligations feature an option, on the part of the owners or an obligation under the
terms of such Obligations, to tender all or a portion of such Obligations to the Issuer, the Trustee or other
fiduciary or agent, and requires that such Obligations or portion thereof be purchased if properly
presented, then for purposes of determining the amounts due in any Bond Year on such Obligations, the
options or obligations of the owners of such Obligations to tender the same for purchase or payment prior
to the end of the term of such Obligation shall be ignored;
(H)
payments on Obligations shall be excluded to the extent such payments are to be paid
from amounts on deposit with the Trustee or other fiduciary in escrow specifically therefor and interest
payments shall be excluded to the extent that such interest payments are (i) to be paid from the proceeds
of Obligations or other available funds held by the Trustee or other fiduciary as capitalized interest
specifically to pay such interest or (ii) paid or expected to be paid from Subsidy Payments;
(I)
if any Obligation is a Guarantee, there shall be included in Debt Service (i) if the
Guarantee has not been drawn upon, twenty-five percent (25%) of the Issuer’s maximum possible
monetary liability under the Guarantee in any Bond Year that such Guarantee is permitted to be drawn
upon or (ii) if the Guarantee has been drawn upon, one hundred percent (100%) of the Issuer’s monetary
liability in each Bond Year under the Guarantee which has been drawn upon, until such time as all
amounts drawn upon the Guarantee have been repaid to the Issuer, and, if the Guarantee remains in effect
after such repayment, for two Bond Years thereafter; and
(J)
payments on Obligations shall be excluded to the extent such payments are expected to
be paid with amounts credited to or on deposit in the Pledged Funds and Accounts that are not treated as
Revenues in the same Bond Year that such amounts are used to exclude payments on such Obligations for
purposes of the Coverage Test.
“Equity Fund” means the fund by that name established pursuant to the Indenture.
“Event of Default” means any of the events specified in the Indenture and described under the
caption “Events of Default and Remedies – Events of Default” below.
“Excluded Principal Payments” means each principal or similar payment on Obligations which
the Issuer determines (in the Certificate of the Issuer delivered to the Trustee) that the Issuer intends to
pay with moneys that are not Revenues (such as commercial paper, balloon indebtedness or bond
anticipation notes) but from future debt obligations of the Issuer, grants from the State or federal
government, or any agency or instrumentality thereof, or any other source of funds of the Issuer, upon
which determination of the Issuer the Trustee may conclusively rely. No such determination shall affect
the security for such Obligations or the obligation of the Issuer to pay such payments from amounts
securing such Obligations.
“Fee and Expense Obligations” means any obligations of the Issuer which constitute fees,
expenses and similar charges in connection with any Bonds, Parity Obligations or Subordinate
Obligations (including fees and expenses and termination payments on Interest Rate Swap Agreements),
which obligations are secured by the lien of the Indenture and payable from the Revenues as provided
therein.
“Fees and Expenses Fund” means the fund by that name established pursuant to the Indenture.
“Fiscal Year” means the period beginning on July 1 of each year and ending on the next
succeeding June 30, or any other 12-month period hereafter selected and designated as the official fiscal
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year period of the Issuer, which designation shall be provided to the Trustee in a Certificate delivered by
the Issuer.
“Fitch” means Fitch Inc., and its successors and assigns, except that if such corporation shall be
dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term
“Fitch” shall be deemed to refer to any other nationally recognized securities rating agency selected by
the Issuer.
“Government Obligations” means:
(A)
non-callable obligations of, or obligations guaranteed as to principal and interest by, the
United States or any agency or instrumentality thereof, when such obligations are backed by the full faith
and credit of the United States, including, but not limited to, all direct or fully guaranteed U.S. Treasury
obligations, Farmers Home Administration certificates of beneficial ownership, General Services
Administration Participation certificates, U.S. Maritime Administration Guaranteed Title XI financing,
Small Business Administration – Guaranteed participation certificates and Guaranteed pool certificates,
Government National Mortgage Association (“GNMA”) - GNMA guaranteed mortgage-backed securities
and GNMA guaranteed participation certificates, U. S. Department of Housing and Urban Development
Local authority bonds, Washington Metropolitan Area Transit Authority Guaranteed transit bonds, and
State and Local Government Series;
(B)
non-callable obligations of government-sponsored agencies that are not backed by the
full faith and credit of the U. S. Government, including, but not limited to, Federal Home Loan Mortgage
Corp. (FHLMC) Debt Obligations, Farm Credit System (formerly Federal Land Banks, Intermediate
Credit Banks, and Banks for Cooperatives) Consolidated Systemwide bonds and notes, Federal Home
Loan Banks (FHL Banks) Consolidated debt obligations, Federal National Mortgage Association
(FNMA) Debt Obligations, and Resolution Funding Corp. (REFCORP) Debt obligations; and
(C)
stripped securities where the principal-only and interest-only strips are derived from noncallable obligations issued by the U. S. Treasury and REFCORP securities stripped by the Federal
Reserve Bank of New York, excluding custodial receipts, i.e. CATs, TIGERS, unit investment trusts and
mutual funds, etc.
“Guarantee” means any obligation of the Issuer guaranteeing in any manner, whether directly or
indirectly, any obligation of any Person.
“Holder” or “Bondholder,” whenever used herein with respect to a Bond, means the person in
whose name such Bond is registered.
“Indenture” means the Indenture, dated as of February 1, 2014, between the Trustee and the
Issuer, as originally executed or as it may from time to time be supplemented or amended by any
Supplemental Indenture delivered pursuant to the provisions thereof.
“Insurance” means any financial guaranty insurance policy or municipal bond insurance policy
issued by an Insurer insuring the payment when due of principal of and interest on a Series of Bonds as
provided in such financial guaranty insurance policy or municipal bond insurance policy.
“Insurer” means any provider of Insurance with respect to a Series of Bonds.
“Interest Fund” means the fund by that name established pursuant to the Indenture.
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“Interest Fund Requirement” means, for any Transfer Calculation Period, (i) the aggregate
amount of interest becoming due and payable on the Outstanding Current Interest Bonds (except for
Bonds constituting Variable Rate Indebtedness which shall be governed by clause (ii) below) during such
Transfer Calculation Period (excluding any interest for which there are moneys deposited in the Interest
Fund from the proceeds of any Series of Bonds or other source and reserved as capitalized interest to pay
such interest during said Transfer Calculation Period) plus (ii) the aggregate amount of interest becoming
due and payable on Outstanding Current Interest Bonds constituting Variable Rate Indebtedness during
the such Transfer Calculation Period, calculated, if the actual rate of interest is not known, at the interest
rate specified in writing by the Issuer, or if the Issuer has not specified an interest rate in writing,
calculated at the maximum interest rate borne by such Variable Rate Indebtedness during the month prior
to the month of deposit plus one hundred (100) basis points. If there are Liquidity Facility Bonds
outstanding during any Transfer Calculation Period, the Interest Fund Requirement shall take into account
and include the Liquidity Facility Rate on Liquidity Facility Bonds required by the Liquidity Facility then
in effect with respect to such Bonds.
“Interest Payment Date,” with respect to each Series of Bonds, shall have the meaning specified
in the Supplemental Indenture establishing the terms and provisions of such Series of Bonds.
“Interest Rate Swap Agreement” or “Swap” means an interest rate swap, cap, collar, option, floor,
forward, derivative, or other hedging agreement, arrangement or security, however denominated, entered
into between the Issuer and a Counterparty, in connection with or incidental to, the issuance or carrying of
Obligations, including, without limitation, an interest rate swap, cap, collar, option, floor, forward,
derivative, or other hedging agreement, arrangement or security entered into in advance of the issuance of
Obligations or incurrence of Obligations.
“Interest Subsidy Bonds” means Bonds for which the Issuer is entitled to receive Subsidy
Payments.
“Issuer” means the California Infrastructure and Economic Development Bank, organized and
existing pursuant to the Act, and its successors.
“Issuer Retained Rights” means (i) the right to receive any Pledged Loan Fees and Expenses, (ii)
any right of the Issuer to indemnification, (iii) the right of the Issuer to receive notices, certificates,
opinions or similar documentation, and (iv) the right of the Issuer to enforce the obligations of any
Borrower contained in the Pledged Loans, including, but not limited to, default remedies.
“Letter of Credit Fund” means a fund by that name established to hold funds that are drawn on
Credit Enhancement provided in the form of a letter of credit and that are to be applied to pay the
principal of or interest on a Series of Bonds, which fund shall be established pursuant to the Supplemental
Indenture establishing the terms and provisions of such Series of Bonds.
“Liquidity Facility” means, with respect to a Series of Bonds, a line of credit, letter of credit,
standby purchase agreement or similar liquidity facility, which secures, enhances or guarantees the
payment of purchase price of such Series of Bonds under certain conditions specified therein, issued by a
commercial bank, insurance company, pension fund or other institution, and delivered or made available
to the Trustee, as from time to time supplemented or amended pursuant to its terms, or, in the event of the
delivery or availability of an Alternate Liquidity Facility, such Alternate Liquidity Facility.
“Liquidity Facility Bonds” means any Bonds purchased with moneys drawn under (or otherwise
obtained pursuant to the terms of) a Liquidity Facility, but excluding any Bonds no longer considered to
be Liquidity Facility Bonds in accordance with the terms of the applicable Liquidity Facility. If
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designated as such in a Supplemental Indenture, Bonds purchased with moneys drawn under Credit
Enhancement in the form of a letter of credit or other similar instrument shall be treated as Liquidity
Facility Bonds.
“Liquidity Facility Provider” means, with respect to a Series of Bonds, the commercial bank,
insurance company, pension fund or other institution issuing (or having primary obligation, or acting as
agent for the institutions obligated, under) a Liquidity Facility then in effect with respect to such Series of
Bonds.
“Liquidity Facility Rate” means, with respect to a Series of Bonds, the interest rate per annum, if
any, specified in the Liquidity Facility delivered in connection with such Series of Bonds as applicable to
Liquidity Facility Bonds.
“Loan” means any loan, lease or other obligation of a Borrower to the Issuer under the Program.
“Loan Agreement” means any agreement evidencing a Pledged Loan or providing security
therefore, made by the Issuer with any Borrower under the Program, together with all extensions,
renewals, modifications or replacements thereof.
“Mandatory Sinking Account Payment” means, with respect to Bonds of any Series and maturity,
the amount required by the Supplemental Indenture establishing the terms and provisions of such Series
of Bonds to be deposited by the Issuer in a Sinking Account for the payment of Term Bonds of such
Series and maturity.
“Moody’s” means Moody’s Investors Service, a corporation duly organized and existing under
the laws of the State of Delaware, and its successors and assigns, except that if such corporation shall be
dissolved or liquidated or shall no longer perform the functions of a securities rating agency, then the term
“Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency selected
by the Issuer.
“Obligations” means any Bonds or Parity Obligations.
“One Month USD LIBOR Rate” means the rate for deposits in U.S. dollars for a one-month
maturity that appears on Reuters Screen LIBOR01 Page (or such other page as may replace that page on
that service, or such other service as may be nominated by the British Bankers Association, for the
purpose of displaying London interbank offered rates for U.S. dollar deposits) as of 11:00 a.m., London
time, on the date of determination of such rate, except that, if such rate does not appear on such page on
such date, the One Month USD LIBOR Rate means a rate determined on the basis of the rates at which
deposits in U.S. dollars for a one-month maturity and in a principal amount of at least U.S. $1,000,000 are
offered at approximately 11:00 a.m., London time, on such date, to prime banks in the London interbank
market by three major banks in the London interbank market (herein referred to as the “Reference
Banks”) selected by the Issuer (provided, however, that the Issuer may appoint an agent to identify such
Reference Banks). The Issuer or its agent is to request the principal London office of each of such
Reference Banks to provide a quotation of its rate. If at least two such quotations are provided, the One
Month USD LIBOR Rate will be the arithmetic mean of such quotations. If fewer than two quotations
are provided, the One Month USD LIBOR Rate will be the arithmetic mean of the rates quoted by three
(if three quotations are not provided, two or one, as applicable) major banks in New York City, selected
by the Issuer or its agent, at approximately 11:00 a.m., New York City time, on such date for loans in
U.S. dollars to leading European banks in a principal amount of at least U.S. $1,000,000 having a onemonth maturity. If none of the banks in New York City selected by the Issuer or its agent is then quoting
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rates for such loans, then the One Month USD LIBOR Rate for the ensuing interest period will mean the
One Month USD LIBOR Rate most recently in effect.
“Opinion of Bond Counsel” means a written opinion of a law firm of national standing in the
field of public finance selected by the Issuer.
“Outstanding,” when used as of any particular time with reference to Bonds, means (subject to
the provisions of the Indenture described below under the caption “Disqualified Bonds”) all Bonds
theretofore, or thereupon being, authenticated and delivered by the Trustee under the Indenture except:
(i) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (ii) Bonds
with respect to which all liability of the Issuer shall have been discharged in accordance with the
provisions of the Indenture described below under the caption “Discharge of Liability on Bonds,”
including Bonds (or portions of Bonds) referred to the Indenture described below under the caption
“Money Held for Particular Bonds;” and (iii) Bonds for the transfer or exchange of or in lieu of or in
substitution for which other Bonds shall have been authenticated and delivered by the Trustee pursuant to
the Indenture; provided, however, that if the principal of or interest due on any Bonds shall be paid by the
Credit Enhancement Provider pursuant to the Credit Enhancement issued in connection with such Bonds,
such Bonds shall remain Outstanding for all purposes and shall not be considered defeased or otherwise
satisfied or paid by the Issuer and the pledge of the Collateral pledged therefor as provided in the
Indenture and all covenants, agreements and other obligations of the Issuer to the Holders shall continue
to exist and shall run to the benefit of such Credit Enhancement Provider and such Credit Enhancement
Provider shall be subrogated to the rights of such Holders.
“Parity Obligations” means any obligation of the Issuer (excluding fees and expenses and
termination payments on Interest Rate Swap Agreements, which fees and expenses and termination
payments shall be secured as Fee and Expense Obligations) incurred in accordance with the Indenture, all
of which obligations are secured by the lien of the Indenture and payable from the Revenues as provided
in the Indenture.
“Participating Underwriter” means any of the original underwriters of a Series of Bonds required
to comply with Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission, under the
Securities Exchange Act of 1934, as the same may be amended from time to time.
“Permitted Investments” means any of the following, if and to the extent the same are at the time
legal for investment of funds held under the Indenture:
(A)
bonds or interest-bearing notes or obligations of the United States, or those for which the
faith and credit of the United States are pledged for the payment of principal and interest;
(B)
bonds or interest-bearing notes on obligations that are guaranteed as to principal and
interest by a federal agency of the United States;
(C)
bonds and notes of the State, or those for which the faith and credit of the State are
pledged for the payment of principal and interest, provided that the ratings of such bonds and notes of the
State are rated, at the time of purchase, within the top three Rating Categories, by at least two of the
following rating agencies: S&P, Moody’s and Fitch;
(D)
bonds or warrants, including, but not limited to, revenue warrants, of any county, city,
metropolitan water district, State water district, State water storage district, irrigation district in the State,
municipal utility district, or school district of the State, provided that the ratings of such bonds or warrants
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are rated, at the time of purchase, within the top three Rating Categories, by at least two of the following
rating agencies: S&P, Moody’s and Fitch;
(E)
bonds, consolidated bonds, collateral trust debentures, consolidated debentures, or other
obligations issued by federal land banks or federal intermediate credit banks established under the Federal
Farm Loan Act, as amended, in debentures and consolidated debentures issued by the Central Bank for
Cooperatives and banks for cooperatives established under the Farm Credit Act of 1933, as amended, in
bonds or debentures of the Federal Home Loan Bank Board established under the Federal Home Loan
Bank Act, in stock, bonds, debentures and other obligations of the Federal National Mortgage Association
established under the National Housing Act as amended, and in the bonds of any federal home loan bank
established under that act, obligations of the Federal Home Loan Mortgage Corporation, in bonds, notes,
and other obligations issued by the Tennessee Valley Issuer under the Tennessee Valley Act as amended,
and bonds, notes, and other obligations guaranteed by the Commodity Credit Corporation for the export
of California agricultural products under the Commodity Credit Corporation Charter Act as amended;
(F)
(1)
commercial paper rated, at the time of purchase, within the top three Rating
Categories by at least two of the following rating agencies: S&P, Moody’s and Fitch. Eligible paper is
further limited to issuing corporations or trusts approved by the State of California Pooled Money
Investment Board that meet the conditions in either subparagraph (a) or subparagraph (b):
(a)
(b)
both of the following:
(i)
organized and operating within the United States; and
(ii)
having total assets in excess of five hundred million dollars
($500,000,000); or
both of the following:
(i)
organized within the United States as a special purpose
corporation or trust; and
(ii)
having program wide credit enhancements including, but
not limited to, overcollateralization, letters of credit, or
surety bond;
(2)
purchases of eligible commercial paper may not exceed 180 days’ maturity,
represent more than 10 percent of the outstanding paper of an issuing corporation or trust, nor exceed 30
percent of the resources of an investment program. At the request of the State of California Pooled
Money Investment Board, the investment shall be secured by the Issuer by depositing with the State
Treasurer securities authorized by California Government Code Section 53651 having a market value at
least 10 percent in excess of the amount of the state’s investment;
(G)
bills of exchange or time drafts drawn on and accepted by a commercial bank rated, at the
time of investment, in the top three Rating Categories, by at least two of the following rating agencies:
S&P, Moody’s and Fitch, otherwise known as bankers acceptances, which are eligible for purchase by the
Federal Reserve System;
(H)
negotiable certificates of deposits issued by a federally or state-chartered bank or savings
and loan association, a state-licensed branch of a foreign bank, or a federally or state-chartered credit
union rated, at the time of investment, in the top three Rating Categories, by at least two of the following
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rating agencies: S&P, Moody’s and Fitch. For the purposes of this definition, negotiable certificates of
deposits do not come within the provisions of Chapter 4 (commencing with Section 16500) and Chapter
4.5 (commencing with Section 16600) of the California Government Code;
(I)
the portion of bank loans and obligations guaranteed by the United States Small Business
Administration or the United States Farmers Home Administration;
(J)
bank loans and obligations guaranteed by the Export-Import Bank of the United States;
(K)
student loan obligations insured under the Guaranteed Student Loan Program established
pursuant to the Higher Education Act of 1965, as amended (20 U.S.C. Sec. 1001 and following) with debt
rated, at the time of investment, in the top three Rating Categories by S&P, Moody’s and Fitch, if rated by
Fitch and eligible for resale to the Student Loan Marketing Association established pursuant to Section
133 of the Education Amendments of 1972, as amended (20 U.S.C. Sec. 1087-2);
(L)
obligations issued, assumed, or guaranteed by the International Bank for Reconstruction
and Development, the Inter-American Development Bank, the Asian Development Bank, the African
Development Bank, the International Finance Corporation, or the Government Development Bank of
Puerto Rico and rated, at the time of investment, in the top three Rating Categories by at least two of the
following rating agencies: S&P, Moody’s and Fitch;
(M)
bonds, debentures, and notes issued by corporations organized and operating within the
United States. Securities eligible for investment under this subdivision (M) shall be rated, at the time of
investment, within the top three Rating Categories, by at least two of the following rating agencies: S&P,
Moody’s and Fitch;
(N)
the California State Surplus Money Investment Fund established pursuant to California
Government Code Section 16470, as amended from time to time;
(O)
repurchase agreements with banks, insurance companies or other financial institutions
whose senior long-term debt (or in the case of entities providing a guaranty, the senior long-term debt of
such guarantor) is rated, at the time of execution of such agreement, in top three Rating Categories, by at
least two of the following rating agencies: S&P, Moody’s and Fitch;
(P)
investments or other contractual arrangements with banks, insurance companies or other
financial institutions whose senior long-term debt (or in the case of entities providing a guaranty, the
senior long-term debt of such guarantor) is rated, at the time of investment, within the top three Rating
Categories by at least two of the following rating agencies: S&P, Moody’s and Fitch; or such
investments or other contractual arrangements which are collateralized by Permitted Investments of the
type and in the amounts consistent with maintaining the then-current ratings on the Bonds by each of the
Rating Agencies, but in all events the senior long-term debt of such entities or any guarantor of debt of
such entities shall be rated, at the time of investment, in the top three Rating Categories by at least two of
the following rating agencies: S&P, Moody’s and Fitch;
(Q)
forward purchase agreements collateralized with obligations described in (A) through (D)
above with banks, insurance companies or other financial institutions whose senior long-term debt (or in
the case of entities providing a guaranty, the senior long-term debt of such guarantor) is rated, at the time
of execution of such agreement, in the top three Rating Categories by at least two of the following rating
agencies: S&P, Moody’s and Fitch;
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(R)
money market funds including funds for which the Trustee, its parent holding company,
if any, or any affiliates or subsidiaries of the Trustee or such holding company provide investment
advisory or other management services rated, at the time of investment, in the top three Rating Categories
by at least two of the following rating agencies: S&P, Moody’s and Fitch; and
(S)
unsecured certificates of deposit, time deposits, money market deposits, demand deposits
and bankers’ acceptances of any bank (including those of the Trustee, its parent holding company, if any,
or any affiliates or subsidiaries of the Trustee or such holding company) the short-term obligations of
which are rated, at the time of investment, in the highest Rating Category by at least two of the following
rating agencies: S&P, Moody’s and Fitch.
“Person” means an association, corporation, firm, partnership, trust, or other legal entity or group
of entities, including a governmental entity or any agency or political subdivision thereof.
“Pledged Loan Fees and Expenses” means any fees and expenses owed to the Issuer under any
Pledged Loan.
“Pledged Loan Fees and Expenses Subaccount” means the subaccount by that name established
within the Unrestricted Assets Account pursuant to the Indenture.
“Pledged Loan Repayments” means all payments of principal, interest or premiums on a Pledged
Loan, whether as a result of scheduled payments or prepayments or remedial proceedings taken in the
event of a default thereon.
“Pledged Loans” means all Loans listed in an exhibit to the Indenture, as such exhibit may be
revised from time to time pursuant to the Indenture.
“Pledged Funds and Accounts” means the Revenue Fund, the Interest Fund, the Principal Fund
(including all Sinking Accounts therein), the Reserve Funds, the Subordinate Obligations Fund, the Fees
and Expenses Fund, the Supplemental Revenue Fund, the Equity Fund and any accounts or subaccounts
therein (excluding the Unrestricted Assets Account and excluding any Borrower’s Loan Subaccount) and
any other funds or accounts established pursuant to the Indenture and designated as such by the Issuer.
“Principal Fund” means the fund by that name established pursuant to the Indenture.
“Principal Fund Requirement” means, with respect to any Transfer Calculation Period, (i) the
aggregate amount of Bond Obligation becoming due and payable on the Outstanding Serial Bonds of all
Series during such Transfer Calculation Period, plus (ii) the aggregate of the Mandatory Sinking Account
Payments to be paid during such Transfer Calculation Period into the respective Sinking Accounts for the
Term Bonds of all Series for which Sinking Accounts have been created and for which mandatory
redemption is required from said Sinking Accounts; provided that if the Issuer certifies to the Trustee that
any principal payments during such Transfer Calculation Period are expected to be refunded on or prior to
their respective due dates or paid from amounts on deposit in a Reserve Fund that would be in excess of
the Bond Reserve Requirement applicable to such Reserve Fund upon such payment, the Principal Fund
Requirement for such Transfer Calculation Period need not include such principal to be so refunded or
paid. Not later than the Transfer Date immediately preceding the beginning of each Bond Year, the
Trustee shall request from the Issuer a Certificate of the Issuer setting forth the principal payments that
will not be included in the Principal Fund Requirement pursuant to the preceding sentence and the reason
therefor. If there are any Liquidity Facility Bonds outstanding during a Transfer Calculation Period then
the Principal Fund Requirement shall take into account and include any amortizations or redemptions of
any Liquidity Facility Bonds required by the Liquidity Facility then in effect with respect to such Bonds.
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For purposes of the Principal Fund Requirement, Liquidity Facility Bonds shall be treated as Serial Bonds
with maturity dates on the payment dates of any amortization or redemptions.
“Program” means the Infrastructure State Revolving Fund Program established and administered
by the Issuer pursuant to the Act.
“Purchase Fund” means a fund by that name established to hold funds to be applied to pay the
purchase price of a Series of Bonds, which fund shall be established pursuant to the Supplemental
Indenture establishing the terms and provisions of such Series of Bonds.
“Rating Agency” means, as and to the extent applicable to a Series of Bonds, each of Fitch,
Moody’s and Standard & Poor’s, but, in each instance, only so long as each such Rating Agency then
maintains a rating on such Series of Bonds at the request of the Issuer.
“Rating Category” means: (i) with respect to any long-term rating category, all ratings
designated by a particular letter or combination of letters, without regard to any numerical modifier, plus
or minus sign or other modifier; and (ii) with respect to any short-term or commercial paper rating
category, all ratings designated by a particular letter or combination of letters and taking into account any
numerical modifier, but not any plus or minus sign or other modifier.
“Rebate Fund” means the fund by that name established pursuant to the Indenture.
“Rebate Requirement” means, with respect to any Series of Bonds, the Rebate Requirement
determined in accordance with the Tax Certificate delivered in connection with such Series of Bonds.
“Redemption Fund” means the fund by that name established pursuant to the Indenture.
“Redemption Price” means, with respect to any Bond (or portion thereof), the Bond Obligation of
such Bond (or portion thereof) plus the applicable premium, if any, payable upon redemption thereof
pursuant to the provisions of such Bond and the Indenture.
“Reserve Facility” means any insurance policy, letter of credit or surety bond issued by a Reserve
Facility Provider and delivered to the Trustee in satisfaction of all or a portion of the Bond Reserve
Requirement applicable to one or more Series of Bonds.
“Reserve Facility Provider” means any issuer of a Reserve Facility.
“Reserve Fund” means any fund by that name established with respect to one or more Series of
Bonds pursuant to the Supplemental Indenture establishing the terms and provisions of such Series of
Bonds.
“Restricted Assets Account” means the account by that name established within the Equity Fund
pursuant to the Indenture.
“Revenue Fund” means the fund by that name established pursuant to the Indenture.
“Revenues” means: (i) all Pledged Loan Repayments; (ii) all investment earnings on amounts
held by the Trustee in the Pledged Funds and Accounts; (iii) all Swap Revenues; and (iv) all Subsidy
Payments.
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“Rule 15c2-12” means Securities and Exchange Commission Rule 15c2-12, as supplemented and
amended from time to time.
“Securities Depository” means The Depository Trust Company, or, in accordance with thencurrent guidelines of the Securities and Exchange Commission, such other securities depository, or no
such depositories, as the Issuer may designate in a Request of the Issuer delivered to the Trustee.
“Serial Bonds” means Bonds, maturing in specified years, for which no Mandatory Sinking
Account Payments are provided.
“Series,” whenever used herein with respect to Bonds, means all of the Bonds designated as being
of the same series, authenticated and delivered in a simultaneous transaction regardless of variations in
maturity, interest rate, redemption and other provisions, and any Bonds thereafter authenticated and
delivered upon transfer or exchange or in lieu of or in substitution for (but not to refund) such Bonds as
herein provided.
“Series 2014A Bonds” means the California Infrastructure and Economic Development Bank
Infrastructure State Revolving Fund Revenue Bonds, Series 2014A authorized by, and at any time
Outstanding pursuant to, the Indenture.
“Series 2016A Bonds” means the California Infrastructure and Economic Development Bank
Infrastructure State Revolving Fund Revenue Bonds, Series 2016A authorized by, and at any time
Outstanding pursuant to, the Indenture.
“SIFMA Swap Index” means, on any date, a rate determined on the basis of the seven-day high
grade market index of tax-exempt variable rate demand obligations, as produced by Municipal Market
Data and published or made available by the Securities Industry & Financial Markets Association
(formerly the Bond Market Association) (“SIFMA”) or by any Person acting in cooperation with or under
the sponsorship of SIFMA and effective from such date.
“Sinking Account” means an account by that name established in the Principal Fund pursuant to
the Indenture for the payment of Term Bonds.
“Standard & Poor’s” or “S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s
Financial Services LLC business, which is a subsidiary of The McGraw-Hill Companies, Inc., a
corporation duly organized and existing under and by virtue of the laws of the State of New York, and its
successors and assigns, except that if such corporation shall be dissolved or liquidated or shall no longer
perform the functions of a securities rating agency, then the term “Standard & Poor’s” or “S&P” shall be
deemed to refer to any other nationally recognized securities rating agency selected by the Issuer.
“State” means the State of California.
“Subordinate Obligations” means any obligations (excluding fees and expenses and termination
payments on Interest Rate Swap Agreements, which fees and expenses and termination payments shall be
secured as Fee and Expense Obligations) of the Issuer issued or incurred in accordance with the
Indenture, which obligations are secured by the lien of the Indenture and payable from the Revenues as
provided therein.
“Subordinate Obligations Fund” means the fund by that name established pursuant to the
Indenture.
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“Subsidy Payments” means payments with respect to the interest due on a Series of Bonds made
by the United States Treasury to the Trustee pursuant to Section 54AA of the Code, Section 6431 of the
Code, or Section 1400U-2 of the Code or any successor to, or extension or replacement of, any of such
provisions of the Code, or any provisions of the Code that create substantially similar direct-pay subsidy
programs to such programs created pursuant to Section 54AA, Section 6431 or Section 1400U-2 of the
Code.
“Supplemental Indenture” means any indenture hereafter duly executed and delivered,
supplementing, modifying or amending the Indenture, but only if and to the extent that such supplemental
indenture is authorized under the Indenture.
“Supplemental Revenue Fund” means the fund by that name established pursuant to the
Indenture.
“Swap Revenues” means all amounts owed or paid to the Issuer by any Counterparty under any
Interest Rate Swap Agreement after offset for amounts owed or paid by the Issuer to such Counterparty
under such Interest Rate Swap Agreement.
“Tax Certificate” means each Tax Certificate delivered by the Issuer at the time of issuance and
delivery of a Series of Bonds, as the same may be amended or supplemented in accordance with its terms.
“Term Bonds” means Bonds payable at or before their specified maturity date or dates from
Mandatory Sinking Account Payments established for that purpose and calculated to retire such Bonds on
or before their specified maturity date or dates.
“Transfer Calculation Period” means (i) with respect to each Transfer Date during the period
commencing on, and including, each day that is two (2) Business Days prior to any April 1 and ending
on, but excluding, the day that is two (2) Business Days prior to the next succeeding October 1, the period
commencing on, and including, such April 1 and ending on, and including, the next succeeding October 1
and (ii) with respect to each Transfer Date during the period commencing on, and including, each day that
is two (2) Business Days prior to any October 1 and ending on, but excluding, the day that is two (2)
Business Days prior to the next succeeding April 1, the period commencing on, but excluding, such
October 1 and ending on, but excluding, the next succeeding April 1.
“Transfer Date” means, initially, each day that is two (2) Business Days prior to each April 1 and
October 1, commencing with October 1, 2016 and, upon delivery of a certificate of the Issuer to the
Trustee specifying additional dates, each additional date specified in the certificate of the Issuer.
“Trustee” means U.S. Bank National Association, a national banking association duly organized
and existing under and by virtue of the laws of the United States of America, or its successor, as Trustee
as provided in the Indenture.
“Unrestricted Assets Account” means the account by that name established within the Equity
Fund pursuant to the Indenture.
“Variable Rate Indebtedness” means any indebtedness the interest rate on which is not fixed at
the time of incurrence of such indebtedness, and has not at some subsequent date been fixed, at a
numerical rate or rates for the entire term of such indebtedness.
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Pledge and Assignment; Revenue Fund
So long as any Bonds are Outstanding or Parity Obligations, Subordinate Obligations, Fee and
Expense Obligations or any other amounts payable under the Indenture remain unpaid, the Issuer
covenants and agrees to: (a) direct the Borrower for each Pledged Loan to transfer Pledged Loan
Repayments directly to the Trustee and (b) promptly transfer Pledged Loan Repayments received by it
from any Borrower to the Trustee. The Trustee shall forthwith deposit in a trust fund, designated as the
“Revenue Fund,” which fund the Trustee shall establish and maintain, all Pledged Loan Repayments
transferred to the Trustee, when and as received by the Trustee. Notwithstanding anything to the contrary
contained in the Indenture, amounts transferred to or received by the Trustee that constitute Pledged Loan
Fees and Expenses shall not be deposited in the Revenue Fund by the Trustee but shall be transferred by
the Trustee directly to the Pledged Loan Fees and Expenses Subaccount of the Unrestricted Assets
Account when and as received.
As security for the payment of all amounts owing on the Bonds, the Parity Obligations, the
Subordinate Obligations and the Fee and Expense Obligations, in the amounts and with the priorities set
forth in the Indenture, the Issuer hereby irrevocably pledges and assigns to the Trustee, and grants to the
Trustee a security interest in, the Collateral, subject to the provisions of the Indenture permitting the
application thereof for the purposes and on the terms and conditions set forth in the Indenture; provided,
however, that the Collateral shall not include the Issuer Retained Rights. The Collateral shall
immediately be subject to the lien of the Indenture and such lien shall be valid, binding and enforceable
against the Issuer and all others asserting rights therein, including all creditors of and transferees from the
Issuer or the Trustee, to the extent set forth in, and in accordance with, the Indenture irrespective of
whether those parties have notice thereof and without the need for any physical delivery, recordation,
filing or further act.
All Bonds and Parity Obligations shall be of equal rank without preference, priority or distinction
of any Bonds and Parity Obligations over any other Bonds and Parity Obligations. All Subordinate
Obligations shall be of equal rank without preference, priority or distinction of any Subordinate
Obligations over any other Subordinate Obligations. All Fee and Expense Obligations shall be of equal
rank without preference, priority or distinction of any Fee and Expense Obligations over any other Fee
and Expense Obligations.
All Revenues (other than Pledged Loan Repayments) shall also be deposited in the Revenue
Fund. The Trustee shall also deposit in the Revenue Fund any other amounts transferred to it by the
Issuer and designated by the Issuer in writing for such purpose.
The Bonds are limited obligations of the Issuer and are secured as to payment of both principal
and interest, and any premium upon redemption thereof, exclusively from the Collateral pledged therefor
as provided in the Indenture.
On or before each January 15 and July 15, the Trustee shall deliver to the Issuer a statement as of
January 1 and July 1, respectively, showing, for each Pledged Loan, all payments received since the last
such statement, or since the date of issuance of the Series 2016A Bonds (in the case of the first such
statement), specifically itemizing (i) the amount of any regularly scheduled principal and interest paid
with respect to such Pledged Loan, (ii) the amount of any prepayment of such Pledged Loan, (iii) the
outstanding principal balance of such Pledged Loan as of the date of such statement, and (iv) if
applicable, whether the payment of such Pledged Loan is delinquent and in what amount.
All Pledged Loans as of the date of execution and delivery thereof shall be listed on an exhibit to
the Indenture. Upon the addition of any Pledged Loan, the Issuer shall within thirty (30) days after such
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addition deliver a revised exhibit to the Trustee. Upon the substitution or release of any Pledged Loan as
permitted by the Indenture, the Issuer shall within thirty (30) days after such substitution or release
deliver a revised exhibit to the Trustee and any Rating Agency that reflects such substitution or release.
Allocation of Revenues
So long as any Bonds are Outstanding or Parity Obligations, Subordinate Obligations, Fee and
Expense Obligations or any other amounts payable under the Indenture remain unpaid, the Trustee shall
set aside the moneys in the Revenue Fund in the following respective funds (each of which the Trustee
shall establish, maintain and hold in trust for the benefit of the Holders of the Bonds and, as and to the
extent applicable, the holders of Parity Obligations, Subordinate Obligations and Fee and Expense
Obligations) on the following respective dates, in the following amounts, in the following order of
priority, the requirements of each such fund (including the making up of any deficiencies in any such fund
resulting from lack of Revenues sufficient to make any earlier required deposit) at the time of deposit to
be satisfied before any deposit is made to any fund subsequent in priority; provided that (i) on a parity
with such deposits the Trustee may set aside or transfer amounts with respect to any outstanding Parity
Obligations as provided in the proceedings for such Parity Obligations delivered to the Trustee pursuant
to the Indenture (which shall be proportionate if such amounts are insufficient to provide for all deposits
required as of any date to be made with respect to the Bonds and such Parity Obligations), (ii) payments
on Interest Rate Swap Agreements that constitute Parity Obligations shall be payable from the Interest
Fund and the required deposits below shall be adjusted to include payments on such Interest Rate Swap
Agreements during the applicable Transfer Calculation Period (which shall be proportionate in the event
such amounts are insufficient to provide for all deposits required as of any date to be made with respect to
the Bonds and such Parity Obligations) and (iii) if any of the deposits or transfers requires more than one
such deposit or transfer and there are not then on deposit in the Revenue Fund sufficient moneys to make
all such deposits and transfers, then such deposits and payments shall be made pro rata (based on the total
amount of such deposits and payments then due) to the extent of available moneys.
(1)
Interest Fund. On each Transfer Date, the Trustee shall set aside in the Interest Fund
amounts then on deposit in the Revenue Fund until the amount on deposit in the Interest Fund is equal to
the Interest Fund Requirement for the Transfer Calculation Period applicable to such Transfer Date;
provided that with respect to a newly issued Series of Bonds having one or more Interest Payment Dates
scheduled to occur during the Transfer Calculation Period in which such Series of Bonds is issued and
prior to the next Transfer Date for such Transfer Calculation Period, the Trustee shall, no later than the
first Interest Payment Date for such Series of Bonds, set aside in the Interest Fund the amount of interest
becoming due on said Series of Bonds on said Interest Payment Dates. The Trustee need not make any
deposit into the Interest Fund with respect to any Bonds on any Transfer Date if the amount contained
therein on such Transfer Date is at least equal to the Interest Fund Requirement for the Transfer
Calculation Period applicable to such Transfer Date. On October 1 of each year, any excess amounts in
the Interest Fund not needed to pay interest on such date (and not held to pay interest on Bonds during the
immediately following Transfer Calculation Period) shall be transferred to the Revenue Fund (but
excluding, in each case, any moneys on deposit in the Interest Fund from the proceeds of any Series of
Bonds or other source and reserved as capitalized interest to pay interest on any future Interest Payment
Dates).
(2)
Principal Fund; Sinking Accounts. On each Transfer Date, the Trustee shall set aside in
the Principal Fund amounts then on deposit in the Revenue Fund until the amount on deposit in the
Principal Fund is equal to the Principal Fund Requirement for the Transfer Calculation Period applicable
to such Transfer Date; provided that with respect to a newly issued Series of Bonds having Bond
Obligation or Mandatory Sinking Account Payments scheduled to be due and payable during the Transfer
Calculation Period in which such Series of Bonds is issued and prior to the next Transfer Date for such
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Transfer Calculation Period, the Trustee shall, no later than the first such payment date for such Series of
Bonds, set aside in the Principal Fund the amount of Bond Obligation or Mandatory Sinking Account
Payments due and payable on said Series of Bonds on said payment dates. All of the aforesaid deposits
made in connection with future Mandatory Sinking Account Payments shall be made without priority of
any payment over any other such payment. The Trustee need not make a deposit into the Principal Fund
with respect to any Bonds on any Transfer Date if the amount contained therein on such Transfer Date is
at least equal to the Principal Fund Requirement for the Transfer Calculation Period applicable to such
Transfer Date. On October 1 of each year, any excess amounts in the Principal Fund not needed to pay
principal on such date (and not held to pay principal on Bonds during the immediately following Transfer
Calculation Period) shall be transferred to the Revenue Fund.
(3)
Reserve Funds. On each Transfer Date, after the transfers described in (1) and (2) above
have been made, the Trustee shall deposit to any Reserve Fund the amounts, if any, required pursuant to
the Indenture.
(4)
Rebate Fund. On each Transfer Date, after the transfers described in (1), (2) and (3)
above have been made, the Trustee shall deposit in the Rebate Fund the amounts, if any, required
pursuant to the Indenture
(5)
Subordinate Obligations Fund. The Trustee shall establish, maintain and hold in trust a
separate fund designated as the “Subordinate Obligations Fund.” On each Transfer Date, after the
transfers described in (1), (2), (3) and (4) above have been made, the Trustee shall deposit in the
Subordinate Obligations Fund amounts then on deposit in the Revenue Fund until the amount on deposit
in the Subordinate Obligations Fund is equal to the amount necessary to make payments due and payable
with respect to Subordinate Obligations during the Transfer Calculation Period applicable to such
Transfer Date.
(6)
Fees and Expenses Fund. The Trustee shall establish, maintain and hold in trust a
separate fund designated as the “Fees and Expenses Fund.” On each Transfer Date, after the transfers
described in (1), (2), (3), (4) and (5) above have been made, the Trustee shall deposit in the Fees and
Expenses Fund such amount as the Issuer shall specify in writing is necessary for the payment of Fee and
Expense Obligations then owing by the Issuer.
(7)
Administrative Expense Fund. The Trustee shall establish, maintain, and hold in trust a
separate fund designated as the “Administrative Expense Fund.” On each Transfer Date, after the
transfers described in (1), (2), (3), (4), (5) and (6) above have been made, the Trustee shall deposit in the
Administrative Expense Fund, amounts then on deposit in the Revenue Fund until the amount on deposit
in the Administrative Expense Fund is equal to the amount of Administrative Expenses budgeted for such
period as is specified in writing to the Trustee by the Issuer.
(8)
Supplemental Revenue Fund. The Trustee shall establish, maintain, and hold in trust a
separate fund designated as the “Supplemental Revenue Fund.” On each Transfer Date, after the transfers
described in (1), (2), (3), (4), (5), (6) and (7) above have been made, the Trustee shall deposit in the
Supplemental Revenue Fund, the amount, if any, required pursuant to the Indenture.
(9)
Other Funds. On each Transfer Date, after the transfers described in (1), (2), (3), (4), (5),
(6), (7) and (8) above have been made, the Trustee shall deposit in any other fund or account established
with respect to Parity Obligations, Subordinate Obligations or Fee and Expense Obligations such amount
as may be specified in or determined under the provisions of the Supplemental Indenture or other
instrument providing for the issuance or incurrence of such Parity Obligations, Subordinate Obligations
or Fee and Expense Obligations to be transferred to such fund or account pursuant to this paragraph.
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(10). Equity Fund. The Trustee shall establish, maintain, and hold in trust a separate fund
designated as the “Equity Fund.” On each Transfer Date, after the transfers described in (1), (2), (3), (4),
(5), (6), (7), (8) and (9) above have been made, the Trustee shall deposit in the Equity Fund all amounts
remaining in the Revenue Fund on such Transfer Date.
Establishment and Application of Funds and Accounts
Each of the funds and accounts described below is established by the Indenture.
Interest Fund. All amounts in the Interest Fund shall be used and withdrawn by the Trustee solely
for the purposes of: (a) paying interest on the Bonds as it shall become due and payable (including
accrued interest on any Bonds purchased or redeemed prior to maturity pursuant to the Indenture), or for
reimbursing the Credit Enhancement Provider for a drawing for such purposes made on Credit
Enhancement provided in the form of an irrevocable, direct-pay letter of credit, and (b) making periodic
payments on Interest Rate Swap Agreements, as provided in the Indenture. If amounts on deposit in the
Interest Fund are not sufficient to pay in full all amounts payable from the Interest Fund, such amounts
shall be applied pro rata (based on the total amount on deposit in the Interest Fund and payments then
due).
Principal Fund. All amounts in the Principal Fund shall be used and withdrawn by the Trustee
solely for the purposes of paying the Bond Obligation of the Bonds when due and payable, except that all
amounts in the Sinking Accounts shall be used and withdrawn by the Trustee solely to purchase or
redeem or pay at maturity Term Bonds, as provided herein, or for reimbursing the Credit Provider for a
drawing for such purposes made on Credit Enhancement provided in the form of an irrevocable, directpay letter of credit. If amounts on deposit in the Principal Fund are not sufficient to pay in full all
amounts payable from the Principal Fund, such amounts shall be applied pro rata (based on the total
amount on deposit in the Principal Fund and payments then due).
The Trustee shall establish and maintain within the Principal Fund a separate account for the
Term Bonds of each Series and maturity, designated as the “_____ Sinking Account,” inserting therein
the Series and maturity designation of such Bonds. On or before the Business Day prior to any date upon
which a Mandatory Sinking Account Payment is due, the Trustee shall transfer the amount of such
Mandatory Sinking Account Payment (being the principal thereof, in the case of Current Interest Bonds,
and the Accreted Value, in the case of Capital Appreciation Bonds) from the Principal Fund to the
applicable Sinking Account. With respect to each Sinking Account, on each Mandatory Sinking Account
Payment date established for such Sinking Account, the Trustee shall apply the Mandatory Sinking
Account Payment required on that date to the redemption (or payment at maturity, as the case may be) of
Term Bonds of such Series and maturity for which such Sinking Account was established, in the manner
provided in the Indenture or the Supplemental Indenture pursuant to which such Series of Bonds was
created; provided that, at any time prior to giving such notice of such redemption, the Trustee shall, upon
receipt of a Request of the Issuer, apply moneys in such Sinking Account to the purchase of Term Bonds
of such Series and maturity at public or private sale, as and when and at such prices (including brokerage
and other charges, but excluding accrued interest, which is payable from the Interest Fund) as is directed
by the Issuer, except that the purchase price (excluding accrued interest, in the case of Current Interest
Bonds) shall not exceed the principal amount or Accreted Value thereof. If, during the 12-month period
(or six-month period with respect to Bonds having semi-annual Mandatory Sinking Account Payments)
immediately preceding said Mandatory Sinking Account Payment date, the Trustee has purchased Term
Bonds of such Series and maturity with moneys in such Sinking Account, or, during said period and prior
to giving said notice of redemption, the Issuer has deposited Term Bonds of such Series and maturity with
the Trustee, or Term Bonds of such Series and maturity were at any time purchased or redeemed by the
Trustee from the Redemption Fund and allocable to said Mandatory Sinking Account Payment, such
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Term Bonds so purchased or deposited or redeemed shall be applied, to the extent of the full principal
amount thereof, to reduce said Mandatory Sinking Account Payment. All Term Bonds purchased or
deposited pursuant to this subsection shall be cancelled by the Trustee and destroyed by the Trustee and a
certificate of destruction shall be delivered to the Issuer by the Trustee. Any amounts remaining in a
Sinking Account on October 1 of each year following the redemption as of such date of the Term Bonds
for which such account was established shall be withdrawn by the Trustee and transferred to the Revenue
Fund. All Term Bonds purchased from a Sinking Account or deposited by the Issuer with the Trustee in a
12-month period ending September 30 (or in a six-month period ending March 31 or September 30, with
respect to Bonds having semi-annual Mandatory Sinking Account Payments) and purchased prior to the
giving of notice by the Trustee for redemption from Mandatory Sinking Account Payments for such
period shall be allocated first to the next succeeding Mandatory Sinking Account Payment for such Series
and maturity of Term Bonds, if any, occurring on the next April 1 or October 1, then as a credit against
such future Mandatory Sinking Account Payments for such Series and maturity of Term Bonds as may be
specified in a Request of the Issuer. All Term Bonds redeemed by the Trustee from the Redemption Fund
shall be credited to such future Mandatory Sinking Account Payments for such Series and maturity of
Term Bonds as may be specified in a Request of the Issuer.
Reserve Funds. The Issuer may at its sole discretion at the time of issuance of any Series of
Bonds or at any time thereafter by Supplemental Indenture provide for the establishment of a Reserve
Fund as additional security for a Series of Bonds. Any Reserve Fund so established by the Issuer shall be
available to secure one or more Series of Bonds as the Issuer shall determine and shall specify in the
Supplemental Indenture establishing such Reserve Fund. Any Reserve Fund established by the Issuer
shall be held by the Trustee and shall comply with the requirements of the Indenture described below.
If there is any deficiency in any Reserve Fund on any Transfer Date such that amounts on deposit
in such Reserve Fund together with the available amount of any Reserve Facility comprising part of the
Bond Reserve Requirement for such Reserve Fund fall below the applicable Bond Reserve Requirement
and such deficiency is (i) due to a withdrawal from the Reserve Fund for purposes of making up any
deficiency in the Interest Fund or the Principal Fund relating to the Bonds of the Series to which the
Reserve Fund relates or (ii) results from a valuation of Permitted Investments held on deposit in the
Reserve Fund pursuant to the Investment of Funds and Accounts section of the Indenture, then, with the
priority set forth in the Allocation of Revenues section of the Indenture, the Trustee shall deposit in such
Reserve Fund the amount necessary to replenish such deficiency or repay any and all obligations due and
payable under the terms of any Reserve Facility comprising part of the Bond Reserve Requirement for
such Reserve Fund until the amount on deposit in such Reserve Fund together with the available amount
of any Reserve Facility comprising part of the Bond Reserve Requirement for such Reserve Fund is equal
to the Bond Reserve Requirement for such Reserve Fund. Upon deposit to a Reserve Fund of the amount
necessary to repay any and all obligations due and payable under the terms of any Reserve Facility, the
Trustee shall transfer such amount to each Reserve Facility Provider providing a Reserve Facility
satisfying a portion of the Bond Reserve Requirement relating to the Bonds of the Series to which the
Reserve Fund relates as their interests may appear.
Subordinate Obligations Fund. All moneys in the Subordinate Obligations Fund shall be used
and withdrawn by the Trustee to pay Subordinate Obligations as such amounts become due and payable.
If amounts on deposit in the Subordinate Obligations Fund are not sufficient to pay in full all amounts
payable from the Subordinate Obligations Fund, such amounts shall be applied pro rata (based on the total
amount on deposit in the Subordinate Obligations Fund and payments then due).
Fees and Expenses Fund. All amounts in the Fees and Expenses Fund shall be used and
withdrawn by the Trustee solely for the purpose of paying fees, expenses and similar charges owed by the
Issuer in connection with the Bonds or any Parity Obligations or Subordinate Obligations (including
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termination payments on any Interest Rate Swap Agreement) as such amounts shall become due and
payable. If amounts on deposit in the Fees and Expenses Fund are not sufficient to pay in full all amounts
payable from the Fees and Expenses Fund, such amounts shall be applied pro rata (based on the total
amount on deposit in the Fees and Expenses Fund and payments then due).
Administrative Expense Fund. All amounts deposited in the Administrative Expense Fund shall
be used and withdrawn by the Trustee solely to pay Administrative Expenses as they become due and
payable as directed by the Issuer.
Supplemental Revenue Fund. The Trustee shall not transfer amounts on deposit in the Revenue
Fund to any fund or account subordinate in priority to the Supplemental Revenue Fund until the Issuer
shall deliver to the Trustee a Certificate of the Issuer calculating the Coverage Test (taking into account
amounts already on deposit in the Supplemental Revenue Fund). If, based on such calculation, the
Coverage Test will not be satisfied as of the date of calculation, then the Issuer shall also specify, in the
Certificate of the Issuer delivered to the Trustee, the amount required to be deposited in the Supplemental
Revenue Fund to pay any projected shortfalls in the scheduled payment of Bonds or Parity Obligations
and to satisfy the Coverage Test as of the date of calculation. Pursuant to the Certificate of the Issuer and
with the priority set forth in the Allocation of Revenues section of the Indenture, the Trustee shall transfer
funds from the Revenue Fund to the Supplemental Revenue Fund. The Trustee shall also deposit in the
Supplemental Revenue Fund any other amounts transferred to it by the Issuer and designated by the Issuer
in writing for such purpose.
All amounts on deposit in the Supplemental Revenue Fund shall be used and withdrawn by the
Trustee on any payment date for Bonds or Parity Obligations for the purpose of making up any deficiency
in the payment of Bonds or Parity Obligations prior to the use of any Reserve Fund for such purpose.
If, on any date, the Issuer delivers to the Trustee a Certificate of the Issuer demonstrating
compliance with the Coverage Test without taking into account the amount (or a portion thereof) then on
deposit in the Supplemental Revenue Fund and requesting that such amount (or portion thereof) be
released from the Supplemental Revenue Fund, then the amount (or such portion thereof) on deposit in
the Supplemental Revenue Fund shall be withdrawn by the Trustee and deposited, transferred or utilized
pursuant to the instructions set forth in the Certificate of the Issuer subject to compliance with any
applicable provisions of any Tax Certificate and, in the event that such instructions provide for depositing
such amount (or such portion thereof), in the Unrestricted Assets Account, then such amount (or portion
thereof) shall be deposited in the Unrestricted Assets Account free and clear of the lien of the Indenture.
Equity Fund; Establishment, Funding and Allocation of Restricted Assets Account and
Unrestricted Assets Account. Unless otherwise specified by the Issuer in a Certificate of the Issuer
delivered to the Trustee, all amounts transferred to the Equity Fund in any Fiscal Year pursuant to the
Allocation of Revenues section of the Indenture shall first be deposited by the Trustee in the Unrestricted
Assets Account until the amount so transferred to the Unrestricted Assets Account in such Fiscal Year is
equal to the Issuer’s projected operating expenses for such Fiscal Year plus the Issuer’s projected
operating expenses for one-half of the following Fiscal Year (or such lesser amount as may be determined
in the sole discretion of the Issuer), all as specified in a Certificate of the Issuer delivered to the Trustee
prior to the first Transfer Date of the Fiscal Year. After making the transfers to the Unrestricted Assets
Account described in the preceding sentence, all amounts transferred to the Equity Fund in the Fiscal
Year pursuant to the Allocation of Revenues section of the Indenture shall be deposited by the Trustee in
the Restricted Assets Account.
The Trustee shall establish, maintain and hold in trust a separate account within the Equity Fund,
designated as the “Restricted Assets Account.” The Trustee shall deposit in the Restricted Assets
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Account all amounts required by the Indenture together with any other amounts provided to the Trustee
by the Issuer for deposit in the Restricted Assets Account. Subject to compliance with any applicable
provisions of any Tax Certificate, all amounts on deposit in the Restricted Assets Account shall be used
and withdrawn by the Trustee as directed in a Certificate of the Issuer for any lawful purpose of the
Program. If, on any date, the Issuer delivers to the Trustee a Certificate of the Issuer demonstrating
compliance with the Coverage Test without taking into account the amount then on deposit in the
Supplemental Revenue Fund and requesting that the amount on deposit in the Restricted Assets Account
(or such portion thereof specified in the Certificate of the Issuer) be released from the Restricted Assets
Account, then the amount (or such portion thereof) on deposit in the Restricted Assets Account shall be
withdrawn by the Trustee and deposited, transferred or utilized pursuant to the instructions set forth in the
Certificate of the Issuer and, in the event that such instructions provide for depositing such amount (or
such portion thereof), in the Unrestricted Assets Account, then such amount (or portion thereof) shall be
deposited in the Unrestricted Assets Account free and clear of the lien of the Indenture.
The Trustee shall establish and maintain a separate account within the Equity Fund, designated as
the “Unrestricted Assets Account” and a separate subaccount within the “Unrestricted Assets Account,”
designated as the “Pledged Loan Fees and Expenses Subaccount.” The Unrestricted Assets Account shall
be maintained by the Trustee for the benefit of the Issuer, shall be controlled by the Issuer, is not part of
the Collateral and shall not be subject to the lien of the Indenture. The Trustee shall deposit in the
Unrestricted Assets Account all amounts required by the Indenture together with any other amounts
provided to the Trustee by the Issuer for deposit in the Unrestricted Assets Account. Subject to
compliance with any applicable provisions of any Tax Certificate, all amounts on deposit in the
Unrestricted Assets Account may be used, transferred or withdrawn by the Issuer at any time for any
lawful purpose of the Issuer pursuant to a Certificate of the Issuer delivered to the Trustee; provided,
however, that in all cases, such Certificate of the Issuer need not demonstrate compliance with the
Coverage Test or other limitation except as expressly provided in this paragraph.
At such time as the Trustee receives a Certificate of the Issuer stating that a Loan has been fully
executed by a Borrower, the name of the Borrower and the amount of such Loan, the Trustee shall
transfer the amount of such Loan from the Restricted Assets Account or the Unrestricted Assets Account,
as applicable, to a separate subaccount that the Trustee shall establish and maintain within the Restricted
Assets Account or the Unrestricted Assets Account, as applicable, designated as the “__________ Loan
Subaccount,” inserting therein the name of the Borrower. Moneys on deposit in each Borrower’s Loan
Subaccount within the Restricted Assets Account and the Unrestricted Assets Account will be disbursed
to the Borrower (or to the Issuer to reimburse the Issuer for any disbursements made to such Borrower on
its Loan prior to the date the Trustee created such Borrower’s Loan Subaccount) upon receipt by the
Trustee of a Requisition of the Issuer; provided, however, that interest, profits and other income received
from the investment of moneys in such Borrower’s Loan Subaccount shall be transferred by the Trustee at
the direction of the Issuer. The Issuer may direct the Trustee in writing to transfer the amount of funds
then held in a Borrower’s Loan Subaccount that the Issuer has decided will not be disbursed to the
Borrower to the Restricted Assets Account or the Unrestricted Assets Account, as applicable.
Redemption Fund. All moneys deposited by the Issuer with the Trustee for the purpose of
optionally redeeming Bonds of any Series shall, unless otherwise directed by the Issuer, be deposited in
the Redemption Fund. All amounts deposited in the Redemption Fund shall be used and withdrawn by
the Trustee solely for the purpose of redeeming Bonds of such Series and maturity as shall be specified by
the Issuer in a Request to the Trustee, in the manner, at the times and upon the terms and conditions
specified in the Supplemental Indenture pursuant to which the Series of Bonds was created; provided that,
at any time prior to giving such notice of redemption, the Trustee shall, upon receipt of a Request of the
Issuer, apply such amounts to the purchase of Bonds at public or private sale, as and when and at such
prices (including brokerage and other charges, but excluding, in the case of Current Interest Bonds,
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accrued interest, which is payable from the Interest Fund) as is directed by the Issuer, except that the
purchase price (exclusive of any accrued interest) may not exceed the Redemption Price or Accreted
Value then applicable to such Bonds; and provided further that in lieu of redemption of Bonds of any
Series, or in combination therewith, amounts in the Redemption Fund may be transferred to the Interest
Fund and Principal Fund and credited against debt service on Bonds of any Series as set forth in a
Certificate of the Issuer. All Term Bonds purchased or redeemed from the Redemption Fund shall be
allocated to Mandatory Sinking Account Payments applicable to such Series and maturity of Term Bonds
as may be specified in a Request of the Issuer.
Rebate Fund. Within the Rebate Fund, the Trustee shall maintain such accounts as shall be
necessary in order to comply with the terms and requirements of each Tax Certificate as directed in
writing by the Issuer. All money at any time deposited in the Rebate Fund shall be held by the Trustee in
trust, to the extent required to satisfy the Rebate Requirement, for payment to the federal government of
the United States of America, and neither the Trustee nor any Holder nor any other Person shall have any
rights in or claim to such money. All amounts deposited into or on deposit in the Rebate Fund shall be
governed by the Indenture and by the applicable Tax Certificate.
Payment Provisions Applicable to Interest Rate Swap Agreements
The Issuer shall, promptly after Swap Revenues are paid by the Counterparty under an Interest
Rate Swap Agreement, transfer or cause to be transferred, the Swap Revenues to the Trustee for deposit
in the Revenue Fund.
Payments on Interest Rate Swap Agreements that are payable as Parity Obligations shall be
payable by the Trustee to the Counterparty from the Interest Fund as provided in the Indenture.
Payments on Interest Rate Swap Agreements that are payable as Subordinate Obligations shall be
payable by the Trustee to the Counterparty from the Subordinate Obligations Fund.
Payments on Interest Rate Swap Agreements that are payable as Fee and Expense Obligations
shall be payable by the Trustee to the Counterparty from the Fees and Expenses Fund.
The Issuer may apply termination payments received from any Counterparty to the defeasance or
redemption of all or a portion of any Bonds then Outstanding.
Investment in Funds and Accounts
All moneys in any of the funds and accounts held by the Trustee or established pursuant to the
Indenture (including any Bond Proceeds Fund held by the Trustee) shall be invested, as directed by the
Issuer, solely in Permitted Investments. Moneys in any Reserve Fund shall be invested in Permitted
Investments maturing in not more than five years, or having a put option or demand option providing
funds upon request for the purpose of payment of the Bonds to which such Reserve Fund relates as
provided herein. Moneys in the remaining funds and accounts shall be invested in Permitted Investments
maturing or available on demand not later than the date on which it is estimated that such moneys will be
required by the Trustee.
Unless otherwise provided in a Supplemental Indenture establishing the terms and provisions of a
Series of Bonds or a Request of the Issuer delivered to the Trustee: (i) all interest, profits and other
income received from the investment of moneys in the Interest Fund representing accrued interest or
capitalized interest shall be retained in the Interest Fund; (ii) all interest, profits and other income received
from the investment of moneys in any Reserve Fund shall be retained in such Reserve Fund to the extent
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of any deficiency therein, and otherwise shall be transferred to the Revenue Fund; (iii) all interest, profits
and other income received from the investment of moneys in a Costs of Issuance Fund shall be retained in
such Costs of Issuance Fund until such time as such Costs of Issuance Fund is closed, and any earnings
received on a Costs of Issuance Fund subsequent to the closure of such Costs of Issuance Fund shall be
transferred to the Revenue Fund; (iv) all interest, profits and other income received from the investment
of moneys in the Equity Fund, the Restricted Assets Account, the Unrestricted Assets Account, any Bond
Proceeds Fund, any Borrower’s Loan Account or any Borrower’s Loan Subaccount shall be retained in
such fund or account, unless the Issuer shall direct that such earnings be transferred to the Revenue Fund
or the Rebate Fund; (v) all interest, profits and other income received from the investment of moneys in
the Rebate Fund shall be retained in the Rebate Fund, except as otherwise provided in the Indenture, (vi)
all interest, profits and other income received from the investment of moneys in any Letter of Credit Fund
or Purchase Fund shall be retained in such Letter of Credit Fund or Purchase Fund, as applicable; and
(vii) all interest, profits and other income received from the investment of moneys in any other fund or
account shall be transferred to the Revenue Fund. Notwithstanding anything to the contrary contained in
this paragraph, an amount of interest received with respect to any Permitted Investment equal to the
amount of accrued interest, if any, paid as part of the purchase price of such Permitted Investment shall be
credited to the fund or account from which such accrued interest was paid.
All Permitted Investments credited to any Reserve Fund shall be valued (at the lesser of cost or
market value) as of the Transfer Date immediately preceding April 1 and October 1 of each year, such
market value to be determined by the Trustee in the manner then currently employed by the Trustee or in
any other manner consistent with corporate trust industry standards. Notwithstanding anything to the
contrary herein, in making any valuations of investments hereunder, the Trustee may utilize and rely on
computerized securities pricing services that may be available to it, including those available through its
regular accounting system.
Issuance of Additional Bonds and Other Obligations
Issuance of Additional Bonds. Subsequent to the issuance of the Series 2014A Bonds, the Issuer
may by Supplemental Indenture establish one or more additional Series of Bonds and the Issuer may
issue, and the Trustee may authenticate and deliver to the purchasers thereof, Bonds of any Series so
established, in such principal amount as shall be determined by the Issuer, but only with respect to each
additional Series of Bonds issued subsequent to the Series 2014A Bonds, upon compliance by the Issuer
with the provisions of the Indenture and subject to the specific conditions set forth below, each of which
is made a condition precedent to the issuance of any such additional Series of Bonds.
(A)
No Event of Default shall have occurred and then be continuing (or the issuance of such
additional Series of Bonds will cure any such Event of Default).
(B)
If a Supplemental Indenture providing for the issuance of such Series requires either (i)
the establishment of a Reserve Fund to provide additional security for such Series of Bonds, or (ii) that
the balance on deposit in an existing Reserve Fund be increased, forthwith upon the receipt of the
proceeds of the sale of such Series, to an amount at least equal to the Bond Reserve Requirement with
respect to such Series of Bonds and all other Bonds secured by such Reserve Fund to be considered
Outstanding upon the issuance of such additional Series of Bonds, then the Supplemental Indenture
providing for the issuance of such additional Series of Bonds shall require deposit of the amount
necessary. Said deposit shall be made as provided in the Supplemental Indenture providing for the
issuance of such additional Series of Bonds and may be made from the proceeds of the sale of such Series
of Bonds or from other funds of the Issuer or from both such sources or, subject to the terms of the
Indenture and any Supplemental Indenture governing such Reserve Fund, may be made in the form of a
Reserve Facility.
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(C)
The aggregate principal amount of Bonds issued under the Indenture shall not exceed any
applicable limitation imposed by the Act.
(D)
The Issuer shall deliver to the Trustee a Certificate of the Issuer demonstrating either (i)
compliance with the Coverage Test after taking into account the issuance of such additional Series of
Bonds or (ii) that Annual Debt Service will not be increased in any Bond Year after taking into account
the issuance of such additional Series of Bonds. For the purpose of demonstrating compliance with the
Coverage Test in accordance with this paragraph, the Issuer shall not take into account amounts on
deposit or expected to be on deposit in the Supplemental Revenue Fund.
Nothing in the Indenture contained shall prevent or be construed to prevent the Supplemental
Indenture providing for the issuance of an additional Series of Bonds from pledging or otherwise
providing, in addition to the security given or intended to be given by the Indenture, additional security
for the benefit of such additional Series of Bonds or any portion thereof.
Limitations on the Issuance of Obligations Secured by or Payable From Collateral; Parity
Obligations; Subordinate Obligations; Fee and Expense Obligations. The Issuer will not, so long as any
of the Bonds are Outstanding, issue any obligations or securities, howsoever denominated, secured in
whole or in part by, or payable in whole or in part from, the Collateral or any portion thereof (including
the Revenues) except as set forth below.
(A)
Bonds authorized pursuant to the Indenture, as described above under the caption
“Issuance of Additional Bonds.”
(B)
Parity Obligations, provided that the following conditions to the issuance or incurrence of
such Parity Obligations are satisfied:
(1)
Such Parity Obligations have been duly and legally authorized by the Issuer for
any lawful purpose;
(2)
No Event of Default shall have occurred and then be continuing (or the issuance
of such Parity Obligations will cure any such Event of Default), as evidenced by the delivery to
the Trustee of a Certificate of the Issuer to that effect;
(3)
The Issuer shall have delivered to the Trustee a Certificate of the Issuer
demonstrating either (i) compliance with the Coverage Test after taking into account the issuance
or incurrence of such Parity Obligations but without taking into account amounts on deposit or
expected to be on deposit in the Supplemental Revenue Fund or (ii) that Annual Debt Service will
not be increased in any Bond Year after taking into account the issuance or incurrence of such
Parity Obligations; provided, however that if the Parity Obligation being issued or incurred
consists of an Interest Rate Swap Agreement (excluding fees and expenses and termination
payments on such Interest Rate Swap Agreement), the Issuer shall be deemed to have complied
with the requirements of this section to the extent that the Series of Bonds to which the Interest
Rate Swap Agreement relates (x) satisfies the requirements of the Issuance of Additional Bonds
section of the Indenture after taking into account the adjustment of Debt Service on the Bonds to
reflect the impact of the Interest Rate Swap Agreement (in the case of Interest Rate Swap
Agreements entered into concurrently with, or subsequent to, the issuance of such Bonds), or (y)
is expected to satisfy the requirements of the Issuance of Additional Bonds section of the
Indenture after taking into account the adjustment of Debt Service on the Bonds to reflect the
impact of the Interest Rate Swap Agreement (in the case of Interest Rate Swap Agreements
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entered into in advance of the issuance of such Bonds), each as evidenced by a Certificate of the
Issuer delivered to the Trustee; and
(4)
As and to the extent applicable, the Trustee is designated as paying agent or
trustee for such Parity Obligations and the Issuer delivers to the Trustee a transcript of the
proceedings providing for the issuance of such Parity Obligations (but the Trustee shall not be
responsible for the validity or sufficiency of such proceedings or such Parity Obligations).
(C)
Subordinate Obligations, provided that the following conditions to issuance or incurrence
of such Subordinate Obligations are satisfied:
(1)
Such Subordinate Obligations have been duly and legally authorized by the
Issuer for any lawful purpose;
(2)
No Event of Default shall have occurred and then be continuing (or the issuance
of such Subordinate Obligations will cure any such Event of Default), as evidenced by the
delivery to the Trustee of a Certificate of the Issuer to that effect; and
(3)
As and to the extent applicable, the Trustee is designated as paying agent or
trustee for such Subordinate Obligations and the Issuer delivers to the Trustee a transcript of the
proceedings providing for the issuance of such Subordinate Obligations (but the Trustee shall not
be responsible for the validity or sufficiency of such proceedings or such Subordinate
Obligations).
(D)
Fee and Expense Obligations.
Designation of Parity Obligations, Subordinate Obligations and Fee and Expense Obligations
The Issuer shall designate additional Parity Obligations, Subordinate Obligations or Fee and
Expense Obligations in a Supplemental Indenture or a Certificate of the Issuer delivered to the Trustee
concurrently with the issuance or incurrence of such Parity Obligations, Subordinate Obligations or Fee
and Expense Obligations.
Certain Covenants of the Issuer
Punctual Payments. The Issuer shall punctually pay or cause to be paid the principal, purchase
price or Redemption Price of and interest on all the Bonds, in strict conformity with the terms of the
Bonds and of the Indenture, according to the true intent and meaning thereof, and shall punctually pay or
cause to be paid all Mandatory Sinking Account Payments, but in each case solely from the Collateral
pledged therefore as provided in the Indenture.
Extension of Payment of Bonds. The Issuer shall not directly or indirectly extend or assent to the
extension of the maturity of any of the Bonds or the time of payment of any Bonds or claims for interest
by the purchase or funding of such Bonds or claims for interest or by any other arrangement and in case
the maturity of any of the Bonds or the time of payment of any such claims for interest shall be extended,
such Bonds or claims for interest shall not be entitled, in case of any default under the Indenture, to the
benefits of the Indenture, except subject to the prior payment in full of the principal of all of the Bonds
then Outstanding and of all claims for interest thereon which shall not have been so extended. Nothing
described in this section shall be deemed to limit the right of the Issuer to issue bonds for the purpose of
refunding any Outstanding Bonds, and such issuance shall not be deemed to constitute an extension of
maturity of Bonds.
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Against Encumbrances. Except as provided in the Indenture, the Issuer shall not create any
pledge, lien, charge or other encumbrance upon the Collateral, or any portion thereof, having priority
over, or having parity with, the lien of the Indenture.
Continuing Disclosure. Upon the issuance of any Series of Bonds requiring an undertaking
regarding continuing disclosure under Rule 15c2-12, the Issuer shall comply with and carry out all of the
provisions of the Continuing Disclosure Agreement executed and delivered in connection with such
Series of Bonds. Notwithstanding any other provision of the Indenture, failure of the Issuer to comply
with the provisions of any Continuing Disclosure Agreement shall not be considered an Event of Default;
provided, however that the Trustee shall, at the written request of any Participating Underwriter or of the
Holders of at least twenty-five (25%) aggregate principal amount of any Series of Bonds then
Outstanding (but only to the extent funds in an amount satisfactory to the Trustee have been provided to it
or it has been otherwise indemnified to its satisfaction from any cost, liability, expense or additional
charges and fees of the Trustee whatsoever, including, without limitation, reasonable fees and expenses of
its attorneys), or any Holder or beneficial owner may, take such actions as may be necessary and
appropriate, including seeking mandate or specific performance by court order, to cause the Issuer to
comply with its obligations under the Indenture.
Release, Substitution, Addition and Amendment of Pledged Loans. The Issuer may release any
Pledged Loan from the lien of the Indenture, substitute Loans for existing Pledged Loans or add
additional Pledged Loans, in each case, by delivering to the Trustee the following: (i) a revised
description of the Pledged Loans; (ii) a Certificate of the Issuer identifying the Loans that are to become
Pledged Loans and/or the Pledged Loans that are to be released; and (iii) a Certificate of the Issuer that
demonstrates compliance with the Coverage Test without taking into account the amount then on deposit
in the Supplemental Revenue Fund and after taking into effect such release, substitution or addition.
Upon delivery of such certificates to the Trustee, (1) the Loans substituted for existing Pledged Loans or
added in such certificate shall become Pledged Loans and be subject to the lien of the Indenture
automatically and without the need for physical delivery, recordation, filing, or other further act, and (2)
the Loans released or for which other Pledge Loans are substituted in such certificate shall no longer be
Pledged Loans and shall be released from the lien of the Indenture automatically and without the need for
physical delivery, recordation, filing, or other further act.
The Issuer may amend the Pledged Loan Repayment provisions of any Loan Agreement if, prior
to such amendment, the Issuer delivers to the Trustee and each Rating Agency a Certificate of the Issuer
that demonstrates compliance with the Coverage Test without taking into account the amount then on
deposit in the Supplemental Revenue Fund after taking into effect the amendment. The Issuer may
amend any of the other provisions of any Loan Agreement in its discretion without delivery of a
Certificate of the Issuer.
The Trustee shall execute such consents to releases, additions or amendments and such other
instruments as the Issuer may reasonably request in order to evidence the release, substitution, addition or
amendment but only upon satisfaction of the requirements of this section or the Defeasance section of the
Indenture, as applicable.
No release, substitution, addition or amendment of any Pledged Loan shall occur except as
expressly provided in this section and the Defeasance section of the Indenture.
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Events of Default and Remedies
Events of Default. The following events shall be Events of Default:
(A)
default in the due and punctual payment of the principal or Redemption Price of any
Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by
proceedings for redemption, or otherwise, or default in the redemption from any Sinking Account of any
Bonds in the amounts and at the times provided therefor;
(B)
default in the due and punctual payment of any installment of interest on any Bond when
and as such interest installment shall become due and payable;
(C)
the Issuer fails to observe or perform any covenant, condition, agreement or provision in
the Indenture on its part to be observed or performed, other than as referred to in subsection (A) or (B) of
this section, for a period of sixty (60) days after written notice, specifying such failure and requesting that
it be remedied, has been given to the Issuer by the Trustee or by any Credit Enhancement Provider;
except that, if such failure can be remedied but not within such sixty (60) day period and if the Issuer has
taken all action reasonably possible to remedy such failure within such sixty (60) day period, such failure
shall not become an Event of Default for so long as the Issuer diligently proceed to remedy the same in
accordance with and subject to any directions or limitations of time established by the Trustee;
(D)
if any payment default exists under any agreement governing any Parity Obligations and
such default continues beyond the grace period, if any, provided for with respect to such default; or
(E)
any Event of Default designated as such in a Supplemental Indenture.
Application of the Revenues and Other Funds After Default; No Acceleration. If an Event of
Default occurs and is continuing, the Trustee shall apply all Revenues and any other amounts then held by
it in the Pledged Funds and Accounts or thereafter received by the Trustee under any of the provisions of
the Indenture for credit to or deposit in the Pledged Funds and Accounts (except as otherwise provided in
the Indenture) as follows and in the following order:
(1)
to the payment of any expenses necessary in the opinion of the Trustee to protect the
interests of the Holders of the Bonds and Parity Obligations, including the costs and expenses of the
Trustee and the Bondholders in declaring such Event of Default, and payment of reasonable fees and
expenses of the Trustee (including reasonable fees and disbursements of its counsel and other agents)
incurred in and about the performance of its powers and duties under the Indenture;
(2)
to the payment of the whole amount of Bond Obligation then due on the Bonds and
amounts then due on Parity Obligations (upon presentation of the Bonds and Parity Obligations to be
paid, and stamping thereon of the payment if only partially paid, or surrender thereof if fully paid) subject
to the provisions of the Indenture, with interest on such Bond Obligation, at the rate or rates of interest
borne by the respective Bonds and on Parity Obligations, to the payment to the persons entitled thereto of
all installments of interest then due and the unpaid principal or Redemption Price of any Bonds and Parity
Obligations that have become due, whether at maturity, by call for redemption or otherwise, in the order
of their due dates, with interest on the overdue Bond Obligation and Parity Obligations at the rate borne
by the respective Bonds and Parity Obligations, and, if the amount available is not sufficient to pay in full
all the Bonds and Parity Obligations due on any date, together with such interest, then to the payment
thereof ratably, according to the amounts of principal or Accreted Value (plus accrued interest) or other
amounts due on such date to the persons entitled thereto, without any discrimination or preference;
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(3)
to the payment of Subordinate Obligations, provided that if the amount available shall not
be sufficient to pay in full all Subordinate Obligations due on any date, then to the payment thereof
ratably, according to the amounts due on such date to the persons entitled thereto, without any
discrimination or preference;
(4)
to the payment of Fee and Expense Obligations, provided that, if the amount available is
not sufficient to pay in full all Fee and Expense Obligations due on any date, then to the payment thereof
ratably, according to the amounts due on such date to the persons entitled thereto, without any
discrimination or preference; and
(5)
to the payment of all other obligations payable under the Indenture.
Notwithstanding anything to the contrary in the Indenture, in no event are the Bonds subject to
acceleration if an Event of Default occurs and is continuing except that Liquidity Facility Bonds are
subject to acceleration as set forth in the Liquidity Facility.
Trustee to Represent Bondholders. The Trustee is irrevocably appointed (and the successive
respective Holders of the Bonds, by taking and holding the same, shall be conclusively deemed to have so
appointed the Trustee) as trustee and true and lawful attorney-in-fact of the Holders of the Bonds for the
purpose of exercising and prosecuting on their behalf such rights and remedies as may be available to
such Holders under the provisions of the Bonds, the Indenture, the Act and applicable provisions of any
other law. Upon the occurrence and continuance of an Event of Default or other occasion giving rise to a
right in the Trustee to represent the Bondholders, the Trustee in its discretion may, and, with respect to
any Series of Bonds for which a Credit Enhancement has been provided, upon the written request of the
Credit Enhancement Provider providing such Credit Enhancement, or if such Credit Enhancement
Provider is then failing to make a payment required pursuant to such Credit Enhancement, upon the
written request of the Holders of not less than a majority in aggregate amount of Bond Obligation of the
Bonds then Outstanding, and upon being indemnified to its satisfaction therefor, shall proceed to protect
or enforce its rights or the rights of such Holders by such appropriate action, suit, mandamus or other
proceedings as it deems most effectual to protect and enforce any such right, at law or in equity, either for
the specific performance of any covenant or agreement contained herein, or in aid of the execution of any
power herein granted, or for the enforcement of any other appropriate legal or equitable right or remedy
vested in the Trustee or in such Holders under the Indenture, the Act or any other law; and upon
instituting such proceeding, the Trustee shall be entitled, as a matter of right, to the appointment of a
receiver of the Collateral pledged under the Indenture, pending such proceedings; provided, however,
that, with respect to any Series of Bonds for which a Credit Enhancement has been provided, the Trustee
may only act with the consent of the Credit Enhancement Provider providing such Credit Enhancement.
All rights of action under the Indenture or the Bonds or otherwise may be prosecuted and enforced by the
Trustee without the possession of any of the Bonds or the production thereof in any proceeding relating
thereto, and any such suit, action or proceeding instituted by the Trustee shall be brought in the name of
the Trustee for the benefit and protection of all the Holders of such Bonds, subject to the provisions of the
Indenture.
Bondholders’ Direction of Proceedings. Notwithstanding anything in the Indenture to the
contrary (except provisions relating to the rights of a Credit Enhancement Provider to direct proceedings
as set forth in the Indenture as described below), the Holders of a majority in aggregate amount of Bond
Obligation of the Bonds then Outstanding shall have the right, by an instrument or concurrent instruments
in writing executed and delivered to the Trustee and upon furnishing the Trustee with indemnification
satisfactory to it, to direct the method of conducting all remedial proceedings taken by the Trustee under
the Indenture, provided that (a) such direction shall not be otherwise than in accordance with law and the
provisions of the Indenture, (b) the Trustee may take any other action deemed proper by the Trustee that
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is not inconsistent with such direction, and (c) the Trustee shall have the right to decline to follow any
such direction that in the opinion of the Trustee would be unjustly prejudicial to Bondholders or holders
of Parity Obligations not parties to such direction.
Limitation on Bondholders’ Right to Sue. No Holder of any Bond shall have the right to institute
any suit, action or proceeding at law or in equity, for the protection or enforcement of any right or remedy
under the Indenture, the Act or any other applicable law with respect to such Bond, unless: (1) such
Holder has given the Trustee written notice of the occurrence of an Event of Default; (2) the Holders of
not less than a majority in aggregate amount of Bond Obligation of the Bonds then Outstanding have
made written request upon the Trustee to exercise the powers granted by the Indenture or to institute such
suit, action or proceeding in its own name; (3) such Holder or said Holders have tendered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such
request; and (4) the Trustee has refused or omitted to comply with such request for a period of sixty (60)
days after such written request has been received by, and said tender of indemnity has been made to, the
Trustee; provided, however, that the written consent of a Credit Enhancement Provider providing a Credit
Enhancement with respect to a Series of Bonds is required if the Credit Enhancement with respect to such
Series of Bonds is in full force and effect and if the Credit Enhancement Provider providing such Credit
Enhancement is not then failing to make a payment as required in connection therewith.
Such notification, request, tender of indemnity and refusal or omission are declared, in every
case, to be conditions precedent to the exercise by any Holder of Bonds of any remedy under the
Indenture or under law; it being understood and intended that no one or more Holders of Bonds have any
right in any manner whatever by his or their action to affect, disturb or prejudice the security of the
Indenture or the rights of any other Holders of Bonds, or to enforce any right under the Indenture, the Act
or other applicable law with respect to the Bonds, except in the manner herein provided, and that all
proceedings at law or in equity to enforce any such right shall be instituted, had and maintained in the
manner herein provided and for the benefit and protection of all Holders of the Outstanding Bonds,
subject to the provisions of the Indenture.
Credit Enhancement Provider Directs Remedies Upon Event of Default. Anything in the
Indenture to the contrary notwithstanding, upon the occurrence and continuance of an Event of Default as
defined in the Indenture, the Credit Enhancement Provider then providing Credit Enhancement for any
Series of Bonds shall be entitled to control and direct the enforcement of all rights and remedies granted
to the Holders of the Bonds secured by such Credit Enhancement or granted to the Trustee for the benefit
of the Holders of the Bonds secured by such Credit Enhancement, provided that the Credit Enhancement
Provider’s consent shall not be required as otherwise provided herein if such Credit Enhancement
Provider is in default of any of its payment obligations as set forth in the Credit Enhancement provided by
such Credit Enhancement Provider.
Modification or Amendment to the Indenture
Amendments Permitted With Consent of Holders. The Indenture and the rights and obligations
of the Issuer, the Holders of the Bonds and the Trustee may be modified or amended by a Supplemental
Indenture, which the Issuer and the Trustee may enter into when the written consent of the Holders of a
majority in aggregate amount of Bond Obligation of the Bonds (or, if such Supplemental Indenture is
only applicable to a Series of Bonds, such Series of Bonds) then Outstanding is filed with the Trustee;
provided that if such modification or amendment will, by its terms, not take effect so long as any Bonds
of any particular maturity remain Outstanding, the consent of the Holders of such Bonds shall not be
required and such Bonds shall not be deemed to be Outstanding for the purpose of any calculation of
Bonds Outstanding. The Credit Enhancement Provider for a Series of Bonds shall be deemed to be the
Holder of such Series for all purposes of the Indenture except the payment of principal of and interest on
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such Series of the Bonds. The written consent of the Holders of a Series of Bonds may be effected (a)
through a consent by the underwriter of such Series of Bonds at the time of the issuance of such Series of
Bonds and (b) through a provision of a Supplemental Indenture that deems any Holders purchasing such
Series of Bonds to consent for purposes of the provisions described in this subsection by virtue of its
purchase of such Series of Bonds.
No such modification or amendment shall (a) extend the maturity of any Bond, or reduce the
amount of principal thereof, or extend the time of payment or reduce the amount of any Mandatory
Sinking Account Payment provided for the payment of any Bond, or reduce the rate of interest thereon, or
extend the time of payment of interest thereon, or reduce any premium payable upon the redemption
thereof, without the consent of the Holder of each Bond so affected, or (b) reduce the aforesaid
percentage of Bond Obligation Holders whose consent is required to effect any such modification or
amendment, or permit the creation of any lien on the Collateral pledged under the Indenture prior to or on
a parity with the lien created by the Indenture, or deprive the Holders of the Bonds of the lien created by
the Indenture on such Collateral (in each case, except as expressly provided in the Indenture), without the
consent of the Holders of all of the Bonds then Outstanding. The Holders are not required to approve the
particular form of any Supplemental Indenture; it is sufficient if the Holders consent to the substance
thereof. Promptly after the execution and delivery by the Issuer and the Trustee of any Supplemental
Indenture, the Trustee shall mail a notice, setting forth in general terms the substance of such
Supplemental Indenture to the Holders of the Bonds at the addresses shown on the registration books of
the Trustee. Any failure to give such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such Supplemental Indenture.
Amendments Permitted Without Consent of Holders. The Indenture and the rights and
obligations of the Issuer, of the Trustee and of the Holders of the Bonds may also be modified or amended
by a Supplemental Indenture, which the Issuer and the Trustee may enter without the consent of any
Bondholders, but only to the extent permitted by the Law and only for any one or more of the following
purposes:
(1)
to add other covenants and agreements thereafter to be observed to the covenants and
agreements of the Issuer in the Indenture contained , to pledge or assign additional security for the Bonds
(or any portion thereof), or to surrender any right or power herein reserved to or conferred upon the
Issuer;
(2)
to make such provisions for the purpose of curing any ambiguity, inconsistency or
omission, or of curing or correcting any defective provision, contained in the Indenture, or in regard to
matters or questions arising under the Indenture, as the Issuer may deem necessary or desirable, and that
does not materially and adversely affect the interests of the Holders of the Bonds;
(3)
to modify, amend or supplement the Indenture in such manner as to permit the
qualification of the Indenture under the Trust Indenture Act of 1939, as amended, or any similar federal
statute hereafter in effect, and to add such other terms, conditions and provisions as may be permitted by
said act or similar federal statute, and that do not materially and adversely affect the interests of the
Holders of the Bonds;
(4)
to provide for the issuance of an additional Series of Bonds pursuant to the provisions of
Article III of the Indenture;
(5)
to make modifications or adjustments necessary, appropriate or desirable to provide for
the issuance or incurrence, as applicable, of Interest Subsidy Bonds, Capital Appreciation Bonds, Parity
Obligations, Subordinate Obligations, Fee and Expense Obligations or Variable Rate Indebtedness, with
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such interest rate, payment, maturity and other terms as the Issuer may deem desirable; subject to the
provisions of the Indenture relating to the Issuance of Additional Bonds;
(6)
to make modifications or adjustments necessary, appropriate or desirable to provide for
change from one interest rate mode to another in connection with any Series of Bonds;
(7)
to make modifications or adjustments necessary, appropriate or desirable to
accommodate Credit Enhancements, Liquidity Facilities and Reserve Facilities;
(8)
to make modifications or adjustments necessary, appropriate or desirable to provide for
the appointment of an auction agent, a broker-dealer, a remarketing agent, a tender agent and/or a paying
agent in connection with any Series of Bonds;
(9)
to provide for any additional covenants or agreements necessary to maintain the taxexempt status of interest on any Series of Bonds;
(10)
if the Issuer agrees in a Supplemental Indenture to maintain the exclusion of interest on a
Series of Bonds from gross income for purposes of federal income taxation, to make such provisions as
are necessary or appropriate to ensure such exclusion;
(11)
to provide for the issuance of Bonds in book-entry form or bearer form and/or to modify
or eliminate the book-entry registration system for any Series of Bonds;
(12)
to modify, alter, amend or supplement the Indenture in any other respect, including
amendments that would otherwise be described in the Indenture as described above under the caption
“Amendments Permitted With Consent of Holders,” if the effective date of such amendments is a date on
which all Bonds affected thereby are subject to mandatory tender for purchase pursuant to the provisions
of the Indenture or if notice of the proposed amendments is given to Holders of the affected Bonds at least
thirty (30) days before the proposed effective date of such amendments and, on or before such effective
date, such Holders have the right to demand purchase of their Bonds pursuant to the provisions of the
Indenture or if all Bonds affected thereby are in an auction mode and a successful auction is held
following notice of such amendment; and
(13)
for any other purpose that does not materially and adversely affect the interests of the
Holders of the Bonds.
Any Supplemental Indenture entered into pursuant to the Indenture as described in this section
shall be deemed not to materially adversely affect the interest of the Holders so long as (i) all affected
Bonds are secured by a Credit Enhancement and (ii) each Credit Enhancement Provider for such Bonds
has given its written consent to such Supplemental Indenture.
Defeasance
Discharge of Indenture. Bonds of any Series or a portion thereof may be paid by the Issuer in any
of the following ways:
(A)
by paying or causing to be paid the Bond Obligations of and interest on such Outstanding
Bonds, as and when they become due and payable;
(B)
by depositing with the Trustee or, subject to the provisions in the Indenture as described
below under the caption “Discharge of Liability on Bonds,” an escrow agent or other fiduciary, in trust, at
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or before maturity, money or securities in the necessary amount (as provided in the Indenture as described
below under the caption “Deposit of Money or Securities”) to pay or redeem such Outstanding Bonds; or
(C)
by delivering to the Trustee, for cancellation by it, such Outstanding Bonds.
If the Issuer pays all Series for which any Bonds are Outstanding and also pay or causes to be
paid all other sums payable and to be payable under the Indenture (including any termination payment
payable under an Interest Rate Swap Agreement) and under any Parity Obligations, Subordinate
Obligations and Fee and Expense Obligations by the Issuer, then and in that case, at the election of the
Issuer (evidenced by a Certificate of the Issuer, filed with the Trustee, signifying the intention of the
Issuer to discharge all such indebtedness and the Indenture), and notwithstanding that any Bonds shall not
have been surrendered for payment, the Indenture and the pledge of Collateral made under the Indenture
and all covenants, agreements and other obligations of the Issuer under the Indenture shall cease,
terminate, become void and be completely discharged and satisfied. In such event, upon Request of the
Issuer, the Trustee shall cause an accounting for such period or periods as may be requested by the Issuer
to be prepared and filed with the Issuer and shall execute and deliver to the Issuer all such instruments as
may be necessary or desirable to evidence such discharge and satisfaction, and the Trustee shall pay over,
transfer, assign or deliver to the Issuer all moneys or securities or other property held by it pursuant to the
Indenture that, as evidenced by a verification report, upon which the Trustee may conclusively rely, from
an independent certified public accountant, a firm of independent certified public accountants or other
independent consulting firm, are not required for the payment or redemption of Bonds not theretofore
surrendered for such payment or redemption.
Discharge of Liability on Bonds. Upon the deposit with the Trustee, escrow agent or other
fiduciary, in trust, at or before maturity, of money or securities in the necessary amount (as provided in
the Indenture as described in the next section) to pay or redeem any Outstanding Bond (whether upon or
prior to its maturity or the redemption date of such Bond), provided that, if such Bond is to be redeemed
prior to maturity, notice of such redemption has been given as provided in the Indenture or provision
satisfactory to the Trustee has been made for the giving of such notice, then all liability of the Issuer in
respect of such Bond shall cease, terminate and be completely discharged, provided that the Holder
thereof shall thereafter be entitled to the payment of the principal of and premium, if any, and interest on
the Bonds, and the Issuer shall remain liable for such payment, but only out of such money or securities
deposited with the Trustee as aforesaid for their payment.
If the deposit specified in the preceding paragraph is made with an escrow agent or other
fiduciary that is not also the Trustee, either the Issuer or such escrow agent or other fiduciary shall
provide a written certification to the Trustee, upon which the Trustee may conclusively rely, that such
deposit has been made.
If the Bonds being discharged are Variable Rate Indebtedness, (i) the Bonds shall be redeemed at
the first possible redemption date or purchase date applicable to such Bonds after any required notice is
provided and to the extent the rate of interest payable on such Bonds prior to such redemption or purchase
date is not known, such rate of interest shall be assumed to be the maximum rate payable thereon or (ii)
the Trustee shall receive a confirmation from the Rating Agency then rating the Bonds that the defeasance
will not result in the reduction or withdrawal of the then-current ratings on the Bonds.
The Issuer may at any time surrender to the Trustee for cancellation by it any Bonds previously
issued and delivered, that the Issuer may have acquired in any manner whatsoever, and such Bonds, upon
such surrender and cancellation, shall be deemed to be paid and retired.
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Notwithstanding anything to the contrary, if the principal of or interest on a Series of Bonds is
paid by a Credit Enhancement Provider pursuant to the Credit Enhancement issued in connection with
such Series of Bonds, the obligations of the Issuer shall not be deemed to be satisfied or considered paid
by the Issuer by virtue of such payments, and the right, title and interest of the Issuer in the Indenture and
the obligations of the Issuer under the Indenture shall not be discharged and shall continue to exist and to
run to the benefit of such Credit Enhancement Provider, and such Credit Enhancement Provider shall be
subrogated to the rights of the Holders of the Bonds of such Series.
Deposit of Money or Securities. Whenever in the Indenture it is provided or permitted that there
be deposited with or held in trust money or securities in the necessary amount to pay or redeem any
Bonds, the money or securities so to be deposited or held may include money or securities held by the
Trustee in the funds and accounts established pursuant to the Indenture and shall be:
(A)
lawful money of the United States of America in an amount equal to the principal amount
of such Bonds and all unpaid interest thereon to maturity, except that, in the case of Bonds that are to be
redeemed prior to maturity and with respect to which notice of such redemption has been given as
provided in the Indenture or provision satisfactory to the Trustee has been made for the giving of such
notice, the amount to be deposited or held shall be the principal amount or Redemption Price of such
Bonds and all unpaid interest thereon to the redemption date; or
(B)
Government Obligations the principal of and interest on which when due will provide
money sufficient to pay the principal or Redemption Price of and all unpaid interest to maturity, or to the
redemption date, as the case may be, on the Bonds to be paid or redeemed, as such principal or
Redemption Price and interest become due, provided that, in the case of Bonds that are to be redeemed
prior to the maturity thereof, notice of such redemption has been given as provided in the Indenture or
provision satisfactory to the Trustee has been made for the giving of such notice; provided, in each case,
that the Trustee has been irrevocably instructed (by the terms of the Indenture or by Request of the Issuer)
to apply such money to the payment of such principal or Redemption Price and interest with respect to
such Bonds.
Payment of Bonds After Discharge of Indenture. Any moneys held by the Trustee in trust for the
payment of the principal, Redemption Price, or interest on any Bond and remaining unclaimed for one (1)
year after such principal, Redemption Price, or interest has become due and payable (whether at maturity
or upon call for redemption as provided in the Indenture), if such moneys were so held at such date, or
one (1) year after the date of deposit of such principal, Redemption Price or interest on any Bond if such
moneys were deposited after the date when such Bond became due and payable, shall be repaid to the
Issuer free from the trusts created by the Indenture, and all liability of the Trustee with respect to such
moneys shall thereupon cease; provided, however, that before the repayment of such moneys to the Issuer
as aforesaid, the Trustee may (at the cost of the Issuer) first mail to the Holders of any Bonds remaining
unpaid at the addresses shown on the registration books maintained by the Trustee a notice, in such form
as may be deemed appropriate by the Trustee, with respect to the Bonds so payable and not presented and
with respect to the provisions relating to the repayment to the Issuer of the moneys held for the payment
thereof. All moneys held by or on behalf of the Trustee for the payment of principal or Accreted Value of
or interest or premium on Bonds, whether at redemption or maturity, shall be held in trust for the account
of the Holders thereof and the Trustee shall not be required to pay Holders any interest on, or be liable to
the Holders or any other person (other than the Issuer) for interest earned on, moneys so held. Any
interest earned thereon shall belong to the Issuer and shall be deposited upon receipt by the Trustee into
the Revenue Fund.
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Disqualified Bonds
In determining whether the Holders of the requisite aggregate Bond Obligation of Bonds have
concurred in any demand, request, direction, consent or waiver under the Indenture, Bonds that are owned
or held by or for the account of the Issuer, or by any other obligor on the Bonds, or by any person directly
or indirectly controlling or controlled by, or under direct or indirect common control with, the Issuer or
any other obligor on the Bonds, shall be disregarded and deemed not to be Outstanding for the purpose of
any such determination. Bonds so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee shall establish to the satisfaction of the Trustee the pledgee’s right to vote such
Bonds and that the pledgee is not a person directly or indirectly controlled by, or under direct or indirect
common control with, the Issuer. In case of a dispute as to such right, any decision by the Trustee taken
upon the advice of counsel shall be full protection to the Trustee. Upon request of the Trustee, the Issuer
shall specify in a Certificate to the Trustee those Bonds disqualified pursuant to the Indenture and the
Trustee may conclusively rely on such certificate.
Waiver of Personal Liability
No member of the Issuer’s board of directors, or any person executing the Bonds shall be
personally liable on the Bonds or subject to any personal liability or accountability by reason of the
issuance thereof. No recourse shall be had for the payment of the principal of or interest on any of the
Bonds or for any claim based thereon or upon any obligation, covenant or agreement contained in the
Indenture against any past, present or future officer, director, member, employee or agent of the Issuer, or
of any successor public entity, either directly or through the Issuer or any successor public entity, or any
person executing the Bonds, under any rule of law or equity, statute or constitution, or by the enforcement
of any assessment or penalty or otherwise, and all such liability of any such officers, directors, members,
employees or agents or any person executing the Bonds, as such is hereby expressly waived and released
as a condition of and consideration for the execution of the Indenture and the issuance of Bonds.
Establishment, Funding and Application of Common Reserve Fund
Pursuant to the First Supplemental Indenture, the Trustee shall establish, maintain and hold in
trust the Common Reserve Fund for the benefit of the Holders of Common Reserve Fund Participating
Bonds. The Common Reserve Fund shall secure all Common Reserve Fund Participating Bonds and the
Issuer shall specify in the Supplemental Indenture relating to such Series of Bonds whether the Bonds of
such Series constitute Common Reserve Fund Participating Bonds. Upon the designation of any Series of
Bonds as Common Reserve Fund Participating Bonds, the amount on deposit in the Common Reserve
Fund shall be increased to an amount equal to the Common Bond Reserve Requirement as of the date of
designation of such Series of Bonds as Common Reserve Fund Participating Bonds. As described in the
forepart of this Official Statement, the Issuer will satisfy the initial Common Bond Reserve Requirement
by causing the Initial Common Reserve Fund Securities to be deposited with the Trustee in the Common
Reserve Fund on the date of delivery of the Series Common Bonds.
In lieu of making a Common Bond Reserve Requirement deposit in cash or in replacement of
moneys then on deposit in the Common Reserve Fund (which shall be transferred by the Trustee to the
Issuer), or in substitution of any Reserve Facility comprising part of the Common Bond Reserve
Requirement, the Issuer may, at any time and from time to time, deliver to the Trustee an irrevocable
letter of credit issued by a financial institution having unsecured debt obligations rated at the time of
delivery of such letter of credit at least equal to the then-current rating on the Common Reserve Fund
Participating Bonds from Moody’s and Standard & Poor’s, in an amount, that, together with cash,
Permitted Investments or other Reserve Facilities, as described in the next paragraph, then on deposit in
the Common Reserve Fund, will equal the Common Bond Reserve Requirement. Such letter of credit
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shall have a term no less than three (3) years or, if less, no less than the final maturity of the Common
Reserve Fund Participating Bonds in connection with which such letter of credit was obtained and shall
provide by its terms that it may be drawn upon as provided in the Indenture. At least six months prior to
the stated expiration of such letter of credit, the Issuer shall either (i) deliver a replacement letter of credit,
(ii) deliver an extension of the letter of credit for at least one (1) additional year or, if less, no less than the
final maturity date of the Common Reserve Fund Participating Bonds in connection with which such
letter of credit was obtained, or (iii) deliver to the Trustee a Reserve Facility satisfying the requirements
described in the next paragraph. Upon delivery of such replacement Reserve Facility, the Trustee shall
deliver the then-effective letter of credit to or upon the order of the Issuer. If the Issuer fails to deposit a
replacement Reserve Facility with the Trustee, the Issuer shall deposit with the Trustee the amount
necessary so that an amount equal to the Common Bond Reserve Requirement will be on deposit in the
Common Reserve Fund no later than the stated expiration date of the letter of credit. If an amount equal
to the Common Bond Reserve Requirement as of the date following the expiration of the letter of credit is
not on deposit in the Common Reserve Fund one (1) week prior to the expiration date of the letter of
credit (excluding from such determination the letter of credit), the Trustee shall draw on the letter of
credit to fund the deficiency resulting therefrom in the Common Reserve Fund.
In lieu of making a Common Bond Reserve Requirement deposit in cash or in replacement of
moneys then on deposit in the Common Reserve Fund (which shall be transferred by the Trustee to the
Issuer) or in substitution of any Reserve Facility comprising part of the Common Bond Reserve
Requirement, the Issuer may, at any time and from time to time, deliver to the Trustee a surety bond or an
insurance policy in an amount which, together with moneys, Permitted Investments, or other Reserve
Facilities then on deposit in the Common Reserve Fund, is no less than the Common Bond Reserve
Requirement. Such surety bond or insurance policy shall be issued by an insurance company whose
unsecured debt obligations (or for which obligations secured by such insurance company’s insurance
policies) are rated at the time of delivery at least equal to the then-current rating on the Common Reserve
Fund Participating Bonds by Moody’s and Standard & Poor’s. Such surety bond or insurance policy shall
have a term of no less than the final maturity of the Common Reserve Fund Participating Bonds in
connection with which such surety bond or insurance policy is obtained. If such surety bond or insurance
policy for any reason lapses or expires, the Issuer shall immediately implement (i) or (iii) described in the
preceding paragraph or deposit with the Trustee the amount necessary so that an amount equal to the
Common Bond Reserve Requirement will be on deposit in the Common Reserve Fund.
Subject to the provisions of the Indenture described in the next paragraph, all amounts in the
Common Reserve Fund (including all amounts which may be obtained from a Reserve Facility on deposit
in the Common Reserve Fund) shall be used and withdrawn by the Trustee, as hereinafter provided: (i)
after the application of any amounts held in the Supplemental Revenue Fund as provided in the Indenture,
for the purpose of making up any deficiency in the Interest Fund or the Principal Fund relating to the
Common Reserve Fund Participating Bonds; or (ii) together with any other moneys available therefor, (x)
for the payment or redemption of all Common Reserve Fund Participating Bonds then Outstanding, (y)
for the defeasance or redemption of all or a portion of the Common Reserve Fund Participating Bonds
then Outstanding, provided, however, that if funds on deposit in the Common Reserve Fund are applied to
the defeasance or redemption of a portion of the Common Reserve Fund Participating Bonds, the amount
on deposit in the Common Reserve Fund immediately subsequent to such partial defeasance or
redemption shall equal the Common Bond Reserve Requirement applicable to all Common Reserve Fund
Participating Bonds Outstanding immediately subsequent to such partial defeasance or redemption, or (z)
for the payment of the final principal and interest payment of the Common Reserve Fund Participating
Bonds. Unless otherwise directed in a Supplemental Indenture establishing the terms and provisions of a
Series of Common Reserve Fund Participating Bonds, the Trustee shall apply amounts held in cash or
Permitted Investments in the Common Reserve Fund prior to applying amounts held in the form of
Reserve Facilities in the Common Reserve Fund, and if there is more than one Reserve Facility being held
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on deposit in the Common Reserve Fund, shall, on a pro rata basis with respect to the portion of the
Common Reserve Fund held in the form of a Reserve Facility (calculated by reference to the maximum
amount of such Reserve Facility), draw under each Reserve Facility issued with respect to the Common
Reserve Fund, in a timely manner and pursuant to the terms of such Reserve Facility to the extent
necessary to obtain sufficient funds on or prior to the date such funds are needed to pay the Bond
Obligation of, Mandatory Sinking Account Payments with respect to, and interest on the Common
Reserve Fund Participating Bonds when due. If the Trustee has notice that any payment of principal of or
interest on a Common Reserve Fund Participating Bond has been recovered from a Holder pursuant to the
United States Bankruptcy Code by a trustee in bankruptcy in accordance with the final, nonappealable
order of a court having competent jurisdiction, the Trustee, pursuant to the terms of, and if so provided
by, the terms of the Reserve Facility, if any, securing the Common Reserve Fund Participating Bonds,
shall so notify the issuer thereof and draw on such Reserve Facility to the lesser of the extent required or
the maximum amount of such Reserve Facility to pay to such Holders the principal and interest so
recovered.
Except for amounts on deposit in the Common Reserve Fund in excess of the Common Bond
Reserve Requirement resulting from the sale or other disposition, or the maturity or redemption, of all or
a portion of the Initial Common Reserve Fund Securities, any amounts in the Common Reserve Fund in
excess of the Common Bond Reserve Requirement shall be transferred by the Trustee on April 1 and
October 1 of each year (1) to the Revenue Fund or (2) if requested by the Issuer in writing prior to such
April 1 or October 1 and subject to the requirements of any applicable Tax Certificate, to or upon the
Order of the Issuer; provided that such amounts shall be transferred only from the portion of the Common
Reserve Fund held in the form of cash or Permitted Investments. Amounts on deposit in the Common
Reserve Fund in excess of the Common Bond Reserve Requirement resulting from the sale or other
disposition, or the maturity or redemption, of all or a portion of the Initial Common Reserve Fund
Securities shall be transferred by the Trustee to or upon the Order of the Issuer subject to the requirements
of any applicable Tax Certificate. In addition, amounts on deposit in the Common Reserve Fund shall be
transferred by the Trustee to or upon the Order of the Issuer (i) upon the defeasance, retirement or
refunding of Common Reserve Fund Participating Bonds, provided that such transfer shall not be made
unless (a) immediately thereafter all of the Common Reserve Fund Participating Bonds shall be deemed
to have been paid pursuant to the Indenture, or (b) the amount remaining in the Common Reserve Fund
after such transfer shall not be less than the Common Bond Reserve Requirement or (ii) upon the
replacement of cash on deposit in the Common Reserve Fund with one or more Reserve Facilities in
accordance with the Indenture, subject in the case of both clauses (i) and (ii) to the requirements of the
applicable Tax Certificate.
Series 2016A Bonds are Common Reserve Fund Participating Bonds
Pursuant to the Second Supplemental Indenture, the Series 2016A Bonds are designated
as Common Reserve Fund Participating Bonds and shall be secured by the Common Reserve
Fund established pursuant to the First Supplemental Indenture. See “Establishment, Funding and
Application of Common Reserve Fund” above.
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APPENDIX D
FORM OF CONTINUING DISCLOSURE AGREEMENT
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CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement (this “Disclosure Agreement”) is executed as of
June 1, 2016, between the California Infrastructure and Economic Development Bank (“IBank”) and U.S.
Bank National Association, as Dissemination Agent (the “Dissemination Agent”) in connection with the
issuance of $_________ of Infrastructure State Revolving Fund Revenue Bonds, Series 2016A (the
“Series 2016A Bonds”). The Series 2016A Bonds will be issued and secured pursuant to an Indenture,
dated as of February 1, 2014 (the “Master Indenture”), between IBank and U.S. Bank National
Association, as trustee (the “Trustee”), as supplemented by a Third Supplemental Indenture, dated as of
June 1, 2016, between IBank and the Trustee (the “Third Supplemental Indenture”). The Master
Indenture, as supplemented, including as supplemented by the Third Supplemental Indenture is referred
to herein as the “Indenture.”) The parties hereto hereby covenant and agree as follows:
SECTION 1. Nature of the Disclosure Agreement. This Disclosure Agreement is executed for the
benefit of the Holders and Beneficial Owners (as defined below) of the Series 2016A Bonds from time to
time, but shall not be deemed to create any monetary liability on the part of IBank to any other persons,
including Holders (as defined below) or Beneficial Owners of the Series 2016A Bonds based on the Rule
(as defined below). The sole remedy in the event of any failure of IBank to comply with this Disclosure
Agreement shall be an action to compel performance of any act required hereunder.
SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to
any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the
following capitalized terms shall have the following meanings:
“Annual Financial Information” means (a) financial information concerning the ISRF Program of
the type appearing under the caption “PRO FORMA CASH FLOW TABLE” (for the most recently completed
fiscal year; projections need not be updated) to the Official Statement, and (b) financial information and
operating data concerning Borrowers and Pledged Loans of the type appearing in the Official Statement
in APPENDIX A–“PLEDGED LOANS,” and (c) financial information with respect to each Significant
Borrower as further described herein. Annual Financial Information shall also include Audited Financial
Statements, if then available, or Unaudited Financial Statements.
“Annual Report” shall mean the Annual Report filed by IBank, or by the Trustee on behalf of
IBank, pursuant to and as described in Sections 3 and 4 of this Disclosure Agreement.
“Audited Financial Statements” means the annual financial statements, if any, of IBank and any
Significant Borrower, as the case may be, audited by such auditor as shall then be required or permitted
by State law. In the event that IBank determines to provide separate audited financial statements for the
ISRF Program, then such separate audited financial statements shall constitute “Audited Financial
Statements” for purposes of this Disclosure Agreement. Audited Financial Statements shall be prepared
in accordance with GAAP; provided, however, that IBank or any Significant Borrower may, from time to
time, if required by federal or State legal requirements, modify the basis upon which its financial
statements are prepared; provided further, however, that in the case of any Significant Borrower, Audited
Financial Statements may be prepared in accordance with such other accounting principles as shall be
specified in the initial filing of Annual Financial Information of such Significant Borrower by IBank or
such Significant Borrower or in the initial official statement or other disclosure document of IBank
setting forth the financial and operating data of such Significant Borrower. Notice of any such
modification shall include a reference to the specific federal or State law or regulation describing such
accounting basis and shall be provided by IBank or any Significant Borrower, as applicable, to the
MSRB.
D-1
“Beneficial Owner” shall mean any person which has or shares the power, directly or indirectly,
to make investment decisions concerning ownership of any Series 2016A Bonds (including persons
holding Series 2016A Bonds through nominees, depositories or other intermediaries).
“Counsel” means any nationally recognized bond counsel or counsel expert m federal securities
laws as they relate to municipal securities selected by IBank.
“Dissemination Agent” shall mean the Trustee acting in such capacity hereunder, or any
successor Dissemination Agent designated in writing by Bank pursuant to Section 7 hereof.
“EMMA” means the Electronic Municipal Marketplace Access website of the MSRB, currently
located at http://emma.msrb.org.
“GAAP” means generally accepted accounting principles as prescribed from time to time for
governmental units by the Governmental Accounting Standards Board.
“Holder” shall mean any person listed on the registration books of IBank as the registered owner
of any Bonds.
“ISRF Program” means IBank’s Infrastructure State Revolving Fund Program.
“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Agreement.
“MSRB” shall mean the Municipal Securities Rulemaking Board established pursuant to
Section 15B(b)(1) of the Securities Exchange Act of 1934 or any other entity designated or authorized by
the Securities and Exchange Commission to receive reports pursuant to the Rule. Until otherwise
designed by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be
made through EMMA.
“Official Statement” shall mean the official statement relating to the Series 2016A Bonds, dated
June __, 2016.
“Pledged Loan” shall have the meaning ascribed thereto in the Indenture.
“Significant Borrower” means a Borrower under a Pledged Loan that has an aggregate unpaid
principal amount equal to or greater than twenty percent (20%) of the aggregate unpaid principal amount
of all Pledged Loans. As of the date hereof, there are no Significant Borrowers.
“Significant Borrower Annual Financial Information” means financial information and operating
data of the type necessary, in the opinion of Counsel, to comply with the Rule (whether expressly set
forth therein or incorporated by reference therein). Significant Borrower Annual Financial Information
shall include Audited Financial Statements of the Significant Borrower, if then available, or Unaudited
Financial Statements of the Significant Borrower.
“Rule” means Rule 15c2-12 promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934 (17 CFR Part 240, §240.15c2-12), as amended, as in effect on the date
of this Disclosure Agreement, including any official interpretations thereof issued either before or after
the effective date of this Disclosure Agreement which are applicable to this Disclosure Agreement.
“Unaudited Financial Statements” means the same as Audited Financial Statements, except that
they shall not have been audited.
D-2
SECTION 3.
Provision of Annual Reports.
(a)
IBank, shall, not later than 240 days after the end of each fiscal year of the IBank in
which any of the Series 2016A Bonds are Outstanding, commencing with the report for the 2014-15
Fiscal Year, file, or caused to be filed, an Annual Report with the MSRB.
(b)
If in any year, IBank does not file, or cause to be filed, the Annual Report with the
MSRB by the time specified in subsection (a) above, IBank shall instead file, or cause to be filed, a notice
with the MSRB stating that the Annual Report has not been timely completed and, if known, stating the
date by which IBank expects to file the Annual Report. Giving of a notice under this subsection (b) shall
not excuse failure to file the Annual Report pursuant to subsection (a) above.
SECTION 4.
Content of Annual Reports.
(a)
The Annual Report shall contain or include by reference Annual Financial Information. If
Unaudited Financial Statements are included as part of the Annual Financial Information because
Audited Financial Statements are not available at the time of filing, the Audited Financial Statements
shall be filed by IBank (in the same manner as the Annual Report) when available.
(b)
The Annual Report may consist of one or more documents. Any of the Annual Financial
Information may be included in the Annual Report by reference to other documents which have been
filed with the MSRB, including any final official statement of IBank or any Significant Borrower. IBank
shall clearly identify in the Annual Report each such document so included by reference.
(c)
IBank shall not be required to undertake any responsibility with respect to any Annual
Financial Information required by or provided pursuant to any Pledged Loan, and neither IBank, its
directors, officers, nor employees have any responsibility or liability to any person, including any Owner
of the Series 2016A Bonds, with respect to any such Annual Financial Information or for the performance
or enforcement of any Pledged Loan, except as provided in a Pledged Loan or other undertaking of a
Significant Borrower and except as provided in the final sentence of this Section 4(c). IBank covenants to
exercise and enforce any and all rights to the full extent permitted by law to obtain Annual Financial
Information of any Significant Borrower under a Pledged Loan, including without limitation seeking
mandate or specific performance by court order to cause any Significant Borrower to provide Significant
Borrower Annual Financial Information.
SECTION 5.
Reporting of Listed Events.
(a)
Pursuant to the provisions of this Section 5, IBank shall give, or cause to be given, notice
of the occurrence of any of the following events with respect to the Series 2016A Bonds in a timely
manner not more than ten (10) business days after the occurrence of the Listed Event:
(i)
Principal and interest payment delinquencies;
(ii)
Unscheduled draws on debt service reserves reflecting financial difficulties;
(iii)
Unscheduled draws on credit enhancements reflecting financial difficulties;
(iv)
Substitution of credit or liquidity providers, or their failure to perform;
(v)
Adverse tax opinions, the issuance by the Internal Revenue Service of proposed
or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701- TEB) or other
D-3
material notices of determinations with respect to the tax status of the Series 2016A Bonds, or
other material events affecting the tax status of the Series 2016A Bonds;
(vi)
Tender offers;
(vii)
Defeasances;
(viii)
Rating changes; or
(ix)
Bankruptcy, insolvency, receivership or similar event of IBank.
Note: for the purposes of the event identified in subparagraph (ix), the event is considered to
occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for
IBank 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 IBank, 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 IBank.
(b)
Pursuant to the provisions of this Section 5, IBank shall give, or cause to be given, notice
of the occurrence of any of the following events with respect to the Series 2016A Bonds, if material:
(i)
Unless described in paragraph 5(a)(v), other material notices or determinations
by the Internal Revenue Service with respect to the tax status of the Series 2016A Bonds or other
material events affecting the tax status of the Series 2016A Bonds;
(ii)
Modifications to rights of Series 2016A Bond holders;
(iii)
Optional, unscheduled or contingent Series 2016A Bond calls;
(iv)
Release, substitution, or sale of property securing repayment of the Series 2016A
(v)
Non-payment related defaults;
Bonds;
(vi)
The consummation of a merger, consolidation, or acquisition involving an
obligated person or the sale of all or substantially all of the assets of the obligated person, 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; or
(vii)
Appointment of a successor or additional trustee or the change of name of a
trustee.
Whenever IBank obtains knowledge of the occurrence of a Listed Event described in
subsection 5(b), IBank shall as soon as possible determine if such event would be material under
applicable federal securities laws.
D-4
If IBank determines that the occurrence of a Listed Event under Section 5(b) would be material
under applicable federal securities laws, IBank shall file, or cause to be filed, a notice of such occurrence
with EMMA in a timely manner not more than ten (10) business days after the event.
SECTION 6. Termination of Reporting Obligation. The obligations of IBank under Sections 3,
4 and 5 of this Disclosure Agreement with respect to the Series 2016A Bonds shall terminate upon the
maturity, legal defeasance or prior redemption of all of the Series 2016A Bonds. If such termination
occurs prior to the final maturity of any Series 2016A Bonds, IBank shall give notice of such termination
with respect to such Series 2016A Bonds in the same manner as for a Listed Event under Section 5.
SECTION 7. Dissemination Agent. IBank may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out the obligations under this Disclosure Agreement, and may
discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent.
The Dissemination Agent shall have no obligation to make disclosure about the Series 2016A Bonds
except as expressly provided herein. The fact that the Dissemination Agent or any affiliate thereof may
have any fiduciary or banking relationship with IBank, apart from the relationship created by the Rule
shall not be construed to mean that the Dissemination Agent has actual knowledge of any event or
condition except as may be provided by written notice from IBank. The Dissemination Agent shall not be
responsible in any manner for the content of any notice or report prepared by IBank pursuant to this
Disclosure Agreement.
SECTION 8. Appointment of Initial Dissemination Agent; Duties of Dissemination Agent. (a)
IBank appoints U.S. Bank National Association as the initial Dissemination Agent hereunder. IBank
directs the Dissemination Agent on its behalf to make filings with the MSRB in accordance with this
Section 8 and within the time frame set forth in clause (c) below, and the Dissemination Agent agrees to
act as IBank’s agent in making such filings, the following:
(i)
the Annual Report pursuant to Section 4 hereof;
(ii)
Listed Event occurrences pursuant to Section 5 hereof;
(iii)
the notices of failure to provide information which IBank has agreed to provide
pursuant to subsection 3(b) hereof; and
(iv)
such other information as IBank shall determine to file with the MSRB through
the Dissemination Agent and shall provide to the Dissemination Agent. If IBank chooses to
include any information in any Annual Financial Information or Operating Data report or in any
notice of occurrence of an Event, in addition to that which is specifically required by this
Agreement, IBank shall have no obligation under this Agreement to update such information or
include it in any future Annual Financial Information or Operating Data report or notice of
occurrence of an Event.
(b)
The information which IBank has agreed to file with the MSRB shall be in the following
form:
(i)
as to all notices, reports and financial statements to be provided to the
Dissemination Agent by IBank, in the form required by the Rule or other applicable document or
agreement; and
(ii)
as to all other notices or reports, in such form as the Dissemination Agent shall
deem suitable for the purpose of which such notice or report is given.
D-5
(c)
The Dissemination Agent shall file the Annual Report with the MSRB within five (5)
business days of receipt thereof from IBank; notice of Listed Event occurrences within two (2) business
days of receipt thereof from IBank (or such lesser period as necessary in order for such Listed Event
occurrence to be provided to the MSRB for filing no more than ten (10) business days after the
occurrence thereof); and the notice of failure to provide the Annual Report by the date due each year
within two (2) business days after such failure. If on any such date, information required to be provided
by IBank to the Dissemination Agent has not been provided on a timely basis, the Dissemination Agent
shall file such information with the MSRB as soon thereafter as it is provided to the Dissemination Agent.
(d)
In addition, the Dissemination Agent shall make the the Annual Report, the Listed Event
occurrences and the notice of failure to provide the Annual Report available to any Bondholder upon
request, but need not transmit such materials to the Bondholders who do not so request. With respect to
requests for information from Bondholders, the Dissemination Agent may require payment by requesting
of holders a reasonable charge for duplication and transmission of the information and for the
Dissemination Agent’s administrative expenses incurred in providing the information.
(e)
To the extent IBank is obligated to file any Annual Financial Information with the MSRB
pursuant to this Agreement, such Annual Financial Information may be set forth in the document or set of
documents transmitted to the MSRB, or may be included by specific reference to documents available on
EMMA or filed with the Securities and Exchange Commission (materials filed by (i) electronic facsimile
transmissions confirmed by first class mail, postage prepaid, or (ii) first class mail, postage prepaid; or
(iii) by whatever means are acceptable to the Securities and Exchange Commission).
(f)
Nothing in this Agreement shall be construed to require the Dissemination Agent to
interpret or provide an opinion concerning the information filed with the MSRB or made available to
Bondholders. If the Dissemination Agent receives a request for an interpretation or opinion, the
Dissemination Agent may refer such request to IBank for response.
SECTION 9. Dissemination Agent Compensation. IBank shall pay or reimburse the
Dissemination Agent for its fees and expenses for the Dissemination Agent’s services rendered in
accordance with this Agreement.
SECTION 10. Amendment: Waiver. Notwithstanding any other provision of this Disclosure
Agreement, IBank may amend or waive any provision of this Disclosure Agreement, provided that the
following conditions are satisfied:
(a)
If the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5 it may only
be made in connection with a change in circumstances that arises from a change in legal requirements,
change in law, or change in the identity, nature or status of an obligated person with respect to the Series
2016A Bonds, or the type of business conducted;
(b)
The undertaking, as amended or taking into account such waiver, would, in the opinion
of Counsel, have complied with the requirements of the Rule at the time of the original issuance of the
Series 2016A Bonds, after taking into account any amendments or interpretations of the Rule, as well as
any change in circumstances; and
(c)
The amendment or waiver either (i) is approved by a majority of the Holders of the
Series 2016A Bonds Outstanding or (ii) does not, in the opinion of Counsel, materially impair the
interests of the Holders or Beneficial Owners of the Series 2016A Bonds.
D-6
In the event of any amendment or waiver of a provision of this Disclosure Agreement, IBank
shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative
explanation of the reason for the amendment or waiver and its impact on the type of financial information
or operating data being presented by the State.
SECTION 11. Additional Information. Nothing in this Disclosure Agreement shall be deemed
to prevent IBank from disseminating any other information, using the means of dissemination set forth in
this Disclosure Agreement or any other means of communication, or including any other information in
any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this
Disclosure Agreement. If IBank chooses to include any information in any Annual Report or notice of
occurrence of a Listed Event in addition to that which is specifically required by this Disclosure
Agreement, IBank shall not have any obligation under this Disclosure Agreement to update such
information or include it in any future Annual Report or notice of occurrence of a Listed Event.
SECTION 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the
Holders and Beneficial Owners from time to time of the Series 2016A Bonds, and shall create no rights in
any other person or entity (except the right of the Trustee or any Holder or Beneficial Owner to enforce
the provisions of this Disclosure Agreement on behalf of the Holders of the Series 2016A Bonds). This
Disclosure Agreement is not intended to create any monetary rights on behalf of any person based upon
the Rule.
SECTION 13. Partial Invalidity. If any one or more of the agreements or covenants or portions
thereof required hereby to be performed by or on the part of IBank shall be contrary to law, then such
agreement or agreements. such covenant or covenants or such portions thereof shall be null and void and
shall be deemed separable from the remaining agreements and covenant or portions thereof and shall in
no way affect the validity hereof, and the Holders of the Series 2016A Bonds shall retain all the benefits
afforded to them hereunder.
SECTION 14. Notices. Any notices or communications to or among any of the parties to this
Disclosure Agreement may be given as follows:
To IBank:
California Infrastructure and Economic Development Bank
1325 J Street, Suite 1823
Sacramento, CA 95814
Attention: General Counsel
To the Dissemination Agent:
U.S. Bank National Association
One California Street, Suite 1000
San Francisco, CA 94111
Attention: Global Corporate Trust Services
SECTION 15. Counterparts. This Disclosure Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall constitute but one and the same
instrument.
SECTION 16. Governing Law. The laws of the State of California shall govern this Disclosure
Agreement, the interpretation thereof and any right or liability arising hereunder. Any action or
proceeding to enforce or interpret any provision of this Disclosure Agreement shall be brought,
commenced or prosecuted in Sacramento County, California, unless waived by IBank.
D-7
IN WITNESS WHEREOF, the parties have executed this Disclosure Agreement by their duly
authorized representatives as of the date first above written.
THE CALIFORNIA INFRASTRUCTURE AND
ECONOMIC DEVELOPMENT BANK
By:
Teveia R. Barnes
Executive Director
U.S. BANK NATIONAL ASSOCIATION, as
Dissemination Agent
By:
Authorized Officer
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APPENDIX E
PROPOSED FORM OF OPINION OF BOND COUNSEL
June [__], 2016
California Infrastructure and Economic
Development Bank
Sacramento, California
California Infrastructure and Economic Development Bank
Infrastructure State Revolving Fund Revenue Bonds, Series 2016A
(Final Opinion)
Ladies and Gentlemen:
We have acted as bond counsel to the California Infrastructure and Economic Development
Bank (the “Issuer”) in connection with the issuance of $[________] aggregate principal amount of
the California Infrastructure and Economic Development Bank Infrastructure State Revolving Fund
Revenue Bonds, Series 2016A (the “Bonds”), issued pursuant to an indenture, dated as of February 1,
2014 (the “Master Indenture”), as supplemented by a first supplemental indenture, dated as of
February 1, 2014 (the “First Supplemental Indenture”), as further supplemented by a second
supplemental indenture, dated as of June 1, 2015 (the “Second Supplemental Indenture”), and as
further supplemented and amended by a third supplemental indenture, dated as of June 1, 2016 (the
“Third Supplemental Indenture” and collectively with the First Supplemental Indenture, the Second
Supplemental Indenture and the Master Indenture, the “Indenture”), each between the Issuer and U.S.
Bank National Association, as trustee (the “Trustee”). Capitalized terms not otherwise defined
herein shall have the meanings ascribed thereto in the Indenture.
In such connection, we have reviewed the Indenture and the Tax Certificate, dated the date
hereof (the “Tax Certificate”) executed by the Issuer; opinions of counsel to the Issuer and the
Trustee; certificates of the Issuer, the Trustee and others; and such other documents, opinions and
matters to the extent we deemed necessary to render the opinions set forth herein.
The opinions expressed herein are based on an analysis of existing laws, regulations, rulings
and court decisions and cover certain matters not directly addressed by such authorities. Such
opinions may be affected by actions taken or omitted or events occurring after the date hereof. We
have not undertaken to determine, or to inform any person, whether any such actions are taken or
omitted or events do occur or any other matters come to our attention after the date hereof.
Accordingly, this letter speaks only as of its date and is not intended to, and may not, be relied upon
or otherwise used in connection with any such actions, events or matters. Our engagement with
respect to the Bonds has concluded with their issuance, and we disclaim any obligation to update this
letter. We have assumed the genuineness of all documents and signatures presented to us (whether as
originals or as copies) and the due and legal execution and delivery thereof by, and validity against,
E-1
any parties other than the Issuer. We have assumed, without undertaking to verify, the accuracy of
the factual matters represented, warranted or certified in the documents, and of the legal conclusions
contained in the opinions, referred to in the second paragraph hereof. Furthermore, we have assumed
compliance with all covenants and agreements contained in the Indenture and the Tax Certificate,
including (without limitation) covenants and agreements compliance with which is necessary to
assure that future actions, omissions or events will not cause interest on the Bonds to be included in
gross income for federal income tax purposes. We call attention to the fact that the rights and
obligations under the Bonds, the Indenture and the Tax Certificate and their enforceability may be
subject to bankruptcy, insolvency, receivership, reorganization, arrangement, fraudulent conveyance,
moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable
principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal
remedies against public instrumentalities in the State of California. We express no opinion with
respect to any indemnification, contribution, liquidated damages, penalty (including any remedy
deemed to constitute a penalty), right of set-off, arbitration, judicial reference, choice of law, choice
of forum, choice of venue, non-exclusivity of remedies, waiver or severability provisions contained
in the foregoing documents, nor do we express any opinion with respect to the state or quality of title
to or interest in any of the assets described in or as subject to the lien of the Indenture or the accuracy
or sufficiency of the description contained therein of, or the remedies available to enforce liens on,
any such assets. Our services did not include financial or other non-legal advice. Finally, we
undertake no responsibility for the accuracy, completeness or fairness of the Official Statement,
dated [_______], 2016, or other offering material relating to the Bonds and express no opinion with
respect thereto.
Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are
of the following opinions:
1.
The Bonds constitute the valid and binding limited obligations of the Issuer.
2.
The Indenture has been duly executed and delivered by, and constitutes the valid and
binding obligation of, the Issuer. The Indenture creates a valid pledge, to secure the payment of the
principal of and interest on the Bonds, of the Collateral, subject to the provisions of the Indenture
permitting the application thereof for the purposes and on the terms and conditions set forth in the
Indenture.
3.
Interest on the Bonds is excluded from gross income for federal income tax purposes
under Section 103 of the Internal Revenue Code of 1986 and is exempt from State of California
personal income taxes. Interest on the Bonds is not a specific preference item for purposes of the
federal individual or corporate alternative minimum taxes, although we observe that it is included in
adjusted current earnings when calculating corporate alternative minimum taxable income. We
express no opinion regarding other tax consequences related to the ownership or disposition of, or the
amount, accrual or receipt of interest on, the Bonds.
Faithfully yours,
ORRICK, HERRINGTON & SUTCLIFFE LLP
per
E-2
APPENDIX F
BOOK-ENTRY ONLY SYSTEM
THE INFORMATION IN THIS APPENDIX F CONCERNING DTC (DEFINED
HEREIN) AND DTC’S BOOK-ENTRY SYSTEM HAS BEEN OBTAINED FROM SOURCES
THAT IBANK BELIEVES TO BE RELIABLE, BUT IBANK DOES NOT TAKE ANY
RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS THEREOF. THERE
CAN BE NO ASSURANCE THAT DTC WILL ABIDE BY ITS PROCEDURES OR THAT
SUCH PROCEDURES WILL NOT BE CHANGED FROM TIME TO TIME.
The Depository Trust Company “DTC”), New York, New York, will act as securities
depository for the Series 2016A Bonds. The Series 2016A Bonds will be issued as fully-registered
securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as
may be requested by an authorized representative of DTC. One fully-registered Series 2016A Bond
certificate will be issued for each maturity of the Series 2016A Bonds, each in the aggregate principal
amount of such maturity, and will be deposited with DTC.
DTC 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 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 Series 2016A Bonds under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Series 2016A Bonds on DTC’s records. The
ownership interest of each actual purchaser of each Series 2016A Bond (“Beneficial Owner”) is in
turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not
receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected
to receive written confirmations providing details of the transaction, as well as periodic statements of
their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered
into the transaction. Transfers of ownership interests in the Series 2016A Bonds are to be
accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of
F-1
Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership
interests in Series 2016A Bonds, except in the event that use of the book-entry system for the Series
2016A Bonds is discontinued.
To facilitate subsequent transfers, all Series 2016A Bonds deposited by Direct Participants
with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name
as may be requested by an authorized representative of DTC. The deposit of Series 2016A Bonds
with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect
any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the
Series 2016A Bonds; DTC’s records reflect only the identity of the Direct Participants to whose
accounts such Series 2016A Bonds are credited, which may or may not be the Beneficial Owners.
The Direct and Indirect Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct
Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. Beneficial Owners of Series 2016A Bonds may
wish to take certain steps to augment the transmission to them of notices of significant events with
respect to the Series 2016A Bonds, such as redemptions, tenders, defaults, and proposed amendments
to the Series 2016A Bond documents. For example, Beneficial Owners of Series 2016A Bonds may
wish to ascertain that the nominee holding the Series 2016A Bonds for their benefit has agreed to
obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to
provide their names and addresses to the registrar and request that copies of notices be provided
directly to them.
Redemption notices shall be sent to DTC. If less than all of the Series 2016A Bonds of a
single maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest
of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other
DTC nominee) will consent or vote with respect to Series 2016A Bonds unless authorized by a
Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC
mails an Omnibus Proxy to IBank 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
Series 2016A Bonds are credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Payments of principal of and interest and redemption proceeds on the Series 2016A Bonds
will be made to Cede & Co., or such other nominee as may be requested by an authorized
representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt
of funds and corresponding detail information from IBank 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 nor its nominee, the Trustee, or IBank,
subject to any statutory or regulatory requirements as may be in effect from time to time. Payments
of principal of and interest and redemption proceeds on each Series 2016A Bond to Cede & Co. (or
such other nominee as may be requested by an authorized representative of DTC) is the responsibility
of the Trustee, disbursement of such payments to Direct Participants will be the responsibility of
F-2
DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of
Direct and Indirect Participants.
DTC may discontinue providing its services as depository with respect to the Series 2016A
Bonds at any time by giving reasonable notice to IBank or the trustee. Under such circumstances, in
the event that a successor depository is not obtained, Series 2016A Bond certificates are required to
be printed and delivered. IBank may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor securities depository). In that event, Series 2016A Bond certificates
will be printed and delivered. To DTC and the requirements of the Indenture with respect to
certificated Series 2016A Bonds will apply.
IBANK AND THE UNDERWRITERS CANNOT AND DO NOT GIVE ANY
ASSURANCES THAT DTC, DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OF
DTC WILL DISTRIBUTE TO THE BENEFICIAL OWNERS OF THE SECURITIES (I)
PAYMENTS OF PRINCIPAL OF AND INTEREST ON THE SERIES 2016A BONDS (II)
CONFIRMATIONS OF THEIR OWNERSHIP INTERESTS IN THE SECURITIES OR (III)
OTHER NOTICES SENT TO DTC OR CEDE & CO., ITS PARTNERSHIP NOMINEE, AS THE
REGISTERED OWNER OF THE SECURITIES, OR THAT THEY WILL DO SO ON A TIMELY
BASIS, OR THAT DTC, DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS WILL
SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT.
NEITHER IBANK NOR THE UNDERWRITERS WILL HAVE ANY RESPONSIBILITY
OR OBLIGATIONS TO DTC, THE DIRECT PARTICIPANTS, THE INDIRECT PARTICIPANTS
OF DTC OR THE BENEFICIAL OWNERS WITH RESPECT TO (1) THE ACCURACY OR
COMPLETENESS OF ANY RECORDS MAINTAINED BY DTC OR ANY DIRECT
PARTICIPANTS OR INDIRECT PARTICIPANTS OF DTC; (2) THE PAYMENT BY DTC OR
ANY DIRECT PARTICIPANTS OR INDIRECT PARTICIPANTS OF DTC OF ANY AMOUNT
DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL AMOUNT OF OR
INTEREST ON SECURITIES; (3) THE DELIVERY BY DTC OR ANY DIRECT PARTICIPANTS
OR INDIRECT PARTICIPANTS OF DTC OF ANY NOTICE TO ANY BENEFICIAL OWNER
THAT IS REQUIRED OR PERMITTED TO BE GIVEN TO OWNERS UNDER THE TERMS OF
THE INDENTURE; OR (4) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS
OWNER OF THE SECURITIES.
F-3
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APPENDIX G
LETTERS FROM CERTAIN UNDERWRITERS
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May 2, 2016
Mr. Blake Fowler
Director, Public Finance Division
Office of the Treasurer of the State of California
915 Capitol Mall, Room 261
Sacramento, CA 95814
RE: IBank Infrastructure State Revolving Fund Revenue Bonds Series 2016A
Dear Mr. Fowler:
Blaylock Beal Van, LLC, is providing the following language for inclusion in the Official Statement.
Blaylock Beal Van, LLC (“Blaylock Beal Van” or “BBV”) has entered into a distribution agreement (the
“Agreement”) with TD Ameritrade, Inc. (“TD”) for the retail distribution of certain municipal securities
offerings underwritten by or allocated to Blaylock Beal Van, including the Series 2016A Bonds. Under the
Agreement, Blaylock Beal Van will share with TD a portion of the underwriting compensation paid to BBV.
Sincerely,
Blaylock Beal Van, LLC
Cc:
Teveia Barnes, Executive Director
California Infrastructure and Economic Development Bank
G-1
[Type text]
BNY Mellon Capital
Markets, LLC
BNY Mellon Center, Suite 475
Pittsburgh, PA 15258
May 19, 2016
Mr. Blake Fowler
Director of Public Finance Division
Office of the Treasurer of the State of California
State of California
915 Capitol Mall, Suite 110
Sacramento, California 95814
Re:
Distribution Agreement relating to BNY Mellon Capital Markets, LLC’s appointment as a CoManaging Underwriter for California General Infrastructure and Economic Development Bank
(IBank) Infrastructure State Revolving Fund Revenue Bonds, Series 2016 A Bonds
Dear Mr. Fowler:
BNY Mellon Capital Markets, LLC is providing the following language for inclusion in the
Official Statement.
BNY Mellon Capital Markets, as a Co-Managing Underwriter on the above referenced
Bonds, and Pershing LLC, both direct or indirect subsidiaries of The Bank of New York Mellon
Corporation, entered into a distribution agreement (the “BNYM Distribution Agreement”) that
enables Pershing LLC to distribute certain new issue municipal securities underwritten by or
allocated to BNY Mellon Capital Markets, LLC, including the Bonds. Under the BNYM
Distribution Agreement, BNY Mellon Capital Markets will share with Pershing LLC a portion of the
fee or commission paid to BNY Mellon Capital Markets, LLC.
Very truly yours,
BNY Mellon Capital Markets, LLC
cc: Teveia Barnes, Cal IBank
BNY Mellon Capital Markets, LLC (“BNYMCM”) is a full‐service broker‐dealer and a wholly owned, indirect non‐bank
subsidiary of The Bank of New York Mellon Corporation. BNYMCM is a member of FINRA and SIPC.
G-2
June 7, 2016
California Infrastructure and Economic Development Bank
[email protected]
Attn: Teveia Barnes
State Treasurer’s Office
Maun Cheo
[email protected]
Re: Fidelity Capital Markets
Dear Ms. Barnes:
Underwriter Fidelity Capital Market (“FCM”) is a division of National Financial Services LLC (“NFS”)
Sincerely,
Fidelity Capital Markets (a division of
National Financial Services LLC)
By: Debra Saunders, Vice President
G-3
May 17, 2016
Mr. Blake Fowler
Director, Public Finance Division
Office of the Treasurer of the State of California
915 Capitol Mall, Room 261
Sacramento, CA 95814
RE:
California Infrastructure and Economic Development Bank
Infrastructure State Revolving Fund Revenue Bonds, Series 2016A (the “Bonds”)
Dear Mr. Fowler:
J.P. Morgan Securities LLC (“JPMS”), one of the Underwriters of the Bonds, has entered
into a negotiated dealer agreement (the “Dealer Agreement”) with Charles Schwab & Co.
(“CS&Co.”) for the retail distribution of certain securities offerings at the original issue
prices. Pursuant to the Dealer Agreement, CS&Co. may purchase Bonds from JPMS at
the original issue price less a negotiated portion of the selling concession applicable to any
Bonds that CS&Co. sells.
J.P. MORGAN SECURITIES LLC
cc: Teveia Barnes
G-4
12100 Wilshire Blvd., Suite 605
Los Angeles, CA 90025
T 310.439.5547 F 310.442.1208
Toll Free 888.294.8898
www.loopcapital.com
May 19, 2016
Mr. Blake Fowler
Director, Public Finance Division
Office of the Treasurer of the State of California
915 Capitol Mall, Room 110
Sacramento, CA 95814
Re: California Infrastructure and Economic Development Bank (IBank)
Infrastructure State Revolving Fund Revenue Bonds Series 2016A (the “Bonds”)
Dear Mr. Fowler:
Loop Capital Markets LLC is providing the following language for inclusion in the Official
Statement.
Loop Capital Markets, one of the Underwriters of the Bonds, has entered into distribution
agreements (each a “Distribution Agreement”) with each of UBS Financial Services Inc.
(“UBSFS”) and Deutsche Bank Securities Inc. (“DBS”) for the retail distribution of certain
securities offerings at their original issue prices. Pursuant to each Distribution Agreement (if
applicable to this transaction), each of UBSFS and DBS will purchase Bonds from Loop
Capital Markets at the original issue price less a negotiated portion of the selling concession
applicable to any Bonds that the firm sells.
Sincerely,
Loop Capital Markets LLC
CC:
Teveia Barnes
California Infrastructure and Economic Development Bank
G-5
May 12, 2016
Mr. Blake Fowler
Director
Public Finance Division
Office of the Treasurer of the State of California
915 Capitol Mall, Room 261
Sacramento, CA 95814
Re:
California Infrastructure and Economic Development Bank (IBank)
Infrastructure State Revolving Fund Revenue Bonds Series 2016A
Dear Mr. Fowler:
Mischler Financial Group, Inc. (“Mischler”), one of the underwriters of the above referenced
bonds (the “ Bonds”), has entered into separate distribution agreements (each a “Distribution
Agreement”) with Hennion & Walsh, Inc. (“H&W”), Higgins Capital Management, Inc.
(“Higgins”), J.J.B. Hilliard, W.L. Lyons, LLC (“Hilliard Lyons”) IFS Securities Inc. (“IFS”),
Newbridge Securities Corporation (“NSC”) and TD Ameritrade (“TDA”) for the retail distribution
of certain securities offerings at the original issue prices. Pursuant to each Distribution
Agreement, H&W, Higgins, Hilliard Lyons, IFS, NSC and TDA may purchase Bonds from
Mischler at the original issue prices less a negotiated portion of the takedown applicable to any
Bonds such firm sells.
Sincerely,
Mischler Financial Group, Inc.
Cc:
Teveia Barnes, IBank
G-6
May 17, 2016
Mr. Blake Fowler
Director of Public Finance
Office of the Treasurer of the State of California
Public Finance Division
915 Capital Mall, Room 261
Sacramento, CA 95814
RE:
CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK
INFRASTRUCTURE STATE REVOLVING FUND REVENUE BONDS,
SERIES 2016A
Dear Mr. Fowler:
Piper Jaffray & Co. is providing the following language for inclusion in the Official Statement.
Piper Jaffray & Co. and UnionBanc Investment Securities LLC (“UnionBanc”) entered into an
agreement (the “Agreement”) which enables UnionBanc to distribute certain new issue municipal
securities underwritten by or allocated to Piper Jaffray & Co., including the California
Infrastructure & Economic Development Bank (“IBank”) Infrastructure State Revolving Fund
Revenue Bonds, Series 2016A (the “Bonds). Under the Agreement, Piper Jaffray & Co. will share
with UnionBanc a portion of the fee or commission paid to Piper Jaffray.
Sincerely,
Piper Jaffray & Co.
cc: Teveia Barnes, IBank
G-7
May 18, 2016
Mr. Blake Fowler, Director of Public Finance Office of the Treasurer of the State of California
Executive Office
915 Capitol Mall, Room 261
Sacramento, CA 95814
RE:
Retail Agreement Letter: California Infrastructure and Economic Development Bank
Infrastructure State Revolving Fund Revenue Bonds Series 2016A
Dear Mr. Fowler:
The Williams Capital Group, L.P., a Co-Managing Underwriter on the California Infrastructure and
Economic Development Bank Infrastructure State Revolving Fund Revenue Bonds Series 2016A, has
entered into a negotiated dealer agreement ("Dealer Agreement") with TD Ameritrade for the retail
distribution of certain securities offerings at the original issue prices. Pursuant to the Dealer
Agreement (if applicable to this transaction), TD Ameritrade may purchase bonds from Williams
Capital at the original issue price less a negotiated portion of the selling concession applicable to any
bonds that such firm sells.
The Williams Capital Group, L.P.
cc: Teveia Barnes, California Infrastructure and Economic Development Bank
THE WILLIAMS CAPITAL GROUP, L.P.
650 Fifth Avenue, 9th Floor, New York, NY 10019 Telephone 212.830.4500 Facsimile 212.830.4545
G-8
May 12, 2016
Mr. Blake Fowler
Director, Public Finance Division
Office of the Treasurer of the State of California
915 Capitol Mall, Room 261
Sacramento, CA 95814
Re:
California Infrastructure and Economic Development Bank
Infrastructure State Revolving Fund Revenue Bonds, Series 2016A (the “Bonds”)
Dear Mr. Fowler:
Wells Fargo Bank, National Association, acting through its Municipal Products Group
("WFBNA MPG") one of the underwriters of the Bonds, has entered into an agreement
(the "Distribution Agreement") with its affiliate, Wells Fargo Advisors, LLC ("WFA"), for
the distribution of certain municipal securities offerings, including the Bonds. Pursuant to
the Distribution Agreement, WFBNA MPG will share a portion of its underwriting or
remarketing agent compensation, as applicable, with respect to the Bonds with WFA.
WFBNA MPG also utilizes the distribution capabilities of its affiliate Wells Fargo
Securities, LLC (“WFSLLC”), for the distribution of municipal securities offerings,
including the Bonds. In connection with utilizing the distribution capabilities of
WFSLLC, WFBNA MPG pays a portion of WFSLLC’s expenses based on its municipal
securities transactions. WFBNA MPG, WFSLLC, and WFA are each wholly-owned
subsidiaries of Wells Fargo & Company.
Wells Fargo Securities is the trade name for certain securities-related capital markets and
investment banking services of Wells Fargo & Company and its subsidiaries, including
Wells Fargo Bank, National Association.
Wells Fargo Bank, National Association
cc:
Teveia Barnes
Executive Director
California Infrastructure and Economic Development Bank
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CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK • INFRASTRUCTURE STATE REVOLVING FUND REVENUE BONDS, SERIES 2016A