Cabrera Capital Markets, LLC Ramirez & Co., Inc.

NEW ISSUE – BOOK-ENTRY ONLY Insured Bonds Rating: S&P: “AA” Underlying Rating: S&P “AA-” See the caption “RATINGS.”

In the opinion of Best Best & Krieger LLP, Riverside, California, Bond Counsel, subject, however, to certain qualifications described herein, under existing law, the interest on the 2021 Bonds is not excluded from gross income for federal income tax purposes. Interest on the 2021 Bonds is exempt from State of California personal income taxes. See the caption “TAX MATTERS.”

$35,045,000 ONTARIO PUBLIC FINANCING AUTHORITY

2021 LEASE REVENUE REFUNDING BONDS, SERIES A (FEDERALLY TAXABLE)

Dated: Date of Delivery Due: October 1, as shown on inside cover The 2021 Bonds will be issued pursuant to an Indenture of Trust, dated as of December 1, 2021, by and between the Ontario Public Financing Authority

and Zions Bancorporation, National Association, as trustee. The 2021 Bonds are payable from Base Rental Payments to be made by the City for the right to the use of certain real property pursuant to an Amended and Restated Lease Agreement, dated as of December 1, 2021, by and between the City, as lessee, and the Authority, as lessor.

The 2021 Bonds are being issued to provide funds: (i) to refund the Authority’s 2013 Lease Revenue Bonds (Capital Projects); and (ii) to pay the costs of issuing the 2021 Bonds, including the premium for a municipal bond insurance policy insuring the 2021 Bonds maturing on October 1 of the years 2026 through 2034, inclusive, 2039 and 2043, to be issued by Build America Mutual Assurance Company.

The City has covenanted under the Lease Agreement to take such action as may be necessary to include all Base Rental Payments and Miscellaneous Rent due thereunder in each of its budgets during the Term of the Lease Agreement and to make the necessary annual appropriations for all such Base Rental Payments and Miscellaneous Rent. The City’s obligation to make Base Rental Payments under the Lease Agreement is subject to abatement during any period in which by reason of damage or destruction (other than by eminent domain, which is otherwise provided for) there is substantial interference with the use and occupancy by the City of the Leased Premises or any portion thereof.

The 2021 Bonds are being issued in fully registered book-entry only form, initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York. Interest on the 2021 Bonds is payable semiannually on April 1 and October 1 of each year, commencing April 1, 2022. Purchasers will not receive certificates representing their interest in the 2021 Bonds. Individual purchases will be in principal amounts of integral multiples of $5,000. Principal of and interest and premium, if any, on the 2021 Bonds will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants who are obligated to remit such payments to the beneficial owners of the 2021 Bonds.

The Authority may issue Additional Bonds payable from Base Rental Payments. The 2021 Bonds and any Additional Bonds are collectively referred to herein as the “Bonds.”

The 2021 Bonds are subject to redemption prior to maturity as described in this Official Statement.

The 2021 Bonds are special obligations of the Authority, payable solely from the Base Rental Payments and the other assets pledged therefor under the Indenture. Neither the faith and credit nor the taxing power of the Authority, the City or the State of California, or any political subdivision thereof, is pledged to the payment of the 2021 Bonds. The Authority has no taxing power.

The obligation of the City to make Base Rental Payments does not constitute a debt of the City or the State of California or any political subdivision thereof within the meaning of any constitutional or statutory debt limit or restriction, and does not constitute an obligation for which the City or the State of California is obligated to levy or pledge any form of taxation or for which the City or the State of California has levied or pledged any form of taxation.

The 2021 Bonds are not subject to acceleration in the event of a payment default.

No debt service reserve fund or account has been established by the Authority or the City in connection with the issuance of the 2021 Bonds.

The scheduled payment of principal of and interest on the 2021 Bonds maturing on October 1 of the years 2026 through 2034, inclusive, 2039 and 2043, with CUSIP #s 68304RCC2, 68304RCD0, 68304RCE8, 68304RCF5, 68304RCG3, 68304RCH1, 68304RCJ7, 68304RCK4, 68304RCL2, 68304RCM0 and 68304RCN8, respectively (collectively, the “Insured Bonds”), when due will be guaranteed under a municipal bond insurance policy to be issued concurrently with the delivery of the Insured Bonds by BUILD AMERICA MUTUAL ASSURANCE COMPANY.

THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT A SUMMARY OF THIS ISSUE. INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION.

The Authority has applied for a municipal bond insurance policy guaranteeing the scheduled payment of principal of and interest on some or all of the maturities of the 2021 Bonds when due. The Authority will determine whether to purchase such a policy in connection with the pricing of the 2021 Bonds.

The 2021 Bonds will be offered when, as and if issued and received by the Underwriters, subject to the approval as to their validity by Best Best & Krieger LLP, Riverside, California, Bond Counsel. Certain legal matters will be passed upon for the City and the Authority by Best Best & Krieger LLP, Ontario, California, as City Attorney and General Counsel to the Authority. Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California is acting as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriters by Quint & Thimmig LLP, Larkspur, California, as Underwriters’ Counsel, for the Insurer by its counsel and for the Trustee by its counsel. It is anticipated that the 2021 Bonds in definitive form will be available for delivery to DTC on or about December 16, 2021.

Cabrera Capital Markets, LLC Ramirez & Co., Inc.

Dated: December 1, 2021

MATURITY SCHEDULE

BASE CUSIP®*: 68304R

$35,045,000

ONTARIO PUBLIC FINANCING AUTHORITY 2021 LEASE REVENUE REFUNDING BONDS, SERIES A

(FEDERALLY TAXABLE)

Maturity Date (October 1) Principal Amount Interest Rate Yield Price

CUSIP®* Suffix

2022 $1,345,000 0.665% 0.665% 100.000 BY5 2023 1,140,000 0.765 0.765 100.000 BZ2 2024 1,180,000 1.139 1.139 100.000 CA6 2025 1,230,000 1.458 1.458 100.000 CB4

2026(I) 1,290,000 1.608 1.608 100.000 CC2 2027(I) 1,340,000 1.807 1.807 100.000 CD0 2028(I) 1,400,000 2.007 2.007 100.000 CE8 2029(I) 1,430,000 2.136 2.136 100.000 CF5 2030(I) 1,460,000 2.286 2.286 100.000 CG3 2031(I) 1,495,000 2.436 2.436 100.000 CH1 2032(I) 1,530,000 2.636 2.636 100.000 CJ7 2033(I) 1,570,000 2.786 2.786 100.000 CK4 2034(I) 1,615,000 2.936 2.936 100.000 CL2

$8,850,000 3.183% Term 2021 Bonds due October 1, 2039(I), Yield: 3.183%, Price: 100.000, CUSIP®* Suffix CM0

$8,170,000 3.283% Term 2021 Bonds due October 1, 2043(I), Yield: 3.283%, Price: 100.000, CUSIP®* Suffix CN8

* CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by S&P Global Market Intelligence. Copyright© CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. None of the City, the Authority, the Underwriters or their agents or counsel assume responsibility for the accuracy of such numbers. (I) Insured Bond.

No dealer, broker, salesperson or other person has been authorized by the City or the Authority to give any information or to make any representations in connection with the offer or sale of the 2021 Bonds other than those contained in this Official Statement and, if given or made, such other information or representations must not be relied upon as having been authorized by the City or the Authority. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor will there be any sale of the 2021 Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.

This Official Statement is not to be construed as a contract with the purchasers or owners of the 2021 Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described in this Official Statement, are intended solely as such and are not to be construed as representations of fact.

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 a 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.

This Official Statement and the information contained in this Official Statement are subject to completion or amendment without notice and neither delivery of this Official Statement nor any sale made hereunder will, under any circumstances, create any implication that there has been no change in the affairs of the City or the Authority or any other parties described in this Official Statement since the date hereof. These securities may not be sold, nor may an offer to buy be accepted, prior to the time that the Official Statement is delivered in final form. This Official Statement is being submitted in connection with the sale of the 2021 Bonds referred to in this Official Statement and may not be reproduced or used, in whole or in part, for any other purpose, unless authorized in writing by the City. All summaries of documents and laws are made subject to the provisions thereof and do not purport to be complete statements of any or all such provisions.

Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “assume,” “project,” “budget,” “intend” or similar words. Such forward-looking statements include, but are not limited to, certain statements contained under the captions “THE CITY” and “CITY FINANCIAL INFORMATION.”

THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE CITY DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. IN EVALUATING SUCH STATEMENTS, POTENTIAL INVESTORS SHOULD SPECIFICALLY CONSIDER THE VARIOUS FACTORS THAT COULD CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS.

IN CONNECTION WITH THE OFFERING OF THE 2021 BONDS, THE UNDERWRITERS MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 2021 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITERS MAY OFFER AND SELL THE 2021

BONDS TO CERTAIN DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AND OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICE STATED ON THE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICE MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITERS.

THE 2021 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT AND HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.

The City maintains a website; however, information presented there is not a part of this Official Statement and should not be relied upon in making an investment decision with respect to the 2021 Bonds.

Build America Mutual Assurance Company (“BAM”) makes no representation regarding the 2021 Bonds or the advisability of investing in the 2021 Bonds. In addition, BAM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding BAM, supplied by BAM and presented under the caption “BOND INSURANCE” and in Appendix G—“SPECIMEN MUNICIPAL BOND INSURANCE POLICY.”

CITY OF ONTARIO COUNTY OF SAN BERNARDINO

STATE OF CALIFORNIA

CITY COUNCIL AND AUTHORITY BOARD OF DIRECTORS

Paul S. Leon, Mayor and Authority Chair Alan D. Wapner, Mayor Pro Tem and Authority Vice Chair

Jim W. Bowman, Councilmember and Authority Board Member Debra Dorst-Porada, Councilmember and Authority Board Member

Ruben Valencia, Councilmember and Authority Board Member

STAFF

Scott Ochoa, City Manager and Authority Executive Director James R. Milhiser, City Treasurer

Armen Harkalyan, Executive Director of Finance and Authority Treasurer Doreen Nunes, Assistant Finance Director

Sheila Mautz, City Clerk and Authority Secretary

SPECIAL SERVICES

City Attorney and Authority General Counsel

Best Best & Krieger LLP Ontario, California

Bond Counsel

Best Best & Krieger LLP Riverside, California

Disclosure Counsel

Stradling Yocca Carlson & Rauth, a Professional Corporation Newport Beach, California

Municipal Advisor

CSG Advisors Incorporated San Francisco, California

Trustee

Zions Bancorporation, National Association Los Angeles, California

Escrow Agent

The Bank of New York Mellon Trust Company, N.A. Los Angeles, California

Verification Agent

Causey Demgen & Moore P.C. Denver, Colorado

i

TABLE OF CONTENTS

INTRODUCTION ................................................. 1 General ............................................................... 1 Security for the 2021 Bonds; Base

Rental Payments .............................................. 1 Limited Obligation ............................................. 2 No Reserve Fund ................................................ 2 Bond Insurance ................................................... 2 Additional Bonds ................................................ 3 The City .............................................................. 3 Continuing Disclosure ........................................ 3 Risk Factors ........................................................ 3 Summaries Not Definitive .................................. 3 Changes Since Preliminary Official

Statement......................................................... 3

PLAN OF FINANCE ............................................. 4 The Refunding Plan ............................................ 4 Estimated Sources and Uses of Funds ................ 5

THE LEASED PREMISES ................................... 5

BASE RENTAL PAYMENT SCHEDULE .......................................................... 7

THE 2021 BONDS ................................................ 8 General ............................................................... 8 Registration, Transfers and Exchanges .............. 8 Redemption ........................................................ 9 Book-Entry Only System ................................. 11

SECURITY AND SOURCES OF PAYMENT FOR THE 2021 BONDS ................. 12

Pledge of Base Rental Payments ...................... 12 Additional Bonds .............................................. 13 Base Rental Payments ...................................... 13 Miscellaneous Rent .......................................... 14 Abatement ........................................................ 15 Substitution or Release of the Leased

Premises ........................................................ 16 Action on Default ............................................. 17 No Reserve Fund .............................................. 17 Insurance .......................................................... 17

BOND INSURANCE .......................................... 18 Bond Insurance Policy ...................................... 18 Build America Mutual Assurance

Company ....................................................... 18

THE CITY ........................................................... 20 General ............................................................. 20 Largest Employers ............................................ 21 Government and Administration ...................... 21 Ontario International Airport ............................ 22

Risk Management ............................................ 22 COVID-19 Outbreak ........................................ 23

CITY FINANCIAL INFORMATION ................ 25 Accounting and Financial Reporting ............... 25 General Economic Condition and

Outlook of the City ....................................... 26 Budget Procedure, Current Budget and

Historical Budget Information ...................... 29 Change in Fund Balance of the City

General Fund ................................................ 33 General Fund Balance Sheets of the

City ............................................................... 34 Property Taxes ................................................. 34 Sales Taxes ...................................................... 37 Transient Occupancy Taxes ............................. 38 Other Taxes ...................................................... 38 Services ............................................................ 38 State of California Motor Vehicle In-

Lieu Payments .............................................. 38 Other Indebtedness ........................................... 39 Retirement Contributions ................................. 42 Other Post-Employment Benefits .................... 50 City Investment Policy ..................................... 52

THE AUTHORITY ............................................. 53

STATE OF CALIFORNIA BUDGET INFORMATION ................................................. 53

General ............................................................. 53 Budget for State Fiscal Year 2021-22 .............. 53 Potential Impact of State Financial

Condition on the City ................................... 55 Redevelopment Dissolution ............................. 55 Future State Budgets ........................................ 57

CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS .................... 57

Article XIIIA of the State Constitution ............ 57 Article XIIIB of the State Constitution ............ 58 Proposition 62 .................................................. 58 Proposition 218 ................................................ 58 Unitary Property ............................................... 59 Proposition 22 .................................................. 59 Proposition 26 .................................................. 60 Future Initiatives .............................................. 60

RISK FACTORS ................................................. 60 General Considerations – Security for

the 2021 Bonds ............................................. 60 Abatement ........................................................ 61 Initiative and Referendum ................................ 62

ii

Insurance on the Leased Premises .................... 62 Condemnation of the Leased Premises ............. 62 Value of Property ............................................. 62 No Acceleration of Base Rental

Payments ....................................................... 63 Certain Risks Associated with Sales Tax

and Other Local Tax Revenues ..................... 63 Assessed Value of Taxable Property ................ 63 Dependence on State for Certain

Revenues ....................................................... 64 Litigation .......................................................... 64 Natural Disasters .............................................. 65 Climate Change ................................................ 65 Cybersecurity.................................................... 66 Hazardous Substances ...................................... 66 Economy of City and State ............................... 66 Split Roll Initiative ........................................... 67 Additional City Obligations ............................. 67 Remedies .......................................................... 67 Limitation on Trustee’s Obligations

under the Indenture ....................................... 67 Release of Property; Additional Bonds ............ 67 Limitations on Enforceability ........................... 68 Secondary Market ............................................. 70 Covenant to Budget and Appropriate ............... 70 Risks Associated with Bond Insurance ............ 70

TAX MATTERS.................................................. 71

CERTAIN LEGAL MATTERS .......................... 74

MUNICIPAL ADVISOR .................................... 74

LITIGATION ...................................................... 75

UNDERWRITING .............................................. 75

RATINGS ............................................................ 75

CONTINUING DISCLOSURE .......................... 76

FINANCIAL INTERESTS ................................. 76

MISCELLANEOUS ............................................ 77 APPENDIX A DEMOGRAPHIC AND

ECONOMIC INFORMATION .................... A-1

APPENDIX B SUMMARY OF PRINCIPAL LEGAL DOCUMENTS ....................... B-1

APPENDIX C AUDITED FINANCIAL STATEMENTS ...................... C-1

APPENDIX D FORM OF BOND COUNSEL OPINION ............ D-1

APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE ...................... E-1

APPENDIX F BOOK-ENTRY ONLY SYSTEM ................................. F-1

APPENDIX G SPECIMEN MUNICIPAL BOND INSURANCE POLICY ......... G-1

[THIS PAGE INTENTIONALLY LEFT BLANK]

1

$35,045,000 ONTARIO PUBLIC FINANCING AUTHORITY

2021 LEASE REVENUE REFUNDING BONDS, SERIES A (FEDERALLY TAXABLE)

INTRODUCTION

General

This Official Statement, which includes the cover page and appendices (the “Official Statement”), provides certain information concerning the above-captioned bonds (the “2021 Bonds”). The 2021 Bonds are being issued by the Ontario Public Financing Authority (the “Authority”), a joint exercise of powers agency the members of which are the City of Ontario, California (the “City”) and the Ontario Housing Authority (the “Housing Authority”).

The 2021 Bonds will be issued pursuant to Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the California Government Code, and an Indenture of Trust, dated as of December 1, 2021 (the “Indenture”), by and between the Authority and Zions Bancorporation, National Association, as trustee (the “Trustee”).

The 2021 Bonds are being issued in fully registered book-entry only form, initially registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). Purchasers will not receive certificates representing their interest in the 2021 Bonds. Individual purchases will be in integral multiples of $5,000. Principal of and interest on the 2021 Bonds will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants who are obligated to remit such payments to the beneficial owners of the 2021 Bonds. See the caption “THE 2021 BONDS—Book-Entry Only System.”

The 2021 Bonds are subject to redemption prior to maturity as described under the caption “THE 2021 BONDS—Redemption.”

The 2021 Bonds are being issued to provide funds: (i) to refund the Authority’s 2013 Lease Revenue Bonds (Capital Projects) (the “2013 Bonds”); and (ii) to pay the costs of issuing the 2021 Bonds, including the premium for a municipal bond insurance policy (the “Policy”) insuring the 2021 Bonds maturing on October 1 of the years 2026 through 2034, inclusive, 2039 and 2043 (collectively, the “Insured Bonds”), to be issued by Build America Mutual Assurance Company (“BAM” or the “Insurer”). See the caption “PLAN OF FINANCE.”

Security for the 2021 Bonds; Base Rental Payments

Pursuant to an Amended and Restated Lease Agreement, dated as of December 1, 2021 (the “Lease Agreement”), by and between the City, as lessor and sublessee, and the Authority, as lessee and sublessor:

(i) the City has leased certain real property of the City and the improvements thereon (collectively, the “Leased Premises”) to the Authority in consideration for the Authority’s assistance in issuing the 2021 Bonds; and

(ii) the Authority has subleased the Leased Premises back to the City in consideration for the City’s payment of semiannual lease payments (the “Base Rental Payments”) to be made by the City for the right to use the Leased Premises as sublessee.

See the caption “THE LEASED PREMISES” for a description of the Leased Premises

2

Under the Indenture, the Authority has assigned to the Trustee for the benefit of the 2021 Bond Owners substantially all of the Authority’s right, title and interest in and to the Lease Agreement, including its right to receive the Base Rental Payments due under the Lease Agreement and to enforce any remedies in the event of a default by the City.

The City has covenanted under the Lease Agreement to take such action as may be necessary to include all Base Rental Payments and Miscellaneous Rent due thereunder in each of its budgets during the Term of the Lease Agreement and to make the necessary annual appropriations for all such Base Rental Payments and Miscellaneous Rent (as described under the caption “SECURITY AND SOURCES OF PAYMENT FOR THE 2021 BONDS—Miscellaneous Rent”).

The Base Rental Payments allocable to the Leased Premises will be abated during any period in which by reason of damage or destruction (other than by eminent domain which is otherwise provided for in the Lease Agreement) there is substantial interference with the use and occupancy by the City of the Leased Premises or any portion thereof. The amounts of the Base Rental Payments under such circumstances may not be less than the amounts of the unpaid Base Rental Payments, unless such unpaid amounts are determined to be greater than the fair rental value of the portions of the Leased Premises not damaged or destroyed, based upon the opinion of an MAI appraiser with expertise in valuing such properties or other appropriate method of valuation, in which event the Base Rental Payments will be abated such that they represent said fair rental value. Such abatement will continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. See the captions “SECURITY AND SOURCES OF PAYMENT FOR THE 2021 BONDS—Abatement” and “RISK FACTORS—Abatement.”

Limited Obligation

THE 2021 BONDS ARE SPECIAL OBLIGATIONS OF THE AUTHORITY, PAYABLE SOLELY FROM THE BASE RENTAL PAYMENTS AND THE OTHER ASSETS PLEDGED THEREFOR UNDER THE INDENTURE. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE AUTHORITY, THE CITY OR THE STATE OF CALIFORNIA (THE “STATE”), OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE 2021 BONDS. THE AUTHORITY HAS NO TAXING POWER.

THE OBLIGATION OF THE CITY TO MAKE BASE RENTAL PAYMENTS DOES NOT CONSTITUTE A DEBT OF THE CITY OR THE STATE OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR RESTRICTION, AND DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE CITY OR THE STATE IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY OR THE STATE HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.

No Reserve Fund


Bond Insurance

Concurrently with the issuance of the 2021 Bonds, the Insurer will issue the Policy for the Insured Bonds, consisting of the 2021 Bonds maturing on October 1 of the years 2026 through 2034, inclusive, 2039 and 2043. The Policy guarantees the scheduled payment of principal of and interest on the Insured Bonds when due as set forth in the form of the Policy set forth in Appendix G. The Bonds maturing on October 1 of the years 2022 through 2025, inclusive, are not insured by the Policy.

3

Additional Bonds

Under the Lease Agreement, the Authority may issue additional bonds (the “Additional Bonds”) payable from Base Rental Payments on a parity basis with the 2021 Bonds. The 2021 Bonds and any Additional Bonds are collectively referred to in this Official Statement as the “Bonds.” See the caption “SECURITY AND SOURCES OF PAYMENT FOR THE 2021 BONDS—Additional Bonds.”

The City

See the captions “THE CITY” and “CITY FINANCIAL INFORMATION,” as well as Appendices A and C for information with respect to the City and the General Fund, including other obligations which are payable from general revenues of the City.

The City notes that much of the historical information related to the City is the latest available but does not in certain instances reflect the impact of the COVID-19 pandemic. See the caption “THE CITY—COVID-19 Outbreak.” Accordingly, such historical information below does not necessarily reflect present economic conditions and future information could be significantly different from such historical information.

Continuing Disclosure

The City has agreed to provide, or to cause to be provided, to the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System for purposes of Securities and Exchange Commission Rule 15c2-12 certain annual financial information and operating data and, in a timely manner, notice of certain listed events. See the caption “CONTINUING DISCLOSURE.”

Risk Factors

Certain events could affect the ability of the City to make the Base Rental Payments when due. See the caption “RISK FACTORS” for a discussion of certain factors that should be considered, in addition to other matters that are set forth in this Official Statement, in evaluating an investment in the 2021 Bonds.

Summaries Not Definitive

The summaries of and references to documents, statutes, reports and other instruments in this Official Statement do not purport to be complete, comprehensive or definitive, and each such summary and reference is qualified in its entirety by the complete document, statute, report or instrument. The capitalization of any word that is not conventionally capitalized, or otherwise defined in this Official Statement, indicates that such word is defined in a particular agreement or other document and, as has the meaning that is given to such word in Appendix B. Copies of the documents described in this Official Statement will be available at the City of Ontario, 303 East B Street, Ontario, California 91764, Attention: Finance Department.

Changes Since Preliminary Official Statement

Changes have been made since the Preliminary Official Statement dated November 18, 2021: (i) throughout this Official Statement to reflect the purchase of the Policy insuring the Insured Bonds; and (ii) under the caption “THE CITY—COVID-19 Outbreak” to reflect the receipt of ARP Act funding in the City’s Fiscal Year 2021-22 budget.

4

PLAN OF FINANCE

The Refunding Plan

The 2013 Bonds, which are currently outstanding in the aggregate principal amount of $31,655,000, were issued pursuant to an Indenture, dated as of September 1, 2013 (the “2013 Indenture”), by and among the City, the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the “2013 Trustee”). The 2013 Bonds are payable from lease payments made by the City to the Authority under the Lease Agreement, dated as of September 1, 2013 (the “2013 Lease Agreement”), by and between the City and the Authority. The City plans to apply a portion of the proceeds of the 2021 Bonds: (i) to defease all of the outstanding 2013 Bonds as of the date of issuance of the 2021 Bonds; (ii) to make the regularly scheduled payments of principal of and interest on the 2013 Bonds on and prior to October 1, 2023; and (iii) to redeem on October 1, 2023 (the “Redemption Date”) the 2013 Bonds maturing on and after October 1, 2024 at a redemption price of 100% of the principal amount thereof, plus interest accrued to the Redemption Date, without premium (the “Redemption Price”).

Information with respect to the outstanding 2013 Bonds is set forth below.

Maturity Date (October 1)

Principal Amount

Interest Rate

CUSIP®* (68304R)

Redemption Price

Redemption Date

2022 $ 690,000 4.000% AD2 N/A N/A 2023 750,000 4.000 AE0 N/A N/A 2024 815,000 4.000 AF7 100% October 1, 2023 2025 885,000 4.125 AG5 100 October 1, 2023 2026 960,000 4.375 AH3 100 October 1, 2023 2027 1,035,000 4.500 AJ9 100 October 1, 2023 2028 1,115,000 4.625 AK6 100 October 1, 2023 2029 1,170,000 4.750 AL4 100 October 1, 2023 2030 1,225,000 5.000 AM2 100 October 1, 2023 2031 1,285,000 5.000 AN0 100 October 1, 2023 2032 1,350,000 5.000 AP5 100 October 1, 2023 2034 2,905,000 5.125 AQ3 100 October 1, 2023 2035 1,565,000 5.125 AR1 100 October 1, 2023 2036 1,645,000 5.250 AS9 100 October 1, 2023 2037 1,735,000 5.250 AT7 100 October 1, 2023 2038 1,825,000 5.375 AU4 100 October 1, 2023 2040 3,945,000 5.375 AV2 100 October 1, 2023 2043 6,755,000 5.375 AW0 100 October 1, 2023

Under an Escrow Deposit and Agreement, dated as of December 1, 2021 (the “2013 Escrow

Agreement”), by and among the City, the Authority and the 2013 Trustee, the City will deliver a portion of the proceeds of the 2021 Bonds to the 2013 Trustee for deposit in the escrow fund established under the 2013 Escrow Agreement (the “2013 Escrow Fund”). The 2013 Trustee will invest a portion of the amounts so deposited in the 2013 Escrow Fund in federal securities (as described in the 2013 Escrow Agreement). From the maturing principal of the federal securities and related investment income and any uninvested moneys on deposit in the 2013 Escrow Fund, the 2013 Trustee will make the regularly scheduled payments of interest on the 2013 Bonds on and prior to the Redemption Date and pay on the Redemption Date the Redemption Price of the 2013 Bonds maturing after the Redemption Date.

* CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by S&P Global Market Intelligence. Copyright© CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. None of the City, the Authority, the Underwriters or their agents or counsel assume responsibility for the accuracy of such numbers.

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Sufficiency of the deposits in the 2013 Escrow Fund for such purposes will be verified by Causey Demgen & Moore P.C., Denver, Colorado (the “Verification Agent”). Assuming the accuracy of such computations, as a result of the deposit and application of funds as provided in the 2013 Escrow Agreement, the 2013 Bonds will be defeased pursuant to the provisions of the 2013 Indenture as of the date of issuance of the 2021 Bonds. Upon the issuance of the 2021 Bonds, the Verification Agent will deliver a report on the mathematical accuracy of the above-described computations based upon certain information and assertions provided to it by the Underwriters relating to the adequacy of the moneys deposited in the 2013 Escrow Fund to pay the Redemption Price of the 2013 Bonds.

The amounts held by the 2013 Trustee in the 2013 Escrow Fund are pledged solely to the payment of the 2013 Bonds and will not be available for the payments on the 2021 Bonds.

Estimated Sources and Uses of Funds

The estimated sources and uses of funds with respect to the 2021 Bonds are shown below.

Sources(1):

Principal Amount $ 35,045,000 Total Sources $ 35,045,000 Uses(1):

Transfer to 2013 Trustee for Deposit in 2013 Escrow Fund $ 34,516,904 Costs of Issuance(2) 528,097 Total Uses $ 35,045,000

(1) All amounts rounded to the nearest dollar. Totals may not add due to rounding. (2) Includes Underwriters’ discount, premium for the Policy and certain legal, municipal advisory, Verification Agent, rating

agency, printing and other financing-related costs.

THE LEASED PREMISES

The Leased Premises are currently owned by the City and have been leased to the Authority, which has in turn subleased the Leased Premises back to the City, all pursuant to the Lease Agreement. The Leased Premises consist of the City’s Police Facility. The Police Facility is on two parcels with a combined land area of approximately 18 acres and is located at 2500 South Archibald Avenue, Ontario, California 91761. The two-story building was acquired in 2001 and completely renovated by 2003 to accommodate the City’s Police Department. The 177,610 square foot building is outfitted throughout with automatic sprinklers and constructed of masonry and fire resistant material. The Leased Premises also include a one-story 6,000 square foot ancillary building which was constructed in 1995 and surface parking. The City will certify at the time of issuance of the 2021 Bonds that the market value of the Leased Premises exceeds the initial aggregate principal amount of the 2021 Bonds. The City also notes that the insured value of the Police Facility (including improvements but excluding land value) is approximately $34,193,352.

Access to the Leased Premises by members of the public has been restricted or subject to significant limitations during the COVID-19 pandemic. See the caption “THE CITY—COVID-19 Outbreak.” However, the City currently expects that the Leased Premises will become more accessible to the public, with limitations on use gradually being lifted, beginning in the second half of 2021.

A covenant recorded against the Leased Premises prohibits the property from being used for residential, day care, hospice, school or hospital purposes, and a portion of the property is restricted to automobile parking uses. The City also notes that certain energy efficiency equipment and improvements (not constituting real property) at the Leased Premises site are subject to a personal property security interest (pursuant to a UCC-1 financing statement) in favor of Banc of America Public Capital Corp. See the caption

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“CITY FINANCIAL INFORMATION—Other Indebtedness—General Fund Supported Debt—2020 Lease/Purchase Agreement.” The foregoing restrictions, together with the Lease Agreement, constitute Permitted Encumbrances under the Lease Agreement.

The City has certified in the Lease Agreement that the annual fair rental value of the Leased Premises is at least equal to the annual Base Rental Payments. For a discussion of the insurance required to be maintained on the Leased Premises, see the caption “SECURITY AND SOURCES OF PAYMENT FOR THE 2021 BONDS—Insurance.”

The City has the right to substitute or release all or portion of the Leased Premises subject to certain conditions precedent. See the caption “SECURITY AND SOURCES OF PAYMENT FOR THE 2021 BONDSSubstitution or Release of the Leased Premises.”

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BASE RENTAL PAYMENT SCHEDULE

Set forth below is a schedule of Base Rental Payments, which secure the 2021 Bonds, assuming no optional or extraordinary prepayments.

Base Rental Payment Date(1) Principal Interest

Total Base Rental Payments

4/1/2022 $ - $ 263,618.96 $ 263,618.96 10/1/2022 1,345,000.00 451,918.23 1,796,918.23 4/1/2023 - 447,446.10 447,446.10 10/1/2023 1,140,000.00 447,446.10 1,587,446.10 4/1/2024 - 443,085.60 443,085.60 10/1/2024 1,180,000.00 443,085.60 1,623,085.60 4/1/2025 - 436,365.50 436,365.50 10/1/2025 1,230,000.00 436,365.50 1,666,365.50 4/1/2026 - 427,398.80 427,398.80 10/1/2026 1,290,000.00 427,398.80 1,717,398.80 4/1/2027 - 417,027.20 417,027.20 10/1/2027 1,340,000.00 417,027.20 1,757,027.20 4/1/2028 - 404,920.30 404,920.30 10/1/2028 1,400,000.00 404,920.30 1,804,920.30 4/1/2029 - 390,871.30 390,871.30 10/1/2029 1,430,000.00 390,871.30 1,820,871.30 4/1/2030 - 375,598.90 375,598.90 10/1/2030 1,460,000.00 375,598.90 1,835,598.90 4/1/2031 - 358,911.10 358,911.10 10/1/2031 1,495,000.00 358,911.10 1,853,911.10 4/1/2032 - 340,702.00 340,702.00 10/1/2032 1,530,000.00 340,702.00 1,870,702.00 4/1/2033 - 320,536.60 320,536.60 10/1/2033 1,570,000.00 320,536.60 1,890,536.60 4/1/2034 - 298,666.50 298,666.50 10/1/2034 1,615,000.00 298,666.50 1,913,666.50 4/1/2035 - 274,958.30 274,958.30 10/1/2035 1,660,000.00 274,958.30 1,934,958.30 4/1/2036 - 248,539.40 248,539.40 10/1/2036 1,715,000.00 248,539.40 1,963,539.40 4/1/2037 - 221,245.18 221,245.18 10/1/2037 1,770,000.00 221,245.18 1,991,245.18 4/1/2038 - 193,075.63 193,075.63 10/1/2038 1,825,000.00 193,075.63 2,018,075.63 4/1/2039 - 164,030.75 164,030.75 10/1/2039 1,880,000.00 164,030.75 2,044,030.75 4/1/2040 - 134,110.55 134,110.55 10/1/2040 1,945,000.00 134,110.55 2,079,110.55 4/1/2041 - 102,183.38 102,183.38 10/1/2041 2,010,000.00 102,183.38 2,112,183.38 4/1/2042 - 69,189.23 69,189.23 10/1/2042 2,075,000.00 69,189.23 2,144,189.23 4/1/2043 - 35,128.10 35,128.10 10/1/2043 2,140,000.00 35,128.10 2,175,128.10

Total: $35,045,000.00 $12,923,518.03 $47,968,518.03 (1) The Base Rental Payment Date is the fifteenth day of the month prior to the date shown. Source: Underwriters.

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THE 2021 BONDS

General

The 2021 Bonds will be issued in fully registered form without coupons in denominations of integral multiples of $5,000. The 2021 Bonds will be dated as of and bear interest (calculated on the basis of a 360-day year comprised of twelve 30-day months) from the dated date thereof at the rates set forth on the inside cover page. Interest on the 2021 Bonds will be paid semiannually on April 1 and October 1 of each year, commencing April 1, 2022 (each, an “Interest Payment Date”).

Interest on the 2021 Bonds will be payable to the person whose name appears on the Registration Books as the Owner thereof as of the fifteenth calendar day of the month immediately preceding each Interest Payment Date (each, a “Record Date”), such interest to be paid by check of the Trustee mailed by first class mail to the Owner at the address of such Owner as its appears on the Registration Books; provided however, that payment of interest may be by wire transfer in immediately available funds to an account in the United States of America to any Owner of 2021 Bonds in the aggregate principal amount of $1,000,000 or more who furnishes written wire instructions to the Trustee at least five days before the applicable Record Date. Principal of any 2021 Bond and any premium upon redemption will be paid by check of the Trustee upon presentation and surrender thereof at the Office of the Trustee. Principal of and interest and premium (if any) on the 2021 Bonds will be payable in lawful money of the United States of America.

Each 2021 Bond will be dated as of the Closing Date, and will bear interest from the Interest Payment Date next preceding the date of authentication thereof, unless: (a) it is authenticated after a Record Date and on or before the following Interest Payment Date, in which event it will bear interest from such Interest Payment Date; or (b) unless it is authenticated on or before March 15, 2022, in which event it will bear interest from the Closing Date; provided, however, that if, as of the date of authentication of any 2021 Bond, interest thereon is in default, such 2021 Bond will bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon.

Registration, Transfers and Exchanges

The 2021 Bonds will be issued as fully registered bonds, registered in the name of Cede & Co. as nominee of DTC, and will be available to actual purchasers of the 2021 Bonds (the “Beneficial Owners”) in the denominations set forth above, under the book-entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants (as defined in Appendix F) as described in this Official Statement. Beneficial Owners will not be entitled to receive physical delivery of the 2021 Bonds. See the caption “—Book-Entry Only System.”

In the event that the book-entry system that is described herein is discontinued, the 2021 Bonds will be printed and delivered as provided in the Indenture. Thereafter, any 2021 Bond may, in accordance with its terms, be transferred on the Registration Books by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such 2021 Bond for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form approved by the Trustee. Transfer of any 2021 Bond will not be permitted by the Trustee during the period established by the Trustee for selection of 2021 Bonds for redemption or if such 2021 Bond has been selected for redemption pursuant to the Indenture. Whenever any 2021 Bonds or Bonds are surrendered for transfer, the Authority will execute and the Trustee will authenticate and deliver a new 2021 Bond or Bonds for a like aggregate principal amount and of like maturity. The Trustee may require the 2021 Bond Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer.

Any 2021 Bond may be exchanged at the Office of the Trustee for a like aggregate principal amount of 2021 Bonds of other authorized denominations and of like maturity. Exchange of any Bond is not permitted during the period established by the Trustee for selection of 2021 Bonds for redemption or if such 2021 Bond

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has been selected for redemption pursuant to the Indenture. The Trustee will require the 2021 Bond Owner requesting such exchange to pay any tax or other governmental charge required to be paid with respect to such exchange.

Redemption

Optional Redemption. The 2021 Bonds maturing on or before October 1, 2031 are not subject to redemption prior to their respective stated maturities. The 2021 Bonds maturing on or after October 1, 2032, are subject to redemption at the option of the Authority as a whole or in part, on any date on or after October 1, 2031, upon at least 45 days’ prior notice to the Trustee or shorter period as acceptable to Trustee from any available source of funds, a redemption price equal to the principal amount of the 2021 Bonds to be redeemed together with accrued interest thereon to the date fixed for redemption, without premium.

Make-Whole Optional Redemption. The 2021 Bonds are subject to redemption prior to their stated maturities at the option of the Authority, in whole or in part on any date, at a redemption price (the “Make-Whole Redemption Price”) equal to the greater of:

(1) the issue price set forth on the inside front cover page hereof (but not less than 100%) of the principal amount of the 2021 Bonds to be redeemed; or

(2) the sum of the present value of the remaining scheduled payments of principal and interest to the maturity date of the 2021 Bonds to be redeemed, not including any portion of those payments of interest accrued and unpaid as of the date on which the 2021 Bonds are to be redeemed, discounted to the date on which the 2021 Bonds are to be redeemed on a semi-annual basis, assuming a 360-day year consisting of twelve 30-day months, at the Treasury Rate, plus 15 basis points;

plus, in each case, accrued interest on the 2021 Bonds to be redeemed to the redemption date.

“Treasury Rate” means, with respect to any redemption date for a particular 2021 Bond, the yield to maturity as of such redemption date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available on a date selected by the Authority that is at least two Business Days, but not more than 35 calendar days, prior to the pricing date of bonds being issued to refund such 2021 Bonds or the redemption date (excluding inflation indexed securities) (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to the maturity date of the 2021 Bonds to be redeemed; provided, however, that if the period from the redemption date to such maturity date is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.

Extraordinary Redemption from Condemnation Award or Insurance Proceeds. The 2021 Bonds are also subject to redemption as a whole or in part on any date, from Net Proceeds of insurance or condemnation required to be used for such purpose as provided in the Indenture, at a redemption price equal to the principal amount thereof plus interest accrued thereon to the date fixed for redemption, without premium.

Mandatory Sinking Fund Redemption. The 2021 Bonds maturing on October 1, 2039 (the “2039 Term Bonds”) are subject to mandatory redemption, in part by lot, from Sinking Account payments set forth in the following schedule on October 1, 2035 and each respective October 1 thereafter at a redemption price equal to the principal amount thereof to be redeemed (without premium), together with interest accrued thereon to the date fixed for redemption; provided, however, that if some but not all of the 2039 Term Bonds have been redeemed pursuant to the optional or extraordinary redemption provisions of the Indenture, the total amount of Sinking Account payments to be made subsequent to such redemption will be reduced in an amount equal to the principal amount of the 2039 Term Bonds so redeemed by reducing each such future Sinking Account payment

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on a pro rata basis (as nearly as practicable) in integral multiples of $5,000, as designated pursuant to written notice filed by the Authority with the Trustee:

Redemption Date (October 1)

Principal Amount

2035 $1,660,000 2036 1,715,000 2037 1,770,000 2038 1,825,000 2039* 1,880,000

* Final Maturity.

In lieu of such redemption, the Trustee may apply amounts in the Sinking Account to the purchase of 2039 Term Bonds 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 Account) as may be directed by the Authority prior to the selection of 2021 Bonds for redemption, except that the purchase price (exclusive of accrued interest) may not exceed the redemption price then applicable to the 2039 Term Bonds, as set forth in a Written Request of the Authority.

The 2021 Bonds maturing on October 1, 2043 (the “2043 Term Bonds”) are subject to mandatory redemption, in part by lot, from Sinking Account payments set forth in the following schedule on October 1, 2040 and each respective October 1 thereafter at a redemption price equal to the principal amount thereof to be redeemed (without premium), together with interest accrued thereon to the date fixed for redemption; provided, however, that if some but not all of the 2043 Term Bonds have been redeemed pursuant to the optional or extraordinary redemption provisions of the Indenture, the total amount of Sinking Account payments to be made subsequent to such redemption will be reduced in an amount equal to the principal amount of the 2043 Term Bonds so redeemed by reducing each such future Sinking Account payment on a pro rata basis (as nearly as practicable) in integral multiples of $5,000, as designated pursuant to written notice filed by the Authority with the Trustee:

Redemption Date (October 1)

Principal Amount

2040 $1,945,000 2041 2,010,000 2042 2,075,000 2043* 2,140,000

* Final Maturity.

In lieu of such redemption, the Trustee may apply amounts in the Sinking Account to the purchase of 2043 Term Bonds 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 Account) as may be directed by the Authority prior to the selection of 2021 Bonds for redemption, except that the purchase price (exclusive of accrued interest) may not exceed the redemption price then applicable to the 2043 Term Bonds, as set forth in a Written Request of the Authority.

Selection of Bonds for Redemption. Except for Sinking Account redemption as described under the subcaption “—Mandatory Sinking Fund Redemption” above, whenever provision is made in the Indenture for the redemption of less than all of the 2021 Bonds, the Trustee will select the 2021 Bonds to be redeemed from all 2021 Bonds or such given portion thereof not previously called for redemption from such maturities as are set forth in a Written Request of the Authority filed with the Trustee. For purposes of such selection, the

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Trustee will treat each 2021 Bond as consisting of separate $5,000 portions and each such portion will be subject to redemption as if such portion were a separate 2021 Bond.

Notice of Redemption. Notice of redemption will be mailed by first class mail, postage prepaid, not less than 20 nor more than 60 days before any redemption date, to the respective Owners of any 2021 Bonds designated for redemption at their addresses appearing on the Registration Books, and to the Securities Depositories and to one or more of the Information Services. Each notice of redemption will state the date of the notice, the redemption date, the place or places of redemption, whether less than all of the 2021 Bonds (or all 2021 Bonds of a single maturity) are to be redeemed, the CUSIP numbers and, if less than all of the 2021 Bonds of a maturity are to be redeemed, bond numbers of the 2021 Bonds to be redeemed, the maturity or maturities of the 2021 Bonds to be redeemed and in the case of 2021 Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed.

In case of an optional redemption as described under the subcaptions “—Optional Redemption” and “—Make-Whole Optional Redemption” above, notice of redemption may be given if moneys sufficient to pay the redemption price are on deposit with the Trustee or available for such purpose on the date that notice of redemption is given or if such notice expressly states that such redemption is conditional on receipt by the Trustee of sufficient moneys. A conditional notice of redemption may be rescinded in the event that there are insufficient moneys to redeem such 2021 Bonds. Each such notice will also state that on the redemption date there will become due and payable on each of said 2021 Bonds the redemption price thereof, and that from and after such redemption date interest thereon shall cease to accrue, and will require that such 2021 Bonds be then surrendered. Neither the failure to receive any notice nor any defect therein will affect the proceedings for such redemption or the cessation of accrual of interest from and after the redemption date. Notice of redemption of 2021 Bonds will be given by the Trustee, at the expense of the Authority, for and on behalf of the Authority.

Partial Redemption of Bonds. Upon surrender of any 2021 Bonds redeemed in part only, the Authority will execute and the Trustee will authenticate and deliver to the Owner thereof, at the expense of the Authority, a new 2021 Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the 2021 Bonds surrendered.

Effect of Notice of Redemption. Notice of redemption having been duly given described under the subcaption “—Notice of Redemption” above, and moneys for payment of the redemption price of, together with interest accrued to the date fixed for redemption on, the 2021 Bonds (or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the 2021 Bonds (or portions thereof) so called for redemption will become due and payable, interest on the 2021 Bonds so called for redemption will cease to accrue, said 2021 Bonds (or portions thereof) will cease to be entitled to any benefit or security under the Indenture, and the Owners of said 2021 Bonds will have no rights in respect thereof except to receive payment of the redemption price thereof. All 2021 Bonds redeemed pursuant to the provisions of the Indenture will be cancelled by the Trustee upon surrender thereof and destroyed.

Book-Entry Only System

The 2021 Bonds are registered in the name of Cede & Co., as nominee of DTC. DTC will act as securities depository for the 2021 Bonds. Ownership interests in the 2021 Bonds may be purchased in book-entry form only. So long as DTC, or Cede & Co. as its nominee, is the registered owner of all 2021 Bonds, all payments on the 2021 Bonds will be made directly to DTC, and disbursement of such payments to the DTC Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of the Participants, as more fully described in Appendix F.

As long as Cede & Co. is the registered owner of the 2021 Bonds, references herein to the Owners of the 2021 Bonds will refer to Cede & Co. and not to the Beneficial Owners. Neither the Authority nor the City gives any assurance that DTC, DTC Participants nor others will distribute payments with respect to the 2021

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Bonds or notices concerning the 2021 Bonds to the Beneficial Owners or that DTC will otherwise serve and act in the manner described in this Official Statement. See Appendix F for a further description of DTC and its book-entry system. The information presented therein is based solely on information provided by DTC.

SECURITY AND SOURCES OF PAYMENT FOR THE 2021 BONDS

Pledge of Base Rental Payments

The 2021 Bonds are payable from and secured by: (a) all amounts received by the Authority or the Trustee pursuant to or with respect to the Lease Agreement, including, without limiting the generality of the foregoing, all of the Base Rental Payments (including both timely and delinquent payments, any late charges, and whether paid from any source), but excluding any amounts described in clause (d) under the caption “—Miscellaneous Rent;” and (b) all interest, profits or other income derived from the investment of amounts in any fund or account established pursuant to the Indenture (collectively, the “Revenues”). Base Rental Payments will be paid by the City from any and all legally available funds.

The Authority, pursuant to the Indenture, has assigned to the Trustee for the benefit of the 2021 Bond Owners all of the Authority’s right, title and interest in and to the Lease Agreement, including, without limitation, its right to receive the Base Rental Payments to be paid by the City under and pursuant to the Lease Agreement; provided that the Authority will retain rights to indemnification, to consent to amendments and to payment of reimbursement of its reasonable costs and expenses under the Lease Agreement. The City will pay Base Rental Payments directly to the Trustee, as assignee of the Authority. See the caption “—Base Rental Payments.”

Subject only to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein, all of the Revenues and any other amounts (including proceeds of the sale of the Bonds) held in any fund or account established pursuant to the Indenture have been pledged to secure the payment of the principal of and interest on the 2021 Bonds in accordance with their terms and the provisions of the Indenture. The foregoing pledge constitutes a lien on and security interest in such assets and will attach, be perfected and be valid and binding from and after the Closing Date, without any physical delivery thereof or further act.

The Authority has transferred in trust, granted a security interest in and assigned to the Trustee, for the benefit of the Owners from time to time of the 2021 Bonds, all of the Revenues and all of the rights of the Authority in the Lease Agreement (except rights to indemnification, to consent to amendments and to payment of reimbursement of its reasonable costs and expenses under the Lease Agreement). The Trustee is entitled to and will collect and receive all of the Revenues, and any Revenues collected or received by the Authority will be deemed to be held, and to have been collected or received, by the Authority as the agent of the Trustee and will forthwith be paid by the Authority to the Trustee. The Trustee is also entitled to and will, subject to the provisions of the Indenture, take all steps, actions and proceedings which the Trustee determines to be reasonably necessary in its judgment to enforce, either jointly with the Authority or separately, all of the rights of the Authority and all of the obligations of the City under the Lease Agreement. The Trustee will deposit all Revenues so received in the Bond Fund which the Trustee will establish, maintain and hold in trust as a separate fund.

Notwithstanding anything in the Indenture or in the 2021 Bonds, the Authority is not required to advance any moneys derived from any source other than the Revenues and other assets pledged under the Indenture for any of the purposes of the Indenture, whether for the payment of the principal of or interest on the 2021 Bonds or for any other purpose of the Indenture. Nevertheless, the Authority may, but is not required to, advance for any of the purposes of the Indenture any funds of the Authority which may be made available to it for such purposes.

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THE 2021 BONDS ARE SPECIAL OBLIGATIONS OF THE AUTHORITY, PAYABLE SOLELY FROM THE BASE RENTAL PAYMENTS AND THE OTHER ASSETS PLEDGED THEREFOR UNDER THE INDENTURE. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE AUTHORITY, THE CITY OR THE STATE OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE 2021 BONDS. THE AUTHORITY HAS NO TAXING POWER.

Additional Bonds

The Authority may issue Additional Bonds, notes or other indebtedness which are payable out of the Revenues in whole or in part pursuant to the Indenture, for the purpose of financing any construction for any other municipal purpose, so long as no Event of Default under the Indenture has occurred and is continuing and provided that the following conditions of the Lease Agreement have been satisfied:

(a) the Lease Agreement is amended to reflect the payment of additional amounts of rental thereunder for the use and occupancy of the Leased Premises;

(b) no Event of Default has occurred and is continuing under the Lease Agreement;

(c) the additional amounts of rental do not cause the total rental payments made by the City under the Lease Agreement to exceed the fair rental value of the Leased Premises, as set forth in a certificate of an Authorized Representative of the City filed with the Trustee and the Authority;

(d) the City obtains and files with the Trustee and the Authority a Written Certificate of an Authorized Representative of the City showing that the fair rental value of the Leased Premises is not less than the sum of the aggregate unpaid principal components of the Base Rental Payments and the aggregate principal components of such additional amounts of rental;

(e) the additional amounts of rental are pledged or assigned for the payment of any bonds, notes, leases or other obligations the proceeds of which will be applied to finance the construction or acquisition of land, facilities or other improvements which are authorized pursuant to the laws of the State; and

(f) the additional rental is not payable at variable rates.

Base Rental Payments

General. In consideration of the lease and leaseback by the Authority of the Leased Premises and in consideration of the issuance of the 2021 Bonds by the Authority for the purpose of refinancing the capital improvements that were originally financed from proceeds of the 2013 Bonds, and subject to the provisions of the Lease Agreement relating to condemnation or damage (as described under the caption “—Abatement,” the City has agreed to pay to the Authority, its successors and assigns, as rental for the use and occupancy of the Leased Premises during each Fiscal Year, the Base Rental Payments (denominated into components of principal and interest) for the Leased Premises in the respective amounts specified in the Lease Agreement, to be due and payable each respective Base Rental Payment Date specified in the Lease Agreement. Any amount held in the Bond Fund, the Interest Account, the Sinking Account or the Principal Account (other than amounts resulting from the prepayment of the Base Rental Payments in part but not in whole pursuant to the Lease Agreement) on any Base Rental Payment Date will be credited towards the Lease Payment then due and payable. The Base Rental Payments coming due and payable in any Fiscal Year will be for the use of the Leased Premises for such Fiscal Year. For purposes of making payments on the 2021 Bonds, the City will deliver the Base Rental Payments to the Trustee no later than one Business Day prior to the Base Rental Payment Date.

Fair Rental Value. The Base Rental Payments and Miscellaneous Rent coming due and payable under the Lease Agreement in each Fiscal Year will constitute the total rental for the Leased Premises for each

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Fiscal Year and will be paid by the City in each Fiscal Year for and in consideration of the right of the use and occupancy of, and the continued quiet use and enjoyment of, the Leased Premises during each Fiscal Year. The City and the Authority have agreed and determined that the total amount of such Base Rental Payments and Miscellaneous Rent for the Leased Premises do not exceed the fair rental value of the Leased Premises. In making such determination, consideration has been given to the obligations of the parties under the Lease Agreement, the uses and purposes which may be served by the Leased Premises and the benefits therefrom which will accrue to the City and the general public.

Covenant to Budget and Appropriate. The Base Rental Payments are payable from any source of available funds of the City, subject to the abatement provisions of the Lease Agreement. See the caption “—Abatement.” The City has covenanted to take such action as may be necessary to include all Base Rental Payments and Miscellaneous Rent due under the Lease Agreement in each of its budgets during the Term of the Lease Agreement and to make the necessary annual appropriations for all such Base Rental Payments and Miscellaneous Rent. The foregoing covenants on the part of the City are deemed to be and will be construed to be ministerial duties imposed by law and it is the duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements in the Lease Agreement agreed to be carried out and performed by the City.

Limited Obligation. The obligation of the City to pay Base Rental Payments and other payments under the Lease Agreement constitutes a current expense of the City and will not in any way be construed to be a debt of the City in contravention of any applicable constitutional or statutory limitation or requirement concerning the creation of indebtedness by the City, nor does anything contained in the Lease Agreement constitute a pledge of the general tax revenues, funds or moneys of the City. Base Rental Payments due under the Lease Agreement will be payable only from current funds which are budgeted and appropriated, or otherwise legally available, for the purpose of paying Base Rental Payments or other payments due thereunder as consideration for use of the Leased Premises during the Fiscal Year for which such funds were budgeted and appropriated or otherwise made legally available for such purpose. The Lease Agreement will not create an immediate indebtedness for any aggregate payments which may become due thereunder. The City has not pledged the full faith and credit of the City, the State or any agency or department thereof to the payment of the Base Rental Payments or any other payments due under the Lease Agreement, the 2021 Bonds or the interest thereon.

THE OBLIGATION OF THE CITY TO MAKE BASE RENTAL PAYMENTS DOES NOT CONSTITUTE A DEBT OF THE CITY, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMIT OR RESTRICTION, AND DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE CITY OR THE STATE IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY OR THE STATE HAS LEVIED OR PLEDGED ANY FORM OF TAXATION.

Miscellaneous Rent

In addition to the Base Rental Payments, the City will pay when due the following items of Miscellaneous Rent:

(a) All fees and expenses incurred by the Authority in connection with or by reason of its leasehold estate in the Leased Premises as and when the same become due and payable;

(b) All compensation and indemnification to the Trustee pursuant to the Indenture for all services rendered under the Indenture and for all reasonable expenses, charges, costs, liabilities, legal fees and other disbursements incurred in and about the performance of its powers and duties under the Indenture;

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(c) The reasonable fees and expenses of such accountants, consultants, attorneys and other experts as may be engaged by the Authority or the Trustee to prepare audits, financial statements, reports, opinions or provide such other services required under this Lease Agreement or the Indenture; and

(d) The reasonable out of pocket expenses of the Authority in connection with the execution and delivery of the Lease Agreement or the Indenture, or in connection with the issuance of the 2021 Bonds, and including but not limited to any and all expenses incurred in connection with the authorization, issuance, sale and delivery of the 2021 Bonds, or incurred by the Authority in connection with any litigation which may at any time be instituted involving the Lease Agreement, the 2021 Bonds, the Indenture or any of the other documents contemplated hereby or thereby, or otherwise incurred in connection with the administration of the Lease Agreement.

Abatement

Abatement of Base Rental Payment in the Event of Damage or Destruction. The Base Rental Payment allocable to the Leased Premises will be abated during any period in which by reason of damage or destruction (other than by eminent domain which provided for under the subcaption “—Eminent Domain” below) there is substantial interference with the use and occupancy by the City of the Leased Premises or any portion thereof. The amounts of the Base Rental Payments under such circumstances may not be less than the amounts of the unpaid Base Rental Payments, unless such unpaid amounts are determined to be greater than the fair rental value of the portions of the Leased Premises not damaged or destroyed, based upon the opinion of an MAI appraiser with expertise in valuing such properties or other appropriate method of valuation, in which event the Base Rental Payments will be abated such that they represent said fair rental value. Such abatement will continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. In the event of any such damage or destruction, the Lease Agreement will continue in full force and effect and the City waives any right to terminate the Lease Agreement by virtue of any such damage and destruction. Notwithstanding the foregoing, there may be no abatement of Base Rental Payments to the extent that: (a) the proceeds of rental interruption insurance are available to pay Base Rental Payments; or (b) amounts in the Bond Fund are available to pay Debt Service payable from Base Rental Payments which would otherwise be abated

Eminent Domain. If all of the Leased Premises are taken permanently under the power of eminent domain or sold to a government threatening to exercise the power of eminent domain, the Term of the Lease Agreement will cease as of the day possession is so taken. If less than all of the Leased Premises are taken permanently, or if all of the Leased Premises or any part thereof is taken temporarily under the power of eminent domain: (a) the Lease Agreement will continue in full force and effect and will not be terminated by virtue of such taking and the parties waive the benefit of any law to the contrary; and (b) there will be a partial abatement of Base Rental Payments in an amount to be agreed upon by the City and the Authority such that the resulting Base Rental Payments for the Leased Premises represent fair consideration for the use and occupancy of the remaining usable portion of the Leased Premises.

Application of Net Proceeds. The Net Proceeds of any insurance award resulting from any damage to or destruction of the Leased Premises by fire or other casualty will be deposited in the Insurance and Condemnation Fund or the Redemption Fund, as applicable, by the Trustee, and applied in accordance with the Indenture. The Net Proceeds of any eminent domain award resulting from any event described under the subcaption “—Eminent Domain,” will be deposited in the Insurance and Condemnation Fund or the Redemption Fund, as applicable, by the Trustee and applied in accordance with the Indenture

See the caption “RISK FACTORS—Abatement.”

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Substitution or Release of the Leased Premises

The City has the option at any time and from time to time during the Term of the Lease Agreement to substitute other land, facilities or improvements (the “Substitute Leased Premises”) for the Leased Premises or any portion thereof (the “Former Leased Premises”) or to release a portion of the Leased Premises (the “Released Premises”) from the lien of the Lease Agreement, provided that the City satisfies all of the following requirements which are conditions precedent to such substitution or release:

(a) The City provides written notification of such substitution or release to the Trustee and Rating Agencies, which notice contains the certification that all conditions set forth below are met with respect to such substitution or release;

(b) The City takes all actions and executes all documents required to subject the Substitute Leased Premises to the terms and provisions of the Lease Agreement, including the filing with the Authority and the Trustee of an amended exhibit thereto which adds thereto a description of the Substitute Leased Premises and deletes therefrom the description of the Former Leased Premises or the Released Premises, as applicable;

(c)

(i) In the case of a substitution, the City determines and certify to the Authority and the Trustee that the fair rental value of the Substitute Leased Premises is at least equal to the remaining Base Rental Payments after such substitution and that the Substitute Leased Premises are essential to the governmental functions of the City;

(ii) In the case of a release, the City determines and certify to the Authority and the Trustee that the fair rental value of the remaining Leased Premises after removal of the Released Premises is at least equal to the then remaining Base Rental Payments;

(d) In the case of a substitution, the City certifies in writing to the Authority and the Trustee that the Substitute Leased Premises serve the public purposes of the City and constitute property which the City is permitted to lease under the laws of the State;

(e) In the case of a substitution, the City certifies in writing to the Authority and the Trustee that the estimated useful life of the Substitute Leased Premises at least extends to the date on which the final Lease Payment becomes due and payable under the Lease Agreement;

(f) In the case of a substitution, the City obtains a CLTA policy of title insurance meeting the requirements of the Lease Agreement with respect to any real property portion of the Substitute Leased Premises;

(g) In the case of a substitution, the substitution of the Substitute Leased Premises will not cause the City to violate any of its covenants, representations and warranties made in the Lease Agreement; and

(h) The City will obtain and cause to be filed with the Trustee and the Authority an opinion of Bond Counsel stating that such substitution or release is permitted under the Lease Agreement and does not cause interest on the 2021 Bonds to become includable in the gross income of the Bond Owners for federal income tax purposes.

From and after the date on which all of the foregoing conditions precedent to such substitution or release are satisfied, the Term of the Lease Agreement will cease with respect to the Former Leased Premises or Released Premises, as applicable, and will be continued with respect to the Substitute Leased Premises and the remaining Leased Premises, and all references in the Lease Agreement to the Former Leased Premises will

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apply with full force and effect to the Substitute Leased Premises. The City is not entitled to any reduction, diminution, extension or other modification of the Base Rental Payments whatsoever as a result of such substitution or release.

Action on Default

Should the City default under the Lease Agreement, the Trustee, as assignee of the Authority under the Lease Agreement, may terminate the Lease Agreement and recover certain damages from the City, or may retain the Lease Agreement and hold the City liable for all Base Rental Payments thereunder on an annual basis, and will have the right to re-enter and re-let the Leased Premises.

Base Rental Payments may not be accelerated upon a default under the Lease Agreement. See the caption “RISK FACTORS—No Acceleration of Base Rental.”

For purposes of certain actions of 2021 Bond Owners under the Indenture and Lease Agreement, such as certain consents and amendments and the direction of remedies following default, such 2021 Bond Owners do not act alone and may not control such matters to the extent that such matters are not supported by the requisite number of the Owners of all Bonds and Additional Bonds, if any.

For a detailed description of events of default and permitted remedies of the Trustee (as assignee of the Authority) contained in the Lease Agreement and the Indenture, see Appendix B.

No Reserve Fund


Insurance

Public Liability and Property Damage Insurance. The City will maintain or cause to be maintained throughout the Term of the Lease Agreement, but only if and to the extent available from reputable insurers at reasonable cost in the reasonable opinion of the City, a standard comprehensive general insurance policy or policies in protection of the Authority, City, and their respective members, officers, agents, employees and assigns. Said policy or policies will provide coverage in the minimum liability limits of $1,000,000 for personal injury or death of each person and $3,000,000 for personal injury or deaths of two or more persons in each accident or event, and in a minimum amount of $500,000 of damage to property resulting from each accident or event. Such public liability and property damage insurance may, however, be in the form of a single limit policy or policies in the amount of $3,000,000 (subject to a deductible clause of not to exceed $100,000) covering all such risks. Such policy or policies will provide coverage in such liability limits and be subject to such deductibles as the City deems adequate and prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of self-insurance by the City, subject to the provisions of the Lease Agreement, or in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. In the case of the City’s self-insurance of public liability and workers’ compensation, the City may maintain a self-insured retention, and pay up to $500,000 of each liability claim and up to $350,000 of each worker’s compensation claim, so long as the provisions of the Indenture have been met. The proceeds of such liability insurance will be applied by the City toward extinguishment or satisfaction of the liability with respect to which the insurance proceeds have been paid.

Casualty Insurance. The City will procure and maintain, or cause to be procured and maintained, throughout the Term of the Lease Agreement, insurance against loss or damage to any Facilities by fire and lightning, with extended coverage and vandalism and malicious mischief insurance. Said extended coverage insurance, if required, will, as nearly as practicable, cover loss or damage by explosion, windstorm, riot,

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aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance, and will include earthquake coverage if such coverage is available at reasonable cost from reputable insurers in the judgment of the City’s risk manager. Such insurance will be in an amount at least equal to the lesser of: (a) 100% of the replacement cost of the Facilities; or (b) the aggregate unpaid principal components of the Base Rental Payments allocable to the Facilities. Such insurance may be subject to such deductibles as the City deems prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. The Net Proceeds of such insurance shall be applied as provided in the Lease Agreement. See the caption “—Abatement—Application of Net Proceeds.”

Each policy of insurance to be maintained by the City pursuant to the foregoing provision must: (a) provide for the full payment of insurance proceeds up to the applicable dollar limit in connection with damage to the Leased Premises and will, under no circumstances, be contingent upon the degree of damage sustained at other facilities owned or leased by the City; and (b) explicitly waive any co-insurance penalty.

Rental Interruption Insurance. The City will procure and maintain, or cause to be procured and maintained, throughout the Term of the Lease Agreement, rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of any Facilities to be constructed on the Leased Premises, as a result of any of the hazards covered by the insurance that is described under the subcaption “—Casualty Insurance” above, in an amount at least equal to the maximum Base Rental Payments allocable to the Facilities coming due and payable during any future 24-month period. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. The proceeds of such insurance, if any, will be paid to the Trustee and deposited in the Bond Fund, and will be applied for the uses and purposes set forth in the Indenture.

BOND INSURANCE

The information under this caption has been prepared by the Insurer for inclusion in this Official Statement. None of the Authority, the City or the Underwriters have reviewed this information, nor do the Authority, the City or the Underwriters make any representation with respect to the accuracy or completeness thereof. The following information is not a complete summary of the terms of the Policy and reference is made to Appendix G for a specimen of the Policy.

Bond Insurance Policy

Concurrently with the issuance of the 2021 Bonds, Build America Mutual Assurance Company (“BAM”) will issue its Municipal Bond Insurance Policy (the “Policy”) for the 2021 Bonds maturing on October 1 of the years 2026 through 2034, inclusive, 2039 and 2043, with CUSIP #s 68304RCC2, 68304RCD0, 68304RCE8, 68304RCF5, 68304RCG3, 68304RCH1, 68304RCJ7, 68304RCK4, 68304RCL2, 68304RCM0 and 68304RCN8, respectively (collectively, the “Insured Bonds”). The Policy guarantees the scheduled payment of principal of and interest on the Insured Bonds when due as set forth in the form of the Policy set forth in Appendix G.

The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law.

Build America Mutual Assurance Company

BAM is a New York domiciled mutual insurance corporation and is licensed to conduct financial guaranty insurance business in all fifty states of the United States and the District of Columbia. BAM provides credit enhancement products solely to issuers in the U.S. public finance markets. BAM will only insure

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obligations of states, political subdivisions, integral parts of states or political subdivisions or entities otherwise eligible for the exclusion of income under section 115 of the U.S. Internal Revenue Code of 1986, as amended. No member of BAM is liable for the obligations of BAM.

The address of the principal executive offices of BAM is: 200 Liberty Street, 27th Floor, New York, New York 10281, its telephone number is: 212-235-2500, and its website is located at: www.buildamerica.com.

BAM is licensed and subject to regulation as a financial guaranty insurance corporation under the laws of the State of New York and in particular Articles 41 and 69 of the New York Insurance Law.

BAM’s financial strength is rated “AA/Stable” by S&P Global Ratings, a business unit of Standard & Poor's Financial Services LLC (“S&P”). An explanation of the significance of the rating and current reports may be obtained from S&P at www.standardandpoors.com. The rating of BAM should be evaluated independently. The rating reflects S&P’s current assessment of the creditworthiness of BAM and its ability to pay claims on its policies of insurance. The above rating is not a recommendation to buy, sell or hold the 2021 Bonds, and such rating is subject to revision or withdrawal at any time by S&P, including withdrawal initiated at the request of BAM in its sole discretion. Any downward revision or withdrawal of the above rating may have an adverse effect on the market price of the 2021 Bonds. BAM only guarantees scheduled principal and scheduled interest payments payable by the issuer of the 2021 Bonds on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the Policy), and BAM does not guarantee the market price or liquidity of the 2021 Bonds, nor does it guarantee that the rating on the 2021 Bonds will not be revised or withdrawn.

Capitalization of BAM. BAM’s total admitted assets, total liabilities, and total capital and surplus, as of September 30, 2021 and as prepared in accordance with statutory accounting practices prescribed or permitted by the New York State Department of Financial Services were $504.3 million, $181.5 million and $322.8 million, respectively.

BAM is party to a first loss reinsurance treaty that provides first loss protection up to a maximum of 15% of the par amount outstanding for each policy issued by BAM, subject to certain limitations and restrictions.

BAM’s most recent Statutory Annual Statement, which has been filed with the New York State Insurance Department and posted on BAM’s website at www.buildamerica.com, is incorporated herein by reference and may be obtained, without charge, upon request to BAM at its address provided above (Attention: Finance Department). Future financial statements will similarly be made available when published.

BAM makes no representation regarding the 2021 Bonds or the advisability of investing in the 2021 Bonds. In addition, BAM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding BAM, supplied by BAM and presented under the caption “BOND INSURANCE.”

Additional Information Available from BAM.

Credit Insights Videos. For certain BAM-insured issues, BAM produces and posts a brief Credit Insights video that provides a discussion of the obligor and some of the key factors BAM’s analysts and credit committee considered when approving the credit for insurance. The Credit Insights videos are easily accessible on BAM’s website at www.buildamerica.com/videos. (The preceding website address is provided for convenience of reference only. Information available at such address is not incorporated herein by reference.)

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Credit Profiles. Prior to the pricing of bonds that BAM has been selected to insure, BAM may prepare a pre-sale Credit Profile for those bonds. These pre-sale Credit Profiles provide information about the sector designation (e.g. general obligation, sales tax); a preliminary summary of financial information and key ratios; and demographic and economic data relevant to the obligor, if available. Subsequent to closing, for any offering that includes bonds insured by BAM, any pre-sale Credit Profile will be updated and superseded by a final Credit Profile to include information about the gross par insured by CUSIP, maturity and coupon. BAM pre-sale and final Credit Profiles are easily accessible on BAM’s website at www.buildamerica.com/credit-profiles. BAM will produce a Credit Profile for all bonds insured by BAM, whether or not a pre-sale Credit Profile has been prepared for such bonds. (The preceding website address is provided for convenience of reference only. Information available at such address is not incorporated herein by reference.)

Disclaimers. The Credit Profiles and the Credit Insights videos and the information contained therein are not recommendations to purchase, hold or sell securities or to make any investment decisions. Credit-related and other analyses and statements in the Credit Profiles and the Credit Insights videos are statements of opinion as of the date expressed, and BAM assumes no responsibility to update the content of such material. The Credit Profiles and Credit Insight videos are prepared by BAM; they have not been reviewed or approved by the issuer of or the underwriters for the 2021 Bonds, and the issuer and underwriters assume no responsibility for their content.

BAM receives compensation (an insurance premium) for the insurance that it is providing with respect to the 2021 Bonds. Neither BAM nor any affiliate of BAM has purchased, or committed to purchase, any of the 2021 Bonds, whether at the initial offering or otherwise.

THE CITY

General

The City is located in southwestern San Bernardino County (the “County”), approximately 35 miles east of Los Angeles near the intersection of Interstates 10 and 15 in the area of southern California known as the “Inland Empire.” The City is adjacent to the cities of Upland, Montclair, Chino and Rancho Cucamonga. The City had a population of approximately 182,004 as of January 1, 2021 and covers approximately 50 square miles. The City was incorporated in 1891 and is a general law city operating under a council/manager form of government. Further information concerning the City is set forth below and in Appendix A.

The City had approximately 1,219 full-time equivalent employees as of June 30, 2021. City employees are represented by seven labor associations which collectively represent approximately 1,078 employees. Relations between the City and its labor associations are governed by memoranda of understanding (each, an “MOU”) that expire on June 30, 2022, with the exception of the American Federation of State, County and Municipal Employees Local 3061 (“AFSCME”), the Association of Ontario Management Employees (“AOME”) and the Teamsters Local 1932 (the “Teamsters”), which are governed by MOUs that expired on June 30, 2021. The City’s relations with AFSCME, AOME and the Teamsters are governed by the expired MOUs while the City negotiates new MOUs with each labor association. A total of approximately 141 management and confidential employees are exempt from collective bargaining. Salaries for exempt employees are set by the City Council. The City has never experienced a strike, slowdown or work stoppage.

The City provides a full range of services, including police and fire protection, construction and maintenance of streets, parks, water and sewer lines, traffic signals and other infrastructure, water, sewer and integrated waste services, recreation and community services and arts, cultural and social programs. The City also operates a municipal golf course, a convention center and a sports and entertainment arena (the Toyota Arena, which opened in 2008).

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Largest Employers

The table below sets forth the largest employers within the City as of June 30, 2021, the latest date for which such information is available.

CITY OF ONTARIO LARGEST EMPLOYERS – FISCAL YEAR 2021

Employer Number of Employees Type of Business

United Parcel Service 5,000-9,999 Shipping Service Workforce Personnel, Inc. 1,000-4,999 Employment Agency Ontario-Montclair School District 1,000-4,999 Public Agency Chaffey Union High School District 1,000-4,999 Public Agency Federal Express Corporation 500-999 Shipping Service QVC Ontario LLC 500-999 Distribution Auto Zoners, Inc. 500-999 Retail Home Depot USA, Inc. 500-999 Retail Cardenas Markets, Inc. 500-999 Retail ULINE, Inc. 250-499 Distribution Source: State of California Employment Development Department.

Government and Administration

The City operates under a council-manager form of government. Councilmembers and the Mayor are currently elected at large for four-year alternating terms. The City Treasurer and City Clerk are also elected by City voters. Beginning with the November 5, 2024 Statewide election, two Councilmembers will be elected by district, with the other two Councilmembers elected by district at the November 3, 2026 Statewide election; the Mayor will continue to be elected Citywide.

The City Manager, appointed by the City Council, serves as the City’s chief administrative officer and is responsible for overseeing the daily operations of City departments and efficient management of all City business. Functions of the City Manager’s Office include coordination of the implementation of City Council policies and programs; providing overall direction to the departments that administer City programs and services; coordinating intergovernmental relations and legislative advocacy; and administration of the City’s communications, media relations and public information programs.

Scott Ochoa has served as the City Manager since October 2017. In this capacity he leads the daily operation of City government. Prior to coming to the City, Mr. Ochoa served as the City Manager of Glendale, California and Monrovia, California. Mr. Ochoa has a Bachelor’s degree from Claremont McKenna College and a Masters in Public Administration degree from the University of Southern California.

Other key personnel responsible for management of the City include the City Treasurer and the Executive Director of Finance. In addition, the City Attorney provides legal services to the City and the Authority.

James R. Milhiser has served as the elected City Treasurer since 1998. Mr. Milhiser has over 40 years of experience in financial services. He has a Bachelor’s degree from California State Polytechnic University, Pomona, and successfully completed a three year program at Pacific Coast Banking School, held at the University of Washington.

Armen Harkalyan serves as the Executive Director of Finance of the City. Mr. Harkalyan was appointed Executive Director of Finance in January 2019. Prior to coming to the City, Mr. Harkalyan served

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as the Deputy Director of Finance and Revenue Manager for the City of Glendale, California. Mr. Harkalyan has a Bachelor’s degree from the California State University, Los Angeles, and a Master’s degree from the University of Phoenix.

Ruben Duran has been City Attorney since 2020. Mr. Duran has been an attorney for more than 22 years in private practice specializing in municipal law. He has a Bachelor’s degree from the University of California, San Diego and a Juris Doctorate degree from University of California, Hastings.

Ontario International Airport

The City is home to Ontario International Airport (“ONT”). ONT is served by approximately 10 commercial carriers with connections to approximately 18 domestic and international destinations. It is also a major cargo airport given the City’s proximity to the large logistics and distribution hub in the Inland Empire.

ONT was developed prior to World War Two and was owned by the federal government until 1967, when it was acquired by a joint powers authority the members of which were the City and the City of Los Angeles Department of Airports (“LAWA”). LAWA operated ONT on behalf of the joint powers authority, eventually acquiring ONT outright in 1985.

In 2016, the City and the Ontario International Airport Authority (“OIAA”), a joint powers authority the members of which are the City and the County, acquired ONT from LAWA and assumed operation and management of ONT. The City paid a portion of the purchase price of ONT to LAWA as well as salaries and legal, consulting and administrative fees associated with the negotiations leading up to the acquisition of ONT from LAWA. The payments made by the City for these purposes totaled $42,373,148 as of June 30, 2019, which amount has been written off by the City and recorded as a capital contribution by OIAA.

The City and OIAA have entered into a number of agreements related to the provision of law enforcement, fire protection, information technology and other services by the City for the benefit of ONT. Currently, approximately 80 police and other public safety officers provide law enforcement and fire protection services at ONT. The City’s charges to ONT for such services are intended to recoup the City’s associated expenses in providing such services.

Risk Management

The City is exposed to various risks of loss related to torts, theft of, damage to and destruction of assets, errors and omissions, injuries to employees and natural disasters. The City has established self-insurance funds to finance uninsured risks of loss up to a maximum of $750,000 for each workers’ compensation claim and $1,000,000 for each general liability claim. For workers’ compensation claims in excess of amounts provided by its internal fund, the City maintains coverage from a private carrier for claims up to the statutory requirements. For general liability claims in excess of amounts provided by its internal fund, the City maintains coverage from the Authority for California Cities Excess Liability (“ACCEL”). ACCEL maintains a shared risk pool for claims up to $4,000,000, with private carriers covering amounts in excess thereof. City is self-insured for unemployment liability claims. The City will pay all claims based on the individual reimbursement account method, as provided by the State. Claims have not exceeded the City’s insurance coverage in any of the last three years.

The City purchases all-risk, replacement cost value property insurance coverage through ACCEL up to a maximum amount of $500,000,000. All property and improvements comprising the Leased Premises are insured under the City’s property insurance coverage. See the caption “SECURITY AND SOURCES OF PAYMENT FOR THE 2021 BONDS—Insurance.”

No assurance can be given as to the adequacy of the insurance maintained now or in the future by the City to fund necessary repairs or replacement of any portion of the Leased Premises, and the City does not

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have any obligation under the Lease Agreement to maintain earthquake coverage or other coverage in the current coverage amounts. Significant damage to any of the Leased Premises could cause Base Rental Payments to be abated. See the captions “SECURITY AND SOURCES OF PAYMENT FOR THE 2021 BONDS—Abatement” and “RISK FACTORS—Natural Disasters.”

COVID-19 Outbreak

The spread of the novel strains of coronavirus collectively called SARS-CoV-2, which cause the disease known as COVID-19 (“COVID-19”), and local, State and federal actions in response to COVID-19, have impacted the City’s operations and finances. In response to the increasing number of COVID-19 infections and fatalities, health officials and experts have recommended, and some governments have mandated, a variety of responses ranging from travel bans and social distancing practices to complete shutdowns of certain services and facilities. The World Health Organization has declared the COVID-19 outbreak to be a pandemic and, on March 4, 2020, as part of the State’s response to address the outbreak, the Governor declared a state of emergency. On March 13, 2020, the President declared a national emergency, freeing up funding for federal assistance to state and local governments. Many school districts across the State temporarily closed some or all school campuses (including schools within the City) in response to local and State directives or guidance.

On March 19, 2020, the Governor issued Executive Order N-33-20, a mandatory Statewide shelter-in-place order applicable to all non-essential services. Certain aspects of the shelter-in-place directives were extended indefinitely until indicators for modifying the stay-at-home order were met. The County also declared a state of emergency in response to the COVID-19 outbreak. On May 4, 2020, the Governor issued an executive order informing local health jurisdictions and industry sectors that they could gradually re-open under new modifications and guidance provided by the State. A phased re-opening of various sectors was underway beginning in mid-2020 in accordance with a four-stage re-opening plan that ended with a full reopening of the State’s economy on June 15, 2021. Although pursuant to the re-opening plan certain restrictions on activities were eased, restrictions were also re-imposed in various jurisdictions (including neighboring Los Angeles County) as local conditions warranted, and such restrictions may be renewed as the pandemic continues.

In addition, the Governor extended the deadline to file and pay spring 2020 property taxes for residential and certain commercial property owners and first quarter 2020 sales and use tax returns by 90 days for all but the very largest taxpayers. As a result of the extended deadline to file sales and use tax returns, it is estimated that up to 361,000 California businesses with less than $5 million in taxable annual sales were permitted to defer up to $50,000 in sales tax payments and enter into 12-month payment plans at zero interest. These actions have resulted in delays in the receipt by the City of its portion of such tax payments.

On March 27, 2020, the President signed the $2.2 trillion Coronavirus Aid, Relief, and Economic Stabilization Act (the “CARES Act”) which provides, among other measures, $150 billion in financial aid to states, tribal governments and local governments to provide emergency assistance to those most significantly impacted by COVID-19. Under the CARES Act, local governments are eligible for reimbursement of certain costs which were expended to address the impacts of the pandemic. The City received a total reimbursement of $5,609,826 under the CARES Act. The funds received by the City under the CARES Act are not available for payment of the 2021 Bonds and cannot be used to backfill any City revenue losses related to COVID-19.

On December 27, 2020, the President signed the $900 billion Coronavirus Response and Relief Supplemental Appropriations Act. Although the act did not provide additional financial assistance to state and local governments, it did extend the deadline (to October 2021) for them to use unspent funds that were previously approved under the CARES Act.

On March 11, 2021, the President signed the American Rescue Plan Act of 2021 (the “ARP Act”), a $1.9 trillion economic stimulus package designed to help the United States’ economy recover from the adverse

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impacts of the COVID-19 pandemic. The ARP Act includes approximately $350 billion in aid to state and local governments such as the City, consisting of both direct funding from the United States Department of Treasury and program moneys that will flow from other federal agencies. Half of the aid to state and local governments was distributed in spring 2021, with the other half following in 2022. The City has been allocated a total of approximately $45,609,291, of which approximately half was received in spring 2021. This funding is available for a broad range of uses, including responding directly to the health emergency, addressing its negative economic impacts with assistance to households and small businesses, restoring government services that were reduced in response to pandemic-related revenue losses and making certain necessary infrastructure improvements. The City has not yet determined how the ARP Act funds that it has received and expects to receive will ultimately be spent, but planning efforts are underway.

The effects of the COVID-19 outbreak and governmental actions responsive to it have altered the behavior of businesses and people in a manner that has had significant negative impacts on global and local economies. In addition, financial markets in the United States and globally have experienced significant volatility attributed to COVID-19 concerns. Volatility in the financial markets caused the California Public Employees Retirement System’s (“CalPERS”) earnings to fall below its investment targets in Fiscal Year 2020. See the caption “CITY FINANCIAL INFORMATION—Retirement Contributions.” The outbreak resulted in increased pressure on State finances as budgetary resources were directed towards containing the pandemic and tax revenues sharply declined in early 2020. Identified cases of COVID-19 and deaths attributable to the COVID-19 outbreak continue to occur throughout the United States, including the County.

Potential impacts to the City associated with the COVID-19 outbreak include, but are not limited to, increasing costs and challenges to the public health system in and around the City, cancellations of public events and disruption of the regional and local economy, with corresponding decreases in General Fund revenues, including as a result of reduced sales and the cancellation of events at the City’s convention center and sports and entertainment arena, all of which are subject to sales and other taxes, reduced hotel occupancy, which is subject to transient occupancy taxes, reduced parking tax revenues as a result of reduced levels of passenger traffic at ONT and fewer business license applications. See the captions “CITY FINANCIAL INFORMATION—Sales Taxes,” “CITY FINANCIAL INFORMATION—Property Taxes” and “CITY FINANCIAL INFORMATION—Other Taxes.”

In response to the COVID-19 outbreak, the City modified its operations to implement remote work opportunities for employees and provide City services online, closed many City facilities to the public, cancelled many programs, rentals and community events and deferred several non-essential capital improvement projects. With improvements in local case rates, the City has phased in the resumption of normal operations and activities while complying with public health orders and California Occupational Safety and Health Administration COVID-19 Prevention Plan mandates. Large gatherings of City personnel at any one time were prohibited for much of 2020 and early 2021 per health officer orders and on-site personnel wore masks and practiced social distancing while working. City Council and other board meetings occurred via teleconference, and public comment and participation for City Council meetings was also conducted via teleconference and electronic means. The City has not experienced and does not at this time foresee a future negative impact on the execution of City services as a result of the COVID-19 outbreak. The City has worked diligently to provide its employees with personal protective equipment and voluntary access to vaccinations. However, there can be no assurance that absences of employees or City leadership due to COVID-19 will not adversely impact City operations.

The COVID-19 outbreak is ongoing, and the duration and severity of the outbreak and the economic and other actions that may be taken by governmental authorities to contain the outbreak or to treat its impact are uncertain. The ultimate impact of COVID-19 on the operations and finances of the City and the General Fund is unknown.

The City reports that Fiscal Year 2019-20 General Fund expenditures were lower than originally budgeted by approximately $9.6 million (3.4%) as the City implemented measures to reduce expenditures in

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response to the COVID-19 pandemic in the last quarter of Fiscal Year 2019-20, including reducing levels of police services at ONT, suspending recruitments, suspending elective spending as well as offering a Retirement/Separation Incentive program and not filling the majority of the positions that were vacated by the program. However, Fiscal Year 2019-20 General Fund revenues came in higher than budgeted by approximately $10.4 million (3.7%) as certain revenues, including Transfers In, Use of Money and Property and Charges for Services, were higher than budgeted. As a result of certain tax revenues, including sales tax and transient occupancy tax revenues, coming in lower than budgeted, the City withdrew approximately $11.4 million from its Economic Uncertainty Reserve (as described under the caption “CITY FINANCIAL INFORMATION—General Economic Condition and Outlook of the City—Fiscal Policies—Economic Uncertainty Reserve”) to balance the Fiscal Year 2019-20 budget. See the caption “CITY FINANCIAL INFORMATION—Budget Procedure, Current Budget and Historical Budget Information.”

The budget for Fiscal Year 2020-21 was developed conservatively to account for the projected impacts of the continuing COVID-19 outbreak, including suspending new hires for the entirety of the Fiscal Year. As amended, the Fiscal Year 2020-21 budget reflected: (i) a decrease in General Fund expenditures of approximately $26.8 million (9.9%) below audited Fiscal Year 2019-20 General Fund expenditures; and (ii) a decrease in General Fund revenues of approximately $47.5 million (16.4%) below audited Fiscal Year 2019-20 General Fund revenues. Based on available information to date, the City is currently estimating that Fiscal Year 2020-21 General Fund expenditures were approximately $24.2 million higher than budgeted (and approximately $2.6 million lower than audited Fiscal Year 2019-20 General Fund expenditures) as the economy recovered and City spending on programs and public safety increased, while Fiscal Year 2020-21 General Fund revenues were approximately $66.3 million higher than budgeted (and approximately $8.4 million higher than Fiscal Year 2019-20 audited General Fund revenues), reflecting a more robust economic recovery than the City conservatively budgeted for. See the captions “CITY FINANCIAL INFORMATION—General Economic Condition and Outlook of the City” and “CITY FINANCIAL INFORMATION—Budget Procedure, Current Budget and Historical Budget Information.”

No CARES Act or ARP Act funding was included in the City’s budget for Fiscal Years 2020-21.

The City continues to actively monitor General Fund revenues and expenditures so that any further impacts of the COVID-19 pandemic can be anticipated. The City does not currently expect that the COVID-19 outbreak will have a material adverse effect on the City’s ability to repay the 2021 Bonds.

CITY FINANCIAL INFORMATION

Accounting and Financial Reporting

The City maintains its accounting records in accordance with Generally Accepted Accounting Principles (“GAAP”) and the standards established by the Governmental Accounting Standards Board (“GASB”). On a quarterly basis, a report is prepared for the City Council and City staff which reviews fiscal performance to date against the budget. Combined financial statements of the City and its component units are produced following the close of each Fiscal Year.

The City Council employs an independent certified public accountant who examines at least annually the financial statements of the City in accordance with generally accepted auditing standards, including tests of the accounting records and other auditing procedures as such accountant considers necessary. As soon as practicable after the end of the Fiscal Year, a final audit and report is submitted by the independent certified public accountant to the City Council.

The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures, or

26

expenses, as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled.

The City’s government-wide financial statements are reported using the economic resource measurement focus and the accrual basis of accounting, under which revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flows.

The City’s governmental fund (including the General Fund) financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting, under which revenues are recognized as soon as they are both measurable and available (i.e. collectible within the current period or soon enough thereafter to pay liabilities of the current period), and expenditures are recorded when a liability is incurred.

The General Fund is the general operating fund of the City. It is used to account for all financial resources except those that are required to be accounted for in another fund. Base Rental Payments will be paid from any legally available funds of the City. Tables 1 through 4 below set forth certain historical and current Fiscal Year budget information for the General Fund. Information on the remaining governmental funds of the City as of June 30, 2020 is set forth in Appendix C.

General Economic Condition and Outlook of the City

Fiscal Policies.

Fund Balance Reserve Policy. The City Council has adopted a Fund Balance Reserve Policy that forms the overall framework within which the City’s General Fund operating budget is formulated. The Fund Balance Reserve Policy establishes the procedures for reporting unrestricted fund balances in the General Fund financial statements. Certain commitments and assignments of the fund balance will help ensure that there will be adequate financial resources to protect the City against unforeseen circumstances and events such as revenue shortfalls and unanticipated expenditures. The policy also authorizes and directs the Financial Services/Fiscal Services Department to prepare financial reports which accurately categorize fund balance in accordance with GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions.

Fund balance is essentially the difference between the assets, deferred outflows and deferred inflows of resources and liabilities reported in a governmental fund. There are five separate components of fund balance, each of which identifies the extent to which the City is bound to honor constraints on the specific purposes for which amounts can be spent:

Nonspendable fund balance (inherently nonspendable, i.e., inventory)

Restricted fund balance (externally enforceable limitations on use, i.e., restricted by law or terms of grant)

Committed fund balance (self-imposed limitations on use)

Assigned fund balance (limitation resulting from intended use)

Unassigned fund balance (residual net resources)

The City Council, as the City’s highest level of decision-making authority, may commit fund balances for specific purposes pursuant to constraints imposed by the adoption of a resolution. These committed amounts cannot be used for any other purpose unless the City Council removes or changes the specified use through the same type of formal action that was originally taken to establish the commitment. City Council

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action to commit fund balances must occur within the fiscal reporting period; however, the amount can be determined subsequently.

Amounts that are constrained by the City’s intent to be used for specific purposes, but are neither restricted nor committed, are reported as assigned fund balances. Pursuant to the City’s fund balance policy established by the City Council on June 22, 2011, by resolution, the City Council has delegated the authority to assign amounts to be used for specific purposes to the City Manager or Executive Director of Finance for the purpose of reporting these amounts on the annual financial statements.

Included in the Fund Balance Reserve Policy is the 18% Stabilization Plan. This plan reflects the goal of the City Council to achieve a minimum of 18% of annual General Fund appropriations as an assigned fund balance in the General Fund. Based on the current year appropriations, the amount assigned to the 18% Stabilization Plan will either increase or decrease accordingly. This assigned balance is intended to be used for specific and defined emergency services and to minimize the potential for disruption of municipal services to citizens. However, included as part of the City’s General Fund balancing strategies for Fiscal Year 2020-21 is the reduction of the General Fund stabilization assignment from 18% to 15%. As of June 30, 2021, the City’s General Fund had an assigned fund balance for the stability arrangement of $106.4 million, which achieved the 15% goal for Fiscal Year 2021-22.

The General Fund is the only City fund that can report a positive unassigned fund balance; this is the residual positive net resources in excess of what can properly be classified in one of the other four categories.

Debt Management Policy. The City has adopted a Debt Management Policy in accordance with California Government Code Section 8855 to establish guidelines and parameters for the effective governance, management and administration of debt issued by the City and its related entities and to ensure compliance with legislation, statutes and laws that place regulations on local agency debt. The following elements have been incorporated into this policy:

The purposes for which debt may be incurred.

The types of debt that may be issued.

Assessment of debt limits generally and for General Fund-supported debt.

Debt structuring and issuance practices.

Debt management practices, including the investment of proceeds and post-issuance compliance.

Capital Asset Management Policy. The City’s Capital Asset Management Policy is intended to: (1) describe the policies and procedures utilized in the City’s capital asset management system; (2) establish guidelines for accounting and depreciating the City’s capital assets; and (3) list and describe suitable capital assets and their estimated useful life.

The primary goals of the Capital Asset Management Policy are: (i) to ensure that the City’s capital assets are properly accounted for; (ii) to establish a consistent and cost-effective method for accounting for the City’s capital assets; and (iii) to assure compliance with GAAP.

Economic Uncertainty Reserve. In Fiscal Year 2019-20, the City established an Economic Uncertainty Reserve with an initial deposit of $20,000,000, representing moneys transferred from the City’s other post-employment benefits fund. The Economic Uncertainty Reserve was established to smooth out revenue and expenditure contingencies. As of June 30, 2021, the balance in the Economic Uncertainty

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Reserve was $8.6 million, as $11.4 million was utilized to offset a Fiscal Year 2019-20 General Fund operating deficit. See the caption “THE CITY—COVID-19 Outbreak.”

Action Plan. In the wake of the 2008 financial crisis, the City developed a Five-Year Budget Action Plan (the “Action Plan”), which was designed to minimize the negative impacts of the global economy on the City’s fiscal health so that the City could continue to preserve public safety levels, meet community and cultural needs and deliver capital projects.

The Action Plan included budget cuts in non-essential expenditures, partnering with vendors and suppliers to limit cost increases, freezing vacant positions, transferring City staff from General Fund-supported positions to vacant positions with funding sources and negotiating with employee groups to forgo contracted raises and merit increases. Implementation of the Action Plan enabled the City to manage its finances after the 2008 financial crisis without layoffs and furloughs and by using accumulated reserves to balance its budgets.

Although the Action Plan covered a five-year period that ended in 2015, the City has continued to utilize the tools that it developed during the Action Plan (now referred to as a Five-Year Forecast) to assist in managing the City’s finances during future economic recessions. As discussed under the caption “THE CITY—COVID-19 Outbreak,” the City applied many of the tools that were first developed during the Action Plan to stabilize its finances during the onset of the COVID-19 pandemic.

Strategic Plan. The City’s Strategic Plan, which serves as a framework for developing the City’s budget, includes the following goals established by the City Council:

Invest in the Growth and Evolution of the City’s Economy.

Maintain the Current High Level of Public Safety.

Operate in a Businesslike Manner.

Pursue City’s Goals and Objectives by Working with Other Governmental Agencies.

Focus Resources in Ontario’s Commercial and Residential Neighborhoods.

Invest in the City’s Infrastructure (Water, Streets, Sewers, Parks, Storm Drains and Public Facilities).

Encourage, Provide or Support Enhanced Recreational, Educational, Cultural and Healthy City Programs, Policies and Activities.

Ensure the Development of a Well Planned, Balanced, and Self-Sustaining Community in Ontario Ranch.

The City is also developing a Fiber Optic Master Plan to guide the design, construction and operation of a fiber optic backbone infrastructure. The fiber optic network is intended to create cost-effective, secure, fast and reliable communications capabilities throughout the City.

Cost Allocation Plan. The City’s Cost Allocation Plan is a basic information tool in a number of financial and budgetary decision-making situations. The Cost Allocation Plan can be used to identify indirect costs incurred by the City in administering and providing support services to special projects, funds and contracts. By identifying total project costs, the Cost Allocation Plan can be used to determine the level of support and to reimburse the General Fund for the indirect costs incurred.

An indirect cost rate is a means for determining fairly and conveniently, within the boundaries of sound administrative principles, what proportion of indirect costs each project or activity should bear. It is the ratio of total indirect expenses to a direct cost base. By applying the indirect cost rate to any particular cost objective, the total cost of the project or activity can be calculated. Indirect costs are categorized as Departmental Overhead and General & Administrative (“G&A”) expenses. Departmental Overhead is

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allocated on the basis of direct personnel costs, while G&A is allocated based on the total project or activity costs (excluding G&A).

The Cost Allocation Plan is utilized in charging the City’s utility funds, including water, sewer and integrated waste, for the costs of General Fund administrative activities that benefit such utility funds. The Cost Allocation Plan is updated on an annual basis.

Summary of General Fund Results and Budgets. As of June 30, 2021, based on unaudited information that is available to date, the General Fund had a year-end surplus (revenues in excess of expenditures) of approximately $29.5 million (inclusive of interfund transfers), which was significantly more than the year-end deficit of $12.6 million that was projected in the Fiscal Year 2020-21 General Fund budget. The budget surplus was the result of renewed economic activity during the second half of Fiscal Year 2021 as the COVID-19 outbreak that is discussed under the caption “THE CITY—COVID-19 Outbreak” waned in and around the City.

For Fiscal Year 2021-22, the adopted General Fund operating budget projects revenues of $276.2 million, which is approximately $21.8 million (7.3%) below unaudited actual Fiscal Year 2020-21 revenues. The adopted Fiscal Year 2021-22 General Fund operating budget projects expenditures of $271.9 million, which is approximately $3.3 million (1.2%) above unaudited actual Fiscal Year 2020-21 expenditures.

See the caption “—Budget Procedure, Current Budget and Historical Budget Information” for additional information relating to the adopted budget for Fiscal Year 2021-22.

Budget Procedure, Current Budget and Historical Budget Information

Budget Timeline. The City’s Fiscal Year 2021-22 budget was approved on June 21, 2021. The budget includes all funding sources of the City, including the General Fund and the Ontario Housing Authority. The City’s budget process is described below.

The Ontario Municipal Code requires that the City Manager present the annual operating budget to the Mayor and City Council for approval. The City’s Financial Services Agency (i.e., department), under the direction of the Executive Director of Finance, is responsible for compiling the estimated revenues and appropriations for the City Manager. Prior to the beginning of each Fiscal Year, the Mayor and City Council adopts the Annual Operating Budget at a public budget workshop.

The development of the Annual Operating Budget begins in February with the dissemination of budget preparation guidelines, including policies and procedures to ensure that the preparation of the budget conforms to fiscal policies and guidelines established by the Mayor and City Council. Following the distribution of the budget development guidelines, a budget “kick-off’ meeting is held with department heads and other key City staff members to review the budget development guidelines.

Before department budget requests are submitted to the City Manager, the Financial Services’ Budget Office reviews and analyzes all department budget requests. This review includes a comparative analysis of historical and current expenditure levels. The City Manager and Budget Office staff then hold budget meetings with each department head to discuss the budget requests and obtain additional information to assist in the assessment of the requests. Following the meetings, the Budget Office adjusts line item requests in accordance with the City Manager’s direction. Finally, the budget is presented to the Mayor and City Council for consideration and approval at a public budget workshop.

The City Council can make amendments to an adopted budget at any time during a Fiscal Year. Quarterly budget update reports include appropriation adjustments and revised revenue projections as needed. The City Manager may authorize budget transfers between line items, programs and agencies within a fund as

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long as the total budget has not exceeded the amount approved by City Council. Budgetary changes between funds require City Council approval.

A summary of the actions taken during the budgetary process is set forth below:

CITY OF ONTARIO BUDGET PROCESS

Source: City.

Current Budget. For Fiscal Year 2021-22, the adopted General Fund operating budget projects revenues of $276.2 million, which is approximately $21.8 million (7.3%) below unaudited actual Fiscal Year 2020-21 revenues. The adopted Fiscal Year 2021-22 General Fund operating budget projects expenditures of $271.9 million, which is approximately $3.3 million (1.2%) above unaudited actual Fiscal Year 2020-21 expenditures.

The General Fund operating budget for Fiscal Year 2021-22 reflects the following significant assumptions: (a) the City will not hire any additional employees; (b) assessed valuations of property will increase by 7.8% above budgeted Fiscal Year 2020-21 assessed valuations; (c) sales tax revenues will increase by 22.6% (before adjustments) above budgeted Fiscal Year 2020-21 sales tax revenues; (d) transient occupancy tax revenues will increase by 22.2% ($2 million) above budgeted Fiscal Year 2020-21 transient occupancy tax revenues; and (e) charges for services at ONT will increase by 15.2% above budgeted Fiscal Year 2020-21 charges for services at ONT.

Guidelines Disseminated

Dissemination of Budget Preparation

Guidelines

Kick-off Meeting

Meeting with Department Heads and

Key Staff

Review

Financial Services Budget Office Reviews Department Requests

Budget Meetings

City Manager and Budget Office Meets

with Department Heads

Adjustments

Budget Requests are Adjusted Per City

Manager Direction

Workshop

Proposed Budget Submitted to City

Council/Hold Public Hearing

Approval

Budget Approved

Implementation/ Adjustments

City Council may Amend Budget during Fiscal

Year/City Manager may Transfer within Funds

February February March March/April

April May June July

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Set forth in Table 1 are recent General Fund budgets and results of the City, including transfers in and out. During the course of each Fiscal Year, the budget is amended and revised as necessary by the City Council.

TABLE 1 CITY OF ONTARIO

GENERAL FUND BUDGETS AND RESULTS

Fiscal Year 2017-18

Adopted Budget

Fiscal Year 2017-18

Audited Results

Fiscal Year 2018-19

Adopted Budget

Fiscal Year 2018-19

Audited Results

Fiscal Year 2019-20

Amended Budget

Fiscal Year 2019-20

Audited Results

Fiscal Year 2020-21

Adopted Budget

Fiscal Year 2020-21

Unaudited Results

Fiscal Year 2021-22

Adopted Budget

Revenues Property Taxes $ 36,875,000 $ 38,701,353 $ 40,700,000 $ 43,086,107 $ 45,875,000 $ 46,749,275 $ 47,800,000 $ 50,622,447 $ 51,421,754 Property Taxes in lieu(1) 15,125,000 16,935,018 17,200,000 18,621,838 19,450,000 20,072,659 20,700,000 21,557,460 22,400,000 Sales Taxes 76,250,000 87,910,014 89,400,000 94,486,731 96,155,000 90,290,690 82,000,000 105,424,829(6) 100,500,000 Franchise Taxes 3,150,000 3,352,120 3,300,000 3,161,540 3,200,000 3,164,111 3,000,000 3,251,867 3,000,000 Transient Occupancy Taxes 12,875,000 14,586,233 15,000,000 14,945,483 15,500,000 12,160,235 9,000,000 10,614,109 11,000,000 Business License Taxes 6,800,000 7,478,153 7,600,000 7,786,821 8,211,000 7,793,962 7,786,820 8,559,248 7,700,000 Other Taxes(2) 3,600,000 4,642,529 3,700,000 4,506,129 4,150,000 4,044,908 2,880,000 3,507,185 3,180,000 Licenses and Permits 2,835,000 4,887,991 3,295,000 5,067,374 3,675,000 5,488,023 4,085,000 8,423,831(7) 4,752,000 Intergovernmental 306,500 4,540,398 34,150,887(4) 3,132,474 307,700 1,268,005 257,500 27,142,544(8) 14,953,623 Fines and Forfeitures 903,800 1,007,271 953,800 1,185,028 928,800 786,630 728,800 656,407 703,000 Use of Money and Property 2,325,000 1,758,523 3,852,920 7,072,112 2,864,185 8,476,572 2,000,000 464,090 1,661,198 Charges for Services – ONT 16,809,230 18,739,184 22,876,078 24,115,412 21,833,115 24,017,776 17,760,013 13,495,516(9) 20,465,576 Charges for Services 8,182,335 12,028,971 9,301,880 14,662,285 9,242,500 12,150,526 8,375,000 15,487,750(10) 21,006,178 Other Revenue 3,679,335 7,445,883 2,409,430 4,002,652 5,162,359 4,969,244 14,202,295 14,959,887 9,417,060 Transfers In 38,515,360 35,308,019 33,182,530 29,182,877 42,633,335 48,168,298 11,132,206 13,835,537 4,000,000 Total Revenues $ 228,231,560 $ 259,321,660 $ 286,922,525 $ 275,014,863 $ 279,187,994 $ 289,600,914 $ 231,707,634 $ 298,002,707 $ 276,160,389 Expenditures General Government $ 18,142,823 $ 23,517,450 $ 29,017,664 $ 27,251,880 $ 28,764,887 $ 28,322,100 $ 29,302,475 $ 28,631,974(11) $ 30,066,985 Public Safety 147,768,449 156,245,698 161,206,627 157,310,539 172,355,187 166,873,394 158,919,543 169,457,050(12) 173,053,603

Community Development 25,436,139 25,914,561 67,171,125 31,597,820 34,501,473 35,829,045 32,573,092 38,056,558(13) 39,388,870 Library(3) 5,155,881 4,768,627 - - - - - - - Public Works 20,812,934 19,337,803 22,178,286 20,679,198 23,082,801 21,303,770 13,793,596(14) 13,545,662(14) 14,572,002 Debt Service 4,500,854 4,289,158 2,985,337 2,989,049 3,852,940 3,852,938 3,887,688 3,887,596 3,916,571 Transfers Out 8,233,903 25,300,348 5,154,000 18,618,087 18,159,588 14,894,106 5,798,525 14,929,892(15) 10,860,303 Total Expenditures $ 230,050,983 $ 259,373,645 $ 287,713,039 $ 258,446,573 $ 280,716,876 $ 271,075,353 $ 244,274,919 $ 268,508,732 $ 271,858,334 Excess (Deficiency) of Revenues Over (Under) Expenditures $ (1,819,423)(5) $ (51,985) $ (790,514)(5)

$ 16,568,290 $ (1,528,882)(5) $ 18,525,561 $ (12,567,285)(5)

$ 29,493,975 $ 4,302,055

(1) See the caption “—State of California Motor Vehicle In-Lieu Payments.” (2) Includes parking tax and property transfer tax revenues. See the caption “—Other Taxes.” (3) Beginning in Fiscal Year 2018-19, Library expenses are included in the Community Development line item. (4) Budgeted amount reflects a five-year grant from the State. The proceeds of such grant are not displayed as General Fund revenues in the City’s audited financial statements. (5) Budgeted deficiencies reflect the application of the assigned General Fund balance.

(Footnotes Continued on Following Page)

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(Footnotes Continued from Prior Page)

(6) Increase from Fiscal Year 2020-21 budgeted amount reflects increased online purchases and sales of building materials. (7) Increase from Fiscal Year 2020-21 budgeted amount reflects increased levels of development activity. (8) Increase from Fiscal Year 2020-21 budgeted amount reflects receipt of CARES Act and ARP Act funding. See the caption “THE CITY—COVID-19 Outbreak.” (9) Decrease from Fiscal Year 2020-21 budgeted amount reflects reduced public safety services provided at ONT as passenger traffic remained low during the COVID-19 pandemic. See the captions

“THE CITY—Ontario International Airport” and “THE CITY—COVID-19 Outbreak.” (10) Increase from Fiscal Year 2020-21 budgeted amount reflects increased levels of development activity. (11) Decrease from Fiscal Year 2020-21 budgeted amount reflects savings in payroll costs as a result of implementation of Retirement/Separation Incentive program. See the caption “THE CITY—

COVID-19 Outbreak.” (12) Increase from Fiscal Year 2020-21 budgeted amount reflects increased additional public safety service costs during the COVID-19 pandemic. (13) Increase from Fiscal Year 2020-21 budgeted amount reflects increased levels of contractual, plan check and inspection services provided as a result of increased levels of development activity.

These costs are partially offset by increased revenues from development activity. See footnotes (7) and (10) above. (14) Decrease from prior Fiscal Years reflects reallocation of certain Public Works functions from the General Fund to various other City funds. (15) Increase from Fiscal Year 2020-21 budgeted amount reflects increased transfers of General Fund reserves to other funds. Sources: Adopted budgets of the City for Fiscal Years 2017-18 through 2021-22, including amended budget for Fiscal Year 2019-20; audited financial statements of the City for Fiscal Years 2017-18

through 2019-20; City for Fiscal Year 2020-21.

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Change in Fund Balance of the City General Fund

Set forth in Table 2 are the City’s General Fund statements of revenues, expenditures and changes in fund balance for the last five Fiscal Years.


GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE

Fiscal Year Ended June 30,

2017 2018 2019 2020 2021(1) Revenues Taxes Property Taxes $ 37,136,654 $ 38,701,353 $ 43,086,107 $ 46,749,275 $ 50,622,447 Property Taxes in lieu(2) 15,838,993 16,935,018 18,621,838 20,072,659 21,557,460 Sales Taxes 86,168,797 87,910,014 94,486,731 90,290,690 105,424,829 Franchise Taxes 3,020,829 3,352,120 3,161,540 3,164,111 3,251,867 Transient Occupancy Taxes 13,886,637 14,586,233 14,945,483 12,160,235 10,614,109 Business License Taxes 7,167,613 7,478,153 7,786,821 7,793,962 8,559,248 Other Taxes(3) 4,047,435 4,642,529 4,506,129 4,044,908 3,507,185 Licenses and Permits 4,384,727 4,887,991 5,067,374 5,488,023 8,423,831 Intergovernmental 5,170,893 4,540,398 3,132,474 1,268,005 27,142,544 Fines and Forfeitures 1,136,159 1,007,271 1,185,028 786,630 656,407 Use of Money and Property 1,063,385 1,758,523 7,072,112 8,476,572 464,090 Charges for Services – ONT(4) - 18,739,184 24,115,412 24,017,776 13,495,516 Charges for Services 9,960,386 12,028,971 14,662,285 12,150,526 15,487,750 Other Revenue 5,776,786 7,445,883 4,002,652 4,969,244 14,959,887 Total Revenues $ 194,759,294 $ 224,013,641 $ 245,831,986 $ 241,432,616 $284,167,170 Expenditures Current General Government $ 24,500,521 $ 23,517,450 $ 27,251,880 $ 28,322,100 $ 28,631,974 Public Safety 134,053,016 156,245,698 157,310,539 166,873,394 169,457,050 Community Development 24,285,744 25,914,561 31,597,820 35,829,045 38,056,558 Library(5) 4,654,465 4,768,627 - - - Public Works 18,105,811 19,337,803 20,679,198 21,303,770 13,545,662(6) Debt Service 3,222,190 4,289,158 2,989,049 3,852,938 3,887,596 Total Expenditures $ 208,821,747 $ 234,073,297 $ 239,828,486 $ 256,181,247 $253,578,840 Excess (Deficiency) of Revenues

Over (Under) Expenditures $ (14,062,453) $ (10,059,656) $ 6,003,500 $ (14,748,631) $ 30,588,330 Other Financing Sources (Uses) Transfers In $ 32,183,311 $ 35,308,019 $ 29,182,877 $ 48,168,298 $ 15,815,913 Transfers Out (25,859,833) (25,300,348) (18,618,087) (14,894,106) (16,924,310) Total Other Financing Sources

(Uses) $ 6,323,478 $ 10,007,671 $ 10,564,790 $ 33,274,192 $ (1,108,397) Special Item(7) - - - $ (42,373,148) - Net Change in Fund Balances $ (7,738,975) $ (51,985) $ 16,568,290 $ (23,847,587) $ 29,479,933 Fund Balances, Beginning of Year $ 123,016,201 $ 115,277,226 $ 114,822,486(8) $ 131,397,957(8) $107,550,370 Fund Balances, End of Year $ 115,277,226 $ 115,225,241 $ 131,390,776 $ 107,550,370 $137,030,303

(1) Reflects unaudited actual results based on available information to date. Subject to change. (2) See the caption “—State of California Motor Vehicle In-Lieu Payments.” (3) Includes parking tax and property transfer tax revenues. See the caption “—Other Taxes.” (4) Primarily reflects police services provided by the City at ONT. Such services commenced in Fiscal Year 2017-18. (5) Beginning in Fiscal Year 2018-19, Library expenses are included in the Community Development line item. (6) Decrease from prior Fiscal Years reflects reallocation of certain Public Works functions from the General Fund to various other City funds. (7) Reflects contribution by the City to the purchase price of ONT and associated salaries and legal, consulting and administrative fees. See the

caption “THE CITY—Ontario International Airport.” (8) As restated. Sources: Audited financial statements of the City for Fiscal Years 2016-17 through 2019-20; City for Fiscal Year 2020-21.

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General Fund Balance Sheets of the City

Set forth in Table 3 are the City’s General Fund balance sheets for the last five Fiscal Years.


GENERAL FUND BALANCE SHEETS

Fiscal Year Ended June 30, 2017 2018 2019 2020 2021(1)

Assets Cash and Investments $ 53,196,528 $ 55,397,144 $ 76,720,178 $ 54,108,152 $ 81,340,732 Receivables Accounts 24,238,656 24,018,468 35,262,054 21,493,884 29,461,897 Taxes 359,610 523,253 121,303 200,483 241,320 Notes and Loans 42,413,324 42,429,148 42,418,148 75,000 63,000 Accrued Interest 550,105 817,533 915,735 685,878 - Prepaid Costs 211,360 243,305 280,083 103,754 161,659 Deposits - - - 72,400 92,400 Due from Other Governments 540,287 - - 120,081 - Due from Other Funds 31,809,083 12,627,426 717,325 495,315 - Advances to Other Funds - - - 58,180,692 56,120,738 Advances to Successor Agency 3,500,000 3,500,000 3,500,000 3,500,000 3,500,000 Restricted Cash and Investments - 145,506 - - - Inventories 144,481 145,989 274,571 300,943 301,530

Total Assets $ 156,963,434 $ 139,847,772 $ 160,209,397 $ 139,336,582 $ 171,283,276 Liabilities, Deferred Inflows of Resources and Fund Balances Liabilities Accounts Payable $ 4,561,951 $ 6,433,656 $ 6,214,226 $ 11,305,415 $ 13,027,849 Accrued Liabilities 16,878,345 4,393,669 4,996,221 6,688,007 3,683,292 Unearned Revenues 5,617,144 765,283 3,138,187 - - Deposits Payable 8,434,626 9,291,886 11,726,555 12,846,099 15,302,265

Total Liabilities $ 35,492,066 $ 20,884,494 $ 26,075,189 $ 30,839,521 $ 32,013,406 Deferred Inflows of Resources

Unavailable Revenues $ 6,194,142 $ 3,738,037 $ 2,743,432 $ 946,691 $ 1,850,705 Total Deferred Inflows of Resources $ 6,194,142 $ 3,738,037 $ 2,743,432 $ 946,691 $ 1,850,705

Fund Balances Nonspendable $ 33,893,841 $ 46,318,442 $ 46,472,802 $ 4,052,097 $ 4,001,189 Restricted 424,497 430,484 438,872 417,464 361,579 Committed 28,877,191 21,066,012 415,884 595,469 3,378 Assigned 52,081,697 47,410,303 84,063,218 99,862,976 133,053,019 Unassigned - - - 2,622,364 -

Total Fund Balances $ 115,277,226 $ 115,225,241 $ 131,390,776 $ 107,550,370 $ 137,419,165 Total Liabilities, Deferred Inflows of

Resources and Fund Balances $ 156,963,434 $ 139,847,772 $ 160,209,397 $ 139,336,582 $_171,283,276 (1) Reflects unaudited actual results based on available information to date. Subject to change. Sources: Audited financial statements of the City for Fiscal Years 2016-17 through 2019-20; City for Fiscal Year 2020-21.

Property Taxes

Property tax receipts of $50,622,447 (excluding motor vehicle license fee in-lieu payments, which are discussed under the caption “—State of California Motor Vehicle In-Lieu Payments”), provided the second largest tax revenue source of the City in Fiscal Year 2020-21 (based on unaudited numbers), contributing approximately 24.9% of General Fund tax revenues and approximately 17.0% of total General Fund revenues during Fiscal Year 2020-21.

Property in the State which is subject to ad valorem taxes is classified as “secured” or “unsecured.” The secured classification includes property on which any property tax levied by a county becomes a lien on that property. A tax that is levied on unsecured property may become a lien on certain other property owned by the taxpayer. Every tax which becomes a lien on secured property has priority over all other liens arising pursuant to State law on the secured property, regardless of the time of the creation of other liens.

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The exclusive means of compelling the payment of delinquent taxes with respect to secured property is the sale of the property securing the taxes for the amount of taxes that are delinquent. The taxing authority has three methods of collecting unsecured personal property taxes: (1) filing a civil action against the taxpayer; (2) obtaining a judgment lien on certain property of the taxpayer from the county clerk or county recorder; and (3) seizing and selling personal property, improvements or possessory interests belonging or taxable to the assessee.

A 10% penalty is added to delinquent taxes which have been levied with respect to property on the secured roll. In addition, beginning on the July 1 following a delinquency, interest begins accruing at the rate of 1.5% per month on the amount delinquent. If taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the county tax collector. A 10% penalty also applies to the delinquent taxes or property on the unsecured roll, and further, an additional penalty of 1.5% per month accrues with respect to such taxes beginning on the varying dates related to the tax billing date.

In an attempt to mitigate the effects of the COVID-19 pandemic on State property taxpayers, on May 6, 2020, the Governor signed Executive Order N-61-20 (“Order N-61-20”). Under Order N-61-20, certain provisions of the State Revenue and Taxation Code were suspended until May 6, 2021 to the extent that they required a tax collector to impose penalties, costs or interest for the failure to pay secured or unsecured property taxes, or to pay a supplemental bill, before the date that such taxes become delinquent. Such penalties, costs and interest were cancelled under the conditions that were provided for in Order N-61-20, including if the property was residential real property which was occupied by the taxpayer or qualified as a small business under certain State laws, the taxes were not delinquent prior to March 4, 2020, the taxpayer filed a claim for relief with the tax collector and the taxpayer demonstrated economic hardship or other circumstances that have arisen due to the COVID-19 pandemic or due to a local, state, or federal governmental response thereto. See the caption “THE CITY—COVID-19 Outbreak.” These actions prevented the City from receiving penalties and interest on delinquent property tax payments in 2020 and 2021, but did not have a material impact on total property tax revenues received by the City during such period.

State law also provides for the supplemental assignment and taxation of property as of the occurrence of a change in ownership or completion of new construction. Collection of taxes based on supplemental assessments occurs throughout the year. Taxes due are prorated according to the amount of time remaining in the tax year.

See the caption “RISK FACTORS—Split Roll Initiative” for a discussion of an initiative that appeared on the November 2020 Statewide ballot which sought to amend provisions of State law relating to property taxes, including the provisions that are discussed above.

For a number of years, the State Legislature shifted property taxes from cities, counties and special districts to the Educational Revenue Augmentation Fund (“ERAF”). In Fiscal Years 1993 and 1994, in response to serious budgetary shortfalls, the State Legislature and administration permanently redirected over $3 billion of property taxes from cities, counties, and special districts to schools and community college districts pursuant to ERAF shifts. The Fiscal Year 2004-05 State Budget included an additional $1.3 billion shift of property taxes from certain local agencies, including the City, in Fiscal Years 2004-05 and 2005-06.

On July 27, 2009, the Governor signed a revised Fiscal Year 2010 State budget that included an ERAF shift of approximately 8% of 1% ad valorem property tax revenues from certain local agencies, including the City.

On November 2, 2010, State voters approved Proposition 22, which: (i) prohibits the State of California from shifting or delaying the distribution of funds from special districts to schools and community colleges; (ii) eliminates the authority to shift property taxes temporarily during a severe financial hardship of the State; and (iii) restricts the State’s authority to use fuel tax revenues to pay debt service on transportation

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bonds, to borrow or change the distribution of fuel tax revenues or to use vehicle license fee revenues to reimburse local governments for state-mandated costs.

Despite the passage of Proposition 22, there can be no assurance that 1% ad valorem property tax revenues which the City currently expects to receive will not be temporarily shifted from the City or reduced pursuant to State legislation enacted in the future, including in response to State budget deficits in the wake of the COVID-19 pandemic. See the caption “STATE OF CALIFORNIA BUDGET INFORMATION.” If the property tax formula is permanently changed in the future, it could have a material adverse effect on the receipt of its share of 1% property tax revenues by the City.

Set forth in Table 4 are the secured and unsecured assessed valuations for property in the City for the last five Fiscal Years, including valuations attributed to the City’s redevelopment successor agency.


ASSESSED VALUATION HISTORY(1)

Fiscal Year Secured Value

Unsecured Value Non-Unitary

Taxable Assessed

Value

Percentage Increase in

Taxable Assessed Value

Direct Tax Rate

2017 $19,151,045 $2,589,867 $15,822 $21,756,734 N/A% 1.0035% 2018 20,576,386 2,666,784 13,344 23,256,514 6.89 1.0035 2019 22,705,622 2,859,078 12,340 25,577,040 9.98 1.0035 2020 24,605,502 2,950,582 12,748 27,568,832 7.79 1.0035 2021 26,416,367 3,178,164 10,444 29,604,975 7.39 1.0035 (1) Figures are in thousands of dollars. Sources: San Bernardino County Assessor Combined Tax Rolls.

Set forth in Table 5 are property tax collections and delinquencies in the City as of June 30 for the last five Fiscal Years. Although the County has adopted the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (known as the Teeter Plan), as provided for in Section 4701 et seq. of the Revenue and Taxation Code of the State, the City does not participate in such plan. As a result, the City is exposed to the risk of property tax payment delinquencies but receives penalties and interest on delinquent collections. The City also receives supplemental taxes throughout the year.

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PROPERTY TAX LEVIES AND COLLECTIONS

Fiscal Year Total

Tax Levy

Collections within the Fiscal Year

of Levy(1)

Percent of Levy Collected within the Fiscal Year of Levy

Collections in Subsequent Years

Percent of Levy Collected to Date

2016 $27,397,660 $27,022,201 98.63% $755,577 101.39% 2017 28,598,396 28,237,630 98.74 628,491 100.94 2018 30,476,605 30,258,907 99.29 662,586 101.46 2019 33,855,137 33,811,751 99.87 275,397 100.69 2020 36,873,998 36,420,730 98.77 332,350 99.67 2021 39,751,526 39,728,385 99.94 341,296 100.80

(1) The amounts shown in this column do not reflect property tax revenues that are attributable to the City’s redevelopment

successor agency. Source: Comprehensive Annual Financial Report of the City for Fiscal Year Ended June 30, 2020; County Assessor for Fiscal

Year 2021.

Information with respect to the ten largest property taxpayers in the City as shown on the Fiscal Year 2020-21 tax roll is set forth in Table 6.


TEN LARGEST PROPERTY TAXPAYERS

Taxpayer 2021 Taxable

Assessed Valuation

% of Total Assessed

Valuation(1)

United Parcel Service Company(2) $ 636,618,427 2.15% Prologis(2) 628,443,766 2.12 Ontario Mills LP(2) 417,203,243 1.41 Vineyard Industrial I LLC 293,286,349 0.99 Watson Land Company 254,340,995 0.86 Costco Wholesale Corporation(2) 159,055,523 0.54 ROC II California Terracina LLC 153,862,113 0.52 Rexford Industrial-Safari LLC 149,842,571 0.51 Comref So California Industrial LLC 149,617,376 0.51 Majestic-CCC IV Partners 142,470,927 0.48 TOTAL $ 2,984,741,290 10.08%

(1) Fiscal Year 2020-21 total taxable assessed value: approximately $29,604,975,381. (2) This taxpayer has a pending property tax appeal. See the caption “RISK FACTORS—Assessed Value of Taxable

Property.” Source: San Bernardino County Assessor 2020/21 Combined Tax Rolls and SBE Non Unitary Tax Roll.

Sales Taxes

Sales tax receipts of $105,424,829 provided the largest tax revenue source for the City in Fiscal Year 2020-21 (based on unaudited numbers), contributing approximately 51.8% of General Fund tax revenues and approximately 35.4% of total General Fund revenues during Fiscal Year 2020-21. Retail sales at the Ontario Mills Mall and automobile sales at the Ontario Auto Center contribute significantly to such receipts.

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A sales tax is imposed on retail sales or consumption of personal property and collected and distributed by the California Department of Tax and Fee Administration (the “CDTFA”). The basic sales tax rate is established by the State Legislature, and local overrides may be approved by voters. The current sales tax rate in the City is 7.75%.

As discussed under the caption “THE CITY—COVID-19 Outbreak,” the Governor extended the deadline to file and pay first quarter sales and use tax returns by 90 days for all but the very largest taxpayers, and up to 361,000 California businesses with less than $5 million in taxable annual sales will be allowed to defer up to $50,000 in sales tax and enter into 12-month payment plans at zero interest. These actions resulted in delays in the receipt by the City of its portion of such tax payments.

Transient Occupancy Taxes

Transient occupancy tax receipts of $10,614,109 provided the fourth largest tax revenue source for the City in Fiscal Year 2020-21 (based on unaudited numbers), contributing approximately 5.21% of General Fund tax revenues and approximately 3.56% of total General Fund revenues during Fiscal Year 2020-21. Transient occupancy taxes are imposed upon hotel guests at a rate of 11.75% of room rental rates. The City is a popular leisure and conference destination in the Inland Empire, having both a sports and entertainment arena (the Toyota Arena) and a convention center.

Other Taxes

Other taxes collected by the City include parking taxes, property transfer taxes, franchise taxes and business license taxes. Parking taxes are levied at the rate of $1.75 per vehicle per day or 12.5% of monthly parking charges. Nearly 80% of the City’s parking tax revenues come from parking structures at ONT. Franchise taxes are levied on gas, electric, cable television and fiber optic service providers within the City. Business license taxes are based on either a flat rate or a gross receipts basis.

With the exception of parking tax revenues, which were down as passenger traffic at ONT was reduced, the City has not experienced material declines in other tax revenues since the onset of the COVID-19 pandemic in March 2020.

Services

Charges of $28,983,266 collected for services provided by the City in Fiscal Year 2020-21, including but not limited to fees for plan checks and other planning services, police services and recreational program fees, provided approximately 9.73% of General Fund revenues during Fiscal Year 2020-21 (based on unaudited numbers). The largest proportion of such charges consists of payments received from the operator of ONT for law enforcement and fire protection services provided by the City at ONT.

The City notes that most recreation programs were cancelled in 2020 as a result of the COVID-19 outbreak, resulting in reduced fees and other revenues from such programs, and that passenger traffic at ONT was down significantly during such period, resulting in a reduced need for law enforcement services. Although the City reassigned public safety personnel from ONT to other budgeted but unfilled safety positions in the City during this period, charges for services were down by approximately 19.87% in Fiscal Year 2020-21 (based on unaudited numbers) compared to Fiscal Year 2019-20.

State of California Motor Vehicle In-Lieu Payments

The State imposes a Vehicle License Fee (the “VLF”), which is the portion of the fees paid in lieu of personal property taxes on a vehicle. The VLF is based on vehicle value and declines as the vehicle ages. Prior to the adoption of the Fiscal Year 2004-05 State Budget, the VLF was 2% of the value of a vehicle. Through legislation in prior Fiscal Years, the State enacted VLF reductions under which the State was required

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to “backfill” local governments for their revenue losses resulting from the lowered fee. The Fiscal Year 2004-05 State Budget permanently reduced the VLF from 2% to 0.65% of the value of a vehicle and deleted the requirement for backfill payments, providing instead that the amount of the backfill requirement will be met by an increase in the property tax allocation to cities and counties. See the caption “STATE OF CALIFORNIA BUDGET INFORMATION.”

VLF receipts totaled $21,557,460 in Fiscal Year 2020-21 (based on unaudited numbers). Such revenues provided the third largest tax revenue source for the City in Fiscal Year 2020-21, contributing approximately 10.59% of General Fund tax revenues and approximately 7.23% of total General Fund revenues.


STATE OF CALIFORNIA MOTOR VEHICLE IN-LIEU PAYMENTS

Fiscal Year Ended June 30, Source 2017 2018 2019 2020 2021(1)

Motor Vehicle In-Lieu Payments $15,838,933 $16,935,018 $18,621,838 $20,072,659 $21,557,460 (1) Reflects unaudited actual results based on available information to date. Subject to change. Source: City.

Other Indebtedness

General Fund-Supported Debt.

2017 Bonds. In 2017, the Authority issued its Lease Revenue Refunding Bonds (the “2017 Bonds”) to refinance certain capital improvements of the City. The 2017 Bonds mature on November 1, 2042 and bear interest at rates varying from 3% to 5% per annum. The 2013 Bonds are payable from rental payments payable from the City to the Authority under a Lease Agreement, dated as of July 1, 2017 (the “2017 Sublease”), by and between the City and the Authority. The leased assets under the 2017 Sublease includes the City’s convention center. As of June 30, 2021, the 2017 Bonds were outstanding in the aggregate principal amount of $25,580,000.

The City has covenanted in the 2017 Sublease to budget and appropriate moneys annually for the lease payments payable thereunder from legally available funds, including the General Fund, on a basis that is substantially similar to the payment of Base Rental Payments under the Lease Agreement in connection with the 2021 Bonds.

2020 Bonds. In 2020, the City issued its 2020 Taxable Pension Obligation Bonds (the “2020 Bonds”) to pay a portion of the City’s unfunded pension liabilities. The 2020 Bonds mature on June 1, 2050 and bear interest at rates varying from 2.071% to 3.979% per annum. The 2020 Bonds are payable from legally available funds of the City, including the General Fund. As of June 30, 2021, the 2020 Bonds were outstanding in the aggregate principal amount of $233,215,000.

The City has covenanted in the trust agreement pursuant to which the 2020 Bonds were issued to budget and appropriate moneys annually for the payments payable thereunder from legally available funds, including the General Fund, on a basis that is substantially similar to the payment of Base Rental Payments under the Lease Agreement in connection with the 2021 Bonds.

2020 Lease/Purchase Agreement. In 2020, the City entered into a lease/purchase agreement (the “2020 Lease/Purchase Agreement”) with Banc of America Public Capital Corp to finance certain energy efficiency improvements to City facilities. The agreement matures in 2040 and bears interest at rates of

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2.320% (tax-exempt component) and 2.961% (taxable component). The 2020 Lease/Purchase Agreement is payable from legally available funds of the City, including the General Fund; the City notes that the financed improvements are expected to generate energy efficiency cost savings for the General Fund. As of June 30, 2021, the 2020 Lease/Purchase Agreement was outstanding in the principal amount of $30,546,423.

2021 Lease/Purchase Agreement. In August 2021, the City entered into a lease/purchase agreement (the “2021 Lease/Purchase Agreement”) with Citizens Business Bank to finance certain improvements to the City’s broadband fiber optic network. The agreement matures in 2042 and bears interest at the rate of 3.55% per annum. The 2021 Lease/Purchase Agreement is payable from legally available funds of the City, including the General Fund, although the primary repayment source is expected to be the City’s Broadband/Fiber Optic Fund. As of the date of this Official Statement, the 2021 Lease/Purchase Agreement was outstanding in the principal amount of $18,031,000.

2021 Real Estate Investment Financing. In March 2021, the City approved a real estate investment financing utilizing available cash totaling $65 million from various City funds, including the Water Capital Fund, the Sewer Capital Fund, the Equipment Services Fund, the General Liability Fund, the Workers Compensation Fund and the Other Post-Employment Benefits Fund, to the Pension Benefits Fund. The financing was structured as a lease/leaseback arrangement through the Ontario Industrial Development Authority that was scheduled to be paid back from the Pension Benefit Fund within 3 years at an interest rate of 1.50% per annum. The City’s goal was to generate income beyond what the City portfolio can earn given the current interest rate environment. The City invested the transferred funds in real estate assets and repaid the loan on November 17, 2021 (prior to maturity) from the proceeds of the successful sale of a City-owned asset; this action was included in the First Quarter Budget Update that was submitted for City Council review and approval on November 16, 2021.

Proposed Additional Issuance. The City is considering the issuance of an additional series of lease revenue bonds in early 2022 (the “2022 Bonds”) to finance a new fire station, Fire Department administration building, parking structure and auxiliary office building. The 2022 Bonds may be issued in a principal amount of up to $100 million. If issued, the 2022 Bonds would be secured by lease payments on certain real property assets of the City (not including the Leased Premises) and would not constitute “Additional Bonds” under the Lease Agreement in connection with the 2021 Bonds. However, the lease payments securing the 2022 Bonds would be payable from legally available funds, including the General Fund, on a basis that is substantially similar to the payment of Base Rental Payments under the Lease Agreement. The City Council has not yet considered or approved the issuance of the 2022 Bonds and there can be no assurance that such obligations would be entered into on the terms that are described in this paragraph.

Other Long Term Debt. In 2013, the City entered into an Installment Purchase Agreement, dated as of September 1, 2013 (the “2013 Water ISA”), with the Authority. The 2013 Water ISA matures on July 1, 2043 and bears interest at rates varying from 4% to 5.25% per annum. The 2013 Water ISA is payable from net revenues of the City’s municipal water utility. As of June 30, 2021, the 2020 Bonds were outstanding in the aggregate principal amount of $64,420,000.

In addition, in 2019, the City entered into an Agreement for Purchase and Sale and Joint Escrow Instructions (the “Great Park Purchase Agreement”) pursuant to which the City agreed to purchase a property to be developed into a park. The Great Park Purchase Agreement is payable in annual installments of $5,000,000 each through January 15, 2025. Although there is no specific source of repayment pledged in the Great Park Purchase Agreement, the City expects to make payments thereunder from park development impact fees and does not expect to apply General Fund moneys to pay the remaining purchase price. As of June 30, 2021, the Great Park Purchase Agreement is outstanding in the principal amount of $19,182,739.

Short-Term Debt. The City currently has no short-term debt outstanding.

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Estimated Direct and Overlapping Bonded Debt. The estimated direct and overlapping bonded debt of the City as of June 30, 2021 is set forth in Table 8. The information in Table 8 has been derived from data assembled and reported to the City by California Municipal Statistics, Inc. None of the City, the Authority or the Underwriters have independently verified the information in Table 8 and the City, the Authority and the Underwriters do not guarantee its accuracy.

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ESTIMATED DIRECT AND OVERLAPPING BONDED DEBT AS OF JUNE 30, 2021

Fiscal Year 2020-21 Assessed Valuation: $29,564,789,984(1)

Total Debt City’s Share of OVERLAPPING TAX AND ASSESSMENT DEBT: 6/30/21 % Applicable(2) Debt 6/30/21 Metropolitan Water District $26,830,000 0.906% $ 243,080 Chaffey Community College District 315,490,000 23.195 73,177,906 Chino Valley Unified School District 557,230,000 5.914 32,954,582 Chaffey Union High School District 530,528,431 41.376 219,511,444 Ontario-Montclair School District 109,165,015 70.213 76,648,032 Mountain View School District School Facilities Improvement District No. 1 9,899,676 100.000 9,890,865 Mountain View School District Community Facilities District No. 1997-1 499,000 100.000 499,000 City of Ontario Community Facilities District No. 13 3,205,000 100.000 3,205,000 City of Ontario Community Facilities District No. 24 14,935,000 100.000 14,935,000 City of Ontario Community Facilities District No. 25 8,365,000 100.000 8,365,000 City of Ontario Community Facilities District No. 26 8,670,000 100.000 8,670,000 City of Ontario Community Facilities District No. 28 8,500,000 100.000 8,500,000 City of Ontario Community Facilities District No. 30 13,465,000 100.000 13,465,000 City of Ontario Community Facilities District No. 31 4,785,000 100.000 4,785,000 City of Ontario Community Facilities District No. 33 5,990,000 100.000 5,990,000 City of Ontario Community Facilities District No. 34 7,615,000 100.000 7,615,000 City of Ontario Community Facilities District No. 38 10,270,000 100.000 10,270,000 City of Ontario Community Facilities District No. 39 5,015,000 100.000 5,015,000 City of Ontario Community Facilities District No. 40 6,340,000 100.000 6,340,000 City of Ontario Community Facilities District No. 43 15,795,000 100.000 15,795,000 City of Ontario Community Facilities District No. 45 9,000,000 100.000 9,000,000 City of Ontario Community Facilities District No. 46 7,130,000 100.000 7,130,000 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $542,004,909 DIRECT AND OVERLAPPING GENERAL FUND DEBT: San Bernardino County General Fund Obligations $214,095,000 11.811% $ 25,286,760 San Bernardino County Pension Obligation Bonds 180,825,585 11.811 21,357,310 San Bernardino County Flood Control District General Fund Obligations 51,360,000 11.811 6,066,130 Chaffey Community College District General Fund Obligations 28,935,000 23.195 6,711,473 Cucamonga School District General Fund Obligations 4,207,000 52.497 2,208,549 City of Ontario General Fund Obligations 57,865,000 100.000 57,865,000(3)

City of Ontario Pension Obligation Bonds 233,215,000 100.000 233,215,000 West Valley Vector Control District General Fund Obligations 2,046,710 32.065 656,278 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $353,366,500 OVERLAPPING TAX INCREMENT DEBT (Successor Agency): $30,222,600 100.000% $30,222,600(4) TOTAL DIRECT DEBT $291,080,000 TOTAL OVERLAPPING DEBT $634,514,009 COMBINED TOTAL DEBT $925,594,009(5) Ratios to Fiscal Year 2020-21 Assessed Valuation: Total Overlapping Tax and Assessment Debt .......................................................... 1.83% Total Direct Debt ($291,080,000) ........................................................................... 0.98% Combined Total Debt ................................................................................................ 3.13% Ratios to Redevelopment Successor Agency Incremental Valuation ($6,999,128,565): Total Overlapping Tax Increment Debt .................................................................... 0.43% (1) Differs from assessed valuation shown in Tables 4 and 6 under the caption “—Property Taxes” as a result of slight differences in methodology. (2) The percentage of overlapping debt applicable to the City is estimated using taxable assessed property value. Applicable percentages were estimated

by determining the portion of each overlapping district’s assessed value that is within the boundaries of the City divided by each such district’s total taxable assessed value.

(3) Excludes 2021 Bonds. (4) Excludes accreted interest on capital appreciation bonds. (5) Excludes tax and revenue anticipation notes, enterprise revenue bonds, mortgage revenue bonds and non-bonded capital lease obligations. Source: California Municipal Statistics, Inc.

Retirement Contributions

Accounting and financial reporting by state and local government employers for defined benefit pension plans is governed by GASB Statement No. 68 (“GASB 68”). GASB 68 includes the following components: (i) unfunded pension liabilities are included on the employer’s balance sheet; (ii) pension expense

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incorporates rapid recognition of actuarial experience and investment returns and is not based on the employer’s actual contribution amounts; (iii) lower actuarial discount rates are required to be used for underfunded plans in certain cases for purposes of the financial statements; (iv) closed amortization periods for unfunded liabilities are required to be used for certain purposes of the financial statements; and (v) the difference between expected and actual investment returns will be recognized over a closed five-year smoothing period. GASB 68 affects the City’s accounting and reporting requirements, but it does not change the City’s pension plan funding obligations.

The City participates in three plans to fund pension benefits for employees: (i) a Police Safety Plan for police personnel; (ii) a Fire Safety Plan for fire department personnel; and (iii) a Miscellaneous Plan for all other eligible personnel. The City’s pension plans are administered by CalPERS. CalPERS administers agent multiple-employer public employee defined benefit pension plans for all of the City’s full-time and certain part-time employees. CalPERS provides retirement, disability and death benefits to plan members and beneficiaries and acts as a common investment and administrative agent for participating public entities within the State, including the City. CalPERS plan benefit provisions and all other requirements are established by State statute and the City Council.

City employees are subject to different benefit levels based on their hire date. The plans’ provisions and benefits in effect at June 30, 2020 are summarized as follows:

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CITY OF ONTARIO CALPERS PENSION PLANS – SUMMARY OF BENEFIT PROVISIONS

Police Safety Plan

Employees Hired Before July 1, 2012

Employees Hired between July 1, 2012 and

December 31, 2012

Employees Hired after December 31, 2012 (Not

Previously CalPERS members)

Benefit Formula 3.0% @ age 50 3.0% @ age 55 2.7% @ age 57 Benefit Vesting 5 years of service 5 years of service 5 years of service

Benefit Payments Monthly for life Monthly for life Monthly for life Minimum Retirement Age 50 50 50 Monthly Benefits as % of

Eligible Compensation 3% 2.4% - 3% 2% - 2.7%

Employee Normal Cost 9.00%(1) 9.00%(1) 13.25%(1) Employer Normal Cost

Rate 21.88% 21.88% 21.88%

Fire Safety Plan

Employees Hired Before July 1, 2012

Employees Hired between July 1, 2012 and

December 31, 2012

Employees Hired after December 31, 2012 (Not

Previously CalPERS members)

Benefit Formula 3.0% @ age 50 3.0% @ age 55 2.7% @ age 57 Benefit Vesting 5 years of service 5 years of service 5 years of service

Benefit Payments Monthly for life Monthly for life Monthly for life Minimum Retirement Age 50 50 50 Monthly Benefits as % of

Eligible Compensation 3% 2.4% - 3% 2% - 2.7%

Employee Normal Cost 9.00%(1) 9.00%(1) 11.25%(1) Employer Normal Cost

Rate 19.36% 19.36% 19.36%

Miscellaneous Plan

Employees Hired on or before

December 31, 2012

Employees Hired after December 31, 2012 (Not Previously CalPERS

members)

Benefit Formula 2.5% @ age 55 2.0% @ age 62 Benefit Vesting 5 years of service 5 years of service

Benefit Payments Monthly for life Monthly for life Minimum Retirement Age 50 52 Monthly Benefits as % of

Eligible Compensation 2% - 2.5% 1% - 2.5%

Employee Normal Cost 8.00%(1) 6.25%(1) Employer Normal Cost

Rate 10.07% 10.07%

(1) Employees are required to make the full employee contribution themselves. The City does not make any portion of the

employee contribution. Source: City.

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Contributions to the City’s pension plans consist of contributions from plan participants (i.e., employees) and contributions by the City.

City employees who were hired after December 31, 2012 and who were not previously CalPERS members receive benefits based on a 2.7% at age 57 formula (for Police Safety Plan and Fire Safety Plan employees) or a 2.0% at age 62 formula (for Miscellaneous Plan employees). Such employees are required to make the full amount of required employee contributions themselves under the California Public Employees’ Pension Reform Act of 2013 (“AB 340”), which was signed by the State Governor on September 12, 2012. AB 340 established a new pension tier for such employees. Benefits for such participants are calculated on the highest average annual compensation over a consecutive 36-month period. Employees are required to pay at least 50% of the total normal cost rate. AB 340 also capped pensionable income as noted below. Amounts are set annually, subject to Consumer Price Index increases, and retroactive benefits increases are prohibited, as are contribution holidays and purchases of additional non-qualified service credit.

CITY OF ONTARIO PENSIONABLE INCOME CAPS FOR CALENDAR YEAR 2021

(AB 340 AND NON-AB 340 EMPLOYEES)

Employees Hired On or Before December 31, 2012

(Non-AB 340 Employees)

Employees Hired After December 31, 2012

(AB 340 Employees)

Maximum Pensionable Income $290,000 $153,671 Maximum Pensionable Income if

also Participating in Social Security N/A $128,059 Source: City.

Additional employee contributions, limits on pensionable compensation and higher retirement ages for new members as a result of the passage of AB 340 are expected to reduce the City’s unfunded pension lability and potentially reduce City contribution levels in the long term.

The City is also required to contribute the actuarially determined remaining amounts necessary to fund benefits for its members. Employer contribution rates for all public employers are determined on an annual basis by the CalPERS actuary and are effective on the July 1 following notice of a change in the rate. Total plan contributions are determined through the CalPERS annual actuarial valuation process. The total minimum required employer contribution is the sum of: (i) the plan’s employer normal cost rate, which funds pension benefits for current employees for the upcoming Fiscal Year (expressed as a percentage of payroll); plus (ii) the employer unfunded accrued liability contribution amount, which funds pension benefits that were previously earned by current and former employees (billed monthly).

For Fiscal Year 2020-21, required employer normal cost rates as a percentage of payroll were 22.318% for Police Safety Plan employees, 19.811% for Fire Safety Plan employees and 10.266% for Miscellaneous Plan employees. For Fiscal Year 2021-22, required employer normal cost rates as a percentage of payroll are 21.88% for Police Safety Plan employees, 19.36% for Fire Safety Plan employees and 10.07% for Miscellaneous Plan employees.

For Fiscal Year 2020-21, the total required employer payment of the unfunded accrued liability for the City’s Police Safety Plan was $8,826,947. For Fiscal Year 2021-22, the total required employer payment of the unfunded accrued liability for the City’s Police Safety Plan is $824,395, reflecting the City’s issuance of the 2020 Bonds, the proceeds of which were applied to pay down a portion of the unfunded accrued liability of $139,203,264. See the caption “—Other Indebtedness—General-Fund Supported Debt—2020 Bonds.”

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For Fiscal Year 2020-21, the total required employer payment of the unfunded accrued liability for the City’s Fire Safety Plan was $5,332,971. For Fiscal Year 2021-22, the total required employer payment of the unfunded accrued liability for the City’s Fire Safety Plan is $647,660, reflecting the City’s issuance of the 2020 Bonds, the proceeds of which were applied to pay down a portion of the unfunded accrued liability of $94,180,092. See the caption “—Other Indebtedness—General-Fund Supported Debt—2020 Bonds.”

For Fiscal Year 2020-21, the total required employer payment of the unfunded accrued liability for the City’s Miscellaneous Plan was $7,056,966. For Fiscal Year 2021-22, the total required employer payment of the unfunded accrued liability for the City’s Miscellaneous Plan is $244,928, reflecting the City’s application of available cash balances to pay down a portion of the unfunded accrued liability of $102,069,092. See footnote (14) to Table 1 under the caption “—Budget Procedure, Current Budget and Historical Budget Information.”

Beginning in Fiscal Year 2017-18, CalPERS began collecting employer contributions toward a pension plan’s unfunded liability as dollar amounts instead of the prior method of a percentage of payroll. According to CalPERS, this change was intended to address potential funding issues that could arise from a declining payroll or a reduction in the number of active members in the plan. Funding the unfunded liability as a percentage of payroll could lead to underfunding of pension plans. Due to stakeholder feedback regarding internal needs for total contributions expressed as an estimated percentage of payroll, the CalPERS reports include such results in the contribution projection for informational purposes only. Contributions toward a pension plan’s unfunded liability will continue to be collected as set dollar amounts.

The City’s required contributions to CalPERS fluctuate each year and, as noted, include a normal cost component and a component equal to an amortized amount of the unfunded liability. Many assumptions are used to estimate the ultimate liability of pensions and the contributions that will be required to meet those obligations. The CalPERS Board of Administration has adjusted and may in the future further adjust certain assumptions used in the CalPERS actuarial valuations, which adjustments may increase the City’s required contributions to CalPERS in future years. Accordingly, the City cannot provide any assurances that the City’s required contributions to CalPERS in future years will not significantly increase (or otherwise vary) from any past or current projected levels of contributions. CalPERS earnings reports for Fiscal Years 2009-10 through 2019-20 report investment gains of approximately 13.3%, 21.7%, 0.1%, 13.2%, 18.4%, 2.4%, 0.6%, 11.2%, 8.6%, 6.7% and 4.7%, respectively. Preliminary returns for Fiscal Year 2020-21 indicate an investment gain of 21.3%. Future earnings performance may increase or decrease future contribution rates for plan participants, including the City. The City notes that CalPERS’ earnings in Fiscal Year 2019-20 were below its investment targets as a result of stock market declines in the wake of the COVID-19 outbreak, which could increase future contribution rates for plan participants, including the City. See the caption “THE CITY—COVID-19 Outbreak.”

On December 21, 2016, the CalPERS Board of Administration voted to lower its discount rate from 7.50% to 7.00% over a three period. For public agencies such as the City, the new discount rate took effect July 1, 2017. Lowering the discount rate means that employers which contract with CalPERS to administer their pension plans will see increases in their normal costs and unfunded actuarial liabilities. Active members hired after January 1, 2013 will also see their contribution rates rise under AB 340. The reduction of the discount rate will result in average employer rate increases of approximately 1% to 3% of normal cost as a percentage of payroll for most retirement plans such as the City’s plans. Additionally, many employers will see a 30% to 40% increase in their current unfunded accrued liability payments (relative to the unfunded accrued liability payments projected in the June 30, 2015 valuation report) for pension plans. These payments are made to amortize unfunded liabilities over 20 years to bring pension funds to a fully funded status over the long-term.

The announcement on July 12, 2021 that CalPERS achieved a preliminary investment return of 21.3% for the period from July 1, 2020 through June 30, 2021 caused the CalPERS Board of Administration to lower CalPERS’ discount rate from 7.00% to 6.80% on November 15, 2021 in accordance with a risk mitigation

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policy that was adopted in 2015, which calls for the discount rate to be lowered if returns exceed the then-current discount rate by two or more percentage points.

Portions of the above disclosures are primarily derived from information that has been produced by CalPERS, its independent accountants and its actuaries. The City has not independently verified such information and neither makes any representations nor expresses any opinion as to the accuracy of the information that has been provided by CalPERS.

The comprehensive annual financial reports of CalPERS are available on CalPERS’ Internet website at www.calpers.ca.gov. The CalPERS website also contains CalPERS’ most recent actuarial valuation reports and other information that concerns benefits and other matters. The textual reference to such Internet website is provided for convenience only. None of the information on such Internet website is incorporated by reference herein. The City cannot guarantee the accuracy of such information. Actuarial assessments are “forward-looking” statements that reflect the judgment of the fiduciaries of the pension plans, and are based upon a variety of assumptions, one or more of which may not materialize or be changed in the future.

The City’s Police Safety Plan had a total net pension liability of approximately $6,879,502 for Fiscal Year 2020-21 (as of the measurement date of June 30, 2020). The net pension liability is the difference between the total pension liability and the fair market value of pension assets. The City’s total pension assets include funds that are held by CalPERS, and its net pension asset or liability is based on such amounts. For Fiscal Year 2020-21, the City incurred Police Safety Plan pension expenses of $154,440,411 (reflecting the issuance of the 2020 Bonds). See the caption “—Other Indebtedness—General-Fund Supported Debt—2020 Bonds.”

The City’s Fire Safety Plan had a total net pension liability of approximately $5,414,056 for Fiscal Year 2020-21 (as of the measurement date of June 30, 2020). The net pension liability is the difference between the total pension liability and the fair market value of pension assets. The City’s total pension assets include funds that are held by CalPERS, and its net pension asset or liability is based on such amounts. For Fiscal Year 2020-21, the City incurred Fire Safety Plan pension expenses of $103,651,019 (reflecting the issuance of the 2020 Bonds). See the caption “—Other Indebtedness—General-Fund Supported Debt—2020 Bonds.”

The City’s Miscellaneous Plan had a total net pension liability of approximately $2,306,182 for Fiscal Year 2020-21 (as of the measurement date of June 30, 2020). The net pension liability is the difference between the total pension liability and the fair market value of pension assets. The City’s total pension assets include funds that are held by CalPERS, and its net pension asset or liability is based on such amounts. For Fiscal Year 2020-21, the City incurred Miscellaneous Plan pension expenses of $113,590,085 (reflecting the City’s application of available cash balances to pay down a portion of the unfunded accrued liability. See footnote (14) to Table 1 under the caption “—Budget Procedure, Current Budget and Historical Budget Information.”

A summary of principal assumptions and methods used to determine the total pension liability for Fiscal Year 2020-21 is shown below.

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CITY OF ONTARIO ACTUARIAL ASSUMPTIONS FOR CALPERS PENSION PLAN

Actuarial Cost Method Entry Age Normal in accordance with the requirements of GASB 68 Asset Valuation Method Market Value of Assets Actuarial Assumptions:

Discount Rate 7.15% Inflation 2.625% Salary Increases Varies by entry age and service Investment Rate of Return 7.25% net of pension plan investment and administrative expenses; includes

projected inflation rate of 2.625% Mortality Rate Table(1) Derived using CalPERS’ membership data for all funds

(1) The mortality table used was developed based on CalPERS-specific data from a 2017 actuarial experience study for the

period from 1997-2015. Source: City.

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Changes in the net pension liability for the City’s pension plans in the most recent Fiscal Year for which information is available were as follows:

CITY OF ONTARIO CHANGES IN CALPERS PENSION PLANS NET PENSION LIABILITY

Police Safety Plan

Increase / (Decrease)

Total Pension Liability

Plan Fiduciary Net Position

Net Pension Liability / (Asset)

Balance at June 30, 2019 $ 407,587,625 $ 276,775,252 $ 130,812,373 Balance at June 30, 2020 437,334,944 430,455,442 6,879,502

Net Changes for period from July 1, 2019 through June 30, 2020

$ 29,747,319 $ 153,680,190 $(123,932,871)

Fire Safety Plan







$ 19,242,734 $ 101,834,255 $(82,591,521)

Miscellaneous Plan







$ 22,378,138 $ 115,353,452 $(92,975,314)

Source: City.

The table below presents the net pension liability of the City’s pension plans, calculated using the discount rate applicable to Fiscal Year 2020-21 (7.15%), as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.15%) or 1 percentage point higher (8.15%) than the Fiscal Year 2020-21 rate:

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CITY OF ONTARIO SENSITIVITY OF THE CALPERS PENSION PLANS NET PENSION LIABILITY

TO CHANGES IN THE DISCOUNT RATE

Plan’s Net Pension Liability/(Asset) Discount Rate – 1%

(6.15%) Applicable Discount

Rate (7.15%) Discount Rate + 1%

(8.15%)

Police Safety Plan $68,191,268 $6,879,502 $(43,266,592) Fire Safety Plan 47,519,238 5,414,056 (29,330,812)

Miscellaneous Plan 57,939,305 2,306,182 (43,708,428) Source: City.

For additional information relating to the City’s pension plans, see Note 10 to the City’s audited financial statements set forth in Appendix C.

Other Post-Employment Benefits

The City provides post-employment health care benefits to qualified retired employees. Employees are eligible for such benefits in accordance with applicable MOUs with employee bargaining units. The City administers a single-employer defined benefit post-employment healthcare plan (the “OPEB Plan”). A menu of benefit provisions, as well as other requirements, are established by state statutes within the Public Employees’ Retirement Law. The City selects optional benefit provisions from the benefit menu by contract with CalPERS and adopts those benefits through local ordinance.

At June 30, 2020 (the census date), the following employees were covered by the benefit terms:

Category Count

Active employees 1,071 Inactive employees or beneficiaries currently receiving benefit payments 831 Inactive employees entitled to but not yet receiving benefit payment 182 Source: City.

The City funds benefits under the OPEB Plan based on an Actuarially Determined Contribution (the “ADC”). For the year ended June 30, 2021, the City’s ADC contribution rate was 102.8% of covered employee payroll. Employees do not contribute to the plan, but may pay the difference between the benefit that they receive and monthly premiums for that benefit.

GASB has issued two pronouncements, known as GASB 74 and GASB 75, related to funding and accounting for the OPEB Plan. Under these pronouncements, OPEB Plan benefits are intended to be accounted for in a manner that is similar to the accounting treatment of pensions under GASB 68. See the caption “—Retirement Contributions.” Under GASB 74 and 75, unfunded OPEB Plan benefits will be recognized on the City’s financial statements and the City is required to use the Entry Age actuarial cost method when calculating OPEB Plan liabilities. In addition, a 20-year municipal bond rate is used to discount unfunded OPEB Plan payments and the long-term rate of return on plan investments is used to discount benefits that are projected to be paid by plan assets.

The City retained a consultant (the “Actuarial Consultant”) to calculate the City’s post-employment benefits funding status. In a report dated June 30, 2021 (the “Report”), the Actuarial Consultant concluded that the City’s ADC is $7,470,000. According to the Actuarial Consultant, the City’s unfunded actuarial accrued liability for post-employment benefits was $0 as of June 30, 2020, the most recent date that such liability was calculated.

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The City is not required to fund the amortization of the unfunded actuarial liability. Prior to Fiscal Year 2019-20, the City’s policy was to pay for OPEB Plan costs as they are incurred. In Fiscal Year 2019-20, the City Council approved the establishment of an irrevocable trust to fund OPEB Plan benefits (the “OPEB Trust”) with the California Employers’ Retiree Benefit Trust, an agent multiple-employer plan that is administered by CalPERS, and approved and authorized an agreement with CalPERS to administer the OPEB Trust on its behalf. As of June 30, 2021, the City held $180,490,001 in the OPEB Trust. Based on the most recent actuarial valuation, the actuarial unfunded liability of the OPEB Plan was estimated to be approximately $27,185,786 using a methodology that is compliant with GASB 75.

Changes in the total liability for the City’s OPEB Benefit plan for Fiscal Year 2019-20 were as follows.

CITY OF ONTARIO CHANGES IN OPEB PLAN LIABILITY


Total OPEB Plan Liability


Net OPEB Plan Liability / (Asset)

Balance at June 30, 2020 $162,628,638 $ N/A $162,628,638 Net Changes for period from July

1, 2020 through June 30, 2021 6,194,563 141,637,415 (135,442,852)

Balance at June 30, 2021 $ 168,823,201 $ 141,637,415 $ 27,185,786 Source: City.

The following table presents the net liability of the OPEB Plan, calculated using the discount rate applicable to Fiscal Year 2020-21 (6.75%), as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (5.75%) or 1 percentage point higher (7.75%) than the current rate:

CITY OF ONTARIO SENSITIVITY OF THE OPEB PLAN TOTAL LIABILITY

TO CHANGES IN THE DISCOUNT RATE

Discount Rate – 1% (5.75%)

Current Discount Rate (6.75%)

Discount Rate + 1% (7.75%)

Plan’s Total Liability/(Asset) $51,747,760 $27,185,786 $7,250,526 Source: City.

Future changes in funding policies and assumptions, including those related to assumed rates of investment return and healthcare cost inflation, could trigger increases in the City’s annual required OPEB Plan contributions, and such increases could be material to the finances of the City. No assurance can be provided that such expenses will not increase significantly in the future. The City does not expect that any increased funding of OPEB Plan benefits will have a material adverse effect on the ability of the City to pay the 2021 Bonds.

For additional information relating to the City’s OPEB Plan, see Note 11 to the City’s audited financial statements set forth in Appendix C.

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City Investment Policy

The City invests its funds in accordance with the City’s investment policy (the “Investment Policy”), which was most recently reviewed and revised by the City Council on December 1, 2020. The Investment Policy: (a) describes the policies and procedures to be utilized in the City’s investment management system; (b) establishes guidelines for the prudent investment of the City’s funds, and (c) lists and describes suitable investments. The goals of the City’s investment policy and investment management function are compliance with law, enhancement of the economic status of the City and protection of the City’s funds by limiting credit and market risks.

In accordance with Section 53600 et seq. of the California Government Code, idle cash management and investment transactions are the responsibility of the City Treasurer. Eligible investments are generally limited to the Local Agency Investment Fund which is operated by the California State Treasurer, local agency bonds, United States Treasury bills, notes and bonds, obligations issued by United States Government agencies, FDIC-insured or negotiable certificates of deposit, repurchase agreements, banker’s acceptances and commercial paper rated A1/P1, as applicable, or better, and issued by a domestic corporation having assets in excess of $500 million. Funds are invested in the following order of priority:

Safety of Principal;

Liquidity; and

Return on Investment.

The City Treasurer is required to provide a quarterly report to the City Manager and the City Council showing the type of investment, date of maturity, amount invested, current market value, rate of interest, and other such information as may be required by the City Council.

A summary of the City’s investments as of June 30, 2021 is set forth in the below table. Approximately $80.9 million (12.8%) of the total investment portfolio as of June 30, 2021 was attributed to the General Fund.

CITY OF ONTARIO SUMMARY OF INVESTMENTS

Investment Maturity

Investment Type 6 Months or Less

6 Months to 1 Year 1 to 3 Years 3 to 5 Years Total

United States Treasury Obligations $104,932,845 $100,644,164 $214,498,572 $ - $420,075,581 Federal Agency Obligations - - 10,000,450 49,738,492 59,738,942 Medium Term Corporate Notes 5,029,165 - 30,722,625 23,121,424 58,873,214 Asset-Backed Securities - - 9,230,231 - 9,230,231 Municipal Bonds - - 4,094,881 7,501,850 11,596,731 Local Agency Investment Fund 72,551,503 - - - 72,551,503

Totals $182,513,513 $100,644,164 $268,546,759 $ 80,361,766 $632,066,202 (1) Totals may not add due to rounding. Source: City.

For additional information relating to the City’s investments, see Note 3 to the City’s audited financial statements set forth in Appendix C.

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THE AUTHORITY

The Authority was organized pursuant to the provisions of Articles 1 through 4 of Chapter 5 of Division 7 of Title 1 of the State Government Code and a Joint Exercise of Powers Agreement, dated as of June 1, 2013, by and between the City and the Housing Authority. The Authority has no financial liability to the Owners of the 2021 Bonds with respect to the payment of Base Rental Payments by the City or with respect to the performance by the City of the other agreements and covenants that the City is required to perform.

STATE OF CALIFORNIA BUDGET INFORMATION

Although the State is not a significant source of City revenues, there can be no assurance that the State’s annual budget or other legislation will not materially adversely affect the financial condition of the City, in particular given that the City receives certain revenues such as sales tax proceeds and VLF from the State. The following information describes the State budget process and the current and upcoming State budgets.

General

Information about the State budget is regularly available at various State-maintained websites. Text of proposed and adopted budgets may be found at the website of the State Department of Finance (the “DOF”), http://www.dof.ca.gov, under the heading “California Budget.” An impartial analysis of the budget is posted by the Legislative Analyst’s Office (the “LAO”) at http://www.lao.ca.gov. In addition, various State Official Statements, many of which contain a summary of the current and past State budgets and the impact of those budgets on cities in the State, may be found at the website of the State Treasurer, http://www.treasurer.ca.gov. The information referred to is prepared by the respective State agency maintaining each website and not by the City or the Authority, and the City and the Authority take no responsibility for the continued accuracy of these Internet addresses or for the accuracy, completeness or timeliness of information posted there, and such information is not incorporated herein by these references.

Budget for State Fiscal Year 2021-22

On July 16, 2021, the Governor signed a series of bills representing the State budget for State fiscal year 2021-22 (the “2021-22 Budget”). The Governor’s signing followed negotiations between the Governor and the State Legislature regarding the final provisions of the 2021-22 Budget, including the expenditure of a large projected State general fund surplus. The State Legislature passed temporary budgetary legislation in June 2021 to meet the required State Constitutional budget deadline. The following is drawn from the DOF summary of the 2021-22 Budget.

The 2021-22 Budget indicates that revenues are up significantly from the forecast included in the Governor’s proposed State budget for State fiscal year 2021-22, resulting in a large budgetary surplus. This is a result of strong cash trends, two major federal relief bills since the beginning of 2021 (as discussed under the caption “THE CITY—COVID-19 Outbreak”), continued stock market appreciation and a significantly upgraded economic forecast from the prior State fiscal year. The 2021-22 Budget also reports that the State has received approximately $285 billion in federal COVID-19 stimulus funding for State programs. Although the 2021-22 Budget acknowledges that building reserves and paying down debts are critical, the 2021-22 Budget allocates approximately 85% of discretionary funds to one-time spending. The multi-year forecast reflects a budget roughly in balance, although the 2021-22 Budget assumes that risks remain to the economic forecast, including a stock market decline that could reduce State revenues.

For State fiscal year 2020-21, the 2021-22 Budget projects total general fund revenues and transfers of $188.8 billion and authorizes expenditures of $166.1 billion. The State is projected to end State fiscal year 2020-21 with total available reserves of $39.8 billion, including $25.1 billion in the traditional general fund

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reserve, $12.3 billion in the State’s basic reserve fund, known as the Budget Stabilization Account (the “BSA”), $1.9 billion in the Public School System Stabilization Account and $450 million in the Safety Net Reserve Fund. For State fiscal year 2021-22, the 2021-22 Budget projects total general fund revenues and transfers of $175.3 billion and authorizes expenditures of $196.4 billion. The State is projected to end State fiscal year 2021-22 with total available reserves of $25.2 billion, including $4 billion in the traditional general fund reserve, $15.8 billion in the BSA, $4.5 billion in the Public School System Stabilization Account and $900 million in the Safety Net Reserve Fund.

The 2021-22 Budget sets the Proposition 98 minimum funding guarantee for State fiscal year 2021-22 at $93.7 billion. This results in per-pupil funding of $13,976 from Proposition 98 funding, growing to $21,555 when accounting for all funding sources. The 2021-22 Budget also makes retroactive increases to the minimum school funding guarantee in fiscal years 2019-20 and 2020-21, setting them at $79.3 billion and $93.4 billion, respectively. Collectively, this represents a three-year increase in the minimum funding guarantee of $47 billion from the level projected by the 2020-21 Budget.

Other significant features of the 2021-22 Budget include the following:

• General Apportionments – An increase of $395 million in ongoing Proposition 98 funding for general apportionments, comprised of: (i) $371.2 million to fund a 5.07% cost of living adjustment; and (ii) $23.8 million to fund 0.50% enrollment growth.

• Deferrals – $1.453 billion in Proposition 98 funding to repay apportionment deferrals, of which $144.6 million is from State fiscal year 2019-20, $1.1 billion is from State fiscal year 2020-21 and $229.8 million is from State fiscal year 2021-22.

• Student Assistance – $250 million in one-time ARP Act funds to support emergency student financial assistance grants. The 2021-22 Budget also provides $160 million in Proposition 98 funding for student assistance, comprised of $100 million in one-time funding available over three years to address student basic needs including food and housing insecurity, $30 million in ongoing funding to support student mental health services and $30 million in ongoing funding for colleges to establish basic needs centers and hire basic needs coordinators.

• Workforce Programs – $42.4 million in ongoing Proposition 98 funding to increase program funding and enable community college districts to support work-based learning opportunities. The 2021-22 Budget also provides $20 million in one-time Proposition 98 funding to support community college participation in High Road Training Partnerships and regional partnerships developed by the California Workforce Development Board.

• Facilities – $581.4 million in State general obligation bond funding, including $8.2 million to start nine new capital outlay projects and $573.2 million for the construction phase of 32 projects anticipated to complete design by the spring 2022. In addition, the 2021-22 Budget provides $511 million in one-time Proposition 98 funding to address deferred maintenance.

For additional information regarding the 2021-22 Budget, see the DOF and LAO websites. The information presented on such websites is not incorporated herein by reference.

None of the websites or webpages that are referenced above is in any way incorporated into this Official Statement. They are cited for informational purposes only. The City, the Authority and the Underwriters make no representation whatsoever as to the accuracy or completeness of any of the information on such websites.

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There can be no assurance that additional legislation will not be enacted in the future to implement provisions relating to the State budget, address the COVID-19 outbreak or otherwise that may affect the City or its General Fund revenues.

Potential Impact of State Financial Condition on the City

The State has experienced significant financial stress in recent years, with budget shortfalls in the several billions of dollars. The COVID-19 outbreak materially adversely impacted the financial condition of the State and the waning of the infection crisis is expected to be followed by increases in unfunded liabilities of the two main retirement systems managed by State entities, CalPERS and CalSTRS. The State also has a significant unfunded liability with respect to other post-employment benefits.

Current and future State budgets will be significantly affected by the COVID-19 outbreak and other factors over which the City has no control. The City cannot determine what actions will be taken in the future by the State Legislature and the Governor to deal with the COVID-19 outbreak, future recessions and resulting changing State revenues and expenditures. There can be no assurance that, as a result of the COVID-19 outbreak or otherwise, the State will not significantly reduce revenues to local governments (including the City) or shift financial responsibility for programs to local governments as part of its efforts to address State financial conditions. Although the State is not a significant source of City revenues, there can be no assurance that State actions to respond to the COVID-19 outbreak will not materially adversely affect the financial condition of the City. The State’s ability to undertake such revenue reductions or shifting has been limited by provisions of the State Constitution. See the caption “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS—Proposition 22.”

Redevelopment Dissolution

General. On December 29, 2011, the State Supreme Court upheld Assembly Bill 1x26 (“AB 1x26”), which dissolved redevelopment agencies in the State. The effect of AB 1x26 upon the City is the termination of the redevelopment functions of the Ontario Redevelopment Agency (the “Former Agency”) and the transfer of such functions to a successor agency (the City, referred to in this context as the “Successor Agency”), which was tasked with winding down the Former Agency’s redevelopment activities. Under AB 1x26, the Successor Agency cannot enter into new redevelopment projects or obligations and its assets can be used only to pay enforceable obligations, which enforceable obligations are generally limited to obligations in existence in mid-2011, when AB 1x26 was signed by the Governor. In addition, the Successor Agency will receive tax increment revenues in amounts that are sufficient to pay 100% (but no greater amount) of such enforceable obligations until such obligations (including accrued interest, as applicable) are paid in full, at which time the Successor Agency will be dissolved. Certain tax revenues formerly allocable to the Former Agency will continue to be available to the Successor Agency to pay certain obligations, and a portion of such revenues may be redirected to other taxing agencies, such as the County, the local school districts and the City. The Successor Agency’s activities are subject to review by an oversight board established under AB 1x26. Under AB 1x26, liabilities of the Successor Agency are not liabilities of the City.

On June 27, 2012, the Governor signed Assembly Bill 1484 (“AB 1484”), which made certain amendments to AB 1x26. Under AB 1484, the County Auditor-Controller, the DOF and the State Controller may require the return of funds that were improperly spent or transferred to a public entity in conflict with the provisions of the Community Redevelopment Law, as amended by AB 1x26 and AB 1484, and if such funds are not returned within 60 days, they may be recovered through an offset of sales and use tax or property tax allocations to the relevant local agency, which, in the case of the Successor Agency, is the City.

On September 22, 2015, the following amendments to AB 1x26 and AB 1484 were enacted as Senate Bill 107 (“SB 107”): (1) redevelopment successor agencies that enter into a written agreement with the DOF to remit unencumbered cash to the county auditor-controller will receive a finding of completion, which provides successor agencies with additional fiscal tools and reduced State oversight; (2) successor agencies that that

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have a “Last and Final” ROPS (as discussed below) may expend a portion of proceeds of bonds issued in 2011, which proceeds are currently frozen; (3) pension or State Water Project override revenues that are not pledged to or not needed for redevelopment bond debt service will be returned to the entity that levies the override; (4) agreements relating to State highway improvements and money loaned to successor agencies to pay costs associated with redevelopment dissolution litigation will be considered enforceable obligations; and (5) reentered agreements entered into after the passage of AB 1484 are unenforceable unless entered into for the purpose of providing administrative support.

SB 107 also: (a) requires the preparation of a Recognized Obligation Payment Schedule with respect to enforceable obligations (a “ROPS”), which are required to be submitted to the oversight board and the DOF in accordance with AB 1x26, once a year beginning with the ROPS period that commenced on July 1, 2016 (rather than twice a year under prior law); (b) establishes an optional “Last and Final” ROPS process beginning in September 2015; under this process, a successor agency that elected to submit a “Last and Final ROPS would no longer submit a periodic ROPS and the enforceable obligations set forth in the “Last and Final” ROPS would be binding on all parties; and (c) clarifies that former tax increment caps and plan limits do not apply for the purposes of paying approved enforceable obligations.

Impact on the City. Significant provisions of AB 1x26, AB 1484, SB 107 and implementing actions of affected parties, including the Successor Agency, the oversight board, the County and the DOF, may be subject to legal challenge, statutory or administrative changes and other clarifications which could affect the impact of the dissolution of redevelopment on the City and its General Fund. The DOF has periodically proposed additional legislation which would modify statutes affecting redevelopment dissolution; it is not known whether additional legislation will be enacted. The full extent of the impact of the implementation of AB 1x26, AB 1484 and SB 107 or potential future legislation on the City’s General Fund is unknown at this time. While certain administrative costs previously charged to the Former Agency by the General Fund will no longer be supported by the Successor Agency, certain property tax revenues formerly allocated to the Former Agency will now be received by the City’s General Fund.

The City does not believe that it has received material amounts from the Former Agency or the Successor Agency which may be asserted to be in violation of AB 1x26 or AB 1484, and the City is not currently engaged in any disputes with the DOF with respect to amounts received from the Former Agency.

Successor Agency Obligations to the General Fund. Although AB 1x26 generally invalidates agreements between host cities and their former redevelopment agencies, provision is made for the enforcement of agreements entered into with respect to obligations which meet certain specified criteria. The City believes that the Successor Agency’s payment obligations under an advance from the General Fund in the amount of $3,500,000 and miscellaneous other advances from the City (collectively, the “Advances”) to the Former Agency constitute enforceable obligations of the Successor Agency. The City expects that the Successor Agency will continue to be able to apply tax increment revenues to the payment of the Advances. The City lists the Advances in each Successor Agency ROPS, and the Advances have been approved as enforceable obligations by the Successor Agency’s oversight board and the DOF. However, there can be no assurance that such entities, the State Controller, other State or County bodies implementing the dissolution of redevelopment or a court will not disagree with the City’s interpretation and seek to prohibit the Successor Agency from making the payments on the Advances in the future, or that additional legislation could be enacted which will not be consistent with the City’s interpretation. There can also be no assurance that AB 1x26, AB 1484 and/or subsequent implementing statutes will not interfere with the receipt by the City from the Successor Agency of the amounts contemplated to be received by the City pursuant to the Advances or otherwise.

As of June 30, 2021, the Advances were collectively outstanding in the principal amount of $3,500,000. The Advances were used by the Former Agency for various redevelopment purposes and are payable from available Successor Agency moneys. The Advances bear interest at the rate of 12% per annum but do not have a specific maturity date.

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To the extent that the Successor Agency’s assets are liquidated for distribution of proceeds to the affected taxing entities, the City currently expects that the City’s General Fund will receive approximately 16.75% of such assets.

Future State Budgets

No prediction can be made by the City as to whether the State will continue to encounter budgetary problems in future years, and if it were to do so, it is not clear what measures would be taken by the State to balance its budget, as required by law. In addition, the City cannot predict the final outcome of future State budget negotiations, the impact that such budgets will have on City finances and operations or what actions will be taken in the future by the State Legislature and the Governor to deal with changing State revenues and expenditures. There can be no assurance that actions taken by the State to address its financial condition will not materially adversely affect the financial condition of the City. Current and future State budgets will be affected by national and State economic conditions and other factors, including the current economic downturn, over which the City has no control.

CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS

There are a number of provisions of the State Constitution that limit the ability of the City to raise and expend tax revenues.

Article XIIIA of the State Constitution

On June 6, 1978, State voters approved an amendment (commonly known as both Proposition 13 and the Jarvis-Gann Initiative) to the State Constitution. The amendment, which added Article XIIIA to the State Constitution, among other things affects the valuation of real property for the purpose of taxation in that it defines the full cash property value to mean “the county assessor’s valuation of real property as shown on the 1975/76 tax bill under ‘full cash value’, or thereafter, the appraised value of real property newly constructed, or when a change in ownership has occurred after the 1975 assessment.” The full cash value may be adjusted annually to reflect inflation at a rate not to exceed 2% per year, or a reduction in the consumer price index or comparable local data at a rate not to exceed 2% per year, or reduced in the event of declining property value caused by damage, destruction or other factors including a general economic downturn. The amendment further limits the amount of any ad valorem tax on real property to 1% of the full cash value, except that additional taxes may be levied to pay debt service on indebtedness approved by the voters prior to December 1, 1978, and bonded indebtedness for the acquisition or improvement of real property approved on or after December 1, 1978 by two-thirds of the votes cast by the voters voting on the proposition (55% in the case of certain school facilities). Property taxes that are subject to Proposition 13 are a significant source of the City’s General Fund revenues. See the caption “CITY FINANCIAL INFORMATION.”

Legislation enacted by the State Legislature to implement Article XIIIA provides that all taxable property is shown at full assessed value as described above. Tax rates for voter approved bonded indebtedness are also applied to 100% of assessed value.

Future assessed valuation growth allowed under Article XIIIA (for new construction, change of ownership or 2% annual value growth) is allocated on the basis of “situs” among the jurisdictions that serve the tax rate area within which the growth occurs. Local agencies and school districts share the growth of “base” revenue from the tax rate area. Each year’s growth allocation becomes part of each agency’s allocation the following year. Article XIIIA effectively prohibits the levying of any other ad valorem property tax above the 1% limit except for taxes to support indebtedness approved by the voters as described above.

Article XIIIA has subsequently been amended to permit reduction of the “full cash value” base in the event of declining property values caused by damage, destruction or other factors, and to provide that there

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would be no increase in the “full cash value” base in the event of reconstruction of property damaged or destroyed in a disaster and in certain other limited circumstances.

Article XIIIB of the State Constitution

At the Statewide special election on November 6, 1979, the voters approved an initiative entitled “Limitation on Government Appropriations,” which added Article XIIIB to the State Constitution. Under Article XIIIB, State and local government entities have an annual “appropriations limit” which limits the ability to spend certain money which are called “appropriations subject to limitation” (consisting of tax revenues and investment proceeds thereof, certain State subventions and regulatory license fees, user charges and user fees to the extent that the proceeds thereof exceed the costs of providing such services, together called “proceeds of taxes,” and certain other funds) in an amount higher than the “appropriations limit.” Article XIIIB does not affect the appropriation of moneys which are excluded from the definition of “appropriations limit,” including debt service on indebtedness existing or authorized as of October 1, 1979, or bonded indebtedness subsequently approved by the voters. In general terms, the “appropriations limit” is to be based on certain 1978-79 expenditures and is to be adjusted annually to reflect changes in the consumer price index, population and services provided by these entities. Among other provisions of Article XIIIB, if those entities’ revenues in any year exceed the amounts permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years.

To the best of the City’s knowledge, the City’s appropriations have never exceeded the limitation on appropriations under Article XIIIB of the State Constitution.

Proposition 62

A statutory initiative (“Proposition 62”) was adopted by the voters of the State at the November 4, 1986 general election which: (a) requires that any tax for general governmental purposes imposed by local governmental entities be approved by resolution or ordinance adopted by two-thirds vote of the governmental agency’s legislative body and by a majority of the electorate of the governmental entity; (b) requires that any special tax (defined as taxes levied for other than general governmental purposes) imposed by a local governmental entity be approved by a two-thirds vote of the voters within the jurisdiction; (c) restricts the use of revenues from a special tax to the purposes or for the service for which the special tax is imposed; (d) prohibits the imposition of ad valorem taxes on real property by local governmental entities except as permitted by Article XIIIA; (e) prohibits the imposition of transaction taxes and sales taxes on the sale of real property by local governmental entities; and (f) requires that any tax that is imposed by a local governmental entity on or after August 1, 1985 be ratified by a majority vote of the electorate within two years of the adoption of the initiative or be terminated by November 15, 1988. The requirements imposed by Proposition 62 were upheld by the State Supreme Court in Santa Clara County Local Transportation Authority v. Guardino, 11 Cal.4th 220 (1995).

Proposition 62 applies to the imposition of any taxes or the implementation of any tax increases after its enactment in 1986, but the requirements of Proposition 62 are largely subsumed by the requirements of Proposition 218 for the imposition of any taxes or the effecting of any tax increases after November 5, 1996. See the caption “—Proposition 218” below.

Proposition 218

On November 5, 1996, State voters approved Proposition 218, an initiative measure entitled the “Right to Vote on Taxes Act.” Proposition 218 added Articles XIIIC and XIIID to the State Constitution, imposing certain vote requirements and other limitations on the imposition of new or increased taxes, assessments and property-related fees and charges. Proposition 218 states that all taxes imposed by local governments are deemed to be either general taxes or special taxes. Special purpose districts, including school districts, have no power to levy general taxes. No local government may impose, extend or increase any

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general tax unless and until such tax is submitted to the electorate and approved by a majority vote. No local government may impose, extend or increase any special tax unless and until such tax is submitted to the electorate and approved by a two-thirds vote.

Proposition 218 also provides that no tax, assessment, fee or charge may be assessed by any agency upon any parcel of property or upon any person as an incident of property ownership except: (a) the ad valorem property tax imposed pursuant to Articles XIII and XIIIA of the State Constitution; (b) any special tax receiving a two-thirds vote pursuant to the State Constitution; and (c) assessments, fees and charges for property-related services as provided in Proposition 218. Proposition 218 then goes on to add voter requirements for assessments and fees and charges imposed as an incident of property ownership, other than fees and charges for sewer, water, and refuse collection services. In addition, all assessments and fees and charges imposed as an incident of property ownership, including sewer, water and refuse collection services, are subjected to various additional procedures, such as hearings and stricter and more individualized benefit requirements and findings.

Proposition 218 also extended the initiative power to reducing or repealing any local taxes, assessments, fees and charges. This extension of the initiative power is not limited to taxes imposed on or after November 6, 1996, the effective date of Proposition 218, and could result in retroactive repeal or reduction in any existing taxes, assessments, fees and charges, subject to overriding federal constitutional principles relating to the impairments of contracts. Legislation implementing Proposition 218 provides that the initiative power provided for in Proposition 218 “shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after (the effective date of Proposition 218) assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights” protected by the United States Constitution. However, no assurance can be given that the voters of the City will not, in the future, approve an initiative which reduces or repeals local taxes, assessments, fees or charges that currently are deposited into the City’s General Fund.

Although a portion of the City’s General Fund revenues are derived from general taxes purported to be governed by Proposition 218, as discussed under the caption “CITY FINANCIAL INFORMATION — Other Taxes,” all of such taxes were imposed in accordance with the requirements of Proposition 218. No assurance can be given that the voters of the City will not, in the future, approve an initiative or initiatives which reduce or repeal local taxes, assessments, fees or charges which support the City’s General Fund.

Unitary Property

Some amount of property tax revenue of the City is derived from utility property which is considered part of a utility system with components located in many taxing jurisdictions (“unitary property”). Under the State Constitution, such property is assessed by the CDTFA as part of a “going concern” rather than as individual pieces of real or personal property. State-assessed unitary and certain other property is allocated to the counties by the CDTFA, taxed at special county-wide rates, and the tax revenues distributed to taxing jurisdictions (including the City) according to a statutory formula that is generally based on the distribution of taxes in the prior year.

Proposition 22

On November 2, 2010, State voters approved Proposition 22, which eliminates the State’s ability to borrow or shift local revenues and certain State revenues that fund transportation programs. Proposition 22 restricts the State’s authority over a broad range of tax revenues, including property taxes allocated to cities (including the City), counties and special districts, the VLF, State excise taxes on gasoline and diesel fuel, the State sales tax on diesel fuel, and the former State sales tax on gasoline. It also makes a number of significant other changes, including restricting the State’s ability to use motor vehicle fuel tax revenues to pay debt service on voter-approved transportation bonds.

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Proposition 26

On November 2, 2010, State voters approved Proposition 26. Proposition 26 amends Article XIIIC of the State Constitution to expand the definition of “tax” to include “any levy, charge, or exaction of any kind imposed by a local government” except the following: (a) a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege; (b) a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product; (c) a charge imposed for the reasonable regulatory costs of a local government for issuing licenses and permits, performing investigations, inspections and audits, enforcing agricultural marketing orders and the administrative enforcement and adjudication thereof; (d) a charge imposed for entrance to or use of local government property, or the purchase, rental or lease of local government property; (e) a fine, penalty or other monetary charge imposed by the judicial branch of government or a local government as a result of a violation of law; (f) a charge imposed as a condition of property development; and (g) assessments and property-related fees imposed in accordance with the provisions of Article XIIID. Proposition 26 provides that the local government bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the governmental activity. The City does not believe that Proposition 26 will adversely affect its General Fund revenues.

Future Initiatives

Articles XIIIA and XIIIB and Propositions 62, 218, 22 and 26 were each adopted as measures that qualified for the ballot pursuant to the State’s initiative process. From time to time other initiative measures could be adopted, further affecting the City’s current revenues or its ability to raise and expend revenues.

RISK FACTORS

Prospective purchasers of the 2021 Bonds should consider carefully all possible factors that may affect the ability of the City to pay Base Rental Payments under the Lease Agreement. The 2021 Bonds may not be a suitable investment for all prospective purchasers.

The following factors, along with the other information in this Official Statement, should be considered by potential investors in evaluating the purchase of the 2021 Bonds. However, the following does not purport to be an exhaustive listing of risks and other considerations which may be relevant to an investment in the 2021 Bonds and there can be no assurance that other risk factors will not become material in the future. In addition, the order in which the following factors are presented is not intended to reflect the relative importance of any such risks.

General Considerations – Security for the 2021 Bonds

The 2021 Bonds are special obligations of the Authority, payable solely from Base Rental Payments. Neither the faith and credit nor the taxing power of the Authority, the City, the State or any political subdivision thereof is pledged to the payment of the 2021 Bonds. The Authority has no taxing power.

The obligation of the City to make the Base Rental Payments does not constitute a debt of the City, the County, the State or any political subdivision thereof within the meaning of any constitutional or statutory debt limit or restriction, and does not constitute an obligation for which the City, the County or the State is obligated to levy or pledge any form of taxation or for which the City, the County or the State has levied or pledged any form of taxation.

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Although the Lease Agreement does not create a pledge, lien or encumbrance upon the funds of the City, the City is obligated under the Lease Agreement to pay the Base Rental Payments and Miscellaneous Rent from any source of legally available funds, and the City has covenanted in the Lease Agreement to take such action as may be necessary to include all such Base Rental Payments and Miscellaneous Rent due thereunder in its annual budgets, and to make necessary annual appropriations for all such Base Rental Payments and Miscellaneous Rent, subject to abatement. The City is currently liable and may become liable on other obligations payable from general revenues. See the caption “CITY FINANCIAL INFORMATION—Other Indebtedness—General Fund-Supported Debt.”

The City has the capacity to enter into other obligations which may constitute additional charges against its revenues, including pension obligations and essential services. To the extent that additional obligations are incurred by the City, the funds available to make Base Rental Payments may be decreased. In the event that the City’s revenue sources are less than its total obligations, the City could choose to fund other activities before making Base Rental Payments. The same result could occur if, because of State Constitutional limits on expenditures, the City is not permitted to appropriate and spend all of its available revenues. However, to the best of the City’s knowledge, the City’s appropriations have never exceeded the limitation on appropriations under Article XIIIB of the State Constitution. See the caption “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS—Article XIIIB of the State Constitution.”

Abatement

In the event of substantial interference with the City’s right to use and occupy any portion of the Leased Premises by reason of damage to or destruction or condemnation of the Leased Premises, or any defects in title to the Leased Premises, the Base Rental Payments will be subject to abatement. See the caption “SECURITY AND SOURCES OF PAYMENT FOR THE 2021 BONDS—Abatement.” The amount of abatement will be such that the resulting payments of Base Rental Payments and Miscellaneous Rent do not exceed the fair rental value for the use and possession of the remaining portions of the Leased Premises as to which the City has beneficial use and occupancy and as to which such damage or destruction or defect in title do not substantially interfere.

In the event that such portion of the Leased Premises, if damaged or destroyed by an insured casualty, could not be replaced during the period of time in which proceeds of the City’s rental interruption insurance will be available in lieu of the Base Rental Payments, plus the period in which funds are available from the funds and accounts established under the Indenture, or in the event that casualty insurance proceeds are insufficient to provide for complete repair or replacement of such portion of the Leased Premises or redemption of the 2021 Bonds, there could be insufficient funds to make payments to Owners in full.

It is not always possible to predict the circumstances under which abatement of rental may occur. In addition, there is no statute, case or other law specifying how such an abatement of rental should be measured. For example, it is not clear whether fair rental value is established as of commencement of the lease or at the time of the abatement. If the latter, the value of the Leased Premises could be substantially higher or lower than its value at the time of the issuance of the 2021 Bonds. Abatement, therefore, could have an uncertain and material adverse effect on the security for and payment of the 2021 Bonds.

If damage, destruction, title defect or eminent domain proceedings with respect to the Leased Premises results in abatement of the Base Rental Payments and if such abated Base Rental Payments, if any, together with moneys from rental interruption or use and occupancy insurance (in the event of any insured loss due to damage or destruction), and eminent domain proceeds, if any, are insufficient to make all payments of principal and interest with respect to the 2021 Bonds during the period that the Leased Premises is being replaced, repaired or reconstructed, then all or a portion of such payments of principal and interest may not be made. Under the Lease Agreement and the Indenture, no remedy is available to the 2021 Bond Owners for nonpayment under such circumstances.

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Initiative and Referendum

The ability of the City to comply with its covenants under the Lease Agreement and to generate revenues that are sufficient to pay Base Rental Payments may be adversely affected by actions and events outside the control of the City, including without limitation actions taken (or not taken) by voters. Under the State Constitution, voters of the State have the ability to initiate legislation and require a public vote on legislation passed by the State Legislature through the powers of initiative and referendum, respectively. The Authority and the City are unable to predict whether any such initiatives might be submitted to or approved by the voters, the nature of such initiatives, or their potential impact on the City and its operations. See the caption “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS—Future Initiatives.”

Insurance on the Leased Premises

Under the Lease Agreement, the City is required to maintain through the term of the Lease Agreement policies of insurance covering loss or damage to the Leased Premises up to replacement costs and covering title defects. If the Leased Premises is damaged or destroyed, there can be no assurance that the insurance proceeds will be sufficient to repair or restore the Leased Premises, or to redeem or defease all of the then-Outstanding 2021 Bonds. In addition, neither the Authority nor the City can provide any assurance as to whether the provider of an insurance policy will pay under such policy. See the caption “SECURITY AND SOURCES OF PAYMENT FOR THE 2021 BONDS—Insurance” for a description of the insurance coverages that are required by the Lease Agreement. See the caption “THE CITY—Risk Management” for a description of the City’s current insurance coverages. Certain risks, such as earthquakes and floods, are not required to be covered under the Lease Agreement unless available at reasonable rates and the City does not currently maintain such coverage.

Condemnation of the Leased Premises

If all of the Leased Premises (or portions thereof such that the remainder is not usable for the public purposes by the City) is taken permanently under the power of eminent domain or sold to a government threatening to exercise the power of eminent domain, the term of the Lease Agreement will cease as of the day possession is taken. If less than all of the Leased Premises is taken permanently, or if the Leased Premises or any part thereof is taken temporarily, under the power of eminent domain, and the remainder is usable for public purposes by the City at the time of such taking: (a) the Facilities Sublease will continue in full force and effect as to such remainder, and will not be terminated by virtue of such taking; and (b) there will be a partial abatement of Base Rental Payments as a result of the application of insurance proceeds of any eminent domain award to the prepayment of the Base Rental Payments, in an amount to be agreed upon by the City and the Authority such that the resulting Base Rental Payments represent fair consideration for the use and occupancy of the remaining usable portion of the Leased Premises.

If all or a portion of the Leased Premises were condemned, there can be no assurance that any such award or payment will be sufficient at the time to prepay or defease all of the then-Outstanding 2021 Bonds. If the award is less than the amounts remaining on such Outstanding 2021 Bonds, then the Owners will be paid less than the amounts remaining on such Outstanding 2021 Bonds.

Value of Property

In the event that the Trustee re-enters or re-lets the Leased Premises upon the occurrence of an Event of Default, there can be no assurance such actions will provide funds in an amount that is sufficient to pay the principal of and interest on the 2021 Bonds. The security under the Lease Agreement extends only to the Authority’s leasehold interest in the Leased Premises and is subject to the restrictions of the Lease Agreement and all other use restrictions applicable to the Leased Premises. The Leased Premises have not been appraised in connection with the issuance of the 2021 Bonds.

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No Acceleration of Base Rental Payments

Nothing in the Lease Agreement permits the Authority or the Trustee to accelerate Base Rental Payments. Although the Trustee is entitled to pursue all available remedies under the Indenture, there can be no assurance that sufficient funds will be available at the time to redeem or defease all of the then-Outstanding 2021 Bonds.

Certain Risks Associated with Sales Tax and Other Local Tax Revenues

Sales and use tax revenues are consistently among the largest sources of General Fund revenues of the City. See the caption “CITY FINANCIAL INFORMATION.”

Sales and use tax revenues are based upon the gross receipts of retail sales of tangible goods and products by retailers with taxable transactions in the City, which could be impacted by a variety of factors. For example, in times of economic recession, the gross receipts of retailers often decline, and such a decline would cause the sales tax revenues received by the City to decline. An economic recession would also be expected to affect hotel occupancy within the City, and consequently, the City’s receipt of transient occupancy taxes. See the captions “THE CITY—COVID-19 Outbreak” and “CITY FINANCIAL INFORMATION.”

In addition, changes or amendments in the laws applicable to the City’s receipt of sales tax revenues or other local taxes, whether implemented by State legislative action or voter initiative, could have an adverse effect on sales tax revenues received by the City. See the caption “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS.”

Many categories of transactions are exempt from the Statewide sales tax, and additional categories could be added in the future. Currently, most sales of food products for human consumption are exempt; this exemption, however, does not apply to liquor or to restaurant meals. The rate of sales tax levied on taxable transactions in the City or the fee charged by the CDTFA for administering the City’s sales tax could also be changed.

As discussed under the caption “THE CITY—COVID-19 Outbreak,” the Governor extended the deadline to file and pay first quarter 2020 sales and use tax returns by 90 days for all but the very largest taxpayers, and up to 361,000 California businesses with less than $5 million in taxable annual sales were allowed to defer up to $50,000 in sales tax and enter into 12-month payment plans at zero interest. The extension resulted in a delay in the receipt by the City of its portion of sales tax payments for 2020. There can be no assurance that additional extensions of payment deadlines will not be ordered should the COVID-19 outbreak continue or economic recessions occur in the future.

Assessed Value of Taxable Property

Property taxes are consistently among the largest sources of General Fund revenues of the City. Natural and economic forces can affect the assessed value of taxable property within the City. The City is located in a seismically active region, and damage from an earthquake in or near the area could cause extensive damage to taxable property. Other natural or manmade disasters, such as flood, fire, wildfire, ongoing drought, toxic dumping, erosion, civil unrest or acts of terrorism, could cause a reduction in the assessed value of taxable property within the City. See the captions “—Natural Disasters” and “—Hazardous Substances.”

In addition, economic and market forces, such as a downturn in the regional economy, could affect assessed values, particularly as these forces might reverberate in the residential housing and commercial property markets as has been experienced in the past. The total assessed value could also be reduced through the reclassification of taxable property to a class exempt from taxation, whether by ownership or use (such as exemptions for property owned by State and local agencies and property used for qualified educational, hospital, charitable or religious purposes).

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Reductions in the market values of taxable property may cause property owners to appeal assessed values and may also be associated with an increase in delinquency rates for property taxes. Section 2(b) of Article XIIIA of the State Constitution and Section 51 of the State Revenue and Taxation Code, which were adopted pursuant to Proposition 8 in 1978, require the County assessor to annually enroll either a property’s adjusted base year value (the “Proposition 13 Value”) or its current market value, whichever is less. When the current market value replaces the higher Proposition 13 Value on the assessor’s roll, such lower value is referred to as the “Proposition 8 Value.”

Although the annual increase for a Proposition 13 Value is limited to no more than 2%, the same restriction does not apply to a Proposition 8 Value. The Proposition 8 Value of a property is reviewed annually as of January 1; the current market value must be enrolled as long as the Proposition 8 Value falls below the Proposition 13 Value. Thus, any subsequent increase or decrease in market value is enrolled regardless of any percentage increase or decrease. Only when a current Proposition 8 Value exceeds the Proposition 13 Value attributable to a piece of property (adjusted for inflation) does a county assessor reinstate the Proposition 13 Value.

Decreases in the assessed value of taxable property within the City resulting from a natural disaster or other calamity, economic recession, reclassification by ownership or use or as a result of the implementation of Proposition 8 all may have an adverse impact on property tax collections by the City, and consequently, the General Fund revenues that are available to make Base Rental Payments.

Dependence on State for Certain Revenues

A number of the City’s revenues are collected and dispersed by the State (such as sales taxes and the VLF) or allocated in accordance with State law (most importantly, property taxes). Therefore, State budget decisions can have an impact on City finances. In the event of a material economic downturn in the State, including as a result of the COVID-19 outbreak that is discussed under the caption “THE CITY—COVID-19 Outbreak,” there can be no assurance that any resulting revenue shortfalls to the State will not reduce revenues to local governments (including the City) or shift financial responsibility for programs to local governments as part of the State’s efforts to address any such related State financial difficulties. See the caption “STATE OF CALIFORNIA BUDGET INFORMATION.”

Although the State’s ability to undertake such revenue reductions or shifting has been limited by provisions of the State Constitution, as described under the caption “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS—Proposition 22,” declining revenues and fiscal difficulties that arose in the State commencing in 20099 led the State to undertake a number of budgeting strategies, which had subsequent impacts on local agencies within the State. These techniques included the issuance of IOUs in lieu of warrants (checks), the enactment of statutes deferring amounts owed to public schools until a later date in the fiscal year or even into the following fiscal year (known as statutory deferrals), trigger reductions, which were budget cutting measures which were implemented or could have been implemented if certain State budgeting goals were not met and the dissolution of local redevelopment agencies in part to make available additional funding for local agencies.

Although recent State budgets have been balanced, largely attributable to improvements in the economy, the additional revenues generated due to the passage of Proposition 30 at the November 6, 2012, Statewide election as well as other spending cuts, there can be no certainty that budget-cutting strategies such as those used in prior years will not be used in the future, should the State budget again be stressed and if projections included in such budget do not materialize, or that Proposition 30 will be renewed.

Litigation

The City may be or become a party to litigation that has an impact on the General Fund. Although the City maintains certain insurance policies that provide liability coverage under certain circumstances and with

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respect to certain types of incidents (as discussed under the caption “THE CITY—Risk Management”), the City cannot predict what types of liabilities may arise in the future. See the caption “LITIGATION.”

Natural Disasters

The occurrence of any natural disaster in the City, including, without limitation, fire, wildfire, windstorm, drought, earthquake, landslide, mudslide or flood, could have an adverse material impact on the economy within the City, its General Fund and the revenues available for the payment of Base Rental Payments. The City is not required to do maintain earthquake insurance by the Lease Agreement unless such insurance is available at reasonable rates. See the captions “SECURITY AND SOURCES OF PAYMENT FOR THE 2021 BONDS—Insurance” and “THE CITY—Risk Management.”

Earthquakes are considered a threat to the City due to the highly active seismic region and the proximity of fault zones, which could influence the entire coastal portion of the State. There are also likely to be unmapped faults in or near the City. Seismically induced ground shaking has affected the City in the past and is expected to affect the City in the future.

An earthquake along one of the faults in the vicinity of the City, either known or unknown, could cause a number of casualties and extensive property damage. The effects of an earthquake could be aggravated by aftershocks and secondary effects such as fires, landslides, dam failure, liquefaction, floods and other threats to public health, safety and welfare. The potential direct and indirect consequences of a major earthquake could easily exceed the resources of the City and would require a high level of self-help, coordination and cooperation.

In recent years, wildfires have caused extensive damage throughout the State. In some instances, entire neighborhoods have been destroyed. Several of the fires that occurred in recent years damaged or destroyed property in areas that were not previously considered to be at risk from such events. Some commentators believe that climate change will lead to even more frequent and more damaging wildfires in the future. Additionally, wildfires increase the risk of mudslides in areas that are surrounded by hillsides because, when wildfires scorch land, they destroy all vegetation on mountains and hillsides. As a result, when heavy rain falls in the winter, there is nothing to stop the rain from penetrating directly into the soil. In addition, waxy compounds in plants and soil that are released during fires create a natural barrier in the soil that prevents rain water from seeping deep into the ground. The result is erosion, mudslides and excess water running off the hillsides often causing flash flooding. In general, property damage due to wildfire or mudslides could result in a significant decrease property tax and other revenues received by the City.

The occurrence of natural disasters in the City could result in substantial damage to the City and the Leased Premises which, in turn, could substantially reduce General Fund revenues and affect the ability of the City to make Base Rental Payments or cause an abatement in Base Rental Payments if the City is unable to use and occupy the Leased Premises. The City maintains liability insurance, rental interruption insurance and property casualty insurance for the Leased Premises. See the caption “THE CITY—Risk Management.” However, there can be no assurance that specific losses will be covered by insurance or, if covered, that claims will be paid in full by the applicable insurers.

Climate Change

The State has historically been susceptible to wildfires and hydrologic variability. As greenhouse gas emissions continue to accumulate in the atmosphere as a result of economic activity, climate change is expected to intensify, increasing the frequency, severity and timing of extreme weather events such as coastal storm surges, drought, wildfires, floods and heat waves, and raising sea levels. The future fiscal impact of climate change on the City is difficult to predict, but it could be significant and it could have a material adverse effect on the General Fund by requiring greater expenditures to counteract the effects of climate change or by changing the operations and activities of City residents and business establishments.

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Cybersecurity

Municipal agencies, like other business entities, face significant risks relating to the use and application of computer software and hardware. Recently, there have been significant cybersecurity incidents affecting municipal agencies, including a freeze affecting computer systems of the City of Atlanta, an attack on the City of Baltimore’s 911 system, an attack on the Colorado Department of Transportation’s computers and an attack that resulted in the temporary closure of the Port of Los Angeles’ largest terminal.

The City employs a multi-layer cyber protection scheme that includes third party consultant assistance, next-generation firewalls, anti-virus software, anti-spam/malware software, intrusion detection/prevention, domain name system filtering services, duplicate systems in a disaster recovery site and multiple copies of all information that is backed up. The City implements recommended strategies suggested by security vendors and makes internal system changes as needed. To date, the City has not experienced a significant attack on its computer operating systems. However, there is no assurance that a future attack or attempted attack would not result in disruption of City operations. The City expects that any such disruptions would be temporary in nature.

Hazardous Substances

A condition that may result in the reduction in the assessed value of property, and therefore property tax revenue available to pay Base Rental Payments, would be the discovery of a hazardous substance that would limit the beneficial use of taxable property within the City. In general, the owners and operators of a property may be required by law to remedy conditions of the property relating to releases or threatened releases of hazardous substances. The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund Act,” is the most well-known and widely applicable of these laws, but State laws with regard to hazardous substances are also stringent and similar in effect. Under many of these laws, the owner or operator may be required to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the property within the City be affected by a hazardous substance, could be to reduce the marketability and value of such property by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller.

The City and the Authority have not independently verified, but are not aware of, the presence of any hazardous substances on the Leased Premises. Hazardous substance liabilities may arise in the future with respect to any of the property in the City resulting from the existence, currently, of a substance presently classified as hazardous but which has not been released or the release of which is not presently threatened, or may arise in the future resulting from the existence, currently, on the parcel of a substance not presently classified as hazardous but which may in the future be so classified. Additionally, such liabilities may arise from the method of handling such substance. These possibilities could significantly affect the value of a parcel.

Economy of City and State

A deterioration in the level of economic activity in the City, the County, the State or the United States, including as a result of the COVID-19 outbreak that is discussed under the caption “THE CITY—COVID-19 Outbreak,” is not currently expected to have a material adverse effect on the City’s general revenues or on the ability of the City to pay principal of and interest on the 2021 Bonds. See the caption “CITY FINANCIAL INFORMATION—General Economic Condition and Outlook of the City.” However, there can be no assurance that adverse economic conditions will not have a negative effect on the City. See the caption “STATE OF CALIFORNIA BUDGET INFORMATION” for information about the State economy and State budget.

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Split Roll Initiative

An initiative measure (the “Split Roll Initiative”) to amend Article XIIIA of the State Constitution qualified for the State’s November 2020 ballot. See the caption “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS—Article XIIIA of the State Constitution.” Although it was not adopted by State voters, the Split Roll Initiative would have based property taxes for commercial and industrial properties on periodic analyses of market values beginning in tax year 2020-21. Such market values would have been reassessed by the applicable county assessor’s office at least once every three years. The Split Roll Initiative included exceptions for businesses with a total market value of less than $2 million (adjusted for inflation), which would have continued to be subject to property taxes based on purchase price, and exempted from property tax assessments up to $500,000 of the value of personal property, or all personal property for businesses with fewer than 50 employees. Although the Split Roll Initiative was not adopted, there can be no assurance that a similar initiative will not be brought before voters in the future. The City is unable to predict how the adoption of such a future initiative would affect the level of commercial building activity within the City and the relationship between the assessed value of different land use types (i.e. residential versus commercial) in the City, or what other impacts such an initiative might have on the local economy or the City’s financial condition, including the receipt of property tax revenues.

Additional City Obligations

The Base Rental Payments under the Lease Agreement are payable from funds that are lawfully available to the City. The City is currently liable for other obligations payable from general revenues of the City. The City has the authority to enter into other obligations that constitute additional claims on such general revenues, including Additional Bonds payable from a lease of the Leased Premises. To the extent that the City incurs additional obligations, the funds available to make Base Rental Payments may be decreased. See the captions “CITY FINANCIAL INFORMATION—Other Indebtedness—General Fund-Supported Obligations” and “SECURITY AND SOURCES OF PAYMENT FOR THE 2021 BONDS—Additional Bonds.”

Remedies

Upon an Event of Default under the Indenture, the Trustee may exercise certain remedies under the Indenture and the Lease Agreement. In the event of a monetary default under the Indenture, the Trustee has the right to enter and take possession of the Leased Premises, and the Trustee may hold, operate and manage the Leased Premises and apply revenues therefrom toward payment of the 2021 Bonds. There can be no assurance that the Trustee will be able to realize from such actions an amount that is sufficient to pay the principal of and interest on the 2021 Bonds. In addition, the Trustee may incur significant operating costs in connection with the Leased Premises.

Limitation on Trustee’s Obligations under the Indenture

The Trustee has no obligation to advance its own funds to pursue any remedies. As a consequence, the Trustee’s willingness and ability to pursue any of the remedies provided in the Indenture and the Lease Agreement may be dependent upon the availability of funds from an interested party. Additionally, the Trustee is not required to acquire possession of the Leased Premises if doing so subjects it to potential liability. There can be no assurance that the Trustee will be willing and able to perform its duties under the Indenture.

Release of Property; Additional Bonds

The Authority and the City may amend the Lease Agreement to substitute or release a portion of the Leased Premises upon compliance with all of the conditions set forth in the Lease Agreement. After a substitution or release, the portion of the Leased Premises for which the substitution or release has been effected will be released from the leasehold encumbrance of the Lease Agreement. Moreover, the City may issue Additional Bonds secured by Base Rental Payments which are increased above current levels. See the

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captions “SECURITY AND SOURCES OF PAYMENT FOR THE 2021 BONDS―Substitution or Release of the Leased Premises” and “SECURITY AND SOURCES OF PAYMENT FOR THE 2021 BONDS—Additional Bonds.”

Although the Lease Agreement requires, among other things, that the Leased Premises, as constituted after such substitution or release, have an annual fair rental value at least equal to the maximum Base Rental Payments for the Leased Premises coming due in the then-current Fiscal Year or in any subsequent Fiscal Year, it does not require that the Leased Premises have an annual fair rental value equal to the annual fair rental value of the Leased Premises prior to the substitution release of any portion thereof. Thus, a portion of the Leased Premises could be replaced with less valuable real property, or could be released altogether. Such a substitution or release could have an adverse impact on the security for the 2021 Bonds, particularly if an event requiring abatement of the Base Rental Payments were to occur subsequent to such substitution or release.

Upon the issuance of Additional Bonds, the Lease Agreement will be amended, to the extent necessary, so as to increase the Base Rental Payments payable by the City thereunder by an aggregate amount that is sufficient to pay the principal of and interest on such Additional Bonds; provided, however, that no such amendment may be made such that the sum of such Base Rental Payments, including any increase in Base Rental Payments as a result of such amendment, plus Miscellaneous Rent, in any Fiscal Year is in excess of the annual fair rental value of the Leased Premises after taking into account the use of the proceeds of any Additional Bonds issued in connection therewith. See the caption “SECURITY AND SOURCES OF PAYMENT FOR THE 2021 BONDS—Additional Bonds” for a full description of the requirements that must be met in order for the City to deliver Additional Bonds.

Limitations on Enforceability

General. The enforcement of any remedies that are provided for in the Lease Agreement and the Indenture could prove both expensive and time consuming. The rights and remedies provided in the Lease Agreement and the Indenture may be limited by and are subject to: (i) the limitations on legal remedies against cities in the State, including State constitutional limits on expenditures and limitations on the enforcement of judgments against funds that are needed to serve the public welfare and interest; (ii) federal bankruptcy laws, as now or later enacted, as discussed in detail under the subcaption “—Bankruptcy” below; (iii) applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors’ rights generally, now or later in effect; (iv) equity principles which may limit the specific enforcement under State law of certain remedies; (v) the exercise by the United States of America of the powers delegated to it by the federal Constitution; and (vi) the reasonable and necessary exercise, in certain exceptional situations, of the police powers that are inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or State government, if initiated, could subject the Owners of the 2021 Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitation or modification of their rights.

The legal opinions that will be delivered concurrently with the issuance of the 2021 Bonds will be qualified, as to the enforceability of the 2021 Bonds, the Indenture, the Lease Agreement and other related documents, by bankruptcy, insolvency, reorganization, moratorium, arrangement, fraudulent conveyance 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 counties in the State.

Failure by the City to pay Base Rental Payments or failure to observe and perform any other terms, covenants or conditions of the Lease Agreement for a period of 30 days after written notice of such failure and request that it be remedied has been given to the City by the Trustee constitute Events of Default under the Indenture and permit the Trustee or the Authority to pursue the remedies that are described in the Lease Agreement and Indenture. Upon an Event of Default, there is no right under any circumstances to accelerate Base Rental Payments or otherwise declare any Base Rental Payment that is not then in default to be

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immediately due and payable, nor do the Authority or the Trustee have any right to re-enter or re-let the affected Leased Premises, except to the limited extent that is described in the Lease Agreement, and only to the extent of the Authority’s leasehold interest under the Lease Agreement. Rather, if the City defaults on its obligation to pay Base Rental Payments with respect to such Leased Premises, the Trustee must sue to recover Base Rental Payments on an annual basis.

Alternatively, the Authority or the Trustee may terminate the Lease Agreement, retake possession of the Leased Premises and proceed against the City to recover damages pursuant to the Lease Agreement. Due to the specialized and limited nature of the Leased Premises (as discussed under the caption “THE LEASED PREMISES”), it is unlikely that 2021 Bond Owners would be able to generate rental income that is sufficient to make all payments of principal of and interest on the 2021 Bonds when due. Moreover, the Trustee is not empowered to sell the fee interest in the Leased Premises (which is owned by the City) for the benefit of the Owners of the 2021 Bonds. Any suit for money damages against the City would be subject to limitations on legal remedies against cities in the State, including a limitation on enforcement of judgments against funds needed to serve the public welfare and interest.

Bankruptcy. Enforceability of the rights and remedies of the Owners of the 2021 Bonds, and the obligations incurred by the City, may become subject to the provisions of Title 11 of the United States Code (the “Bankruptcy Code”) and applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the enforcement of creditors’ rights generally, now or later in effect, equity principles which may limit the specific enforcement under State law of certain remedies, the exercise by the United States of America of the powers delegated to it by the federal Constitution, the reasonable and necessary exercise, in certain exceptional situations, of the police powers inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose and the limitations on remedies against cities in the State. Bankruptcy proceedings, or the exercise of powers by the federal or State government, if initiated, could subject the Owners of the 2021 Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitation or modification of their rights. Under Chapter 9 of the Bankruptcy Code, which governs the bankruptcy proceedings of public agencies such as the City, involuntary petitions are not permitted. If the City were to file a petition under Chapter 9 of the Bankruptcy Code, the Owners of the 2021 Bonds, the Trustee and the Authority could be prohibited from taking any steps to enforce their rights under the Lease Agreement or from taking any steps to collect amounts due from the City under the Lease Agreement.

In particular, if the City were to become a debtor under the Bankruptcy Code, the City would be entitled to all of the protective provisions of the Bankruptcy Code as applicable in a Chapter 9 case. Among the adverse effects of such a bankruptcy might be: (i) the application of the automatic stay provisions of the Bankruptcy Code, which, until relief is granted, would prevent collection of payments from the City or the commencement of any judicial or other action for the purpose of recovering or collecting a claim against the City, and which could prevent the Trustee from making payments from funds in its possession; (ii) the avoidance of preferential transfers occurring during the relevant period prior to the filing of a bankruptcy petition; (iii) the existence of unsecured or secured debt which may have a priority of payment that is superior to that of Owners of the 2021 Bonds; and (iv) the possibility of the adoption of a plan (an “Adjustment Plan”) for the adjustment of the City’s various obligations over the objections of the Trustee or all of the Owners of the 2021 Bonds and without their consent, which Adjustment Plan may restructure, delay, compromise or reduce the amount of any claim of the Owners if the Bankruptcy Court finds that such Adjustment Plan is “fair and equitable” and in the best interests of creditors. The Adjustment Plans approved by the Bankruptcy Courts in connection with the bankruptcies of the cities of Vallejo, San Bernardino and Stockton resulted in significant reductions in the amounts payable by the cities under lease revenue obligations that were substantially identical or similar to the 2021 Bonds. The City can provide no assurances about the outcome of the bankruptcy cases of other California municipalities or the nature of any Adjustment Plan if it were to file for bankruptcy.

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In addition, the City could either reject the Lease Agreement or assume the Lease Agreement despite any provision of such documents that makes the bankruptcy or insolvency of the City an event of default thereunder. If the City rejects the Lease Agreement, the Trustee, on behalf of the Owners of the 2021 Bonds, would have a pre-petition unsecured claim that may be substantially limited in amount, and this claim would be treated in a manner under an Adjustment Plan over the objections of the Trustee or Owners of the 2021 Bonds. Moreover, such rejection would terminate the Lease Agreement and the City’s obligations to make payments thereunder. The City may also be permitted to assign the Lease Agreement to a third party, regardless of the terms of the transaction documents.

Secondary Market

There can be no guarantee that there will be a secondary market for the 2021 Bonds, or, if a secondary market exists, that the 2021 Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing in connection with a particular issue is suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon the then prevailing circumstances. Such prices could be substantially different from the original purchase price.

In addition, the City has entered into a continuing disclosure undertaking in connection with the 2021 Bonds. Any material failure to comply with such undertaking in the future may adversely affect the liquidity of the affected 2021 Bonds and their market price in the secondary market.

Covenant to Budget and Appropriate

Under the Lease Agreement, the City has covenanted to take such actions as are necessary to include the Base Rental Payments and the estimated Miscellaneous Rent in its annual budgets and to make the necessary annual appropriations for all Base Rental Payments. Such covenant is deemed to be a duty imposed by law, and it is the duty of the public officials of the City to take such actions and do such things as are required by law in the performance of the official duty of such officials to enable such entity to carry out and perform such covenants. A court, however, in its discretion may decline to enforce such covenant. Upon execution and delivery of the Series 2021 Bonds, Bond Counsel will render its opinion (substantially in the form of Appendix D) to the effect that, subject to certain limitations and qualifications, the Lease Agreement constitutes a valid and binding obligation of the City.

Risks Associated with Bond Insurance

In the event that the Authority defaults in the payment of principal of or interest on the Insured Bonds when due, the owners of the Insured Bonds will have a claim under the Policy for such payments. See the caption “BOND INSURANCE.” In the event that the Insurer becomes obligated to make payments with respect to the Insured Bonds, no assurance can be given that such event will not adversely affect the market for the 2021 Bonds. In the event that the Insurer is unable to make payment of principal of and interest on the Insured Bonds when due under the Policy, the Insured Bonds will be payable solely from Base Rental Payments and amounts held in certain funds and accounts established under the Indenture, as described under the caption “SECURITY AND SOURCES OF PAYMENT FOR THE 2021 BONDS.”

The long-term rating on the Insured Bonds is dependent in part on the financial strength of the Insurer and its claims-paying ability. The Insurer’s financial strength and claims-paying ability are predicated upon a number of factors which could change over time. If the long-term ratings of the Insurer are lowered, such event could adversely affect the market for the 2021 Bonds. See the caption “RATINGS.”

None of the Authority, the City or the Underwriters have made an independent investigation of the claims-paying ability of the Insurer and no assurance or representation regarding the financial strength or projected financial strength of the Insurer is being made by the Authority, the City or the Underwriters in this

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Official Statement. Therefore, when making an investment decision with respect to the Insured Bonds, potential investors should carefully consider the ability of the City to pay Base Rental Payments, assuming that the Policy is not available to make payments on the Insured Bonds, and the claims-paying ability of the Insurer through final maturity of the Insured Bonds.

So long as the Policy remains in effect and the Insurer is not in default of its obligations thereunder, the Insurer has certain notice, consent and other rights under the Indenture and will have the right to control all remedies for default under the Indenture with respect to the Insured Bonds. The Insurer is not required to obtain the consent of the owners of the Insured Bonds with respect to the exercise of remedies. See Appendix B.

TAX MATTERS

In the opinion of Bond Counsel, based upon an analysis of existing laws, regulations, rulings and court decisions, interest on the 2021 Bonds is exempt from State of California personal income taxes. Bond Counsel observes that interest on the 2021 Bonds is not excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 (the “Code”). Bond Counsel expresses no opinion regarding any other tax consequences relating to the ownership or disposition of, or the amount, accrual, or receipt of interest on, the 2021 Bonds. The proposed form of opinion of Bond Counsel is contained in Appendix D hereto.

The following discussion summarizes certain U.S. federal tax considerations generally applicable to holders of the 2021 Bonds that acquire their 2021 Bonds in the initial offering. The discussion below is based upon laws, regulations, rulings and decisions in effect and available on the date hereof, all of which are subject to change, possibly with retroactive effect. Prospective investors should note that no rulings have been or are expected to be sought from the U.S. Internal Revenue Service (the “IRS”) with respect to any of the U.S. federal tax consequences discussed below, and no assurance can be given that the IRS will not take contrary positions. Further, the following discussion does not deal with U.S. tax consequences applicable to any given investor, nor does it address the U.S. tax considerations applicable to all categories of investors, some of which may be subject to special taxing rules (regardless of whether or not such investors constitute U.S. Holders), such as certain U.S. expatriates, banks, REITs, RICs, insurance companies, tax-exempt organizations, dealers or traders in securities or currencies, partnerships, S corporations, estates and trusts, investors that hold their 2021 Bonds as part of a hedge, straddle or an integrated or conversion transaction or investors whose “functional currency” is not the U.S. dollar. Furthermore, it does not address: (i) alternative minimum tax consequences; (ii) the net investment income tax imposed under Section 1411 of the Code; or (iii) the indirect effects on persons who hold equity interests in a holder. This summary also does not consider the taxation of the 2021 Bonds under state, local or non-U.S. tax laws. In addition, this summary generally is limited to U.S. tax considerations applicable to investors that acquire their 2021 Bonds pursuant to this offering for the issue price that is applicable to such 2021 Bonds (i.e., the price at which a substantial amount of the 2021 Bonds are sold to the public) and who will hold their 2021 Bonds as “capital assets” within the meaning of Section 1221 of the Code.

As used herein, “U.S. Holder” means a beneficial owner of a 2021 Bond that for U.S. federal income tax purposes is an individual citizen or resident of the United States, a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States or any state thereof (including the District of Columbia), an estate the income of which is subject to U.S. federal income taxation regardless of its source or a trust where a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons (as defined in the Code) have the authority to control all substantial decisions of the trust (or a trust that has made a valid election under U.S. Treasury Regulations to be treated as a domestic trust). As used herein, “Non-U.S. Holder” generally means a beneficial owner of a 2021 Bond (other than a partnership) that is not a U.S. Holder. If a partnership holds the 2021 Bonds, the tax treatment of such partnership or a partner in such partnership generally will depend upon the status of the partner and upon the activities of the partnership. Partnerships holding the 2021 Bonds, and

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partners in such partnerships, should consult their own tax advisors regarding the tax consequences of an investment in the 2021 Bonds (including their status as U.S. Holders or Non-U.S. Holders).

Notwithstanding the rules described below, it should be noted that, under enacted law that became effective for tax years beginning after December 31, 2017 (or, in the case of original issue discount, for tax years beginning after December 31, 2018), certain taxpayers that are required to prepare certified financial statements or file financial statements with certain regulatory or governmental agencies may be required to recognize income, gain and loss with respect to the 2021 Bonds at the time that such income, gain or loss is recognized on such financial statements instead of under the rules described below.

Prospective investors should consult their own tax advisors in determining the U.S. federal, state, local or non-U.S. tax consequences to them from the purchase, ownership and disposition of the 2021 Bonds in light of their particular circumstances.

U.S. Holders

Interest. Interest on the 2021 Bonds generally will be taxable to a U.S. Holder as ordinary interest income at the time such amounts are accrued or received, in accordance with the U.S. Holder’s method of accounting for U.S. federal income tax purposes.

To the extent that the issue price of any maturity of the 2021 Bonds is less than the amount to be paid at maturity of such 2021 Bonds (excluding amounts stated to be interest and payable at least annually over the term of such 2021 Bonds) by more than a de minimis amount, the difference may constitute original issue discount (“OID”). U.S. Holders of the 2021 Bonds will be required to include OID in income for U.S. federal income tax purposes as it accrues, in accordance with a constant yield method based on a compounding of interest (which may be before the receipt of cash payments attributable to such income). Under this method, U.S. Holders generally will be required to include in income increasingly greater amounts of OID in successive accrual periods.

2021 Bonds purchased for an amount in excess of the principal amount payable at maturity (or, in some cases, at their earlier call date) will be treated as issued at a premium. A U.S. Holder of a 2021 Bond issued at a premium may make an election, applicable to all debt securities purchased at a premium by such U.S. Holder, to amortize such premium, using a constant yield method over the term of such 2021 Bond.

Sale or Other Taxable Disposition of the 2021 Bonds. Unless a nonrecognition provision of the Code applies, the sale, exchange, redemption, retirement (including pursuant to an offer by the City) or other disposition of a 2021 Bond will be a taxable event for U.S. federal income tax purposes. In such event, in general, a U.S. Holder of a 2021 Bond will recognize gain or loss equal to the difference between: (i) the amount of cash plus the fair market value of property received (except to the extent attributable to accrued but unpaid interest on the 2021 Bond, which will be taxed in the manner described above); and (ii) the U.S. Holder’s adjusted U.S. federal income tax basis in the 2021 Bond (generally, the purchase price paid by the U.S. Holder for the 2021 Bond, decreased by any amortized premium, and increased by the amount of any OID previously included in income by such U.S. Holder with respect to such 2021 Bond). Any such gain or loss generally will be capital gain or loss. In the case of a non-corporate U.S. Holder of the 2021 Bonds, the maximum marginal U.S. federal income tax rate applicable to any such gain will be lower than the maximum marginal U.S. federal income tax rate applicable to ordinary income if such U.S. holder’s holding period for the 2021 Bonds exceeds one year. The deductibility of capital losses is subject to limitations.

Defeasance of the 2021 Bonds. If the City defeases any 2021 Bond, the 2021 Bond may be deemed to be retired for U.S. federal income tax purposes as a result of the defeasance. In that event, in general, a holder will recognize taxable gain or loss equal to the difference between: (i) the amount realized from the deemed sale, exchange or retirement (less any accrued qualified stated interest which will be taxable as such); and (ii) the holder’s adjusted tax basis in the 2021 Bond.

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Information Reporting and Backup Withholding. Payments on the 2021 Bonds generally will be subject to U.S. information reporting and possibly to “backup withholding.” Under Section 3406 of the Code and applicable U.S. Treasury Regulations issued thereunder, a non-corporate U.S. Holder of the 2021 Bonds may be subject to backup withholding at the current rate of 24% with respect to “reportable payments,” which include interest paid on the 2021 Bonds and the gross proceeds of a sale, exchange, redemption, retirement or other disposition of the 2021 Bonds. The payor will be required to deduct and withhold the prescribed amounts if: (i) the payee fails to furnish a U.S. taxpayer identification number (“TIN”) to the payor in the manner required; (ii) the IRS notifies the payor that the TIN furnished by the payee is incorrect; (iii) there has been a “notified payee underreporting” described in Section 3406(c) of the Code; or (iv) the payee fails to certify under penalty of perjury that the payee is not subject to withholding under Section 3406(a)(1)(C) of the Code. Amounts withheld under the backup withholding rules may be refunded or credited against the U.S. Holder’s federal income tax liability, if any, provided that the required information is timely furnished to the IRS. Certain U.S. holders (including among others, corporations and certain tax-exempt organizations) are not subject to backup withholding. A holder’s failure to comply with the backup withholding rules may result in the imposition of penalties by the IRS.

Non-U.S. Holders

Interest. Subject to the discussions below under the subcaption “—Information Reporting and Backup Withholding” and the caption “—Foreign Account Tax Compliance Act (“FATCA”)—U.S. Holders and Non-U.S. Holders,” payments of principal of, and interest on, any 2021 Bond to a Non-U.S. Holder, other than: (1) a controlled foreign corporation, as such term is defined in the Code, which is related to the City through stock ownership; and (2) a bank which acquires such 2021 Bond in consideration of an extension of credit made pursuant to a loan agreement entered into in the ordinary course of business, will not be subject to any U.S. federal withholding tax provided that the beneficial owner of the 2021 Bond provides a certification completed in compliance with applicable statutory and regulatory requirements, which requirements are discussed below under the subcaption “—Information Reporting and Backup Withholding,” or an exemption is otherwise established.

Disposition of the 2021 Bonds. Subject to the discussions below under the subcaption “—Information Reporting and Backup Withholding” and the caption “—Foreign Account Tax Compliance Act (“FATCA”)—U.S. Holders and Non-U.S. Holders,” any gain realized by a Non-U.S. Holder upon the sale, exchange, redemption, retirement (including pursuant to an offer by the City or a deemed retirement due to defeasance of the 2021 Bond) or other disposition of a 2021 Bond generally will not be subject to U.S. federal income tax, unless: (i) such gain is effectively connected with the conduct by such Non-U.S. Holder of a trade or business within the United States; or (ii) in the case of any gain realized by an individual Non-U.S. Holder, such holder is present in the United States for 183 days or more in the taxable year of such sale, exchange, redemption, retirement (including pursuant to an offer by the City) or other disposition and certain other conditions are met.

U.S. Federal Estate Tax. A 2021 Bond that is held by an individual who at the time of death is not a citizen or resident of the United States will not be subject to U.S. federal estate tax as a result of such individual’s death, provided that, at the time of such individual’s death, payments of interest with respect to such 2021 Bond would not have been effectively connected with the conduct by such individual of a trade or business within the United States.

Information Reporting and Backup Withholding. Subject to the discussion below under the caption “—Foreign Account Tax Compliance Act (“FATCA”)—U.S. Holders and Non-U.S. Holders,” under current U.S. Treasury Regulations, payments of principal and interest on any 2021 Bonds to a holder that is not a United States person will not be subject to any backup withholding tax requirements if the beneficial owner of the 2021 Bond or a financial institution holding the 2021 Bond on behalf of the beneficial owner in the ordinary course of its trade or business provides an appropriate certification to the payor and the payor does not have actual knowledge that the certification is false. If a beneficial owner provides the certification, the

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certification must give the name and address of such owner, state that such owner is not a United States person, or, in the case of an individual, that such owner is neither a citizen nor a resident of the United States, and the owner must sign the certificate under penalties of perjury. The current backup withholding tax rate is 24%.

Foreign Account Tax Compliance Act (“FATCA”)—U.S. Holders and Non-U.S. Holders

Sections 1471 through 1474 of the Code impose a 30% withholding tax on certain types of payments made to foreign financial institutions, unless the foreign financial institution enters into an agreement with the U.S. Treasury to, among other things, undertake to identify accounts held by certain U.S. persons or U.S.-owned entities, annually report certain information about such accounts, and withhold 30% on payments to account holders whose actions prevent it from complying with these and other reporting requirements, or unless the foreign financial institution is otherwise exempt from those requirements. In addition, FATCA imposes a 30% withholding tax on the same types of payments to a non-financial foreign entity unless the entity certifies that it does not have any substantial U.S. owners or the entity furnishes identifying information regarding each substantial U.S. owner. Under current guidance, failure to comply with the additional certification, information reporting and other specified requirements imposed under FATCA could result in the 30% withholding tax being imposed on payments of interest on the 2021 Bonds. In general, withholding under FATCA currently applies to payments of U.S. source interest (including OID) and, under current guidance, will apply to certain “passthru” payments no earlier than the date that is two years after publication of final U.S. Treasury Regulations defining the term “foreign passthru payments.” Prospective investors should consult their own tax advisors regarding FATCA and its effect on them.

The foregoing summary is included herein for general information only and does not discuss all aspects of U.S. federal taxation that may be relevant to a particular holder of the 2021 Bonds in light of the holder’s particular circumstances and income tax situation. Prospective investors are urged to consult their own tax advisors as to any tax consequences to them from the purchase, ownership and disposition of the 2021 Bonds, including the application and effect of state, local, non-U.S., and other tax laws.

A copy of the proposed form of opinion of Bond Counsel for the 2021 Bonds is attached hereto as Appendix D.

CERTAIN LEGAL MATTERS

The valid, legal and binding nature of the 2021 Bonds is subject to the approval of Best Best & Krieger LLP, Riverside, California, acting as Bond Counsel. The form of such legal opinion is attached hereto as Appendix D, and such legal opinion will be attached to each 2021 Bond. Certain legal matters will be passed upon for the City by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, as Disclosure Counsel, and by Best Best & Krieger LLP, Ontario, California, the City Attorney, for the Underwriters by their counsel, Quint & Thimmig LLP, Larkspur, California, for the Insurer by its counsel and for the Trustee by its counsel.

From time to time Disclosure Counsel serves as counsel to the Underwriters with respect to transactions other than the issuance of the 2021 Bonds.

MUNICIPAL ADVISOR

The Authority has retained CSG Advisors Incorporated, San Francisco, California (the “Municipal Advisor”) as municipal advisor in connection with the sale of the 2021 Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained herein.

The Municipal Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities.

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LITIGATION

At the time of issuance of the 2021 Bonds, the Authority and the City will deliver certificates substantially to the effect that there is no litigation then pending or threatened to restrain or enjoin the issuance of the 2021 Bonds or in any way contesting or affecting the validity of the 2021 Bonds, the Lease Agreement, any proceedings of the Authority or the City taken with respect to the delivery or sale of the 2021 Bonds, the pledge or application of any money or security provided for the payment of the 2021 Bonds, the existence or powers of the Authority or the City or the title of any officers of the Authority or the City to their respective positions, or the outcome of which could materially adversely affect the ability of the City to make the Base Rental Payments.

UNDERWRITING

The 2021 Bonds will be purchased by Cabrera Capital Markets, LLC and Ramirez & Co., Inc. and (collectively, “Underwriters”), pursuant to a purchase contract, dated the date hereof (the “Purchase Contract”), by and among the City, the Authority and Cabrera Capital Markets, LLC, as representative of the Underwriters. Under the Purchase Contract, the Underwriters have agreed to purchase all, but not less than all, of the 2021 Bonds for an aggregate purchase price of $34,817,207.50 (representing the principal amount of the 2021 Bonds, less an Underwriters’ discount of $227,792.50). The Purchase Contract provides that the Underwriters will purchase all of the 2021 Bonds if any are purchased, the obligation to make such a purchase being subject to certain terms and conditions set forth in the Purchase Contract, the approval of certain legal matters by counsel and certain other conditions.

The initial public offering prices stated on the inside cover page of this Official Statement may be changed from time to time by the Underwriters. The Underwriters may offer and sell the 2021 Bonds to certain dealers (including dealers depositing 2021 Bonds into investment trusts), dealer banks, banks acting as agents and others at prices lower than said public offering prices.

RATINGS

S&P has assigned the rating of “AA” to the Insured Bonds based upon the delivery of the Policy by the Insurer at the time of issuance of the 2021 Bonds. S&P has also assigned the 2021 Bonds the rating of “AA-” notwithstanding the delivery of the Policy for the Insured Bonds.

Future events, including the impacts of the COVID-19 pandemic that is described under the caption “THE CITY—COVID-19 Outbreak,” could have an adverse impact on the rating of the 2021 Bonds, and there is no assurance that any credit rating that is given to the 2021 Bonds will be maintained for any period of time or that the rating may not be qualified, downgraded, lowered or withdrawn entirely by S&P if, in the judgment of S&P, circumstances so warrant. Any such qualification, downgrade, lowering or withdrawal of the rating may have an adverse effect on the market price of the 2021 Bonds. The rating reflects only the views of S&P (which views and criteria could change at any time), and an explanation of the significance of such rating may be obtained from S&P. Generally, a rating agency bases its ratings on the information and materials furnished to it (which may include information and material from the City that is not included in this Official Statement) and on investigations, studies and assumptions of its own.

The City has covenanted in a Continuing Disclosure Certificate to file notices of any rating changes on the 2021 Bonds with the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system. See the caption “CONTINUING DISCLOSURE” and Appendix E. Notwithstanding such covenant, information relating to rating changes on the 2021 Bonds may be publicly available from the rating agencies prior to the time that such information is provided to the City and prior to the date by which the City is obligated to file a notice of rating change. Purchasers of the 2021 Bonds are directed to the rating agencies and their respective websites and official media outlets for the most current ratings with respect to the 2021 Bonds after the initial issuance of the 2021 Bonds.

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None of the Authority, the City or the Underwriters make any representation as to the Insurer’s creditworthiness and no representation that the Insurer’s credit rating will be maintained in the future. S&P has previously taken action to downgrade the ratings of certain municipal bond insurers and has published various releases outlining the processes that S&P intends to follow in evaluating the ratings of financial guarantors. For some financial guarantors, the result of such evaluations could be a rating affirmation, a change in rating outlook, a review for downgrade or a downgrade. Potential investors are directed to S&P for additional information on S&P’s evaluations of the financial guaranty industry and individual financial guarantors, including the Insurer. See the caption “BOND INSURANCE” for further information relating to the Insurer.

CONTINUING DISCLOSURE

The City has covenanted in a Continuing Disclosure Certificate, dated the date of issuance of the 2021 Bonds, for the benefit of the holders and Beneficial Owners of the 2021 Bonds, to provide certain financial information and operating data relating to the City by not later than March 31 following the end of the City’s Fiscal Year (currently its Fiscal Year ends on June 30) (the “Annual Report”), commencing on March 31, 2022 with the report for the Fiscal Year ended June 30, 2021, and to provide notices of the occurrence of certain enumerated events. The Annual Report and the notices of enumerated events will be filed by the City with EMMA, which is maintained on the Internet at http://emma.msrb.org/. The specific nature of the information to be contained in the Annual Report and the notices of enumerated events is set forth in Appendix E. These covenants have been made in order to assist the Underwriters in complying with subsection (b)(5) of Rule 15c2-12.

The City and certain related entities have entered into several prior continuing disclosure undertakings. In the previous five years, the City believes that it has complied in all material respects with all undertakings made pursuant to Rule 15c2-12, except as follows: (i) with respect to the City’s Community Facilities District No. 13 Special Tax Bonds, semiannual filings due April 30, 2017, October 31, 2017 and April 30, 2019 were not timely filed; (ii) the City did not provide notice of certain rating changes on a timely basis; (iii) certain tabular information which was required to be updated in connection with the undertaking for the City’s 2020 Bonds was not included in the 2021 annual report for such obligations; and (iv) one table which was required to be updated in connection with the undertaking for 1995 bonds of the City’s Assessment District No. 108 was not included in the 2017-2020 annual reports for such obligations.

In order to ensure compliance with its continuing disclosure obligations in the future, the City has designated staff members within the Investments & Revenue Resources Department with the responsibility of ensuring timely and complete filings and has retained an outside consultant to conduct periodic reviews of City compliance. In addition, the City’s debt management policy includes continuing disclosure compliance policies and procedures. See the caption “CITY FINANCIAL INFORMATION— General Economic Condition and Outlook of the City—Fiscal Policies—Debt Management Policy.”

FINANCIAL INTERESTS

The fees being paid to the Underwriters, Bond Counsel, Disclosure Counsel and counsel to the Underwriters are contingent upon the issuance and delivery of the 2021 Bonds.

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MISCELLANEOUS

The Authority and the City have approved and authorized the preparation, execution and distribution of this Official Statement. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such, and are not representations of fact. This Official Statement is not to be construed as an agreement or contract among any of the City, the Authority and the purchasers or holders of any 2021 Bonds.

ONTARIO PUBLIC FINANCING AUTHORITY

By: /s/Scott Ochoa Executive Director

CITY OF ONTARIO

By: /s/Scott Ochoa City Manager

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APPENDIX A

DEMOGRAPHIC AND ECONOMIC INFORMATION

The following information is presented as general background data. The 2021 Bonds are payable solely from moneys of the City as described in the Official Statement. The taxing power of the City, the County, the State of California or any political subdivision thereof is not pledged to the payment of the 2021 Bonds.

The City also notes that the below information is the latest available but does not in any instance reflect the impact of the COVID-19 pandemic. See the Official Statement under the caption “THE CITY—COVID-19 Outbreak.” Accordingly, the historical information below does not necessarily reflect present economic conditions and future information could be significantly different from the historical information below.

Introduction

City of Ontario. The City is located in southwestern San Bernardino County (the “County”), approximately 35 miles east of Los Angeles near the intersection of Interstates 10 and 15 in the area of southern California known as the “Inland Empire.” The City is adjacent to the cities of Upland, Montclair, Chino and Rancho Cucamonga. The City had a population of approximately 182,004 as of January 1, 2021 and covers approximately 50 square miles. The City was incorporated in 1891 and is a general law city operating under a council/manager form of government.

The City is a full service city and provides police and fire protection, street construction and maintenance, parks and recreational programs, water and sewer utilities and arts, cultural and social programs. The City also operates a municipal golf course, convention center and sports and entertainment arena (the Toyota Arena, which opened in 2008).

San Bernardino County. The County was established by an act of the State Legislature on April 26, 1853. Located in the southern portion of the State, the County covers 20,105 square miles, making it the largest county in the United States. The County has a population of over 2 million and extends from dense suburban development in the southwest portion of the County near the Los Angeles urban area to large expanses of desert and federally owned land in the eastern portion of the County, which stretches to the Nevada border.

Population

The table below summarizes population of the City, the County, and the State of California for the last five calendar years.

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CITY OF ONTARIO, SAN BERNARDINO COUNTY AND CALIFORNIA Population

Year City of Ontario San Bernardino County State of California

2017 172,858 2,139,520 39,352,398 2018 175,083 2,150,017 39,519,535 2019 178,606 2,165,876 39,605,361 2020 180,788 2,175,424 39,648,938 2021 182,004 2,175,909 39,466,855

Source: California Department of Finance, E-4 Population Estimate for Cities, Counties, and the State, 2011-21, with 2010

Census Benchmark.

Employment

The following table summarizes historical employment and unemployment for the County, the State of California and the United States for the last five calendar years.

SAN BERNARDINO COUNTY, CALIFORNIA AND UNITED STATES Civilian Labor Force, Employment, and Unemployment

(Annual Averages)

Year Area Labor Force Employment Unemployment Unemployment

Rate(1)

2016 San Bernardino County 930,200 875,400 53,900 5.8 California 19,012,000 17,965,400 1,046,600 5.5 United States 159,187,000 151,436,000 7,751,000 4.9

2017 San Bernardino County 942,700 895,900 46,800 5.0 California 19,173,800 18,246,800 927,000 4.8 United States 160,320,000 153,337,000 6,982,000 4.4



2020 San Bernardino County 966,200 874,900 91,300 9.4 California 18,821,200 16,913,100 1,908,100 10.1 United States 160,742,000 147,795,000 12,947,000 8.1 (1) The unemployment rate is computed from unrounded data; therefore, it may differ from rates computed from rounded

figures available in this table. Source: California Employment Development Department, Monthly Labor Force Data for Counties, Annual Average 2010-20,

March 2020 Benchmark, and US Department of Labor.

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Major Industries in the County

The table below sets forth the ten largest industries by employment in San Bernardino County in 2019.

SAN BERNARDINO COUNTY Major Employers – 2019

Employer Number of Employees % of Total

County of San Bernardino >10,000 1.31% Amazon >10,000 1.31 Loma Lina University Medical Center >10,000 1.31 Kaiser Permanente >10,000 1.31 State of California >10,000 1.31 Wal-Mart 5,000-9,999 0.66-1.31 United Parcel Service 5,000-9,999 0.66-1.31 State Brothers 5,000-9,999 0.66-1.31 Federal Express 2,500-4,999 0.33-0.66 San Manuel Tribe & Casino 2,500-4,999 0.33-0.66 Source: San Bernardino County Annual Financial Report Fiscal Year Ended June 30, 2020.

Construction Activity

The following tables reflect building permit valuations for the City and the County for the five most recent calendar years for which information is available.

CITY OF ONTARIO Building Permits and Valuation

(Dollars in Thousands)

2016 2017 2018 2019 2020 Permit Valuation: New Single-family $ 88,899 $123,192 $478,674 $282,287 $101,990 New Multi-family 25,065 111,621 33,348 40,635 8,459 Res. Alterations/Additions 5,490 5,118 5,376 5,916 3,709 Total Residential 119,454 239,931 517,398 328,838 114,158 Total Nonresidential 197,787 122,243 185,202 268,019 125,537 Total All Building $ 317,241 $362,174 $702,600 $596,857 $239,695 New Dwelling Units: Single Family 446 648 1,056 1,091 472 Multiple Family 206 1,010 273 322 74 Total 652 1,658 1,329 1,413 546 Note: Columns may not sum to totals due to independent rounding. Source: Construction Industry Research Board: “Building Permit Summary.”

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SAN BERNARDINO COUNTY Building Permits and Valuation

(Dollars in Thousands)

2016 2017 2018 2019 2020 Permit Valuation: New Single-family $ 706,602 $ 1,009,451 $ 1,114,778 $ 1,078,798 $ 934,304 New Multi-family 119,498 278,761 268,565 232,079 143,366 Res. Alterations/Additions 62,042 77,812 71,938 139,761 61,789 Total Residential 888,142 1,366,024 1,455,281 1,450,638 1,139,459 Total Nonresidential 994,282 1,285,596 1,080,129 1,377,099 1,062,072 Total All Building $ 1,882,424 $ 2,651,620 $ 2,535,410 $ 2,827,737 $ 2,201,531 New Dwelling Units: Single Family 2,896 4,253 3,311 4,096 3,631 Multiple Family 976 2,578 1,775 1,884 910 Total 3,872 6,831 5,086 5,980 21,622 Note: Columns may not sum to totals due to independent rounding. Source: Construction Industry Research Board: “Building Permit Summary.”

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APPENDIX B

SUMMARY OF PRINCIPAL LEGAL DOCUMENTS

The following is a summary of certain definitions and provisions of the Amended and Restated Lease Agreement and the Indenture which are not described elsewhere in the Official Statement. This summary does not purport to be comprehensive and reference should be made to the Lease Agreement and the Indenture for a full and complete statement of their provisions.

INDENTURE OF TRUST

Definitions

Unless the context otherwise requires, the terms defined in the Indenture shall, for all purposes of the Indenture and of any indenture supplemental to the Indenture and of any certificate, opinion or other document mentioned in the Indenture, have the meanings specified in the Indenture, to be equally applicable to both the singular and plural forms of any of the terms defined in the Indenture. In addition, all capitalized terms used and not otherwise defined in the Indenture shall have the respective meanings given such terms in the Lease Agreement.

“Authority” means the Ontario Public Financing Authority, a joint powers authority duly organized and existing under the laws of the State.

“Authorized Representative” means: (a) with respect to the Authority, its Chairperson, Vice Chairperson, Executive Director, Treasurer or Secretary or any other person designated as an Authorized Representative of the Authority by a Written Certificate of the Authority signed by its Chairperson or Vice Chairperson, Executive Director or Treasurer and filed with the City and the Trustee; and (b) with respect to the City, its Mayor, Deputy Mayor, City Manager, City Clerk, Executive Director of Finance or any other person designated as an Authorized Representative of the City by a Written Certificate of the City signed by its Mayor, Deputy Mayor, City Manager or Executive Director of Finance and filed with the Authority and the Trustee.

“Bond Counsel” means (a) Best Best & Krieger LLP, or (b) any other attorney or firm of attorneys appointed by or acceptable to the Authority of nationally recognized experience in the issuance of obligations the interest on which is excludable from gross income for federal income tax purposes under the Tax Code.

“Bond Fund” means the fund by that name established and held by the Trustee pursuant to the Indenture.

“Bond Law” means the Marks Roos Local Bond Pooling Act of 1985, constituting Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State, as in existence on the Closing Date or as thereafter amended from time to time.

“Bond Proceeds Fund” means the fund by that name established and held by the Trustee pursuant to the Indenture.

“Bond Year” means each twelve month period extending from October 2 in one calendar year to October 1 of the succeeding calendar year, both dates inclusive; except that the first Bond Year shall commence on the Closing Date and extend to and including October 1, 2022.

“Bonds” means the Ontario Public Financing Authority 2021 Lease Revenue Refunding Bonds, Series A (Federally Taxable), authorized by and at any time Outstanding pursuant to the Indenture.

“Book-Entry Depository” means DTC or any successor as Book-Entry Depository for the Bonds, appointed pursuant to the Indenture.

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“Business Day” means a day (other than a Saturday or a Sunday) on which banks are not required or authorized to remain closed in the city in which the Office of the Trustee is located.

“City” means the City of Ontario, a municipal corporation organized under the laws of the State.

“Closing Date” means December 16, 2021, being the date of delivery of the Bonds to the Original Purchaser.

“Costs of Issuance” means all expenses incurred in connection with the authorization, issuance, sale and delivery of the Bonds and the application of the proceeds of the Bonds, including but not limited to all compensation, fees and expenses (including but not limited to fees and expenses for legal counsel) of the Authority, initial fees and expenses of the Trustee and its counsel, title insurance premiums, appraisal fees, compensation to any financial consultants or underwriters, legal fees and expenses, filing and recording costs, rating agency fees, costs of preparation and reproduction of documents and costs of printing.

“Costs of Issuance Fund” means the fund by that name established and held by the Trustee pursuant to the Indenture.

“Debt Service” means, during any period of computation, the amount obtained for such period by totaling the following amounts: (a) the principal amount of all Outstanding Serial Bonds coming due and payable by their terms in such period; (b) the minimum principal amount of all Outstanding Term Bonds scheduled to be redeemed by operation of mandatory sinking fund deposits in such period; and (c) the interest which would be due during such period on the aggregate principal amount of Bonds which would be Outstanding in such period if the Bonds are retired as scheduled, but deducting and excluding from such aggregate amount the amount of Bonds no longer Outstanding.

“DTC” means The Depository Trust Company, New York, New York, and its successors and assigns.

“Escrow Agreement” means the Escrow Deposit and Trust Agreement, dated as of December 1, 2021, among the City, the Authority and the Escrow Bank.

“Escrow Bank” means The Bank of New York Mellon Trust Company, N.A., or its successor in interest, pursuant to the Escrow Agreement.

“Event of Default” means any of the events specified in the Indenture.

“Fair Market Value” means, with respect to any investment, the price at which a willing buyer would purchase such investment from a willing seller in a bona fide, arm’s length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of Section 1273 of the Tax Code) and, otherwise, the term “Fair Market Value” means the acquisition price in a bona fide arm’s length transaction (as referenced above) if (i) the investment is a certificate of deposit that is acquired in accordance with applicable regulations under the Tax Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with applicable regulations under the Tax Code, or (iii) the investment is a United States Treasury Security State and Local Government Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt.

“Federal Securities” means:

(a) any direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), the payment of principal of and interest on which are unconditionally and fully guaranteed by the United States of America;

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(b) any obligations the principal of and interest on which are unconditionally guaranteed by the United States of America; and

(c) pre-refunded municipal obligations defined as follows: Any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice: and (i) which are rated, based on the escrow, in the highest rating category of S&P and Moody’s or any successors thereto; or (ii)(A) which are fully secured as to principal and interest and redemption premium, if any, by a fund consisting only of cash or obligations described in paragraphs (a) or (b) above, which fund may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (B) which fund is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates thereof or on the redemption date or dates specified in the irrevocable instructions referred to above, as appropriate.

“Fiscal Year” means any twelve month period extending from July 1 in one calendar year to June 30 of the succeeding calendar year, both dates inclusive, or any other twelve month period selected and designated by the Authority as its official fiscal year period.

“Indenture” means the Indenture of Trust, as originally executed or as it may from time to time be supplemented, modified or amended by any Supplemental Indenture pursuant to the provisions of the Indenture.

“Independent Accountant” means any certified public accountant or firm of certified public accountants appointed and paid by the Authority or the City, and who, or each of whom (a) is in fact independent and not under domination of the Authority or the City; (b) does not have any substantial interest, direct or indirect, in the Authority or the City; and (c) is not connected with the Authority or the City as an officer or employee of the Authority or the City but who may be regularly retained to make annual or other audits of the books of or reports to the Authority or the City.

“Information Services” means in accordance with then-current guidelines of the Securities and Exchange Commission, the Electronic Municipal Market Access System (referred to as “EMMA”), a facility of the Municipal Securities Rulemaking Board (at http://emma.msrb.org), or such service or services as the Authority may designate in a certificate delivered to the Trustee.

“Insurance and Condemnation Fund” means the fund by that name established and held by the Trustee pursuant to the Indenture.

“Insured Bonds” means the Bonds which mature October 1, 2026 through and including October 1, 2043.

“Insurer” means Build America Mutual Assurance Company, or any successor thereto.

“Interest Account” means the account by that name established in the Bond Fund pursuant to the Indenture.

“Interest Payment Date” means each April 1 and October 1 commencing April 1, 2022.

“Late Payment Rate” means the lesser of (a) the greater of (i) the per annum rate of interest, publicly announced from time to time by JPMorgan Chase Bank, N.A., at its principal office in The City of New York, New York, as its prime or base lending rate (“Prime Rate”) (any change in such Prime Rate to be effective on the date such change is announced by JPMorgan Chase Bank, N.A.) plus 5%, and (ii) the then applicable highest rate of interest on the Bonds and (b) the maximum rate permissible under applicable usury or similar laws limiting interest rates. In the event JPMorgan Chase Bank, N.A., ceases to announce its Prime Rate, the Prime Rate shall be the prime or base lending rate of such other bank, banking association or trust company as the Insurer, in its sole and absolute discretion, shall designate. Interest at the Late Payment Rate on any amount owing to the Insurer shall be computed on the basis of the actual number of days elapsed in a year of 360 days.

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“Lease Agreement” means that certain Amended and Restated Lease Agreement, dated as of December 1, 2021, by and between the Authority, as lessor, and the City, as lessee.

“Moody’s” means Moody’s Investors Service, its successors and assigns.

“Net Proceeds” means all amounts derived from any policy of casualty insurance or title insurance with respect to the Leased Premises, or the proceeds of any taking of the Leased Premises or any portion thereof in eminent domain proceedings (including sale under threat of such proceedings), to the extent remaining after payment therefrom of all expenses incurred in the collection and administration thereof.

“Office” means with respect to the Trustee, the corporate trust office of the Trustee, or at such other or additional offices as may be specified in writing to the Authority and the City.

“Original Purchaser” means Cabrera Capital Markets, LLC and Samuel A. Ramirez & Co., Inc., as the original purchasers of the Bonds upon their delivery by the Trustee on the Closing Date.

“Outstanding,” when used as of any particular time with reference to Bonds, means (subject to the provisions of the Indenture) all Bonds theretofore, or thereupon being, authenticated and delivered by the Trustee under the Indenture except: (a) Bonds theretofore cancelled by the Trustee or surrendered to the Trustee for cancellation; (b) Bonds with respect to which all liability of the Authority shall have been discharged in accordance with the Indenture, including Bonds (or portions thereof) described in the Indenture; and (c) 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.

“Owner,” whenever used in the Indenture with respect to a Bond, means the person in whose name the ownership of such Bond is registered on the Registration Books.

“Permitted Investments” means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein:

1. Direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America.

2. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself):

a. Farmers Home Administration (FmHA)

Certificates of beneficial ownership

b. Federal Housing Administration Debentures (FHA)

c. General Services Administration

Participation certificates

d. Government National Mortgage Association (GNMA or “Ginnie Mae”)

GNMA - guaranteed mortgage-backed bonds

GHMA - guaranteed pass-through obligations (participation certificates)

(not acceptable for certain cash-flow sensitive issues.)

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e. U.S. Maritime Administration

Guaranteed Title XI financing

f. U.S. Department of Housing and Urban Development (HUD)

Project Notes

Local Authority Bonds

3. Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit U.S. government agencies (stripped securities are only permitted if they have been stripped by the agency itself):

a. Federal Home Loan Bank System

Senior debt obligations (Consolidated debt obligations)

b. Federal Home Loan Mortgage Corporation (FHLMC or “Freddie Mae”)

Participation Certificates (Mortgage-backed securities)

Senior debt obligations

c. Federal National Mortgage Association (FNMA or “Fannie Mae”) Mortgage-backed securities and senior debt obligations (excluded are stripped mortgage securities which are valued greater than par on the portion of unpaid principal).

d. Student Loan Marketing Association (SLMA or “Sallie Mae”)

Senior debt obligations

e. Resolution Funding Corp. (REFCORP) Only the interest component of REFCORP strips which have been stripped by request to the Federal Reserve Bank of New York in book entry form are acceptable.

f. Farm Credit System

Consolidated systemwide bonds and notes

4. Money market funds registered under the Federal Investment Company of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of AAAm-G; AAAm, or AA-m and if rated by Moody’s rated Aaa, Aa1 or Aa2 including funds for which the Trustee or an affiliate advises or services, but excluding such funds with a floating net asset value.

5. Certificates of deposit secured at all times by collateral described in (1) and/or (2) above. CD’s must have a one year or less maturity. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks whose term obligations are rated “A-1” or better by S&P and “Prime-1” by Moody’s.

The collateral must be held by a third party and the bondholders must have a perfected first security interest in the collateral.

6. Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC, including BIF and SAIF or collateralized by Permitted Investments described in clause (1) for amounts in excess of insured amounts.

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7. Investment agreements with a domestic or foreign bank or corporation, the long-term debt or financial strength of which, or, in the case of a guaranteed corporation the long-term debt, or, in the case of a monoline financial guarantee insurance company, financial strength, of the guarantor is rated in at least the “double A” category by Moody’s and S&P; provided, that, by the terms of the investment agreement:

a. interest payments are to be made to the Trustee at all times and in the amounts as necessary to pay debt service on the Bonds as may be described in such investment agreement, or if the investment agreement is for the construction fund, construction draws;

b. the invested funds are available for withdrawal without penalty or premium, at any time upon not more than seven days’ prior notice; the Authority and the Trustee agree in the Indenture to give or cause to be given notice in accordance with the terms of the investment agreement so as to receive funds thereunder with no penalty or premium paid;

c. the investment agreement shall state that it is the unconditional and general obligation of; and is not subordinated to any other obligation of, the provider thereof or, if the provider is a bank, the agreement or the opinion of counsel shall state that the obligation of the provider to make payments thereunder ranks pari passu with the obligations of the provider to its other depositors and its other unsecured and unsubordinated creditors;

d. the Authority or the Trustee receives the opinion of domestic counsel (which opinion shall be addressed to the Authority and Trustee) that such investment agreement is legal, valid, binding and unenforceable upon the provider in accordance with its terms and of foreign counsel (if applicable) in a form and substance acceptable by the Authority;

e. the investment agreement shall provide that if during its term

(i) the provider’s rating by either S&P or Moody’s falls below “AA-” or “Aa3”, respectively, the provider shall, at its option, within 10 days of receipt of publication of such downgrade, either (a) collateralize the investment agreement by delivering or transferring in accordance with the applicable state and federal laws (other than by means of entries on the provider’s books) to the Authority, the Trustee or a third party acting solely as agent therefor (the “Holder of the Collateral”) collateral free and clear of any third party liens or claims the market value of which collateral is maintained at levels and upon such conditions as would be acceptable to S&P and Moody’s to maintain an “A” rating in an “A” rated structured financing (with a market value approach); or (b) repay the principal of and accrued but unpaid interest on the investment (including such other amounts as are required to permit the Trustee to receive the initially contemplated yield through the term of the Agreement), or (c) assign its obligations thereunder to a financial counter-party, acceptable to the Authority, and rated in the double A category by both Moody’s and S&P; and

(ii) the provider’s rating by either S&P or Moody’s is withdrawn or suspended or falls below “A-” or “A3”, respectively, the provider must, at the direction of the Authority or the Trustee (who shall give such direction if so directed by the Authority), within 10 days of receipt of such direction, repay the principal of and accrued but unpaid interest on the investment, in either case with no penalty or premium to the Authority or Trustee; and

f. the investment agreement shall state and an opinion of counsel shall be rendered, in the event collateral is required to be pledged by the provider under the terms of the investment agreement, at the time such collateral is delivered, that the Holder of the Collateral has a perfected first priority security interest in the collateral, any substituted collateral and all proceeds thereof (in the case of bearer securities, this means the Holder of the Collateral is in possession); or

g. the investment agreement must provide that if during its term

(i) the provider shall default in its payment obligations, the provider’s obligation under the investment agreement shall, at the direction of the Authority or the Trustee (who shall give such direction

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if so directed by the Authority), be accelerated and amounts invested and accrued but unpaid interest thereon shall be repaid to the Authority or Trustee, as appropriate; and

(ii) the provider shall become insolvent, not pay its debts as they become due, be declared or petition to be declared bankrupt, etc. (“event of insolvency”), the provider’s obligations shall automatically be accelerated and the amounts invested and accrued but unpaid interest thereon shall be repaid to the Authority or Trustee, as appropriate.

8. Commercial paper rated “Prime-1” by Moody’s and “A-1+” or better by S&P.

9. Bonds or notes issued by any state or municipality which are rated by Moody’s and S&P in the highest long-term rating categories assigned by such agencies unless such obligations are issued by the State, in which case such obligations are rated in one of the two highest long-term rating categories of S&P and Moody’s.

10. Federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured and unguaranteed obligation rating of “Prime-1” or “A3” or better by Moody’s and “A-1+” or better by S&P.

11. Repurchase agreements that provide for the transfer of securities from a dealer bank or securities firm (seller/borrower) to the Trustee (buyer/lender), and the transfer of cash from the Trustee to the dealer bank or securities firm with an agreement that the dealer bank or securities firm will repay the cash plus a yield to the Trustee in exchange for the securities at a specified date.

Repurchase agreements must satisfy the following criteria:

a. Repos must be between the municipal entity and a dealer bank or securities firm.

(1) Primary dealers on the Federal Reserve reporting dealer list which fall under the jurisdiction of the SIPC and which are rated “A” or better by Standard & Poor’s Ratings Group and Moody’s, or

(2) Banks rated “A” or above by Standard & Poor’s Ratings Group and Moody’s Investor Services.

b. The written repurchase agreement must include the following:

(1) Securities which are acceptable for transfer are:

(a) Direct U.S. governments.

(b) Federal agencies backed by the full faith and credit of the U.S. Government (and FNMA & FHLMC)

(2) The term of the repurchase agreement may be up to 30 years.

(3) The collateral must be delivered to the municipal entity, trustee (if trustee is not supplying the collateral) or third party acting as agent for the trustee (if the trustee is supplying the collateral) before/simultaneous with payment (perfection by possession of certificated securities).

(4) The trustee has perfected first priority security interest in the collateral.

(5) Collateral is free and clear of third-party liens and in the case of SIPC broker was not acquired pursuant to a repo or reverse repo.

(6) Failure to maintain the requisite collateral percentage, after a two day restoration period, will require the trustee to liquidate collateral.

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(7) Valuation of Collateral

(a) The securities must be valued weekly, marked-to-market at a current market price plus interest.

(b) The value of collateral must be equal to 104% of the amount of cash transferred by the municipal entity to the dealer bank or security firm under the repurchase agreement plus accrued interest. If the value of securities held as collateral slips below 104% of the value of the cash transferred by municipality, then additional cash and/or acceptable securities must be transferred. If, however, the securities used as collateral are FNMA or FHLMC, then the value of collateral must equal 105%.

c. Legal opinion which must be delivered to the municipal entity:

Repurchase agreement meets guidelines under state law for legal investment of public funds.

12. Pre-refunded municipal bonds rated “Aaa” by Moody’s and “AAA” by S&P. If, however, the issue is only rated by S&P (i.e., there is no Moody’s rating), then the pre-refunded bonds must have been pre-refunded with cash, direct U.S. or U.S. guaranteed obligations, or AAA rated pre-refunded municipals to satisfy this condition.

13. State of California Local Agency Investment Fund (LAIF).

“Policy” means the Municipal Bond Insurance Policy issued by the Insurer that guarantees the scheduled payment of principal of and interest on the Insured Bonds when due.

“Principal Account” means the account by that name established in the Bond Fund pursuant to the Indenture.

“Record Date” means, with respect to any Interest Payment Date, the fifteenth (15th) calendar day of the month preceding such Interest Payment Date.

“Redemption Fund” means the fund by that name established pursuant to the Indenture.

“Registration Books” means the records maintained by the Trustee pursuant to the Indenture for the registration and transfer of ownership of the Bonds.

“Representation Letter” means the letter of representations from the Authority to, or other instrument or agreement of the Authority with, a Book-Entry Depository in which the Authority, among other things, makes certain representations to such Depository with respect to the Bonds, the payment thereof and delivery of notices with respect thereto.

“Revenues” means: (a) all amounts received by the Authority or the Trustee pursuant to or with respect to the Lease Agreement, including, without limiting the generality of the foregoing, all of the Base Rental Payments (including both timely and delinquent payments, any late charges, and whether paid from any source), but excluding any amounts payable under the Lease Agreement; and (b) all interest, profits or other income derived from the investment of amounts in any fund or account established pursuant to the Indenture.

“S&P” means Standard & Poor’s Global Ratings Services, a Standard & Poor’s Financial Services LLC, its successors and assigns.

“Securities Depositories” means The Depository Trust Company, 55 Water Street, 50th Floor, New York, New York 10041-0099 Attn. Call Notification Department, Fax (212) 855-7232; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories as the Authority may designate in a Written Certificate of the Authority delivered to the Trustee.

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“Serial Bonds” means the Bonds maturing on October 1 in each of the years 2022 through 2034.

“Sinking Account” means the account by that name established and held by the Trustee pursuant to the Indenture.

“State” means the State of California.

“Supplemental Indenture” means any indenture duly authorized after the Indenture and entered into between the Authority and the Trustee, supplementing, modifying or amending the Indenture; but only if and to the extent that such Supplemental Indenture is specifically authorized under the Indenture.

“Tax Code” means the Internal Revenue Code of 1986, as amended.

“Tax Regulations” means temporary and permanent regulations promulgated under or with respect to Sections 103 and 141 through 150, inclusive, of the Tax Code.

“Term Bonds” means the Bonds maturing on October 1, 2039 and on October 1, 2043.

“Trustee” means Zions Bancorporation, National Association, a national banking association organized and existing under the laws of the United States of America, or its successor, as Trustee under the Indenture as provided in the Indenture.

“Undertaking to Provide Continuing Disclosure” means, as applicable, that certain Certificate of the Authority or the City, as applicable, by that name and dated as of the Closing Date and referred to in the Indenture of the Lease Agreement.

“Written Certificate,” “Written Request” and “Written Requisition” of the Authority or the City mean, respectively, a written certificate, request or requisition signed in the name of the Authority or the City by its 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.

“2013 Bonds” means the $33,390,000 original principal amount of Ontario Public Financing Authority 2013 Lease Revenue Bonds (Capital Projects).

“2013 Indenture” means the Indenture of Trust, dated as of September 1, 2013, among the Authority, the City and the 2013 Trustee and relating to the 2013 Bonds.

“2013 Trustee” means The Bank of New York Mellon Trust Company, N.A., as Trustee under the 2013 Indenture.

Interpretation

(a) Unless the context otherwise indicates, words expressed in the singular shall include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for convenience only and shall be deemed to include the neuter, masculine or feminine gender, as appropriate.

(b) Headings of articles and sections in the Indenture and the table of contents are solely for convenience of reference, do not constitute a part of the Indenture and shall not affect the meaning, construction or effect of the Indenture.

(c) All references to “Articles”, “Sections” and other subdivisions in the Indenture are to the corresponding Articles, Sections or subdivisions of the Indenture; the words “herein”, “hereof”, “hereby”, “hereunder” and other words of similar import refer to the Indenture as a whole and not to any particular Article, Section or subdivision of the Indenture.

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Establishment and Application of Costs of Issuance Fund

The Trustee shall establish, maintain and hold in trust a separate fund designated as the “Costs of Issuance Fund.” The moneys in the Costs of Issuance Fund shall be used and withdrawn by the Trustee to pay the Costs of Issuance upon submission of Written Requisitions of the Authority stating the person to whom payment is to be made, the amount to be paid, the purpose for which the obligation was incurred and that such payment is a proper charge against said fund. All amounts remaining in the Costs of Issuance Fund shall be transferred by the Trustee to the Interest Account and the Costs of Issuance Fund shall be closed.

Refunding Fund

The Trustee shall establish, maintain and hold in trust a separate fund to be known as the “Refunding Fund.” The Trustee shall disburse moneys in the Refunding Fund immediately on the Closing Date to the Escrow Bank and the Refunding Fund shall be closed.

Validity of Bonds

The validity of the authorization and issuance of the Bonds is not dependent on and shall not be affected in any way by any proceedings taken by the Authority or the Trustee with respect to or in connection with the Lease Agreement. The recital contained in the Bonds that the same are issued pursuant to the Constitution and laws of the State shall be conclusive evidence of their validity and of compliance with the provisions of law in their issuance.

Pledge and Assignment; Bond Fund

(a) Subject only to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth in the Indenture, all of the Revenues and any other amounts (including proceeds of the sale of the Bonds) held in any fund or account established pursuant to the Indenture are pledged to secure the payment of the principal of and interest on the Bonds in accordance with their terms and the provisions of the Indenture. Said pledge shall constitute a lien on and security interest in such assets and shall attach, be perfected and be valid and binding from and after the Closing Date, without any physical delivery thereof or further act.

(b) The Authority transfers in trust, grants a security interest in and assigns to the Trustee, for the benefit of the Owners from time to time of the Bonds, all of the Revenues and all of the rights of the Authority in the Lease Agreement (other than the rights of the Authority under the Indenture). The Trustee shall be entitled to and shall collect and receive all of the Revenues, and any Revenues collected or received by the Authority shall be deemed to be held, and to have been collected or received, by the Authority as the agent of the Trustee and shall forthwith be paid by the Authority to the Trustee. The Trustee also shall be entitled to and shall, subject to the provisions of the Indenture, take all steps, actions and proceedings which the Trustee determines to be reasonably necessary in its judgment to enforce, either jointly with the Authority or separately, all of the rights of the Authority and all of the obligations of the City under the Lease Agreement. The Trustee shall deposit all Revenues so received in the Bond Fund which the Trustee shall establish, maintain and hold in trust as a separate fund.

Allocation of Revenues

On or before each date on which principal of or interest on the Bonds becomes due and payable, the Trustee shall transfer from the Bond Fund and deposit into the following respective accounts (each of which the Trustee shall establish and maintain within the Bond Fund), the following amounts in the following order of priority, the requirements of each such account (including the making up of any deficiencies in any such account resulting from lack of Revenues sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any transfer is made to any account subsequent in priority:

(a) The Trustee shall deposit in the Interest Account an amount required to cause the aggregate amount on deposit in the Interest Account to be at least equal to the amount of interest becoming due and payable on such date on all Bonds then Outstanding.

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(b) The Trustee shall deposit in the Principal Account an amount required to cause the aggregate amount on deposit in the Principal Account to equal the principal amount of the Bonds coming due and payable on such date.

(c) The Trustee shall deposit in the Sinking Account an amount equal to the aggregate principal amount of the Term Bonds required to be redeemed on such date, if any, pursuant to the Indenture.

Application of Interest Account

All amounts in the Interest Account shall be used and withdrawn by the Trustee solely for the purpose of 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).

Application of Principal Account

All amounts in the Principal Account shall be used and withdrawn by the Trustee solely to pay the principal amount of the Bonds at their respective maturity dates.

Application of Sinking Account

All moneys on deposit in the Sinking Account shall be used and withdrawn by the Trustee for the sole purpose of redeeming or purchasing (in lieu of redemption) Term Bonds pursuant to the Indenture.

Application of Redemption Fund

When required the Trustee shall establish and maintain the Redemption Fund, amounts in which shall be used and withdrawn by the Trustee solely for the purpose of paying the principal of the Bonds to be redeemed pursuant to the Indenture; provided, however, that at any time prior to giving notice of redemption of any such Bonds, the Trustee may 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 accrued interest, which is payable from the Interest Account) as shall be directed pursuant to a Written Request of the Authority received prior to the selection of Bonds for redemption, except that the purchase price (exclusive of accrued interest) may not exceed the redemption price then applicable to the Bonds.

Insurance and Condemnation Fund

(a) Establishment of Fund. Upon the receipt of any proceeds of insurance or eminent domain with respect to any portion of the Leased Premises, the Trustee shall establish and maintain a separate Insurance and Condemnation Fund, to be held and applied as set forth in the Indenture.

(b) Application of Insurance Proceeds. Any proceeds of insurance against accident to or destruction of the Facilities collected by the City in the event of any such accident or destruction shall be applied in accordance with the Lease Agreement. The City shall cause any such proceeds to be paid to the Trustee for deposit in the Insurance and Condemnation Fund. If the City fails to determine and notify the Trustee in writing of its determination, within forty five (45) days following the date of such deposit, to replace, repair, restore, modify or improve the Facilities, then such proceeds shall be promptly transferred by the Trustee to the Redemption Fund and applied to the redemption of Bonds pursuant to the Indenture; provided, however, that such redemption will occur only if the fair rental value of the remaining portion of the Leased Premises is sufficient to allow the City to continue to make Base Rental Payments in amounts sufficient to pay debt service on the Bonds that remain Outstanding after such redemption. Notwithstanding the foregoing sentence, however, in the event of damage or destruction of the Facilities in full, the proceeds of such insurance shall be used by the City to rebuild or replace the Facilities if such proceeds are not sufficient, together with other available funds then held by the Trustee, to redeem all of the Outstanding Bonds. All proceeds deposited in the Insurance and Condemnation Fund and not so transferred to the Redemption Fund shall be applied to the prompt replacement, repair, restoration, modification or improvement of the damaged or destroyed portions of the Facilities by the City, upon receipt of Written Requisitions of the City as

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agent for the Authority (i) stating with respect to each payment to be made (A) the requisition number, (B) the name and address of the person to whom payment is due, (C) the amount to be paid and (D) that each obligation mentioned therein has been properly incurred, is a proper charge against the Insurance and Condemnation Fund, has not been the basis of any previous withdrawal; (ii) specifying in reasonable detail the nature of the obligation; and (iii) accompanied by a bill or a statement of account for such obligation. The Trustee may conclusively rely on any such Written Requisitions. Any balance of the proceeds remaining after such work has been completed as certified by the City as agent for the Authority shall be paid to the City.

(c) Application of Eminent Domain Proceeds. If all or any part of the Leased Premises shall be taken by eminent domain proceedings (or sold to a government threatening to exercise the power of eminent domain) the proceeds therefrom shall be applied in accordance with the Lease Agreement. The City shall cause any such proceeds to be paid to the Trustee for deposit in the Insurance and Condemnation Fund, to be applied and disbursed by the Trustee as follows:

(i) If the City has not given written notice to the Trustee, within forty-five (45) days following the date on which such proceeds are deposited with the Trustee, of its determination that such proceeds are needed for the replacement of the Leased Premises or such portion thereof, the Trustee shall transfer such proceeds to the Redemption Fund to be applied towards the redemption of the Bonds pursuant to the Indenture.

(ii) If the City has given written notice to the Trustee, within forty five (45) days following the date on which such proceeds are deposited with the Trustee, of its determination that such proceeds are needed for replacement of the Leased Premises or such portion thereof, the Trustee shall pay to the City, or to its order, from said proceeds such amounts as the City may expend for such replacement, upon the filing of Written Requisitions of the City as agent for the Authority in the form and containing the provisions set forth in the Indenture and upon which the Trustee may conclusively rely.

Investments

All moneys in any of the funds or accounts established with the Trustee pursuant to the Indenture shall be invested by the Trustee solely in Permitted Investments which mature not later than the date such moneys are estimated by the Authority to be required. Such investments shall be directed by the Authority pursuant to a Written Request of the Authority filed with the Trustee at least two (2) Business Days in advance of the making of such investments (which Written Request shall certify that the investments constitute Permitted Investments). In the absence of any such directions from the Authority, the Trustee shall invest any such moneys in Permitted Investments described in the Indenture; provided, however, that any such investment shall be made by the Trustee only if, prior to the date on which such investment is to be made, the Trustee shall have received a written direction specifying a specific money market fund and, if no such written direction is so received, the Trustee shall hold such moneys uninvested. Permitted Investments purchased as an investment of moneys in any fund shall be deemed to be part of such fund or account.

All interest or gain derived from the investment of amounts in any of the funds or accounts established under the Indenture shall be deposited in the Bond Fund. For purposes of acquiring any investments under the Indenture, the Trustee may commingle funds held by it under the Indenture. The Trustee, or an affiliate, may act as principal or agent in the acquisition or disposition of any investment and may impose its customary charges therefor. The Trustee shall incur no liability for losses arising from any investments made pursuant to the Indenture. Permitted Investments that are registered securities shall be registered in the name of the Trustee.

The Authority covenants that all investments of amounts deposited in any fund or account created by or pursuant to the Indenture, or otherwise containing proceeds of the Bonds, shall be acquired and disposed of at the Fair Market Value thereof.

Valuation and Disposition of Investments

For the purpose of determining the amount in any fund or account, all Permitted Investments credited to such fund or account shall be valued at the Fair Market Value thereof; provided, however, that investments in funds

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or accounts (or portions thereof) that are subject to a yield restriction under applicable provisions of the Tax Code shall be valued at their present value (within the meaning of Section 148 of the Tax Code), consisting generally of the cost thereof. The Trustee shall have no duty in connection with the determination of Fair Market Value other than to follow the investment directions of the Authority.

Payment Provisions Relating to the Insured Bonds

In the event that principal and/or interest due on the Insured Bonds shall be paid by the Insurer pursuant to the Policy, the Insured Bonds shall remain outstanding for all purposes, not be defeased or otherwise satisfied and not be considered paid by the Issuer, the assignment and pledge of the trust estate and all covenants, agreements and other obligations of the Issuer to the registered owners shall continue to exist and shall run to the benefit of the Insurer, and the Insurer shall be subrogated to the rights of such registered owners.

In the event that on the second (2nd) business day prior to any payment date on the Insured Bonds, the Trustee has not received sufficient moneys to pay all principal of and interest on the Insured Bonds due on such payment date, the Trustee shall immediately notify the Insurer or its designee on the same business day by telephone or electronic mail, of the amount of the deficiency. If any deficiency is made up in whole or in part prior to or on the payment date, the Trustee shall so notify the Insurer or its designee.

In addition, if the Trustee has notice that any holder of the Insured Bonds has been required to disgorge payments of principal of or interest on the Insured Bonds pursuant to a final, non-appealable order by a court of competent jurisdiction that such payment constitutes an avoidable preference to such holder within the meaning of any applicable bankruptcy law, then the Trustee shall notify the Insurer or its designee of such fact by telephone or electronic mail, or by overnight or other delivery service as to which a delivery receipt is signed by a person authorized to accept delivery on behalf of the Insurer.

The Trustee shall irrevocably be designated, appointed, directed and authorized to act as attorney-in-fact for holders of the Insured Bonds as follows:

i) If there is a deficiency in amounts required to pay interest and/or principal on the Insured Bonds, the Trustee shall (a) execute and deliver to the Insurer, in form satisfactory to the Insurer, an instrument appointing the Insurer as agent and attorney-in-fact for such holders of the Insured Bonds in any legal proceeding related to the payment and assignment to the Insurer of the claims for interest on the Insured Bonds, (b) receive as designee of the respective holders (and not as Paying Agent) in accordance with the tenor of the Policy payment from the Insurer with respect to the claims for interest so assigned, (c) segregate all such payments in a separate account (the “BAM Policy Payment Account”) to only be used to make scheduled payments of principal of and interest on the Insured Bond, and (d) disburse the same to such respective holders; and

ii) If there is a deficiency in amounts required to pay principal of the Insured Bonds, the Trustee shall (a) execute and deliver to the Insurer, in form satisfactory to the Insurer, an instrument appointing the Insurer as agent and attorney-in-fact for such holder of the Insured Bonds in any legal proceeding related to the payment of such principal and an assignment to the Insurer of the Insured Bonds surrendered to the Insurer, (b) receive as designee of the respective holders (and not as Paying Agent) in accordance with the tenor of the Policy payment therefore from the Insurer, (c) segregate all such payments in the BAM Policy Payment Account to only be used to make scheduled payments of principal of and interest on the Insured Obligation, and (d) disburse the same to such holders.

The Trustee shall designate any portion of payment of principal on Insured Bonds paid by the Insurer, whether by virtue of mandatory sinking fund redemption, maturity or other advancement of maturity, on its books as a reduction in the principal amount of Insured Bonds registered to the then current holder, whether DTC or its nominee or otherwise, and shall issue a replacement Insured Bond to the Insurer, registered in the name directed by the Insurer, in a principal amount equal to the amount of principal so paid (without regard to authorized denominations); provided that the Trustee's failure to so designate any payment or issue any replacement Insured Bond shall have no effect on the amount of principal or interest payable by the Authority on any Insured Bond or the subrogation or assignment rights of the Insurer.

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Payments with respect to claims for interest on and principal of Insured Bonds disbursed by the Trustee from proceeds of the Policy shall not be considered to discharge the obligation of the Authority with respect to such Insured Bonds, and the Insurer shall become the owner of such unpaid Insured Bonds and claims for the interest in accordance with the tenor of the assignment made to it under the provisions of the preceding paragraphs or otherwise. The Indenture and the Lease Agreement shall not be discharged or terminated unless all amounts due or to become due to the Insurer have been paid in full or duly provided for.

Irrespective of whether any such assignment is executed and delivered, the Authority, City and Trustee agree for the benefit of the Insurer that:

i) They recognize that to the extent the Insurer makes payments directly or indirectly (e.g., by paying through the Trustee), on account of principal of or interest on the Insured Bonds, the Insurer will be subrogated to the rights of such holders to receive the amount of such principal and interest from the Authority, with interest thereon, as provided and solely from the sources stated in the Indenture, the Lease Agreement and the Insured Bonds; and

ii) They will accordingly pay to the Insurer the amount of such principal and interest, with interest thereon as provided in the Indenture and the Insured Bonds, but only from the sources and in the manner provided therein for the payment of principal of and interest on the Insured Bonds to holders, and will otherwise treat the Insurer as the owner of such rights to the amount of such principal and interest.

iii) Additional Payments. The Authority agrees unconditionally that it will pay or reimburse the Insurer on demand any and all reasonable charges, fees, costs, losses, liabilities and expenses that the Insurer may pay or incur, including, but not limited to, fees and expenses of the Insurer’s agents, attorneys, accountants, consultants, appraisers and auditors and reasonable costs of investigations, in connection with the administration (including waivers and consents, if any), enforcement, defense, exercise or preservation of any rights and remedies in respect of the Indenture and the Lease Agreement (“Administrative Costs”). For purposes of the foregoing, costs and expenses shall include a reasonable allocation of compensation and overhead attributable to the time of employees of the Insurer spent in connection with the actions described in the preceding sentence. The Authority agrees that failure to pay any Administrative Costs on a timely basis will result in the accrual of interest on the unpaid amount at the Late Payment Rate, compounded semi-annually, from the date that payment is first due to the Insurer until the date the Insurer is paid in full.

Notwithstanding anything herein to the contrary, the Authority agrees to pay to the Insurer (a) a sum equal to the total of all amounts paid by the Insurer under the Policy (“BAM Policy Payment”); and (b) interest on such BAM Policy Payments from the date paid by the Insurer until payment thereof in full by the Authority payable to the Insurer at the Late Payment Rate per annum (collectively, “BAM Reimbursement Amounts”) compounded semi-annually. Notwithstanding anything to the contrary, including without limitation the post default application of revenue provisions, BAM Reimbursement Amounts shall be, and the Authority covenants and agrees that the BAM Reimbursement Amounts are, payable from and secured by a lien on and pledge of the same revenues and other collateral pledged to the Insured Bonds on a parity with debt service due on the Insured Bonds.

iv) The rights granted to the Insurer under the Indenture and the Lease Agreement to request, consent to or direct any action are rights granted to the Insurer in consideration of its issuance of the Policy. Any exercise by the Insurer of such rights is merely an exercise of the Insurer’s contractual rights and shall not be construed or deemed to be taken for the benefit, or on behalf, of the holders of the Insured Bonds and such action does not evidence any position of the Insurer, affirmative or negative, as to whether the consent of the holders of the Insured Bonds or any other person is required in addition to the consent of the Insurer.

v) The Insurer shall be entitled to pay principal or interest on the Insured Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer (as such terms are defined in the Policy) and any amounts due on the Insured Bonds as a result of acceleration of the maturity thereof in accordance with the Indenture and the Lease Agreement, whether or not the Insurer has received a claim upon the Policy.

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vi) So long as the Insured Bonds are outstanding or any amounts are due and payable to the Insurer, the Authority shall not sell, lease, transfer, encumber or otherwise dispose of the Property or any material portion thereof, except upon obtaining the prior written consent of the Insurer.

vii) No contract shall be entered into or any action taken by which the rights of the Insurer or security for or source of payment of the Insured Bonds may be impaired or prejudiced in any material respect except upon obtaining the prior written consent of the Insurer.

viii) If an event of default occurs under any agreement pursuant to which any Obligation, defined below, of the Authority has been incurred or issued and that permits the holder of such Obligation or trustee to accelerate the Obligation or otherwise exercise rights or remedies that are adverse to the interest of the holders of the Insured Bonds or the Insurer, as the Insurer may determine in its sole discretion, then an event of default shall be deemed to have occurred under the Indenture and the Lease Agreement for which the Insurer or the Trustee, at the direction of the Insurer, shall be entitle to exercise all available remedies under the Indenture and the Lease Agreement, at law and in equity. For purposes of the foregoing "Obligation" shall mean any bonds, loans, certificates, installment or lease payments or similar obligations that are payable and/or secured on a parity or subordinate basis to the Insured Bonds.

Other Provisions Relating to the Insurer

(a) Notice and Other Information to be given to the Insurer. The Authority will provide the Insurer with all notices and other information it is obligated to provide (i) under its Continuing Disclosure Agreement and (ii) to the holders of Bonds or the Trustee under the Security Documents.

The notice address of the Insurer is: Build America Mutual Assurance Company, 200 Liberty Street, 27th Floor, New York, NY 10281, Attention: Surveillance, Re: Policy No. __________, Telephone: (212) 235-2500, Telecopier: (212) 235-1542, Email: [email protected]. In each case in which notice or other communication refers to an event of default or a claim on the Insurance Policy, then a copy of such notice or other communication shall also be sent to the attention of the General Counsel at the same address and at [email protected] or at Telecopier: (212) 235-5214 and shall be marked to indicate “URGENT MATERIAL ENCLOSED.”

(b) Amendments to Documents. The Authority shall send copies of any such amendments or supplements to the Insurer and the rating agencies which have assigned a rating to the Insured Bonds.

Particular Covenants

Punctual Payment

The Authority shall punctually pay or cause to be paid the principal of and interest and premium (if any) 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, but only out of Revenues and other assets pledged for such payment as provided in the Indenture.

Extension of Payment of Bonds

The Authority 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 claims for interest by the purchase of such Bonds 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 in the Indenture shall be deemed to limit the right of the Authority 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 the Bonds.

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Against Encumbrances

The Authority shall not create, or permit the creation of, any pledge, lien, charge or other encumbrance upon the Revenues and other assets pledged or assigned under the Indenture while any of the Bonds are Outstanding, except the pledge and assignment created by the Indenture. Subject to this limitation, the Authority expressly reserves the right to enter into one or more other indentures for any of its corporate purposes, and reserves the right to issue other obligations for such purposes.

Power to Issue Bonds and Make Pledge Assignments

The Authority is duly authorized pursuant to law to issue the Bonds and to enter into the Indenture and to pledge and assign the Revenues and other assets purported to be pledged and assigned, respectively, under the Indenture in the manner and to the extent provided in the Indenture. The Bonds and the provisions of the Indenture are and will be the legal, valid and binding special obligations of the Authority in accordance with their terms, and the Authority and the Trustee shall at all times, subject to the provisions of the Indenture and to the extent permitted by law, defend, preserve and protect said pledge and assignment of Revenues and other assets and all the rights of the Bond Owners under the Indenture against all claims and demands of all persons whomsoever.

Accounting Records and Financial Statements

The Trustee shall at all times keep, or cause to be kept, proper books of record and account, prepared in accordance with corporate trust industry standards, in which complete and accurate entries shall be made of all transactions made by it relating to the proceeds of Bonds, the Revenues, the Lease Agreement and all funds and accounts established pursuant to the Indenture. Such books of record and account shall be available for inspection by the Authority and the City, during business hours, upon reasonable notice, and under reasonable circumstances. The Trustee shall furnish the Authority a monthly cash transaction statements which include detail for all investment transactions effected by the Trustee or brokers selected by the Authority, provided that the Trustee shall not be obligated to deliver any accounting of any fund or account that (a) has a balance of zero and (b) has not had any activity since the last reporting date. Upon the Authority’s election, such statements will be delivered via the Trustee’s online service and upon electing such service, paper statements will be provided only upon request. The Authority waives the right to receive brokerage confirmations of security transactions effected by the Trustee as they occur, to the extent permitted by law. The Authority further understands that trade confirmations for securities transactions effected by the Trustee will be available upon request and at no additional cost and other trade confirmations may be obtained from the applicable broker.

Additional Obligations

The Authority may issue additional bonds, notes or other indebtedness which are payable out of the Revenues in whole or in part pursuant to the Indenture for the purpose of financing any construction for any other municipal purpose, so long as no Event of Default under the Indenture has occurred and is continuing and provided that the conditions of the Lease Agreement have been satisfied.

Lease Agreement

Subject to the provisions of the Indenture, the Trustee shall promptly collect all amounts due from the City pursuant to the Lease Agreement. Subject to the provisions of the Indenture, the Trustee shall enforce, and take all steps, actions and proceedings which the Trustee determines to be reasonably necessary for the enforcement of all of its rights thereunder as assignee of the Authority and for the enforcement of all of the obligations of the City under the Lease Agreement.

Waiver of Laws

The Authority shall not at any time insist upon or plead in any manner whatsoever, or claim or take the benefit or advantage of, any stay or extension law now or at any time, in force that may affect the covenants and

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agreements contained in the Indenture or in the Bonds, and all benefit or advantage of any such law or laws is expressly waived by the Authority to the extent permitted by law.

Further Assurances

The Authority will make, execute and deliver any and all such further indentures, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of the Indenture and for the better assuring and confirming the rights and benefits provided in the Indenture to the Bond Owners.

Leased Premises

If an event of abatement occurs pursuant to the Lease Agreement, the City shall use its best efforts to the extent permissible under the laws of the State of California to make all Base Rental Payments in excess of the amount of rental interruption insurance, if necessary, in order to ensure the reconstruction, repair, restoration, modification or improvement of the Leased Premises.

Events of Default

The following events shall be Events of Default under the Indenture:

(a) Default in the due and punctual payment of the principal of any Bonds when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption, by acceleration, or otherwise.

(b) Default in the due and punctual payment of any installment of interest on any Bonds when and as the same shall become due and payable.

(c) Default by the Authority in the observance of any of the other covenants, agreements or conditions on its part in the Indenture or in the Bonds contained, if such default shall have continued for a period of thirty (30) days after written notice thereof, specifying such default and requiring the same to be remedied, shall have been given to the Authority by the Trustee; provided, however, that if in the reasonable opinion of the Authority the default stated in the notice can be corrected, but not within such thirty (30) day period, such default shall not constitute an Event of Default under the Indenture if the Authority shall commence to cure such default within such sixty (60) day period and thereafter diligently and in good faith cure such failure in a reasonable period of time.

(d) The occurrence and continuation of an event of default under and as defined in the Lease Agreement.

No Acceleration Upon Event of Default

If any Event of Default shall occur there shall not be any right on the part of the Trustee or the Bondholders to declare the principal of all of the Bonds then Outstanding, and the interest accrued thereon, to be due and payable immediately.

Application of Revenues and Other Funds After Default

Notwithstanding anything to the contrary contained in the Indenture, if an Event of Default shall occur and be continuing, all Revenues and any other funds then held or thereafter received by the Trustee under any of the provisions of the Indenture shall be applied by the Trustee as follows and in the following order:

(a) To the payment of any expenses necessary in the opinion of the Trustee to protect the interests of the Owners of the Bonds and payment of reasonable fees, charges and expenses of the Trustee (including reasonable fees and disbursements of its counsel) incurred in and about the performance of its powers and duties under the Indenture;

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(b) To the payment of the principal of and interest then due on the Bonds (upon presentation of the Bonds to be paid, and stamping or otherwise noting thereon of the payment if only partially paid, or surrender thereof if fully paid) in accordance with the provisions of the Indenture, as follows:

First. To the payment to the persons entitled thereto of all installments of interest then due in the order of the maturity of such installments, and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto, without any discrimination or preference; and

Second. To the payment to the persons entitled thereto of the unpaid principal of any Bonds which shall have become due, whether at maturity or by acceleration or redemption, with interest on the overdue principal at the rate borne by the respective Bonds (to the extent permitted by law), and, if the amount available shall not be sufficient to pay in full all the Bonds, together with such interest, then to the payment thereof ratably, according to the amounts of principal due on such date to the persons entitled thereto, without any discrimination or preference.

Trustee to Represent Bond Owners

The Trustee is irrevocably appointed under the Indenture (and the successive respective Owners 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 Owners of the Bonds for the purpose of exercising and prosecuting on their behalf such rights and remedies as may be available to such Owners under the provisions of the Bonds, the Indenture and applicable provisions of any 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 Bond Owners, the Trustee in its discretion may, and upon the written request of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding, and upon being indemnified to its satisfaction therefor, the Trustee shall, proceed to protect or enforce its rights or the rights of such Owners by such appropriate action, suit, mandamus or other proceedings as it shall deem 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 in the Indenture, or in aid of the execution of any power granted in the Indenture, or for the enforcement of any other appropriate legal or equitable right or remedy vested in the Trustee or in such Owners under the Bonds, the Indenture or any other law. Upon instituting such proceeding, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver of the Revenues and other assets pledged under the Indenture, pending such proceedings. 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 Owners of such Bonds, subject to the provisions of the Indenture.

Bond Owners’ Discretion of Proceedings

Anything in the Indenture to the contrary notwithstanding, the Owners of a majority in aggregate principal amount 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 indemnification of the Trustee to its reasonable satisfaction, to direct the method of conducting all remedial proceedings taken by the Trustee under the Indenture, provided that such direction shall not be otherwise than in accordance with law and the provisions of the Indenture, and that the Trustee shall have the right to decline to follow any such direction which in the opinion of the Trustee would expose it to liability.

Limitation on Bond Owners’ Right to Sue

Notwithstanding any other provision in the Indenture, no Owner of any Bonds 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 Lease Agreement or any other applicable law with respect to such Bonds, unless (a) such Owner shall have given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a majority in aggregate principal amount of the Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers granted before by the Indenture or to institute such suit, action or proceeding in its own name; (c) such Owner or Owners shall have tendered to the Trustee reasonable indemnity against the costs,

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expenses and liabilities to be incurred in compliance with such request; (d) the Trustee shall have failed to comply with such request for a period of sixty (60) days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee; and (e) no direction inconsistent with such written request shall have been given to the Trustee during such sixty (60) day period by the Owners of a majority in aggregate principal amount of the Bonds then Outstanding.

Such notification, request, tender of indemnity and refusal or omission are declared by the Indenture, in every case, to be conditions precedent to the exercise by any Owner of Bonds of any remedy under the Indenture or under law; it being understood and intended that no one or more Owners of Bonds shall 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 Owners of Bonds, or to enforce any right under the Bonds, the Indenture, the Lease Agreement or other applicable law with respect to the Bonds, except in the manner provided in the Indenture, and that all proceedings at law or in equity to enforce any such right shall be instituted, had and maintained in the manner provided in the Indenture and for the benefit and protection of all Owners of the Outstanding Bonds, subject to the provisions of the Indenture.

Absolute Obligation of Authority

Nothing in the Indenture or in the Bonds contained shall affect or impair the obligation of the Authority, which is absolute and unconditional, to pay the principal of and interest and premium (if any) on the Bonds to the respective Owners of the Bonds at their respective dates of maturity, or upon call for redemption, as provided in the Indenture, but only out of the Revenues and other assets pledged in the Indenture therefor, or affect or impair the right of such Owners, which is also absolute and unconditional, to enforce such payment by virtue of the contract embodied in the Bonds.

Termination of Proceedings

In case any proceedings taken by the Trustee or any one or more Bond Owners on account of any Event of Default shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Trustee or the Bond Owners, then in every such case the Authority, the Trustee and the Bond Owners, subject to any determination in such proceedings, shall be restored to their former positions and rights under the Indenture, severally and respectively, and all rights, remedies, powers and duties of the Authority, the Trustee and the Bond Owners shall continue as though no such proceedings had been taken.

Remedies Not Exclusive

No remedy conferred upon or reserved in the Indenture to the Trustee or to the Owners of the Bonds is intended to be exclusive of any other remedy or remedies, and each and every such remedy, to the extent permitted by law, shall be cumulative and in addition to any other remedy given under the Indenture or now or after the execution of the Indenture existing at law or in equity or otherwise.

No Waiver of Default

No delay or omission of the Trustee or of any Owner of the Bonds to exercise any right or power arising upon the occurrence of any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein; and every power and remedy given by the Indenture to the Trustee or to the Owners of the Bonds may be exercised from time to time and as often as may be deemed expedient.

Insurer’s Provisions Regarding Events of Default

(a) Consent of BAM in Addition to Bondholder Consent. Whenever the Indenture requires the consent of holders of Insured Bonds, the Insurer’s consent shall also be required. In addition, any amendment, supplement, modification to, or waiver of, any of the Security Documents that adversely affects the rights or interests of the Insurer shall be subject to the prior written consent of the Insurer.

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(b) Insolvency. Any reorganization or liquidation plan with respect to the Authority or the City must be acceptable to the Insurer. The Trustee and each owner of the Insured Bonds hereby appoint the Insurer as their agent and attorney-in-fact with respect to the Insured Bonds and agree that the Insurer may at any time during the continuation of any proceeding by or against the Authority or the City under the United States Bankruptcy Code or any other applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (an “Insolvency Proceeding”) direct all matters relating to such Insolvency Proceeding, including without limitation, (A) all matters relating to any claim or enforcement proceeding in connection with an Insolvency Proceeding (a “Claim”), (B) the direction of any appeal of any order relating to any Claim, (C) the posting of any surety, supersedeas or performance bond pending any such appeal, and (D) the right to vote to accept or reject any plan of adjustment. In addition, the Trustee and each owner of the Insured Bonds delegate and assign to the Insurer, to the fullest extent permitted by law, the rights of the Trustee and each owner of the Insured Bonds with respect to the Insured Bonds in the conduct of any Insolvency Proceeding, including, without limitation, all rights of any party to an adversary proceeding or action with respect to any court order issued in connection with any such Insolvency Proceeding.

(c) Control by the Insurer Upon Default. Anything in the Indenture or the Lease Agreement to the contrary notwithstanding, upon the occurrence and continuance of a default or an event of default, the Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the holders of the Insured Bonds or the Trustee for the benefit of the holders of the Insured Bonds under the Indenture and the Lease Agreement. No default or event of default may be waived without the Insurer’s written consent.

(d) The Insurer as Owner. Upon the occurrence and continuance of a default or an event of default, the Insurer shall be deemed to be the sole owner of the Insured Bonds for all purposes under the Indenture and the Lease Agreement, including, without limitations, for purposes of exercising remedies and approving amendments.

(e) Grace Period for Payment Defaults. No grace period shall be permitted for payment defaults on the Insured Bonds. No grace period for a covenant default shall exceed 30 days without the prior written consent of the Insurer.

(f) Special Provisions for Insurer Default. If an Insurer Default shall occur and be continuing, then, notwithstanding anything in paragraphs (a)-(e) above to the contrary, (1) if at any time prior to or following an Insurer Default, the Insurer has made payment under the Policy, to the extent of such payment BAM shall be treated like any other holder of the Insured Bonds for all purposes, including giving of consents, and (2) if the Insurer has not made any payment under the Policy, the Insurer shall have no further consent rights until the particular Insurer Default is no longer continuing or the Insurer makes a payment under the Policy, in which event, the foregoing clause (1) shall control. For purposes of this paragraph, “Insurer Default” means: (A) the Insurer has failed to make any payment under the Policy when due and owing in accordance with its terms; or (B) the Insurer shall (i) voluntarily commence any proceeding or file any petition seeking relief under the United States Bankruptcy Code or any other Federal, state or foreign bankruptcy, insolvency or similar law, (ii) consent to the institution of or fail to controvert in a timely and appropriate manner, any such proceeding or the filing of any such petition, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator or similar official for such party or for a substantial part of its property, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, or (vi) take action for the purpose of effecting any of the foregoing; or (C) any state or federal agency or instrumentality shall order the suspension of payments on the Policy or shall obtain an order or grant approval for the rehabilitation, liquidation, conservation or dissolution of the Insurer (including without limitation under the New York Insurance Law).

The Trustee

Duties, Immunities and Liabilities of Trustee

(a) The Trustee shall, prior to an Event of Default, and after the curing of all Events of Default which may have occurred, perform such duties and only such duties as are expressly and specifically set forth in the Indenture and no implied duties or covenants shall be read into the Indenture against the Trustee. The Trustee shall, during the existence of any Event of Default (which has not been cured), exercise such of the rights and powers vested in it by the Indenture, and use the same degree of care and skill in its exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.

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(b) The Authority may remove the Trustee at any time unless an Event of Default shall have occurred and then be continuing, and the Authority shall remove the Trustee if at any time requested to do so by the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding (or their attorneys duly authorized in writing) or if at any time the Trustee shall cease to be eligible in accordance with the Indenture, or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or its property shall be appointed, or any public officer shall take control or charge of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, in each case by giving written notice of such removal to the Trustee and the City and thereupon shall appoint a successor Trustee by an instrument in writing. Any such removal shall be made upon at least thirty (30) days’ prior written notice to the Trustee. Upon giving such written notice of removal, the Authority shall promptly appoint a successor Trustee by an instrument in writing.

(c) The Trustee may at any time resign by giving written notice of such resignation to the Authority, to the City, and by giving the Bond Owners notice of such resignation by mail at the addresses shown on the Registration Books. Upon receiving such notice of resignation, the Authority shall promptly appoint a successor Trustee by an instrument in writing.

(d) Any removal or resignation of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of appointment by the successor Trustee; provided, however, that no removal, resignation or termination of the Trustee shall take effect until a successor shall be appointed. If no successor Trustee shall have been appointed and have accepted appointment within forty five (45) days of giving notice of removal or notice of resignation as aforesaid, the Authority shall, and the Trustee may, petition any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. Any successor Trustee appointed under the Indenture shall signify its acceptance of such appointment by executing and delivering to the Authority and to its predecessor Trustee a written acceptance thereof, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become vested with all the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named Trustee; but, nevertheless at the Written Request of the Authority or the request of the successor Trustee, such predecessor Trustee shall execute and deliver any and all instruments of conveyance or further assurance and do such other things as may reasonably be required for more fully and certainly vesting in and confirming to such successor Trustee all the right, title and interest of such predecessor Trustee in and to any property held by it under the Indenture and shall pay over, transfer, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions set forth in the Indenture. Upon request of the successor Trustee, the Authority shall execute and deliver any and all instruments as may be reasonably required for more fully and certainly vesting in and confirming to such successor Trustee all such moneys, estates, properties, rights, powers, trusts, duties and obligations. Upon acceptance of appointment by a successor Trustee as provided in the Indenture, the Authority shall mail or cause the successor Trustee to mail a notice of the succession of such Trustee to the trusts under the Indenture to the Bond Owners at the addresses shown on the Registration Books. If the Authority fails to mail such notice within fifteen (15) days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the Authority.

(e) Any Trustee appointed under the Indenture shall be a corporation or association organized and doing business under the laws of any state or the United States of America or the District of Columbia, authorized under such laws to exercise corporate trust powers, which shall have (or, in the case of a corporation included in a bank holding company system, the related bank holding company shall have) a combined capital and surplus of at least Two Hundred Fifty Million Dollars ($250,000,000), and subject to supervision or examination by federal or State agency, so long as any Bonds are Outstanding. If such corporation publishes a report of condition at least annually pursuant to law or to the requirements of any supervising or examining agency above referred to then for the purpose of the Indenture, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of the Indenture, the Trustee shall resign immediately in the manner and with the effect specified in the Indenture.

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Merger or Consolidation

Any bank or trust company into which the Trustee may be merged or converted or with which it may be consolidated or any bank or trust company resulting from any merger, conversion or consolidation to which it shall be a party or any bank or trust company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided such bank or trust company shall be eligible under the Indenture shall be the successor to such Trustee, without the execution or filing of any paper or any further act, anything in the Indenture to the contrary notwithstanding.

Liability of Trustee

(a) The recitals of facts in the Indenture and in the Bonds contained shall be taken as statements of the Authority and not of the Trustee, and the Trustee shall not assume responsibility for the correctness of the same, or make any representations as to the validity or sufficiency of the Indenture, the Bonds or the Lease Agreement, nor shall the Trustee incur any responsibility in respect thereof, other than as expressly stated in the Indenture in connection with the respective duties or obligations in the Indenture or in the Bonds assigned to or imposed upon it. The Trustee shall, however, be responsible for its representations contained in its certificate of authentication on the Bonds. The Trustee shall not be liable in connection with the performance of its duties under the Indenture, except for its own negligence or willful misconduct. The Trustee may become the Owner of Bonds with the same rights it would have if it were not Trustee, and, to the extent permitted by law, may act as depository for and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Bond Owners, whether or not such committee shall represent the Owners of a majority in principal amount of the Bonds then Outstanding.

(b) The Trustee shall not be liable for any error of judgment made in good faith by a responsible officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts.

(c) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under the Indenture.

(d) The Trustee shall not be liable for any action taken by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by the Indenture.

(e) The Trustee shall not be deemed to have knowledge of any Event of Default under the Indenture, or any other event which, with the passage of time, the giving of notice, or both, would constitute an Event of Default under the Indenture unless and until it shall have actual knowledge thereof, or shall have received written notice thereof, at its Office. Except as otherwise expressly provided in the Indenture, the Trustee shall not be bound to ascertain or inquire as to the performance or observance by the Authority or the City of any of the terms, conditions, covenants or agreements in the Indenture, under the Lease Agreement or of any of the documents executed in connection with the Bonds, or as to the existence of an Event of Default or an event which would, with the giving of notice, the passage of time, or both, constitute an Event of Default. The Trustee shall not be responsible for the validity, effectiveness or priority of any collateral given to or held by it. Without limiting the generality of the foregoing, the Trustee shall not be required to ascertain or inquire as to the performance or observance by the City and the Authority of the terms, conditions, covenants or agreements set forth in the Lease Agreement, other than the covenants of the City to pay Miscellaneous Rent to the Trustee when due and to file with the Trustee, when due, such reports and certifications as the City is required to file with the Trustee thereunder.

(f) No provision of the Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties under the Indenture, or in the exercise of any of its rights or powers, if it is not assured to its satisfaction that the repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

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(g) The Trustee may execute any of the trusts or powers under the Indenture or perform any duties under the Indenture either directly or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it under the Indenture.

(h) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by the Indenture at the request or direction of Owners pursuant to the Indenture, unless such Owners shall have offered to the Trustee security or indemnity acceptable to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. No permissive power, right or remedy conferred upon the Trustee under the Indenture shall be construed to impose a duty to exercise such power, right or remedy.

(i) Whether or not therein expressly so provided, every provision of the Indenture and the Lease Agreement relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of the Indenture.

(j) The Trustee shall not be concerned with or accountable to anyone for the subsequent use or application of any moneys which shall be released or withdrawn in accordance with the provisions of the Indenture.

(k) The Trustee makes no representation or warranty, expressed or implied as to the title, value, design, compliance with specifications or legal requirements, quality, durability, operation, condition, merchantability or fitness for any particular purpose for the use contemplated by the Authority or the City of the Leased Premises. In no event shall the Trustee be liable for incidental, indirect, special or consequential damages in connection with or arising from the Lease Agreement or the Indenture for the existence, furnishing or use of the Leased Premises.

(l) The Trustee may establish such funds and accounts under the Indenture as it deems necessary or appropriate to perform its obligations under the Indenture.

Right to Rely on Documents

The Trustee shall be protected in acting upon any notice, resolution, request, requisition, consent, order, certificate, report, opinion, bonds or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Trustee may consult with counsel, who may be counsel of or to the Authority, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it under the Indenture in good faith and in accordance therewith.

The Trustee may treat the Owners of the Bonds appearing in the Registration Books as the absolute owners of the Bonds for all purposes and the Trustee shall not be affected by any notice to the contrary.

Whenever in the administration of the trusts imposed upon it by the Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action under the Indenture, such matter (unless other evidence in respect thereof be specifically prescribed in the Indenture) may be deemed to be conclusively proved and established by a Written Certificate, Written Request or Written Requisition of the Authority or the City, and such Written Certificate, Written Request or Written Requisition shall be full warrant to the Trustee for any action taken or suffered in good faith under the provisions of the Indenture in reliance upon such Written Certificate, Written Request or Written Requisition, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may deem reasonable.

If the Trustee acts on any communication (including, but not limited to, communication with respect to the delivery of securities or the wire transfer of funds) sent by electronic transmission, the Trustee, absent negligence or willful misconduct, will not be responsible or liable in the event such communication is not an authorized or authentic communication of the party involved or is not in the form the party involved, sent or intended to send (whether due to fraud, distortion or otherwise). The Trustee will not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee’s reliance upon and compliance with such instructions notwithstanding the fact that such instructions conflict or are inconsistent with a subsequent written instruction. The Authority

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agrees to assume all risks arising out of the use of such electronic transmission to submit instructions and directions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized instructions, and the risk of interception and misuse by third parties.

The Trustee shall not be considered in breach of or in default in its obligations under the Indenture and will not incur any liability for not performing any act or fulfilling any duty, obligation or responsibility under the Indenture, or progress in respect thereto in the event of enforced delay (“unavoidable delay”) in the performance of such obligations due to unforeseeable causes beyond its control and without its fault or negligence, including, but not limited to, natural catastrophes, civil or military disturbances, loss or malfunctions of utilities, any act of God or war, terrorism or the unavailability of the Federal Reserve Bank or other wire or communication facility, epidemics, quarantine restrictions, strikes, riot, or any similar event and/or occurrences beyond the control of the Trustee.

Preservation and Inspection of Documents

All documents received by the Trustee under the provisions of the Indenture shall be retained in its respective possession pursuant to its records retention policies and shall be subject at all reasonable times to the inspection of the Authority, the City and any Bond Owner, and their agents and representatives duly authorized in writing, at reasonable hours and under reasonable conditions.

Compensation and Indemnification

The Authority shall pay to the Trustee (solely from Miscellaneous Rent) from time to time the compensation for all services rendered under the Indenture and also all reasonable expenses and disbursements, incurred in and about the performance of its powers and duties under the Indenture.

The Authority shall indemnify, defend and hold harmless the Trustee and its officers, directors, agents and employees, against any loss, liability or expense incurred without negligence or willful misconduct on its part, arising out of or in connection with the acceptance or administration of this trust, including costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers under the Indenture. As security for the performance of the obligations of the Authority under the Indenture and the obligation of the City to pay Miscellaneous Rent to the Trustee, the Trustee shall have a lien prior to the lien of the Bonds upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of or interest on particular Bonds. The rights of the Trustee and the obligations of the Authority under the Indenture shall survive the discharge of the Bonds and the Indenture.

Modification or Amendment of the Indenture

Amendments Permitted

(a) The Indenture and the rights and obligations of the Authority and of the Owners of the Bonds and of the Trustee may be modified or amended from time to time and at any time by an indenture or indentures supplemental thereto, which the Authority and the Trustee may enter into when the written consents of the Owners of a majority in aggregate principal amount of all Bonds then Outstanding and the Insurer, shall have been filed with the Trustee. No such modification or amendment shall (i) extend the fixed maturity of any Bonds, or reduce the amount of principal thereof or extend the time of payment, or change the method of computing the rate of interest thereon, or extend the time of payment of interest thereon, without the consent of the Owner of each Bond so affected, or (ii) reduce the aforesaid percentage of Bonds the consent of the Owners of which is required to effect any such modification or amendment, or permit the creation of any lien on the Revenues and other assets pledged under the Indenture prior to or on a parity with the lien created by the Indenture except as permitted in the Indenture, or deprive the Owners of the Bonds of the lien created by the Indenture on such Revenues and other assets (except as expressly provided in the Indenture), without the consent of the Owners of all of the Bonds then Outstanding and the Insurer. It shall not be necessary for the consent of the Bond Owners to approve the particular form of any Supplemental Indenture, but it shall be sufficient if such consent shall approve the substance thereof.

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(b) The Indenture and the rights and obligations of the Authority, of the Trustee and the Owners of the Bonds may also be modified or amended from time to time and at any time by a Supplemental Indenture, which the Authority and the Trustee may enter into without the consent of any Bond Owners or the Insurer, if the Trustee has been furnished an opinion of counsel that the provisions of such Supplemental Indenture shall not materially adversely affect the interests of the Owners of the Bonds or the Insurer, including, without limitation, for any one or more of the following purposes:

(i) to add to the covenants and agreements of the Authority in the Indenture contained other covenants and agreements thereafter to be observed, to pledge or assign additional security for the Bonds (or any portion thereof), or to surrender any right or power reserved in the Indenture to or conferred upon the Authority;

(ii) 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 Authority may deem necessary or desirable, provided that such modification or amendment does not materially adversely affect the interests of the Bond Owners, in the opinion of Bond Counsel filed with the Trustee;

(iii) to modify, amend or supplement the Indenture in such manner as to permit the qualification under the Trust Indenture Act of 1939, as amended, or any similar federal statute in effect after the execution of the Indenture, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute; and

(iv) to facilitate the issuance of additional bonds of the Authority secured by Base Rental Payments of the City pursuant to the Lease Agreement.

(c) The Trustee may in its discretion, but shall not be obligated to, enter into any such Supplemental Indenture authorized by the Indenture which materially adversely affects the Trustee’s own rights, duties or immunities under the Indenture or otherwise.

(d) Prior to the Trustee entering into any Supplemental Indenture under the Indenture, there shall be delivered to the Trustee an opinion of Bond Counsel stating, in substance, that such Supplemental Indenture has been adopted in compliance with the requirements of the Indenture and that the adoption of such Supplemental Indenture will not, in and of itself, adversely affect the exclusion from gross income for purposes of federal income taxes of interest on the Bonds.

Effect of Supplemental Indenture

Upon the execution of any Supplemental Indenture pursuant to the Indenture shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under the Indenture of the Authority, the Trustee and all Owners of Bonds Outstanding shall thereafter be determined, exercised and enforced subject in all respects to such modification and amendment, and all the terms and conditions of any such Supplemental Indenture shall be deemed to be part of the terms and conditions of the Indenture for any and all purposes.

Endorsement of Bonds; Preparation of New Bonds

Bonds delivered after the execution of any Supplemental Indenture pursuant to the Indenture may, and if the Trustee so determines shall, bear a notation by endorsement or otherwise in form approved by the Authority and the Trustee as to any modification or amendment provided for in such Supplemental Indenture, and, in that case, upon demand on the Owner of any Bonds Outstanding at the time of such execution and presentation of his Bonds for the purpose at the Office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, a suitable notation shall be made on such Bonds. If the Supplemental Indenture shall so provide, new Bonds so modified as to conform, in the opinion of the Authority and the Trustee, to any modification or amendment contained in such Supplemental Indenture, shall be prepared and executed by the Authority and authenticated by the Trustee, and upon demand on the Owners of any Bonds then Outstanding shall be exchanged at the Office of the

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Trustee, without cost to any Bond Owner, for Bonds then Outstanding, upon surrender for cancellation of such Bonds, in equal aggregate principal amount of the same series and maturity.

Amendment of Particular Bonds

The provisions of the Indenture shall not prevent, any Bond Owner from accepting any amendment as to the particular Bonds held by him.

Defeasance

Discharge of Indenture

Any or all of the Outstanding Bonds may be paid by the Authority in any of the following ways, provided that the Authority also pays or causes to be paid any other sums payable under the Indenture by the Authority:

(a) by paying or causing to be paid the principal of and interest and premium (if any) on such Bonds, as and when the same become due and payable;

(b) by depositing with the Trustee, in trust, at or before maturity, money or securities in the necessary amount (as provided in the Indenture) to pay or redeem such Bonds; or

(c) by delivering to the Trustee, for cancellation by it, all of such Bonds.

If the Authority shall also pay or cause to be paid all other sums payable under the Indenture by the Authority, then and in that case, at the election of the Authority (evidenced by a Written Certificate of the Authority, filed with the Trustee, signifying the intention of the Authority to discharge all such indebtedness and the Indenture), and notwithstanding that any of such Bonds shall not have been surrendered for payment, the Indenture and the pledge of Revenues and other assets made under the Indenture with respect to such Bonds and all covenants, agreements and other obligations of the Authority under the Indenture with respect to such Bonds shall cease, terminate, become void and be completely discharged and satisfied. In such event, upon the Written Request of the Authority, the Trustee shall execute and deliver to the Authority 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 City all moneys or securities or other property held by it pursuant to the Indenture which are not required for the payment or redemption of any of such Bonds not theretofore surrendered for such payment or redemption.

Discharge of Liability on Bonds

Upon the deposit with the Trustee, in trust, at or before maturity, of money or securities in the necessary amount (as provided in the Indenture) to pay or redeem any Outstanding Bonds (whether upon or prior to the maturity or the redemption date of such Bonds), provided that, if such Bonds are to be redeemed prior to maturity, notice of such redemption shall have been given as provided in the Indenture or provision satisfactory to the Trustee shall have been made for the giving of such notice, then all liability of the Authority in respect of such Bonds shall cease, terminate and be completely discharged, and the Owners thereof shall thereafter be entitled only to payment out of such money or securities deposited with the Trustee as aforesaid for their payment, subject, however, to the provisions of the Indenture.

The Authority may at any time surrender to the Trustee for cancellation by it any Bonds previously issued and delivered, which the Authority may have acquired in any manner whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired.

Deposit of Money or Securities with the Trustee

Whenever in the Indenture it is provided or permitted that there be deposited with or held in trust by the Trustee money or securities in the necessary amount to pay or redeem any Bonds, the money or securities so to be

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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 which are to be redeemed prior to maturity and in respect of which notice of such redemption shall have been given as provided in the Indenture or provision satisfactory to the Trustee shall have been made for the giving of such notice, the amount to be deposited or held shall be the principal amount of such Bonds and all unpaid interest thereon to the redemption date; or

(b) non-callable Federal Securities, the principal of and interest on which when due will, in the written opinion of an Independent Accountant filed with the City, the Authority and the Trustee, provide money sufficient to pay the principal of and interest and premium (if any) on the Bonds to be paid or redeemed, as such principal, interest and premium become due, provided that in the case of Bonds which are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in in the Indenture or provision satisfactory to the Trustee shall have been made for the giving of such notice;

provided, in each case, that (i) the Trustee shall have been irrevocably instructed (by the terms of the Indenture or by Written Request of the Authority) to apply such money to the payment of such principal, interest and premium (if any) with respect to such Bonds, and (ii) the Authority shall have delivered to the Trustee an opinion of Bond Counsel to the effect that such Bonds have been discharged in accordance with the Indenture (which opinion may rely upon and assume the accuracy of the Independent Accountant’s opinion referred to above).

At least three (3) Business Days prior to any defeasance with respect to the Insured Bonds, the Authority shall deliver to the Insurer draft copies of an escrow agreement, an opinion of bond counsel regarding the validity and enforceability of the escrow agreement and the defeasance of the Insured Bonds, a verification report (a “Verification Report”) prepared by a nationally recognized independent financial analyst or firm of certified public accountants regarding the sufficiency of the escrow fund. Such opinion and Verification Report shall be addressed to the Insurer and shall be in form and substance satisfactory to the Insurer. In addition, the escrow agreement shall provide that:

(a) Any substitution of securities following the execution and delivery of the escrow agreement shall require the delivery of a Verification Report and the prior written consent of BAM, which consent will not be unreasonably withheld;

(b) The Authority will not exercise any prior optional redemption of Insured Bonds secured by the escrow agreement or any other redemption other than mandatory sinking fund redemptions unless (i) the right to make any such redemption has been expressly reserved in the escrow agreement and such reservation has been disclosed in detail in the official statement for the refunding bonds, and (ii) as a condition to any such redemption there shall be provided to the Insurer a Verification Report as to the sufficiency of escrow receipts without reinvestment to meet the escrow requirements remaining following any such redemption; and

(c) The Authority shall not amend the escrow agreement or enter into a forward purchase agreement or other agreement with respect to rights in the escrow without the prior written consent of the Insurer.

Unclaimed Funds

Notwithstanding any provisions of the Indenture, and subject to applicable provisions of State law, any moneys held by the Trustee in trust for the payment of the principal of, or interest on, any Bonds and remaining unclaimed for two (2) years after the principal of such Bonds has become due and payable (whether at maturity or upon call for redemption or by acceleration as provided in the Indenture), if such moneys were so held at such date, or two (2) years after the date of deposit of such moneys if deposited after said date when such Bonds became due and payable, shall be repaid to the Authority free from the trusts created by the Indenture upon receipt of a Written Request of the Authority, 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 Authority as aforesaid, the Trustee may (at the cost of the City) first mail to the Owners of Bonds which have not yet been paid, at the addresses shown on the

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Registration Books, 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 Authority of the moneys held for the payment thereof.

Miscellaneous

Liability of Authority Limited to Revenues

Notwithstanding anything in the Indenture or in the Bonds contained, the Authority shall not be required to advance any moneys derived from any source other than the Revenues and other assets pledged under the Indenture for any of the purposes in the Indenture mentioned, whether for the payment of the principal of or interest on the Bonds or for any other purpose of the Indenture. Nevertheless, the Authority may, but shall not be required to, advance for any of the purposes of the Indenture any funds of the Authority which may be made available to it for such purposes.

Limitation of Rights to Parties and Bond Owners

Nothing in the Indenture or in the Bonds expressed or implied is intended or shall be construed to give to any person other than the Authority, the Trustee, the City and the Owners of the Bonds, any legal or equitable right, remedy or claim under or in respect of the Indenture or any covenant, condition or provision therein or contained in the Indenture; and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the Authority, the Trustee, the City and the Owners of the Bonds.

Funds and Accounts

Any fund or account required by the Indenture to be established and maintained by the Trustee may be established and maintained in the accounting records of the Trustee, either as a fund or an account, and may, for the purposes of such records, any audits thereof and any reports or statements with respect thereto, be treated either as a fund or as an account; but all such records with respect to all such funds and accounts shall at all times be maintained in accordance with corporate trust industry standards to the extent practicable, and with due regard for the requirements of the Indenture and for the protection of the security of the Bonds and the rights of every Owner thereof.

Waiver of Notice; Requirement of Mailed Notice

Whenever in the Indenture the giving of notice by mail or otherwise is required, the giving of such notice may be waived in writing by the person entitled to receive such notice and in any such case the giving or receipt of such notice shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Whenever in the Indenture any notice shall be required to be given by mail, such requirement shall be satisfied by the deposit of such notice in the United States mail, postage prepaid, by first class mail.

Destruction of Bonds

Whenever in the Indenture provision is made for the cancellation by the Trustee and the delivery to the Authority of any Bonds, the Trustee shall, in lieu of such cancellation and delivery, destroy such Bonds and deliver a certificate of such destruction to the Authority.

Severability of Invalid Provision

If any one or more of the provisions contained in the Indenture or in the Bonds shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in the Indenture and such invalidity, illegality or unenforceability shall not affect any other provision of the Indenture, and the Indenture shall be construed as if such invalid or illegal or unenforceable provision had never been contained in the Indenture. The Authority declares that it would have entered into the Indenture and each and every other section, paragraph, sentence, clause or phrase of the Indenture

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and authorized the issuance of the Bonds pursuant thereto irrespective of the fact that any one or more sections, paragraphs, sentences, clauses or phrases of the Indenture may be held illegal, invalid or unenforceable.

The Insurer As Third Party Beneficiary

The Insurer is recognized as and shall be deemed to be a third party beneficiary of the Indenture and may enforce the provisions of the Indenture as if it were a party thereto.

Evidence of Rights of Bond Owners

Any request, consent or other instrument required or permitted by the Indenture to be signed and executed by Bond Owners may be in any number of concurrent instruments of substantially similar tenor and shall be signed or executed by such Bond Owners in person or by an agent or agents duly appointed in writing. Proof of the execution of any such request, consent or other instrument or of a writing appointing any such agent, or of the holding by any person of Bonds transferable by delivery, shall be sufficient for any purpose of the Indenture and shall be conclusive in favor of the Trustee and the Authority if made in the manner provided in the Indenture.

The fact and date of the execution by any person of any such request, consent or other instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying that the person signing such request, consent or other instrument acknowledged to him the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer.

The ownership of Bonds shall be proved by the Registration Books.

Any request, consent, or other instrument or writing of the Owner of any Bond shall bind every future Owner of the same Bond and the Owner of every Bond issued in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the Authority in accordance therewith or reliance thereon.

Disqualified Bonds

In determining whether the Owners of the requisite aggregate principal amount of Bonds have concurred in any demand, request, direction, consent or waiver under the Indenture, Bonds which are known by the Trustee to be owned or held by or for the account of the Authority or the City, 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 Authority or the City 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 for the purposes of this section 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 controlling or controlled by, or under direct or indirect common control with, the Authority or the City or any other obligor on the Bonds. 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.

Moneys Held for Particular Bonds

The money held by the Trustee for the payment of the interest or principal due on any date with respect to particular Bonds (or portions of Bonds in the case of Bonds redeemed in part only) shall, on and after such date and pending such payment, be set aside on its books and held in trust by it for the Owners of the Bonds entitled thereto, subject, however, to the provisions of the Indenture but without any liability for interest thereon.

Waiver of Personal Liability

No member, officer, agent or employee of the Authority shall be individually or personally liable for the payment of the principal of or interest or premium (if any) on the Bonds or be subject to any personal liability or

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accountability by reason of the issuance thereof; but nothing contained in the Indenture shall relieve any such member, officer, agent or employee from the performance of any official duty provided by law or by the Indenture.

AMENDED AND RESTATED LEASE AGREEMENT

DEFINITIONS

Definitions

Unless the context clearly otherwise requires or unless otherwise defined in the Lease Agreement, the capitalized terms in the Lease Agreement shall have the respective meanings specified in the Indenture. In addition, the following terms defined in the Lease Agreement and the following terms defined in the Lease Agreement shall, for all purposes of the Lease Agreement, have the respective meanings specified in the Lease Agreement.

“Base Rental Payments” means the amounts payable by the City pursuant to the Lease Agreement, including any prepayment thereof pursuant thereto and including any amounts payable upon a delinquency in the payment thereof.

“Base Rental Payment Date” means fifteen (15) days prior to any Interest Payment Date.

“Event of Default” means any of the events of default defined as such in the Lease Agreement.

“Facilities” means all of the buildings, improvements and facilities at any time situated on the Site and described in the Lease Agreement or amendment to the Lease Agreement and by this reference incorporated therein.

“Fiscal Year” means the twelve month period beginning on July 1 of any year and ending on June 30 of the next succeeding year, or any other twelve month period established by the City as its fiscal year pursuant to written notice filed with the Authority and the Trustee.

“Hazardous Substance” means any substance, pollutant or contamination included in such (or any similar) term under any federal, state or local statute, law, ordinance, code or regulation now in effect or hereafter enacted or amended.

“Indenture” means the Indenture of Trust dated as of December 1, 2021, by and between the Authority and the Trustee, together with any duly authorized and executed amendments thereto.

“Leased Premises” means the Site and Facilities subject to the provisions of the Lease Agreement.

“Miscellaneous Rent” means the amounts of additional rental which are payable by the City pursuant to the Lease Agreement.

“Permitted Encumbrances” means, as of any time: (a) liens for general ad valorem taxes and assessments, if any, not then delinquent, or which the City may permit to remain unpaid pursuant to the Lease Agreement; (b) the Lease Agreement, the Indenture and any other agreement or other document contemplated under the Lease Agreement to be recorded against the Leased Premises; (c) any right or claim of any mechanic, laborer, materialman, supplier or vendor not filed or perfected in the manner prescribed by law; (d) a first priority exclusive security interest in favor of each of Banc of America Public Capital Corp and Banc of America Leasing & Capital, LLC, and their respective successors and assigns, granted with respect to the equipment, fixtures and other goods and property located at the Leased Premises financed or refinanced pursuant to (i) the Tax-Exempt Equipment Lease/Purchase Agreement (Escrow Account) dated as of September 30, 2020, as supplemented, amended or restated, between Banc of America Public Capital Corp and its successors and assigns and the City and (ii) the Taxable Equipment Lease/Purchase Agreement (Escrow Account) dated as of September 30, 2020, as supplemented, amended or restated, between Banc of America Leasing & Capital, LLC and its successors and assigns and the City (including in each case related UCC personal property and fixture filing financing statements); and (e) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions

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or restrictions which exist on record and which the City certifies in writing will not materially impair the use of the Leased Premises for their intended purposes.

“Site” means all of the land described in the Lease Agreement.

“Term” means the time during which the Lease Agreement is in effect, as provided in the Lease Agreement.

“Trustee” means Zions Bancorporation, National Association or any successor thereto acting as Trustee pursuant to the Indenture.

REPRESENTATIONS, COVENANTS AND WARRANTIES

Representations, Covenants and Warranties of the City

The City makes the following covenants, representations and warranties to the Authority as of the date of the execution and delivery of the Lease Agreement:

(a) Due Organization and Existence. The City is a municipal corporation duly organized and validly existing under the laws of the State, has full legal right, power and authority under the laws of the State to enter into the Lease Agreement and to carry out and consummate all transactions contemplated thereby, and by proper action the City has duly authorized the execution and delivery of the Lease Agreement.

(b) Due Execution. The representatives of the City executing the Lease Agreement have been fully authorized to execute the same pursuant to a resolution duly adopted by the City Council of the City.

(c) Valid, Binding and Enforceable Obligations. The Lease Agreement has been duly authorized, executed and delivered by the City and constitutes the legal, valid and binding agreement of the City enforceable against the City in accordance with the terms of the Lease Agreement.

(d) No Conflicts. The execution and delivery of the Lease Agreement, the consummation of the transactions contemplated in the Lease Agreement and the fulfillment of or compliance with the terms and conditions thereof, do not and will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which the City is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the City, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially and adversely affect the consummation of the transactions contemplated by the Lease Agreement or the financial condition, assets, properties or operations of the City.

(e) Consents and Approvals. No consent or approval of any trustee or holder of any indebtedness of the City or of the voters of the City, and no consent, permission, authorization, order or license of, or filing or registration with, any governmental authority is necessary in connection with the execution and delivery of the Lease Agreement, or the consummation of any transaction contemplated therein, except as have been obtained or made and as are in full force and effect.

(f) No Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other governmental authority pending or, to the knowledge of the City after reasonable investigation, threatened against or affecting the City or the assets, properties or operations of the City which, if determined adversely to the City or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by or the validity of the Lease Agreement, or upon the financial condition, assets, properties or operations of the City, and the City is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default

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might have consequences that would materially and adversely affect the consummation of the transactions contemplated by the Lease Agreement or the financial conditions, assets, properties or operations of the City.

(g) Essentiality. The Leased Premises constitute property that is essential to carrying out the governmental functions of the City.

Covenants of City and Authority to the Insurer

(a) So long as the Policy is in effect and the Insurer is not in default in respect of its payment obligations thereunder, the Insurer shall be (i) deemed to be the sole and exclusive Owner of the Insured Bonds for purposes of all approvals, consents, waivers, institution of any action, and the direction of all remedies and (ii) entitled to direct and control the enforcement of all remedies granted under the Lease Agreement.

(b) Any amendment, modification or supplement to the Lease Agreement shall be subject to the prior written consent of the Insurer.

(c) The Insurer shall be recognized as being a third-party beneficiary under the Lease Agreement and may enforce any right, remedy or claim conferred upon, given or granted thereunder.

(d) No sublease, release, sale, disposition or substitution of the Leased Premises shall occur without the prior written consent of the Insurer. Without limiting the generality of the foregoing, no portion of the Leased Premises may be released following the partial prepayment of Base Rental Payments, the partial redemption of the Insured Bonds, or the exercise of a purchase option or similar right, unless in each case the Insurer shall have provided its prior written consent to such release.

(e) The Leased Premises shall be covered at all times by property and casualty insurance in an amount equal to the greater of the replacement value of the property or the principal amount of the Insured Bonds. Self-insurance and pooled insurance programs shall be subject to the prior written consent of the Insurer. Any blanket or umbrella insurance policies for property and casualty insurance shall not be permitted unless the Insurer otherwise consents. The Trustee shall be the beneficiary under such policy.

(f) The City shall, prior to or simultaneously with the issuance of the Insured Bonds, furnish a title insurance policy, in form and substance acceptable to the Insurer, from a title insurance company acceptable to the Insurer. The face amount of the title insurance policy shall not be less than the principal amount of the Insured Bonds. The Trustee shall be the beneficiary under such policy.

(g) The Leased Premises shall be covered at all times by rental interruption insurance in an amount equal to not less the two years’ worth of rental payments. The provider of such insurance shall be rated at least “A” by A.M. Best & Company. The Trustee shall be the beneficiary under such policy.

(h) If insurance or condemnation proceeds with respect to the Leased Premises are received, such proceeds shall be applied to replacement or restoration of the Leased Premises or to redemption of Insured Bonds; provided, however, that unless all outstanding Insured Bonds are to be redeemed from such amount, the prior written consent of the Insurer shall be required for any such redemption.

(i) Except for the Insured Bonds, the City shall not issue or incur, directly or indirectly, any additional certificates, notes, bonds or other indebtedness that are (i) payable from or secured by the Base Rental Payments payable under the Lease Agreement or (ii) secured by, or granted a lien on, the Leased Premises.

(j) No termination, assignment (other than to the Trustee in accordance with the Indenture), transfer or sublease of the Lease Agreement shall be permitted without the prior written consent of the Insurer.

(k) The City represents, warrants and covenants that the Leased Property are not located in the FEMA 100 year flood plain.

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(l) The City covenants and agrees to comply in all material respects with all laws applicable to the Leased Premises, including without limitation all local, State and federal environmental and Hazardous Substances laws, rules and regulations, and with any order of any jurisdiction over the Leased Premises. For purposes of this paragraph, “Hazardous Substances” means any substances, pollutants, wastes and contaminants now or hereafter included in such (or any similar) term under any federal, state or local ordinance, code or regulation now existing or hereafter enacted or amended.

(m) The provisions of this section shall control and supersede any conflicting or inconsistent provisions in the Lease Agreement.

Representations, Covenants and Warranties of Authority

The Authority makes the following covenants, representations and warranties to the City as of the date of the execution and delivery of the Lease Agreement:

(a) Due Organization and Existence. The Authority is a joint powers authority duly organized and existing under and by virtue of the laws of the State; has power to enter into the Lease Agreement and the Indenture; is possessed of full power to own and hold, improve and equip real and personal property, and to lease and lease back the same; and has duly authorized the execution and delivery of each of the aforesaid agreements and such agreements constitute the legal, valid and binding agreements of the Authority, enforceable against the Authority in accordance with their respective terms.

(b) Due Execution. The representatives of the Authority executing the Lease Agreement and the Indenture are fully authorized to execute the same pursuant to official action taken by the governing body of the Authority.

(c) Valid Binding and Enforceable Obligations. The Lease Agreement and the Indenture have been duly authorized, executed and delivered by the Authority and constitute the legal, valid and binding agreements of the Authority, enforceable against the Authority in accordance with their respective terms.

(d) No Conflicts. The execution and delivery of the Lease Agreement and the Indenture, the consummation of the transactions contemplated therein and the fulfillment of or compliance with the terms and conditions thereof, do not and will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which the Authority is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the Authority, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially and adversely affect the consummation of the transactions contemplated by the Lease Agreement and the Indenture or the financial condition, assets, properties or operations of the Authority.

(e) Consents and Approvals. No consent or approval of any trustee or holder of any indebtedness of the Authority, and no consent, permission, authorization, order or license of, or filing or registration with, any governmental authority is necessary in connection with the execution and delivery of the Lease Agreement or the Indenture, or the consummation of any transaction contemplated therein, except as have been obtained or made and as are in full force and effect.

(f) No Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other governmental authority pending or, to the knowledge of the Authority after reasonable investigation, threatened against or affecting the Authority or the assets, properties or operations of the Authority which, if determined adversely to the Authority or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by or the validity of the Lease Agreement or the Indenture, or upon the financial condition, assets, properties or operations of the Authority, and the Authority is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal

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or other governmental authority, which default might have consequences that would materially and adversely affect the consummation of the transactions contemplated by the Lease Agreement or the Indenture or the financial conditions, assets, properties or operations of the Authority.

Refinancing of Project and Leased Premises

In order to pay the Authority’s lease payment for the Leased Premises under the Lease Agreement, on the Closing Date, the Authority and the City shall execute all documents and take all action as may be required to refinance the Project by depositing sufficient funds with the Escrow Fund established under the Escrow Agreement.

Payment of Costs of Issuance

Payment of all Costs of Issuance shall be made from the moneys deposited with the Trustee in the Costs of Issuance Fund, which moneys shall be disbursed for such purpose in accordance with the Indenture. Any Costs of Issuance for the payment of which insufficient funds shall be available on deposit in the Costs of Issuance Fund, shall be paid by the City.

LEASE; TERM OF THE LEASE AGREEMENT; BASE RENTAL PAYMENTS

Lease by Authority and Lease Back to City

(a) The Lease Agreement amends and restates the 2013 Lease with respect to certain Base Rental Payments thereunder relating to the 2013 Bonds and amends and supersedes the 2013 Ground Lease. In consideration of the payment of $35,045,000 by the Authority less the Underwriter’s Bond discount, and less the payment of Costs of Issuance, and in consideration of the execution of the Lease Agreement by the City, and other good and valuable consideration, the City thereby leases to the Authority, and the Authority thereby leases from the City, the Leased Premises for the Term of the Lease Agreement, plus one week following the end of the Term of the Lease Agreement.

(b) Under the Lease Agreement, the Authority leases the Leased Premises to the City, and the City thereby leases the Leased Premises from the Authority, upon the terms and conditions set forth in the Lease Agreement.

(c) Under the Lease Agreement, the City takes possession of the Leased Premises on the Closing Date.

Term of Lease Agreement

The Term of the Lease Agreement shall commence on December 1, 2021 and shall end on October 1, 2043, unless such term is extended as provided in the Lease Agreement or unless Base Rental Payments have been paid or prepaid in full or provision shall have been made for such payment pursuant to the Lease Agreement. If on October 1, 2043, the Indenture shall not be discharged by its terms or if the Base Rental Payments payable under the Lease Agreement shall have been abated at any time and for any reason, then the Term of the Lease Agreement shall be extended until the earlier of October 1, 2053, or the date the Indenture shall be discharged by its terms. If prior to October 1, 2043, the Indenture shall be discharged by its terms and any amounts then owed to the Trustee have been paid in full, the Term of the Lease Agreement shall thereupon end.

Base Rental Payments; Security Deposit

(a) Obligation to Pay. In consideration of the lease and lease back by the Authority of the Leased Premises and in consideration of the issuance of the Bonds by the Authority for the purpose of refinancing the Project, and subject to the provisions of the Lease Agreement, the City agrees to pay to the Authority, its successors and assigns, as rental for the use and occupancy of the Leased Premises during each Fiscal Year, the Base Rental Payments (denominated into components of principal and interest) for the Leased Premises in the respective amounts specified in the Lease Agreement, to be due and payable each respective Base Rental Payment Date

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specified in the Lease Agreement. Any amount held in the Bond Fund, the Interest Account, the Sinking Account or the Principal Account (other than amounts resulting from the prepayment of the Base Rental Payments in part but not in whole pursuant to the Lease Agreement) on any Base Rental Payment Date shall be credited towards the Lease Payment then due and payable. The Base Rental Payments coming due and payable in any Fiscal Year shall be for the use of the Leased Premises for such Fiscal Year. For purposes of making payments on the Bonds, the City shall deliver the Base Rental Payments to the Trustee no later than one Business Day prior to the Base Rental Payment Date.

(b) Effect of Prepayment. In the event that the City prepays all Base Rental Payments in full pursuant to the Lease Agreement, the City’s obligations under the Lease Agreement shall thereupon cease and terminate, including but not limited to the City’s obligation to pay Base Rental Payments under the Lease Agreement. In the event that the City prepays the Base Rental Payments in part but not in whole pursuant to the Lease Agreement, the Authority shall provide, or cause to be provided, to the Trustee and the City a revised schedule of Base Rental Payments due after such partial prepayment, which revised schedule of Base Rental Payments shall be sufficient to provide for the scheduled payment of remaining principal of and interest on the Bonds, and which schedule shall represent an adjustment to the schedule of Base Rental Payments set forth in the Lease Agreement after taking into account said partial prepayment.

(c) Rate on Overdue Payments. In the event the City should fail to make any of the payments required in the Lease Agreement, the payment in default shall continue as an obligation of the City until the amount in default shall have been fully paid, and the City agrees to pay the same with interest thereon, to the extent permitted by law, from the date of default to the date of payment at the rate per annum equal to the average interest rate on the Bonds. Such interest, if received, shall be deposited in the Bond Fund.

(d) Fair Rental Value. The Base Rental Payments and Miscellaneous Rent coming due and payable under the Lease Agreement in each Fiscal Year shall constitute the total rental for the Leased Premises for each Fiscal Year and shall be paid by the City in each Fiscal Year for and in consideration of the right of the use and occupancy of, and the continued quiet use and enjoyment of, the Leased Premises during each Fiscal Year. The parties to the Lease Agreement have agreed and determined that the total amount of such Base Rental Payments and Miscellaneous Rent for the Leased Premises do not exceed the fair rental value of the Leased Premises. In making such determination, consideration has been given to the obligations of the parties under the Lease Agreement, the uses and purposes which may be served by the Leased Premises and the benefits therefrom which will accrue to the City and the general public.

(e) Source of Payments; Budget and Appropriation. The Base Rental Payments shall be payable from any source of available funds of the City, subject to the provisions of the Lease Agreement. The City covenants to take such action as may be necessary to include all Base Rental Payments and Miscellaneous Rent due under the Lease Agreement in each of its budgets during the Term of the Lease Agreement and to make the necessary annual appropriations for all such Base Rental Payments and Miscellaneous Rent. The covenants on the part of the City contained in the Lease Agreement shall be deemed to be and shall be construed to be ministerial duties imposed by law and it shall be the duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements in the Lease Agreement agreed to be carried out and performed by the City.

The City and the Authority understand and intend that the obligation of the City to pay Base Rental Payments and other payments under the Lease Agreement constitutes a current expense of the City and shall not in any way be construed to be a debt of the City in contravention of any applicable constitutional or statutory limitation or requirement concerning the creation of indebtedness by the City, nor shall anything contained therein constitute a pledge of the general tax revenues, funds or moneys of the City. Base Rental Payments due under the Lease Agreement shall be payable only from current funds which are budgeted and appropriated, or otherwise legally available, for the purpose of paying Base Rental Payments or other payments due under the Lease Agreement as consideration for use of the Leased Premises during the Fiscal Year for which such funds were budgeted and appropriated or otherwise made legally available for such purpose. The Lease Agreement shall not create an immediate indebtedness for any aggregate payments which may become due under the Lease Agreement. The City has not pledged the full faith and credit of the City, the State or any agency or department thereof to the payment of the Base Rental Payments or any other payments due under the Lease Agreement, the Bonds or the interest thereon.

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(a) Assignment. The City understands and agrees that all Base Rental Payments have been assigned by the Authority to the Trustee in trust, pursuant to the Indenture, for the benefit of the Owners of the Bonds, and the City thereby assents to such assignment. The Authority directs the City by the Lease Agreement, and the City thereby agrees, to pay all of the Base Rental Payments to the Trustee at its Office.

(b) Security Deposit. Notwithstanding any other provision of the Lease Agreement, the City may on any date secure the payment of the Base Rental Payments in whole or in part by depositing with the Trustee an amount of cash which, together with other available amounts, is either (a) sufficient to pay such Base Rental Payments, including the principal and interest components thereof, in accordance with the related Lease Payment schedule set forth in the Lease Agreement, or (b) invested in whole or in part in non callable Federal Securities in such amount as will, in the opinion of an Independent Accountant, together with interest to accrue thereon and together with any cash which is so deposited, be fully sufficient to pay such Base Rental Payments when due under the Lease Agreement or on any optional prepayment date pursuant to the Lease Agreement, as the City shall instruct at the time of said deposit. Said security deposit shall be deemed to be and shall constitute a special fund for the payment of Base Rental Payments in accordance with the provisions of the Lease Agreement. In connection with the making of any such security deposit, the Authority shall take, and shall cause the Trustee to take, any actions necessary to remove the appropriate portions of the Leased Premises from the lien of the Lease Agreement.

(c) Delinquent Base Rental Payments. Any delinquent Base Rental Payment shall be made to the Trustee for application as set forth in the Indenture.

Optional Prepayment

The City shall have the option to prepay the principal components of the Base Rental Payments in whole, or in part in any integral multiple of $5,000, on any date on or after October 1, 2031, by paying a prepayment price equal to the aggregate principal components of the Base Rental Payments to be prepaid, together with a prepayment premium equal to the premium (if any) required to be paid on the corresponding redemption of the Bonds pursuant to the Indenture and together with accrued interest to the prepayment date. Such prepayment price (except the interest portion thereof, which shall be deposited into the Interest Account) shall be deposited by the Trustee in the Redemption Fund to be applied to the redemption of Bonds pursuant to the Indenture. The Authority shall give the Trustee written notice of the City’s intention to exercise its option not less than sixty (60) days in advance of the date of exercise or such shorter period acceptable to the Trustee. Notwithstanding any such prepayment, as long as any Bonds remain Outstanding or any Miscellaneous Rent payments remain unpaid, the City shall not be relieved of its obligations under the Lease Agreement as to such Bonds or such Miscellaneous Rent.

Quiet Enjoyment

During the Term of the Lease Agreement, the Authority shall provide the City with quiet use and enjoyment of the Leased Premises, and the City shall, during such Term, peaceably and quietly have and hold and enjoy the Leased Premises without suit, trouble or hindrance from the Authority, except as expressly set forth in the Lease Agreement. The Authority will, at the request of the City and at the City’s cost, join in any legal action in which the City asserts its right to such possession and enjoyment to the extent the Authority may lawfully do so. Notwithstanding the foregoing, the Authority shall have the right to inspect the Leased Premises as provided in the Lease Agreement.

Title

During the Term of the Lease Agreement, the Authority shall hold a leasehold in the Leased Premises, and in any and all additions which comprise fixtures, repairs, replacements or modifications to the Leased Premises, except for those fixtures, repairs, replacements or modifications which are added to the Leased Premises by the City at its own expense and which may be removed without damaging the Leased Premises and except for any items added to the Leased Premises by the City pursuant to the Lease Agreement. All right, title and interest of the Authority in and to the Leased Premises shall be transferred to and vested in the City if (a) the City pays all of the Base Rental Payment and Miscellaneous Rent during the Term of the Lease Agreement as the same become due and payable, or if the City posts a security deposit for payment of the Base Rental Payments pursuant to the Lease Agreement or prepays the Base Rental Payments pursuant to the Lease Agreement if the City has paid in full all of

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the Miscellaneous Rent coming due and payable as of the date of such prepayment; and provided in any event that no Event of Default shall have occurred and be continuing. The Authority agrees to take any and all steps and execute and record any and all documents reasonably required by the City to consummate any such transfer of title.

Miscellaneous Rent

In addition to the Base Rental Payments, the City shall pay when due the following items of Miscellaneous Rent:

(a) All fees and expenses incurred by the Authority in connection with or by reason of its leasehold estate in the Leased Premises as and when the same become due and payable;

(b) All compensation and indemnification to the Trustee pursuant to the Indenture for all services rendered under the Indenture and for all reasonable expenses, charges, costs, liabilities, legal fees and other disbursements incurred in and about the performance of its powers and duties under the Indenture;

(c) The reasonable fees and expenses of such accountants, consultants, attorneys and other experts as may be engaged by the Authority or the Trustee to prepare audits, financial statements, reports, opinions or provide such other services required under the Lease Agreement or the Indenture; and

(d) The reasonable out of pocket expenses of the Authority in connection with the execution and delivery of the Lease Agreement or the Indenture, or in connection with the issuance of the Bonds, and including but not limited to any and all expenses incurred in connection with the authorization, issuance, sale and delivery of the Bonds, or incurred by the Authority in connection with any litigation which may at any time be instituted involving the Lease Agreement, the Bonds, the Indenture or any of the other documents contemplated thereby, or otherwise incurred in connection with the administration of the Lease Agreement.

Substitution or Release of Leased Premises

The City shall have, and is granted by the Lease Agreement, the option at any time and from time to time during the Term of the Lease Agreement, to substitute other land, facilities or improvements (the “Substitute Leased Premises”) for the Leased Premises or any portion thereof (the “Former Leased Premises”) or to release a portion of the Leased Premises (the “Released Premises”) from the lien of the Lease Agreement, provided that the City shall satisfy all of the following requirements which are thereby declared to be conditions precedent to such substitution or release:

(a) The City shall provide written notification of such substitution or release to the Trustee and Rating Agencies, which notice shall contain the certification that all conditions set forth in the Lease Agreement are met with respect to such substitution or release;

(b) The City shall take all actions and shall execute all documents required to subject the Substitute Leased Premises to the terms and provisions of the Lease Agreement, including the filing with the Authority and the Trustee of an amended Lease Agreement which adds thereto a description of the Substitute Leased Premises and deletes therefrom the description of the Former Leased Premises or the Released Premises, as applicable;

(c) (i) In the case of a substitution, the City shall determine and certify to the Authority and the Trustee that the fair rental value of the Substitute Leased Premises is at least equal to the remaining Base Rental Payments after such substitution and that the Substitute Leased Premises are essential to the governmental functions of the City;

(ii) In the case of a release, the City shall determine and certify to the Authority and the Trustee that the fair rental value of the remaining Leased Premises after removal of the Released Premises is at least equal to the then remaining Base Rental Payments;

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(d) In the case of a substitution, the City shall certify in writing to the Authority and the Trustee that the Substitute Leased Premises serve the public purposes of the City and constitute property which the City is permitted to lease under the laws of the State;

(e) In the case of a substitution, the City shall certify in writing to the Authority and the Trustee that the estimated useful life of the Substitute Leased Premises at least extends to the date on which the final Lease Payment becomes due and payable under the Lease Agreement;

(f) In the case of a substitution, the City shall obtain a CLTA policy of title insurance meeting the requirements of the Lease Agreement with respect to any real property portion of the Substitute Leased Premises;

(g) In the case of a substitution, the substitution of the Substitute Leased Premises shall not cause the City to violate any of its covenants, representations and warranties made in the Lease Agreement; and

(h) The City shall obtain and cause to be filed with the Trustee and the Authority an opinion of Bond Counsel stating that such substitution or release is permitted under the Lease Agreement and does not cause interest on the Bonds to become includable in the gross income of the Bond Owners for federal income tax purposes.

From and after the date on which all of the foregoing conditions precedent to such substitution or release are satisfied, the Term of the Lease Agreement shall cease with respect to the Former Leased Premises or Released Premises, as applicable, and shall be continued with respect to the Substitute Leased Premises and the remaining Leased Premises and all references therein to the Former Leased Premises shall apply with full force and effect to the Substitute Leased Premises. The City shall not be entitled to any reduction, diminution, extension or other modification of the Base Rental Payments whatsoever as a result of such substitution or release.

MAINTENANCE; TAXES; INSURANCE; USE LIMITATIONS; AND OTHER MATTERS

Maintenance, Utilities, Taxes and Assessments

Throughout the Term of the Lease Agreement, as part of the consideration for the rental of the Leased Premises, all improvement, repair and maintenance of the Leased Premises shall be the responsibility of the City and the City shall pay for or otherwise arrange for the payment of all utility services supplied to the Leased Premises which may include, without limitation, janitor service, security, power, gas, telephone, light, heating, water and all other utility services, and shall pay for or otherwise arrange for the payment of the cost of the repair and replacement of the Leased Premises resulting from ordinary wear and tear or want of care on the part of the City or any assignee or sublessee thereof. In exchange for the Base Rental Payments provided in the Lease Agreement, the Authority agrees to provide only the Leased Premises, as more specifically set forth in the Lease Agreement. The City waives the benefits of subsections 1 and 2 of Section 1932 of the California Civil Code, but such waiver shall not limit any of the rights of the City under the terms of the Lease Agreement.

The City shall also pay or cause to be paid all taxes and assessments of any type or nature, if any, charged to the Authority or the City affecting the Leased Premises or the respective interests or estates therein; provided that with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the City shall be obligated to pay only such installments as are required to be paid during the Term of the Lease Agreement as and when the same become due.

The City may, at the City’s expense and in its name, in good faith contest any such taxes, assessments, utility and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Authority shall notify the City that, in the opinion of independent counsel, by nonpayment of any such items, the interest of the Authority in the Leased Premises will be materially endangered or the Leased Premises or any part thereof will be subject to loss or forfeiture, in which event the City shall promptly pay such taxes, assessments or charges or provide the Authority with full security against any loss which may result from nonpayment, in form satisfactory to the Authority.

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Modification of Leased Premises

The City shall, at its own expense, have the right to make additions, modifications and improvements to the Leased Premises. All additions, modifications and improvements to the Leased Premises shall thereafter comprise part of the Leased Premises and be subject to the provisions of the Lease Agreement. Such additions, modifications and improvements shall not in any way damage the Leased Premises or cause the Leased Premises to be used for purposes other than those authorized under the provisions of State and federal law; and the City shall file with the Trustee a certificate which states that the Leased Premises, upon completion of any additions, modifications and improvements made thereto pursuant to the Lease Agreement, shall be of a value that is not substantially less than the value of the Leased Premises immediately prior to the making of such additions, modifications and improvements. The City will not permit any mechanic’s or other lien to be established or remain against the Leased Premises for labor or materials furnished in connection with any remodeling, additions, modifications, improvements, repairs, renewals or replacements made by the City pursuant to the Lease Agreement; provided that if any such lien is established and the City shall first notify or cause to be notified the Authority of the City’s intention to do so, the City may in good faith contest any lien filed or established against the Leased Premises, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom and shall provide the Authority with full security against any loss or forfeiture which might arise from the nonpayment of any such item, in form satisfactory to the Authority. The Authority will cooperate fully in any such contest, upon the request and at the expense of the City.

Public Liability and Property Damage Insurance

The City shall maintain or cause to be maintained throughout the Term of the Lease Agreement, but only if and to the extent available from reputable insurers at reasonable cost in the reasonable opinion of the City, a standard comprehensive general insurance policy or policies in protection of the Authority, City, and their respective members, officers, agents, employees and assigns. Said policy or policies shall provide coverage in the minimum liability limits of $1,000,000 for personal injury or death of each person and $3,000,000 for personal injury or deaths of two or more persons in each accident or event, and in a minimum amount of $500,000 of damage to property resulting from each accident or event. Such public liability and property damage insurance may, however, be in the form of a single limit policy or policies in the amount of $3,000,000 (subject to a deductible clause of not to exceed $100,000) covering all such risks. Such policy or policies shall provide coverage in such liability limits and be subject to such deductibles as the City shall deem adequate and prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of self insurance by the City, subject to the provisions of the Lease Agreement, or in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. In the case of the City’s self-insurance of public liability and workers’ compensation, the City may maintain a self-insured retention, and pay up to $500,000 of each liability claim and up to $350,000 of each worker’s compensation claim, so long as the provisions of the Lease Agreement have been met. The proceeds of such liability insurance shall be applied by the City toward extinguishment or satisfaction of the liability with respect to which the insurance proceeds shall have been paid.

Casualty Insurance

The City shall procure and maintain, or cause to be procured and maintained, throughout the Term of the Lease Agreement, insurance against loss or damage to any Facilities by fire and lightning, with extended coverage and vandalism and malicious mischief insurance. Said extended coverage insurance, if required, shall, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance, and shall include earthquake coverage if such coverage is available at reasonable cost from reputable insurers in the judgment of the City’s risk manager. Such insurance shall be in an amount at least equal to the lesser of (a) one hundred percent (100%) of the replacement cost of the Facilities, or (b) the aggregate unpaid principal components of the Base Rental Payments allocable to the Facilities. Such insurance may be subject to such deductibles as the City shall deem prudent. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. The Net Proceeds of such insurance shall be applied as provided in the Lease Agreement.

B-40

Each policy of insurance to be maintained by the City pursuant to the Lease Agreement shall (a) provide for the full payment of insurance proceeds up to the applicable dollar limit in connection with damage to the Leased Premises and shall, under no circumstances, be contingent upon the degree of damage sustained at other facilities owned or leased by the City; and (b) explicitly waive any co-insurance penalty.

Rental Interruption Insurance

The City shall procure and maintain, or cause to be procured and maintained, throughout the Term of the Lease Agreement, rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of any Facilities to be constructed on the Leased Premises, as a result of any of the hazards covered by the insurance required by the Lease Agreement, in an amount at least equal to the maximum Base Rental Payments allocable to the Facilities coming due and payable during any future twenty-four (24) month period. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. The proceeds of such insurance, if any, shall be paid to the Trustee and deposited in the Bond Fund, and shall be applied for the uses and purposes set forth in the Indenture.

Recordation of the Lease Agreement; Title Insurance

On or before the Closing Date the City shall, at its expense, (a) cause the Lease Agreement, or a memorandum thereof in form and substance approved by Bond Counsel, to be recorded in the office of the San Bernardino County Recorder and (b) obtain a CLTA policy of title insurance insuring the City’s leasehold estate under the Lease Agreement, subject only to Permitted Encumbrances, in an amount at least equal to the aggregate principal amount of the Bonds. All Net Proceeds received under said policy shall be deposited with the Trustee in the Redemption Fund and shall be applied to the redemption of the Bonds pursuant to the Indenture.

Net Proceeds of Insurance; Form of Policies

(a) Each policy of insurance maintained pursuant to the Lease Agreement shall name the Trustee as loss payee so as to provide that all proceeds thereunder shall be payable to the Trustee and shall name the Authority, the City and the Trustee as insureds. The City shall pay or cause to be paid when due the premiums for all insurance policies required by the Lease Agreement. All such policies shall provide that the Trustee shall be given thirty (30) days’ notice of each expiration, any intended cancellation thereof or reduction of the coverage provided thereby. The Trustee shall not be responsible for the sufficiency or amount of any insurance or self insurance required in the Lease Agreement and shall be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss. The City shall cause to be delivered to the Trustee annually, no later than July 1 in each year, beginning on July 1, 2022, a certificate stating that all of the insurance policies required by the Lease Agreement are in full force and effect and identifying whether any such insurance is then maintained in the form of self insurance.

(b) In the event that any insurance maintained pursuant to the Lease Agreement shall be provided in the form of self insurance, the City shall file with the Trustee annually, within ninety (90) days following the close of each Fiscal Year, a statement of the risk manager of the City or an independent insurance adviser engaged by the City identifying the extent of such self-insurance and stating the determination that the City maintains sufficient reserves with respect thereto. In the event that any such insurance shall be provided in the form of self insurance by the City, the City shall not be obligated to make any payment with respect to any insured event except from such reserves. The Trustee shall not be responsible for the sufficiency or adequacy of any insurance required in the Lease Agreement and shall be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss agreed to by the Trustee.

(c) If the City shall fail to perform any of its obligations under the Lease Agreement, the Authority or the Trustee may, but shall not be obligated to, take such action as may be necessary to cure such failure, including the advancement of money, and the City shall be obligated to repay all such advances as soon as possible, with interest at the rate payable by the Authority on the Bonds from the date of the advance to the date of repayment.

B-41

Installation of Personal Property

The City may, at any time and from time to time, in its sole discretion and at its own expense, install or permit to be installed items of equipment or other personal property in or upon any portion of the Leased Premises. All such items shall remain the sole property of the City, in which neither the Authority nor the Trustee shall have any interest, and may be modified or removed by the City at any time provided that the City shall repair and restore any and all damage to the Leased Premises resulting from the installation, modification or removal of any such items. Nothing in the Lease Agreement shall prevent the City from purchasing or leasing items to be installed pursuant to the Lease Agreement under a lease or conditional sale agreement, or subject to a vendor’s lien or security agreement, as security for the unpaid portion of the purchase price thereof, provided that no such lien or security interest shall attach to any part of the Leased Premises.

Liens

Neither the City nor the Authority shall, directly or indirectly, create, incur, assume or suffer to exist any mortgage, pledge, lien, charge, encumbrance or claim on or with respect to any portion of the Leased Premises, other than the respective rights of the Authority and the City as provided in the Lease Agreement and other than Permitted Encumbrances. Except as expressly provided in the Lease Agreement, the City and the Authority shall promptly, at their own expense, take such action as may be necessary to duly discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim, for which it is responsible, if the same shall arise at any time. The City shall reimburse the Authority for any expense incurred by it in order to discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim.

Continuing Disclosure

The City covenants and agrees by the Lease Agreement that it will comply with and carry out all of the provisions of its Undertaking to Provide Continuing Disclosure with respect to the Bonds, as originally executed and as it may be amended from time to time in accordance with the terms thereof. Notwithstanding any other provision of the Lease Agreement, failure of the City to comply with such Undertaking to Provide Continuing Disclosure shall not be considered an Event of Default; however, any Owner may take such actions, as provided in such Undertaking to Provide Continuing Disclosure, as may be necessary and appropriate to cause the City to comply with its obligations under such Undertaking to Provide Continuing Disclosure.

DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS

Eminent Domain

If all of the Leased Premises shall be taken permanently under the power of eminent domain or sold to a government threatening to exercise the power of eminent domain, the Term of the Lease Agreement shall cease as of the day possession shall be so taken. If less than all of the Leased Premises shall be taken permanently, or if all of the Leased Premises or any part thereof shall be taken temporarily under the power of eminent domain, (a) the Lease Agreement shall continue in full force and effect and shall not be terminated by virtue of such taking and the parties waive the benefit of any law to the contrary, and (b) there shall be a partial abatement of Base Rental Payments in an amount to be agreed upon by the City and the Authority such that the resulting Base Rental Payments for the Leased Premises represent fair consideration for the use and occupancy of the remaining usable portion of the Leased Premises.

Application of Net Proceeds

(a) From Insurance Award. The Net Proceeds of any insurance award resulting from any damage to or destruction of the Leased Premises by fire or other casualty shall be deposited in the Insurance and Condemnation Fund or the Redemption Fund, as applicable, by the Trustee and applied in accordance with the Indenture.

B-42

(b) From Eminent Domain Award. The Net Proceeds of any eminent domain award resulting from any event described in the Lease Agreement shall be deposited in the Insurance and Condemnation Fund or the Redemption Fund, as applicable, by the Trustee and applied in accordance with the Indenture.

Abatement of Base Rental Payment in the Event of Damage or Destruction

The Base Rental Payments allocable to the Leased Premises shall be abated during any period in which by reason of damage or destruction (other than by eminent domain which is provided for in the Lease Agreement) there is substantial interference with the use and occupancy by the City of the Leased Premises or any portion thereof. The amounts of the Base Rental Payments under such circumstances may not be less than the amounts of the unpaid Base Rental Payments, unless such unpaid amounts are determined to be greater than the fair rental value of the portions of the Leased Premises not damaged or destroyed, based upon the opinion of an MAI appraiser with expertise in valuing such properties or other appropriate method of valuation, in which event the Base Rental Payments shall be abated such that they represent said fair rental value. Such abatement shall continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. In the event of any such damage or destruction, the Lease Agreement shall continue in full force and effect and the City waives any right to terminate the Lease Agreement by virtue of any such damage and destruction. Notwithstanding the foregoing, there may be no abatement of Base Rental Payments to the extent that (a) the proceeds of rental interruption insurance are available to pay Base Rental Payments, or (b) amounts in the Bond Fund are available to pay Debt Service payable from Base Rental Payments which would otherwise be abated.

DISCLAIMER OF WARRANTIES; ACCESS

Disclaimer of Warranties

Neither the Authority nor the Trustee makes any warranty or representation, either express or implied, as to the value, design, condition, merchantability or fitness for any particular purpose or fitness for the use contemplated by the City of the Leased Premises, or any other representation or warranty with respect to the Leased Premises. In no event shall the Authority, the Trustee, and their respective assigns be liable for incidental, indirect, special or consequential damages in connection with or arising out of the Lease Agreement or the Indenture for the existence, furnishing, functioning or the City’s use of the Leased Premises.

Rights of Access

The City agrees that the Authority and any Authorized Representative of the Authority, and the Authority’s successors or assigns, shall have the right at all reasonable times to enter upon and to examine and inspect the Leased Premises. The City further agrees that the Authority, any Authorized Representative of the Authority, and the Authority’s successors or assigns shall have such rights of access to the Leased Premises as may be reasonably necessary to cause the proper maintenance of the Leased Premises in the event of failure by the City to perform its obligations under the Lease Agreement.

Release and Indemnification Covenants

By the Lease Agreement, the City agrees to indemnify and save the Authority, the Trustee, and their respective officers, agents, successors and assigns, harmless from and against all claims, losses and damages, including legal fees and expenses, arising out of (a) the use, maintenance, condition or management of, or from any work or thing done on the Leased Premises by the City, (b) any breach or default on the part of the City in the performance of any of its obligations under the Lease Agreement, (c) any act or negligence of the City or of any of its agents, contractors, servants, employees or licensees with respect to the Leased Premises, (d) the use, presence, storage, disposal of any Hazardous Substances on or about the Leased Premises, or (e) any act or negligence of any sublessee of the City with respect to the Leased Premises. No indemnification is made under the Lease Agreement for willful misconduct, negligence under the Lease Agreement by the Authority or the Trustee or any of their respective officers, agents, employees, successors or assigns.

B-43

ASSIGNMENT, SUBLEASING AND AMENDMENT

Assignment by the Authority

The Authority’s rights under the Lease Agreement, including the right to receive and enforce payment of the Base Rental Payments to be made by the City under the Lease Agreement, have been pledged and assigned to the Trustee for the benefit of the Owners of the Bonds pursuant to the Indenture, to which pledge and assignment the City thereby consents. The assignment of the Lease Agreement to the Trustee is solely in its capacity as Trustee under the Indenture and the duties, powers and liabilities of the Trustee in acting under the Lease Agreement shall be subject to the provisions of the Indenture.

Assignment and Subleasing by the City

The Lease Agreement may not be assigned by the City. The City may sublease the Leased Premises or any portion thereof, but only with the written consent of the Authority and subject to all of the following conditions:

(a) The Lease Agreement and the obligation of the City to make Base Rental Payments under the Lease Agreement shall remain obligations of the City;

(b) The City shall, within thirty (30) days after the delivery thereof, furnish or cause to be furnished to the Authority and the Trustee a true and complete copy of such sublease;

(c) No such sublease by the City shall cause the Leased Premises to be used for a purpose other than as may be authorized under the provisions of the laws of the State; and

(d) The City shall furnish the Authority and the Trustee with a written opinion of Bond Counsel, stating that such sublease is permitted by the Lease Agreement and the Indenture, and will not cause the interest on the Bonds to become included in gross income for federal income tax purposes.

Amendment of the Lease Agreement

The Authority and the City may at any time amend or modify any of the provisions of the Lease Agreement, but only (a) with the prior written consent of a majority in aggregate principal amount of the Outstanding Bonds, or (b) without the consent of any of the Bond Owners, but only if such amendment or modification is for any one or more of the following purposes:

(a) to add to the covenants and agreements of the City contained in the Lease Agreement, other covenants and agreements thereafter to be observed, or to limit or surrender any rights or power reserved to or conferred upon the City in the Lease Agreement;

(b) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in the Lease Agreement, or in any other respect whatsoever as the Authority and the City may deem necessary or desirable, provided that, in the opinion of Bond Counsel, such modifications or amendments will not materially adversely affect the interests of the Owners of the Bonds;

(c) to amend any provision thereof relating to the Tax Code, to any extent whatsoever but only if and to the extent such amendment will not adversely affect the exclusion from gross income of interest on the Bonds under the Tax Code, in the opinion of Bond Counsel;

(d) to amend the description of the Leased Premises set forth in the Lease Agreement to add property acquired by the City and the Authority from proceeds on deposit in the Project Fund or to reflect accurately the property originally intended to be included therein, or in connection with any substitution or release pursuant to the Lease Agreement; or

B-44

(e) to obligate the City to pay additional amounts of rental under the Lease Agreement for the use and occupancy of the Leased Premises, provided that (A) no Event of Default has occurred and is continuing under this Lease, (B) such additional amounts of rental do not cause the total rental payments made by the City under the Lease Agreement to exceed the fair rental value of the Leased Premises, as set forth in a certificate of an Authorized Representative of the City filed with the Trustee and the Authority, (C) the City shall have obtained and filed with the Trustee and the Authority a Written Certificate of an Authorized Representative of the City showing that the fair rental value of the Leased Premises is not less than the sum of the aggregate unpaid principal components of the Base Rental Payments and the aggregate principal components of such additional amounts of rental, (D) such additional amounts of rental are pledged or assigned for the payment of any bonds, notes, leases or other obligations the proceeds of which shall be applied to finance the construction or acquisition of land, facilities or other improvements which are authorized pursuant to the laws of the State, and (E) such additional rental is not at variable rates.

EVENTS OF DEFAULT; REMEDIES

Events of Default Defined

The following shall be “Events of Default” under the Lease Agreement:

(a) Failure by the City to pay any Lease Payment required to be paid under the Lease Agreement at the time specified in the Lease Agreement.

(b) Failure by the City to make any Miscellaneous Rent payment required under the Lease Agreement and the continuation of such failure for a period of thirty (30) days.

(c) Failure by the City to observe and perform any covenant, condition or agreement on its part to be observed or performed, other than as referred to in the preceding clauses (a) or (b), for a period of thirty (30) days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Authority, or the Trustee; provided, however, that if in the reasonable opinion of the City the failure stated in the notice can be corrected, but not within such sixty (60) day period, such failure shall not constitute an Event of Default if the City shall commence to cure such failure within such sixty (60) day period and thereafter diligently and in good faith shall cure such failure in a reasonable period of time.

(d) The filing by the City of a voluntary petition in bankruptcy, or failure by the City promptly to lift any execution, garnishment or attachment, or adjudication of the City as a bankrupt, or assignment by the City for the benefit of creditors, or the entry by the City into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the City in any proceedings instituted under the provisions of applicable federal bankruptcy law, or under any similar acts which may hereafter be enacted.

Remedies on Default

Whenever any Event of Default referred to in the Lease Agreement shall have happened and be continuing, it shall be lawful for the Authority to exercise any and all remedies available pursuant to law or granted pursuant to the Lease Agreement; provided, however, that notwithstanding anything to the contrary in the Lease Agreement or in the Indenture, there shall be no right under any circumstances to accelerate the Base Rental Payments or otherwise declare any Base Rental Payments not then in default to be immediately due and payable or to terminate the Lease Agreement or to cause the leasehold interest of the Authority or the subleasehold interest of the City in the Site to be sold, assigned or otherwise alienated. Each and every covenant of the Lease Agreement to be kept and performed by the City is expressly made a condition and upon the breach thereof the Authority may exercise any and all rights of entry and re-entry upon the Leased Premises. In the event of such default and notwithstanding any re entry by the Authority, the City shall, as expressly provided in the Lease Agreement, continue to remain liable for the payment of the Base Rental Payments and/or damages for breach of the Lease Agreement and the performance of all conditions contained in the Lease Agreement, and in any event such rent and damages shall be payable to the Authority at the time and in the manner as provided in the Lease Agreement, to wit:

B-45

(a) The City agrees to and shall remain liable for the payment of all Base Rental Payments and the performance of all conditions contained in the Lease Agreement and shall reimburse the Authority for any deficiency arising out of the re leasing of the Leased Premises, or, in the event the Authority is unable to re-let the Leased Premises, then for the full amount of all Base Rental Payments to the end of the Term of the Lease Agreement, but said Base Rental Payments and/or deficiency shall be payable only at the same time and in the same manner as provided for in the Lease Agreement the payment of Base Rental Payments under the Lease Agreement, notwithstanding such entry or re-entry by the Authority or any suit in unlawful detainer, or otherwise, brought by the Authority for the purpose of effecting such re-entry or obtaining possession of the Leased Premises or the exercise of any other remedy by the Authority.

(b) The City irrevocably appoints the Authority by the Lease Agreement as the agent and attorney in fact of the City to enter upon and re lease the Leased Premises in the event of default by the City in the performance of any covenants contained in the Lease Agreement to be performed by the City and to remove all personal property whatsoever situated upon the Leased Premises to place such property in storage or other suitable place in the County of San Bernardino, for the account of and at the expense of the City, and the City thereby exempts and agrees to save harmless the Authority from any costs, loss or damage whatsoever arising or occasioned by any such entry upon and re leasing of the Leased Premises and the removal and storage of such property by the Authority or its duly authorized agents in accordance with the provisions contained in the Lease Agreement.

(c) By the Lease Agreement, the City waives any and all claims for damages caused or which may be caused by the Authority in re-entering and taking possession of the Leased Premises as provided in the Lease Agreement and all claims for damages that may result from the destruction of or injury to the Leased Premises and all claims for damages to or loss of any property belonging to the City that may be in or upon the Leased Premises.

(d) The City agrees that the terms of the Lease Agreement constitute full and sufficient notice of the right of the Authority to re lease the Leased Premises in the event of such re-entry without effecting a surrender of the Lease Agreement, and further agrees that no acts of the Authority in effecting such releasing shall constitute a surrender or termination of the Lease Agreement irrespective of the term for which such re leasing is made or the terms and conditions of such re leasing, or otherwise.

(e) The City further waives the right to any rental obtained by the Authority in excess of the Base Rental Payments and thereby conveys and releases such excess to the Authority as compensation to the Authority for its services in re leasing the Leased Premises.

No Remedy Exclusive

No remedy conferred upon or reserved to the Authority in the Lease Agreement is intended to be exclusive and every such remedy shall be cumulative and shall, except as expressly provided therein to the contrary, be in addition to every other remedy given under the Lease Agreement or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Authority to exercise any remedy reserved to it in the Lease Agreement it shall not be necessary to give any notice, other than such notice as may be required in the Lease Agreement or by law.

No Additional Waiver Implied by One Waiver

In the event any agreement contained in the Lease Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach under the Lease Agreement.

B-46

Trustee and Bondholder to Exercise Rights

Such rights and remedies as are given to the Authority under the Lease Agreement have been assigned by the Authority to the Trustee under the Indenture, to which assignment the City thereby consents. Such rights and remedies shall be exercised by the Trustee and the Owners of the Bonds as provided in the Indenture.

MISCELLANEOUS

Binding Effect

The Lease Agreement shall inure to the benefit of and shall be binding upon the Authority and the City and their respective successors and assigns.

Severability

In the event any provision of the Lease Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision of the Lease Agreement.

Net-net-net Lease

The Lease Agreement shall be deemed and construed to be a “net net net lease” and the City thereby agrees that the Base Rental Payments shall be an absolute net return to the Authority, free and clear of any expenses, charges or set offs whatsoever.

Further Assurances and Corrective Instruments

The Authority and the City agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements to the Lease Agreement and such further instruments as may reasonably be required for correcting any inadequate or incorrect description of the Leased Premises thereby leased or intended so to be or for carrying out the expressed intention of the Lease Agreement.

Applicable Law

The Lease Agreement shall be governed by and constructed in accordance with the laws of the State.

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APPENDIX C

AUDITED FINANCIAL STATEMENTS

ComprehensiveAnnual Financial

ReportFiscal Year

Ended June 30, 2020

ON THE COVER

The Ontario Youth Activities League (OYAL) hosted a free soccer clinic coached by the Ontario Fury for 150 kids.

Toyota became the new sponsor for the Arena this year.

The annual Fire Department Open House was held at Station 3 in October. The event was full of safety demonstrations and family activities.

Ontario Mills continues to be the hub of retail activity in the city.

Ontario International Airport continues to thrive with China Airlines completing its 1st year at ONT terminals and international travel booming at the start of 2019.

Ontario Police Department Bike Patrol continues to keep the Civic Center area safe for special events, pedestrians and employees.

Ontario Night Out had 42 registered block parties of residents, all committed to building a healthier and safer community.

The City of Ontario opened its 3rd public Dog Park at James R. Bryant Park on April 27, 2019.

City of Ontario, California

COMPREHENSIVE ANNUAL FINANCIAL REPORT

For Fiscal Year Ending June 30, 2020

Prepared By:

Fiscal Services Department Of the Financial Services Agency

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CITY OF ONTARIO

COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2020

TABLE OF CONTENTS Page Number INTRODUCTORY SECTION Letter of Transmittal ............................................................................................................................... vi Certificate of Achievement for Excellence in Financial Reporting ....................................................... xiv Principal Officers ................................................................................................................................... xv Organizational Chart ............................................................................................................................ xvi FINANCIAL SECTION INDEPENDENT AUDITORS’ REPORT .................................................................................................. 1 MANAGEMENT'S DISCUSSION AND ANALYSIS ................................................................................ 5 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements:

Statement of Net Position ............................................................................................................... 35

Statement of Activities .................................................................................................................... 36

Fund Financial Statements: Balance Sheet - Governmental Funds ........................................................................................... 38 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position ..................................................................................................... 41 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds .................................................................................................... 42 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities .................................................................................................................... 45 Statement of Net Position - Proprietary Funds ............................................................................... 46 Statement of Revenues, Expenses and Changes in Fund Net Position - Proprietary Funds ........................................................................................................... 48 Statement of Cash Flows - Proprietary Funds ............................................................................... 49 Statement of Fiduciary Net Position - Fiduciary Funds .................................................................. 50 Statement of Changes in Fiduciary Net Position – Fiduciary Funds .............................................. 51

Notes to Basic Financial Statements .................................................................................................... 53

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TABLE OF CONTENTS Page Number REQUIRED SUPPLEMENTARY INFORMATION

Budget Comparison Information ................................................................................................... 113

Budgetary Comparison Schedule – General Fund ................................................................ 114 Budgetary Comparison Schedule – Measure I ...................................................................... 116 Budgetary Comparison Schedule – Ontario Housing Authority ............................................. 117

Modified Approach for City Infrastructure Capital Assets ............................................................. 118 Pension Plan:

Schedule of Changes in the Net Pension Liability and Related Ratios: Miscellaneous Plan ............................................................................................................... 121 Safety Police Plan .................................................................................................................. 122 Safety Fire Plan ...................................................................................................................... 123

Schedule of Pension Plan Contributions ................................................................................... 124

OPEB Plan: Schedule of Changes in OPEB Liability and Related Ratios .................................................... 125 Schedule of OPEB Contributions .............................................................................................. 126

COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES

Combining Balance Sheet - Nonmajor Governmental Funds ...................................................... 128 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds ..................................................... 134 Budgetary Comparison Schedules - Special Revenue Funds:

Special Gas Tax ..................................................................................................................... 139 Quiet Home Program ............................................................................................................. 140 Park Impact / Quimby ............................................................................................................. 141 Community Development ....................................................................................................... 142 Asset Seizure ......................................................................................................................... 143 Mobile Source Air Pollution .................................................................................................... 144 Special Assessment/Fee Districts .......................................................................................... 145 Grants..................................................................................................................................... 146 Cable Access ......................................................................................................................... 147 Storm Drain Maintenance ...................................................................................................... 148 Historic Preservation .............................................................................................................. 149 NMC Public Services ............................................................................................................. 150 NMC CFD ............................................................................................................................... 151 OMC CFD .............................................................................................................................. 152

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TABLE OF CONTENTS Page Number COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES (Continued)

Budgetary Comparison Schedules – Capital Projects Funds

Capital Projects ...................................................................................................................... 153 Impact Fees ........................................................................................................................... 154 NMC CFD ............................................................................................................................... 155

Combining Statement of Net Position - Internal Service Funds ................................................... 156 Combining Statement of Revenues, Expenses and Changes in Fund Net Position - Internal Service Funds .................................................................................. 157 Combining Statement of Cash Flows - Internal Service Funds .................................................... 158 Combining Statement of Net Position - All Agency Funds ........................................................... 160

Combining Statement of Changes in Assets and Liabilities - All Agency Funds .......................................................................................................................... 168

STATISTICAL SECTION

Financial Trends

Schedule 1 – Net Position by Component ............................................................................. 179 Schedule 2 – Changes in Net Position .................................................................................. 180 Schedule 3 – Changes in Fund Balances, Governmental Funds .......................................... 182 Schedule 4 – Fund Balances, Governmental Funds ............................................................. 184

Revenue Capacity Schedule 5 – Assessed Value and Estimated Actual Value of Taxable Property ................................................................................................. 185 Schedule 6 – Direct and Overlapping Property Tax Rates ................................................... 186 Schedule 7 – Principal Property Taxpayers ........................................................................... 187 Schedule 8 – Property Tax Levies and Collections ............................................................... 188 Schedule 9 – Taxable Sales by Category .............................................................................. 189 Schedule 10 – Direct and Overlapping Sales Tax Rates ....................................................... 190 Schedule 11 – Sales Taxpayers by Industry.......................................................................... 191

Debt Capacity Schedule 12 – Ratios of Outstanding Debt by Type .............................................................. 192 Schedule 13 – Ratios of General Bonded Debt Outstanding ............................................... 193 Schedule 14 – Direct and Overlapping Governmental Activities Debt .................................. 194 Schedule 15 – Legal Debt Margin Information ...................................................................... 195 Schedule 16 – Pledged-Revenue Coverage ......................................................................... 196

Demographic and Economic Informatio7 Schedule 17 – Demographic and Economic Statistics .......................................................... 197 Schedule 18 – Principal Employers ...................................................................................... 198

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CITY OF ONTARIO


TABLE OF CONTENTS

Page Number

STATISTICAL SECTION (Continued)

Operating Information

Schedule 19 – Full-time City Government Employees by Function ...................................... 200 Schedule 20 – Operating Indicators by Function/Program .................................................... 201 Schedule 21 – Capital Asset Statistics by Function/Program ................................................ 202

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CITY OF ONTARIO List of Officials & Executive Staff

Elected Officials

Paul S. Leon ................................................................................................ Mayor Alan Wapner.................................................................................. Mayor Pro Tem Jim W. Bowman .......................................................................... Council Member Debra Dorst-Porada .................................................................... Council Member Ruben Valencia ........................................................................... Council Member James R. Milhiser ............................................................................ City Treasurer Sheila Mautz........................................................................................... City Clerk

Executive Staff

Scott Ochoa.................. City Manager/Executive Director of the Housing Authority Darlene Sanchez ............................................................... Assistant City Manager Ruben Duran ..................................................................................... City Attorney Mike Lorenz ........................................................................................ Police Chief Ray Gayk ............................................................................................... Fire Chief Scott Burton................................................................... Utilities General Manager Tito Haes ............................................................. Executive Director Public Works Scott Murphy .................................... Executive Director Community Development Helen McAlary ................................. Executive Director Community Life & Culture Armen Harkalyan ..................................................... Executive Director of Finance Angela Lopez ............................................. Executive Director Human Resources Colin Fernandes .................................. Executive Director Information Technology

CITY OF ONTARIO CITYWIDE ORGANIZATIONAL CHART

FISCAL YEAR 2020-21

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City Manager

Mayor & City Council City Clerk City Treasurer

City Attorney Boards & Commissions

Human Resources Financial Services

Information Technology

Fire Police

Public Works Ontario Municipal Utilities Company

Community Life & Culture Community Development

People of Ontario

Management’s Responsibility for the Financial Statements

Auditor’s Responsibility

Government Auditing Standards

203 N. Brea Blvd., Suite 203 Brea, CA 92821 Lance, Soll & Lunghard, LLP Phone: 714.672.0022

Opinions

Other Matters Required Supplementary Information

Other Information

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MANAGEMENT'S DISCUSSION AND ANALYSIS

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Management’s Discussion and Analysis The following Management Discussion and Analysis (MD&A) of the City of Ontario’s (City) financial performance provides an introduction and overview to the financial activities of the City for the fiscal year ended June 30, 2020. This narrative discussion and analysis focuses on the current year’s activities, resulting changes and currently known facts; therefore, the information presented here should be considered in conjunction with additional information furnished in the Letter of Transmittal and the accompanying basic financial statements. FINANCIAL HIGHLIGHTS

Government-Wide • Total assets and deferred outflows of the City exceeded liabilities and deferred inflows by

$1.76 billion (net position). Of this amount, $360.36 million (unrestricted net position) may be used to meet the City’s ongoing obligations to citizens and creditors.

• For the fiscal year ended June 30, 2020, total net position increased by $15.53 million before a ($1.10) million restatement. Total revenues from all sources were $469.15 million and total expenses for all functions/programs were $453.62 million.

• Of total revenues, program revenues were $294.21 million and general revenues were $174.94 million. Program revenues are broken into three categories: Charges for Services, $236.78 million; Operating Contributions and Grants, $6.68 million; and Capital Contributions and Grants, $50.75 million.

Fund Based • For the fiscal year ended June 30, 2020, the assigned fund balance of the General Fund was

$99.86 million. The assigned portion of $51.27 million represents the City Council’s goal to achieve a minimum of 18 percent of the annual general fund appropriations (stabilization policy).

• For the General Fund, actual resources (inflows) available for appropriation were $421.00 million, which was more than the final budget of $419.47 million by $1.53 million. Actual charges (outflows) of $313.45 million were $17.77 million more than the final budget of $295.68 million.

CITY OF ONTARIO: COMPREHENSIVE ANNUAL FINANCIAL REPORT

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OVERVIEW OF THE FINANCIAL STATEMENTS The financial statements presented herein include all of the activities of the City of Ontario and its component units as prescribed by GASB Statement No. 34. This discussion and analysis are intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements comprise three components: 1) Government-Wide Financial Statements, 2) Fund Financial Statements, and 3) Notes to the Financial Statements. This report also contains other supplementary information in addition to the basic financial statements themselves.

Government-Wide Financial Statements The Government-Wide Financial Statements present both long-term and short-term information about the City’s overall financial picture. Financial reporting at this level uses a perspective similar to that found in the private sector with its basis in full accrual accounting and elimination or reclassification of internal activities.

The Statement of Net Position is measured as the difference between (a) assets and deferred outflow of resources and (b) liabilities and deferred inflow of resources. This is one way to measure the City’s financial health, or financial position. Over time, increases or decreases in the City’s net position may serve as an indicator of whether or not its financial health is improving or deteriorating.

The Statement of Activities presents information on how the City’s net position 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 related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (i.e., uncollected taxes or earned but unused vacation leaves).

In both the Statement of Net Position and Statement of Activities, we divide the City into two kinds of activities:

Governmental activities – Most of the City’s basic services are reported here, including General Government (City Council, Office of the City Manager, Records Management, Financial Services and Human Resources), Public Safety, Community Development, and Public Works. Revenues from property taxes, transient occupancy tax (TOT), sales tax, parking tax, business license tax, etc., finance most of these activities.

Business-type activities – The City charges a fee to customers to recover all or most of the cost of certain services it provides. The City’s water, sewer, integrated waste, and broadband/fiber operations are reported in this category.


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The Government-Wide Financial Statements include not only the City, known as the primary government, but also the legally separate component units. The Ontario Housing Authority, the Industrial Development Authority, the Ontario Redevelopment Financing Authority, and the Ontario Public Financing Authority are known as Blended Component Units. Although legally separate, these component units’ function for all practical purposes as departments of the City, and therefore have been included as an integral part of the primary government.

Fund Financial Statements The Fund Financial Statements are designed to report information about groupings (funds) of related accounts, which are used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds can be divided into three categories: governmental funds, proprietary funds and fiduciary funds. The City uses all three types, each using different accounting methods.

Governmental Funds – Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the City’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

The City maintains twenty-one individual governmental funds. These funds report financial transactions using the modified accrual accounting method. Information for five out of the twenty funds are presented separately in the Balance Sheet and the Statement of Revenues, Expenditures and Changes in Fund Balances. The following five funds are major funds: General Fund, Measure I Fund, Ontario Housing Authority Fund, Capital Projects Fund, and Impact Fees Fund. Data for other governmental funds (non-major) are combined into a single presentation as part of the additional required supplementary information. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements that follow the notes to the financial statements.


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The City adopts an annual appropriated budget for the General Fund, the Special Revenue Funds, and the Capital Project Funds. A budgetary comparison statement has been provided for each of the funds to demonstrate compliance with this budget.

Proprietary Funds – Proprietary funds are primarily used to account for when the City charges for the services it provides, whether to outside customers or to other units of the City. These funds are reported in the same way that all activities are reported in the Statement of Net Position and the Statement of Activities, using an accrual basis of accounting. In fact, the City’s enterprise funds (a component of proprietary funds) are the same as the business-type activities that is reported in the government-wide financial statements but provide more detail information, such as the statement of cash flows. The City uses internal service funds (the other component of proprietary funds) to report activities that provide supplies and services for the City’s other programs and activities, such as Equipment Services, Self-Insurance, Information Technology and Other Post Employment Benefit funds. Since these activities predominantly benefit governmental rather than business-type functions, they are included within the governmental activities in the government-wide financial statements.

Fiduciary Funds – Fiduciary funds are used to account for resources held for the benefit of parties outside the City. In these cases, the City has a fiduciary responsibility and is acting as a trustee. The Statement of Fiduciary Net Position separately reports all of the City’s fiduciary activities. The City excludes these activities from the City’s other financial statements because the City cannot use these assets to finance its operations. However, the City is responsible for ensuring that the assets reported in these funds are used for their intended purposes.

Notes to the Financial Statements Notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements, and it is an integral part of the financial statements.

Other information

In addition to the basic financial statements and accompanying notes, this report also presents certain combining statements referred to earlier in connection with non-major governmental and proprietary funds. These combining and individual fund statements and schedules can be found immediately following the Notes to the Financial Statements.


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GOVERNMENT - WIDE FINANCIAL ANALYSIS This analysis will focus on the City’s net position (Table 1) and changes in net position (Table 2) of the governmental and business-type activities for the fiscal year ended June 30, 2020. Management has included comparative data from fiscal year ended June 30, 2019 in its analysis.

Net Position (Table 1)

(in millions)

2020 2019 2020 2019 2020 2019

Current and Other Assets 663.97$ 841.93$ 336.99$ 387.07$ 1,000.96$ 1,229.00$ Capital Assets 1,084.36 1,023.72 248.89 251.40 1,333.25 1,275.12

Total Assets 1,748.33 1,865.65 585.88 638.47 2,334.21 2,504.12

Deferred Charges on Refunding - - 0.80 0.85 0.80 0.85 Deferred Pension Related Items 391.32 65.72 36.87 5.46 428.19 71.18 Deferred OPEB Related Items 130.03 5.13 16.54 0.98 146.57 6.11 Total Deferred Outflows of Resources 521.34 70.85 54.21 7.29 575.55 78.14

Long-term Debt Outstanding 800.32 579.72 115.91 136.99 916.23 716.71 Other Liabilities 64.42 51.18 21.11 18.91 85.53 70.09

Total Liabilities 864.74 630.90 137.02 155.90 1,001.76 786.80

Deferred Charges on Refunding 1.00 1.06 - - 1.00 1.06 Deferred Pension Related Items 7.25 8.94 0.72 0.64 7.98 9.58 Deferred OPEB Related Items 124.17 33.77 15.80 6.43 139.97 40.21 Total Deferred Inflows of Resources 132.43 43.77 16.52 7.07 148.95 50.84

Net Position: Net Investment in Capital Asset 997.86 959.78 182.09 184.56 1,179.94 1,144.34 Restricted 215.61 204.45 3.14 - 218.75 204.45 Unrestricted 59.05 97.60 301.32 298.23 360.36 395.83

Total Net Position 1,272.51$ 1,261.83$ 486.54$ 482.79$ 1,759.05$ 1,744.62$

Governmental Activities Business-Type Activities Government-Wide Totals


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The City’s Government-wide total net position was $1.76 billion, with assets of $2.33 billion, deferred outflows of $575.55 million, liabilities of $1.00 billion and deferred inflows of $148.95 million. The net investment in capital assets of $1.18 billion represents 67.1 percent of the City’s total net position. This is an increase of $35.60 million from the previous year. The net investment in capital assets (e.g., infrastructure, land, structures and improvements, furniture and equipment) component of net position consists of capital assets, net of accumulated depreciation, reduced by any related outstanding debt used to acquire, construct, or improve those assets. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other resources, since the capital assets themselves cannot be used to liquidate these liabilities.

Another portion of the City’s net position of $218.75 million (12.4 percent of the total net position) represents resources that are subject to external restrictions in how they may be used. The remaining balance of $360.36 million or 20.5 percent of the total net position (unrestricted position) may be used to meet the government’s ongoing obligations to citizens and creditors within the program areas. Overall Financial Activities Overall, the City’s financial position increased from the prior year by $14.42 million (see Table 2 on the following page).

The overall cost of all governmental and business-type activities this year was $453.61 million and was an overall net increase of $2.36 million or less than one percent compared to the prior year.

Total revenue of all governmental and business-type activities was $469.15 million for this fiscal year; a decrease of $69.44 million or 12.9 percent. Program revenues were $294.21 million and general revenues were $174.94 million. The largest single revenue category was Charges for Services, at $236.78 million, which is program revenue. This revenue goes directly against the expenses in recovering the costs of providing those services. Charges for Services revenue increased by $0.71 million or less than one percent. Sales Taxes, which are considered general revenues, were the second largest revenue at $90.29 million. The third largest revenue source was Property Taxes (general revenue) at $67.24 million. Capital Contributions and Grants, another program revenue source, at $50.75 million was the fourth largest revenue category.


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Changes in Net Position (Table 2) (in millions)

2020 2019 2020 2019 2020 2019RevenuesProgram Revenues: Charges for Services 112.33$ 113.71$ 124.45$ 122.36$ 236.78$ 236.07$ Operating Contributions and Grants 6.54 8.85 0.14 0.12 6.68 8.97 Capital Contributions and Grants 46.20 58.83 4.55 4.46 50.75 63.29 Sub-total Program Revenues 165.07 181.39 129.14 126.94 294.21 308.33 General Revenues: Property Taxes 67.24 63.16 - - 67.24 63.16 Sales Taxes 90.29 94.49 - - 90.29 94.49 Business Licenses Taxes 7.79 7.79 - - 7.79 7.79 Franchise Taxes 3.43 3.42 - - 3.43 3.42 Transient Occupancy Taxes 12.16 14.94 - - 12.16 14.94 Other Taxes 4.04 4.50 - - 4.04 4.50 Motor Vehicle In-Lieu 0.14 0.08 - - 0.14 0.08 Use of Money and Property 18.60 32.11 8.35 7.87 26.95 39.98 Other 4.20 1.65 0.47 0.25 4.67 1.90 Gain on Sale of Other Investments 0.61 - - 0.61 - Special Item (Note 15) (42.37) - - - (42.37) - Sub-total General Revenues 166.12 222.14 8.82 8.12 174.94 230.26 Total Revenues 331.19$ 403.53$ 137.96$ 135.06$ 469.15$ 538.59$

Expenses General government 31.86$ 34.59$ -$ -$ 31.86$ 34.59$ Public safety 177.84 178.04 - - 177.84 178.04 Community development 92.31 76.42 - - 92.31 76.42 Public works 28.83 40.40 - - 28.83 40.40 Interest on long-term debt 3.49 2.66 - - 3.49 2.66 Water - - 57.70 52.90 57.70 52.90 Sewer - - 23.26 24.73 23.26 24.73 Integrated Waste - - 34.38 39.48 34.38 39.48 I.T. Fiber - - 3.94 2.03 3.94 2.03 Total Expenses 334.33$ 332.11$ 119.28$ 119.14$ 453.61$ 451.25$

Change in Net Position before Transfers (3.14)$ 71.42$ 18.68$ 15.92$ 15.54$ 87.34$

Transfers 14.47 4.65 (14.47) (4.65) - - Change in Net Position 11.34$ 76.07$ 4.21$ 11.27$ 15.54$ 87.34$

Restatement of Net Position (0.66) 45.93 (0.45) (36.20) (1.10) 9.73 Net Position at Beginning of Year 1,261.83 1,139.83 482.79 507.72 1,744.61 1,647.55

Net Position at End of Year 1,272.51$ 1,261.83$ 486.54$ 482.79$ 1,759.05$ 1,744.62$



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Governmental Activities Under the governmental activities, the City’s net position at the end of the year increased to $1.27 billion after a ($3.14) million net difference between revenue and expense, transfers of $14.47 million and restatement of ($0.66) million. The cost of all governmental activities this year was $334.33 million or 73.7 percent of the government-wide total expenses and was an increase of $2.22 million or less than one percent from last fiscal year.

Graph 1 below presents the costs of each of the City’s five governmental functions – general government, public safety, community development, public works, and interest on long-term debt, as well the governmental program’s revenues. The net cost (total cost less program revenues) is the amount that was paid from general revenues.

Expenses and Program Revenues – Governmental Activities (Graph 1) (in millions)


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Expenses in General Government were $31.86 million or 9.5 percent of total Governmental Activities expenses. Of this amount, $7.83 million was funded by program revenues, while the remaining $24.03 million was funded by general revenues. General Government expenditures decreased $2.73 million or 7.9 percent compared to the previous year as a result of reduced administrative expenditures.

Public Safety expenses were $177.84 million or 53.2 percent of the total Governmental Activities expenses. Of this amount, $30.04 million was funded by program revenues, while the remaining $147.8 million was funded by general revenues. Expenses for Public Safety decreased slightly by $0.20 million or less than one percent.

Expenses in Community Development were $92.31 million or 27.6 percent of the total Governmental Activities expenditures. These expenses increased by $15.89 million or 20.8 percent due to development activities in the Ontario Ranch planned community. Program revenues relating to the funding of community development activities amounted to $126.16 million, which were primarily from charges for services of $78.67 million and capital contributions and grants of $45.02 million.

Public Works expenses were $28.83 million or 8.6 percent of the total Governmental Activities expenditures. Of this amount, $1.04 million was funded by program revenues, with the remaining $27.79 million funded by general revenues. Public Works expenses decreased by $11.57 million or 28.6 percent from the prior year due to the reduction of capital improvement projects completed in the current year.

Interest on long-term debt had expenses of $3.49 million or one percent of total Governmental Activities and is funded entirely by general revenues.


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Graph 2 below presents governmental activities revenue by source. Total revenue for governmental activities was $331.19 million (before transfers); a decrease of $72.34 million or 17.9 percent compared to the previous fiscal year. The four largest revenue sources under governmental activities were the categories of Charges for Services, Sales Taxes, Property Taxes, and Capital Contributions and Grants.

Charges for Services (program revenue) was $112.33 million or 30.1 percent of total governmental activities revenue. Compared to the prior year, charges for services revenue slightly declined $1.38 million or 1.2 percent. Sales Taxes (general revenue) were $90.29 million or 24.2 percent of total governmental activities revenue. It had a decrease of $4.20 million or 4.4 percent compared to the previous fiscal year – primarily from the economic slowdown resulting from COVID-19 stay in place and business shut down orders. Property Taxes (general revenue) was $67.24 million or 18.0 percent of total governmental activities revenue. Growth in assessed valuations and new development are primarily the reason for this increase in revenue. Capital Contributions and Grants (program revenue) was $46.20 million or 12.4 percent of the total governmental activities revenue. This program revenue experienced a decrease of $12.62 million or 21.5 percent over the prior year – mainly due to the sluggish economy from the COVID19 pandemic.

Revenues by Source – Governmental Activities (Graph 2)


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Business-type Activities

Net position for business-type activities was $486.54 million at June 30, 2020, with assets of $585.88 million, deferred outflows of resources of $54.21 million, liabilities of $137.02. million and deferred inflows of resources of $16.52 million. Unrestricted net position of $301.32 million represented 61.9 percent of total business-type activities net position; this amount may be used to meet the government’s on-going obligations. Net investment in capital assets of $182.09 million represented 37.4 percent of the total net position from business-type activities. Compared to the prior year, the City’s net position from business-type activities from the prior year increased slightly by $3.75 million or less than one percent.

Total revenue (excluding transfers) for the City’s business-type activities was $137.96 million, which represented a small gain of $2.90 million or 2.1 percent from the prior year. Program revenues amounted to $129.14 million or 93.6. percent of total business-type related revenue. Program revenues increased $2.20 million or 1.7 percent. General revenue for business-type activities was $8.82 million. Business-type activities incurred $119.28 million of expenditures for the year; relatively flat compared to the prior year amount of $119.14 million.

Graph 3 presents the costs of each of the City’s business activities and the associated program revenue. Since business-type activities are primarily used when the City charges customers for the services it provides, program revenues (charges for services) should be comparable to the costs of these programs and represent the major funding source for these activities.

Expenses and Program Revenues – Business-type Activities (Graph 3) (in millions)


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Graph 4 presents revenues by source for business-type activities. Total revenue for business-type activities was $137.96 million (before transfers); this was a small increase of $2.90 million or 2.1 percent compared to the previous year. Charges for Services (program revenue) amounted to $124.45 million or 90.2 percent of total business-type activities revenues. The remaining revenues by source of 9.8 percent is from Capital Contributions and Grants ($4.55 million), General Revenues ($8.82 million) and Operating Contributions and Grants ($0.14 million). Revenue from Water Services is the largest revenue source at $57.70 million or 41.8 percent of the total revenues from business-type activities. It had a minor increase of $2.23 million or 4.0 percent compared to the previous fiscal year due to additional usage from a drier winter and the COVID-19 stay in place orders. The second largest revenue source was revenue from Integrated Waste services at $38.34 million or 27.8 percent of total business-type activities revenues. Integrated Waste services revenue had a slight decrease of approximately $20,000 or less than one percent.

Revenues by Source – Business-Type Activities (Graph 4)


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FINANCIAL ANALYSIS OF THE GOVERNMENT’S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

Governmental Funds The focus of the City’s governmental funds is to provide information on near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year.

During the current fiscal year, the City had five major governmental funds: General Fund, Measure I Fund, Ontario Housing Authority, Capital Projects Fund, and Impact Fees Fund. The General Fund is the City’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The General Fund is discussed in depth later in the MD&A. The special revenue fund for the Measure I Fund accounts for revenues from a one-half percent sales tax on all retail transactions within the County. The proceeds are to be used for transportation improvements, railroad grade separation projects, and traffic management programs. The special revenue fund for the Ontario Housing Authority Fund accounts for low and moderate housing funds to implement various programs and projects to assist in affordable housing. The Capital Projects Fund accounts for financial transactions of general capital improvements. The capital projects fund for the Impact Fees Fund accounts for developer-paid impact fees for infrastructure construction. Each major fund is discussed in the Notes to the Financial Statements.

As of June 30, 2020, governmental funds reported combined ending fund balances of $479.61 million. Approximately 26.1 percent or $124.98 million of this total amount constitutes assigned/unassigned fund balance. The remaining fund balance of $354.63 million is comprised of the following: Nonspendable ($4.05 million), Restricted ($215.61 million), and Committed ($134.97 million). Included in the Nonspendable fund balance are as follows: Advances to Other Funds ($3.50 million); Inventories ($0.30 million); Prepaid costs ($0.18 million); and Notes and Loans ($0.07 million). For the Restricted fund balance (external enforceable limitations on usage), they are comprised as follows: Community Development projects ($90.74 million); Public Services ($37.65 million); Affordable Housing projects ($37.30 million); Park Development projects ($24.30 million); Bond Improvement projects ($18.60 million); Transportation improvement projects ($4.84 million); AQMD activities ($1.60 million); Endowment and trusts ($0.42 million) and Public Safety ($0.16 million). Included in the Committed fund balance (self-imposed limitations on usage) is $134.97 million for City Facilities infrastructure improvements and capital replacement.


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Governmental Revenues

Revenues of governmental funds for Fiscal Year 2019-20 were $374.31 million, with a decrease of $13.99 million or 3.6 percent compared to the previous fiscal year. This small reduction in governmental revenue is primarily attributable to decreased revenues in Contribution from Property Owners and Impact Fees from developer completed infrastructure in the Ontario Ranch planned community.

Table 3 below presents a summary of governmental fund revenues for the fiscal year ended June 30, 2020, with comparative amounts from the prior year.

Comparison of Major Governmental Revenues (Table 3) Fiscal Years 2019-20 and 2018-19

Amount % of Total Amount % of Total $ Increase / % Increase /FY 19-20 Revenues FY 18-19 Revenues (Decrease) (Decrease)

Property Tax 66,821,934$ 17.9% 63,156,933$ 16.3% 3,665,001$ 5.8%

Sales Tax 90,290,690 24.1% 94,486,731 24.3% (4,196,041) -4.4%

Transient Occupancy Tax 12,160,235 3.2% 14,945,483 3.8% (2,785,248) -18.6%

Parking Tax 2,771,083 0.7% 3,235,108 0.8% (464,025) -14.3%

Business Licenses Tax 7,793,962 2.1% 7,786,821 2.0% 7,141 0.1%

Other Taxes 13,019,343 3.5% 8,287,241 2.1% 4,732,102 57.1%

Licenses & Permits 5,488,023 1.5% 5,067,374 1.3% 420,649 8.3%

Intergovernmental 17,814,256 4.8% 21,912,280 5.6% (4,098,024) -18.7%

15,503,662 4.1% 35,587,107 9.2% (20,083,445) 100.0%

Charges for Services 114,818,886 30.7% 109,518,406 28.2% 5,300,480 4.8%

Use of Money & Property 18,759,439 5.0% 14,861,752 3.8% 3,897,687 26.2%

Fines and Forfeitures 786,630 0.2% 1,185,128 0.3% (398,498) -33.6%

Miscellaneous 8,286,111 2.2% 8,275,990 2.1% 10,121 0.1%

TOTAL 374,314,254$ 100.0% 388,306,354$ 100.0% (13,992,100)$ -3.6%

Contribution from Property Owners and Impact Fees


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Governmental Expenditures

Total expenditures for Fiscal Year 2019-20 were $370.44 million, an increase of $47.12 million or 14.6 percent compared to the prior year. This is primarily due to an increase of $27.74 million in Community Development from development related projects at the Ontario Ranch planned community and an increase of $19.23 million in Public Safety due to the purchase a helicopter and increase public safety service levels at Ontario Ranch.

Table 4 presents a summary of governmental fund expenditures for the Fiscal Year ended June 30, 2020 with comparative amounts from the prior year.

Comparison of Major Governmental Expenditures (Table 4) Fiscal Years 2019-20 and 2018-19

Amount % of Total Amount % of Total $ Increase / % Increase/FY 19-20 Expenditures FY 18-19 Expenditures (Decrease) (Decrease)

General Government 33,754,652$ 9.1% 33,100,934$ 10.2% 653,718$ 2.0%

Public Safety 180,119,824 48.6% 160,884,992 49.8% 19,234,832 12.0%

Community Development 130,014,298 35.1% 102,279,086 31.6% 27,735,212 27.1%

Public Works 22,694,083 6.1% 24,047,574 7.4% (1,353,491) -5.6%

366,582,857$ 99.0% 320,312,586$ 99.1% 46,270,271$ 14.4%

Debt Service 3,852,938 1.0% 2,999,049 0.9% 853,889 28.5%

TOTAL 370,435,795$ 100.0% 323,311,635$ 100.0% 47,124,160$ 14.6%

Total Operating Expenditures


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Proprietary Funds

The City’s Proprietary funds consist of four Enterprise Funds and five Internal Service Funds. The Internal Service Funds are presented as Governmental Activities in the Proprietary Funds financial statements. Individual fund data is provided in the form of combining statements.

Operating revenues for Enterprise Funds include sales and service charges, interdepartmental charges and miscellaneous. Total operating revenues for all Enterprise Funds for Fiscal Year 2019-20 were $122.78 million, while non-operating revenues were $10.63 million. Operating expenses for Fiscal Year 2019-20 were $118.52 million, while non-operating expenses were $3.27 million. During the fiscal year, the net amount transferred out to the City’s Governmental Funds was $14.47 million to support for the various governmental activities.

The City also has five Internal Service funds to allocate costs of the City’s information systems, equipment services, risk management, other post-employment benefits, and pension benefits operations to the various departments. The interdepartmental charges for service (revenues) in Fiscal Year 2019-20 were $42.19 million.

Fiduciary Funds

As mentioned earlier, the City uses Fiduciary Funds to account for resources held for the benefit of parties outside the City, in which the City is acting as trustee. The Statement of Fiduciary Net Position reports twenty-five activities for which the City has a fiduciary responsibility. These include: the Redevelopment Financing Authority, a JPA formed between the City and the Agency to establish a vehicle to reduce local borrowing costs and promote greater use of new and existing financial instruments; West End Communications Authority, a seven-member JPA that operates and maintains a consolidated 800MHZ communication system designed to serve public safety agencies; the Sanitary Collection Treatment Fund which collects sewer capital assessment fees on behalf of the Inland Empire Utilities Agency; the West End Fire and Emergency Response Commission, a JPA of five local fire departments to establish a hazardous materials response team, an urban search and rescue team and the servicing of joint authority breathing apparatus equipment used for emergency purposes; and the Private Purpose Trust Fund for the Successor Agency of the Former Redevelopment Agency, which was formed upon dissolution of the Ontario Redevelopment Agency. The successor agency is subject to the control of newly established County Oversight Board and can only pay enforceable obligations in existence at the date of dissolution. Furthermore, it will hold the remaining assets of the former Redevelopment Agency until they are distributed to other units of state and local government. The remaining are assessment/special assessment bond redemption funds and community facility district debt service funds used to collect assessments and administer the debt service of the districts.


21

GENERAL FUND – FUND BALANCE ANALYSIS The General Fund is the primary operating fund of the City. The fund balance of $107.55 million as of June 30, 2020 had a decrease of $23.85 million compared to the previous year. This is primarily due to the City’s forgiveness of a $42.37 million receivable for services associated with the transfer of the Ontario International Airport (ONT) to a local joint powers authority: Ontario International Airport Authority (OIAA). As a measure of the General Fund’s liquidity, it may be useful to compare both Assigned and Unassigned fund balance and total fund balance to total fund operating expenditures. Assigned and Unassigned fund balance of $102.49 million represents 95.3 percent of total General Fund fund balance, while the total Nonspendable, Restricted, and Committed fund balance amounts to $5.07 million and comprises 4.7 percent of the total fund balance.

Total fund balance of the General Fund consists of four components: 1) Nonspendable fund balance of $4.05 million – represents $3.50 million in advances to other funds and $0.55 million in prepaid, inventory, and notes and loans; 2) Restricted fund balance of $0.42 million – consists of endowment and trust funds; 3) Committed fund balance of $0.60 million – represents City infrastructure ($370,412) and Ontario Motor Speedway ($225,057) – to be used for community activities, facilities, and projects; and 4) Assigned fund balance of $99.86 million – consists of the stability arrangement of $51.27 million, economic uncertainty of $20.00 million, compensated absences of $17.23 million, City facilities and capital replacement of $6.20 million, and continuing appropriations of $5.16 million.

For additional details of the City’s General Fund Balance, please refer to Note 14 in the Notes to the Basic Financial Statements.


22

GENERAL FUND – REVENUE AND EXPENDITURE ANALYSIS Revenues For Fiscal Year 2019-20, General Fund revenues were $241.43 million, a decline of $4.40 million or 1.8 percent from the prior fiscal year. Sales Tax revenues were $90.29 million, a decrease of $4.20 million from the prior fiscal year mainly due to the economic slowdown resulting from the COVID-19 stay at home and business shut down orders. Transient Occupancy Tax was $12.16 million, a decline of $2.79 million or 18.6 percent as result of the closure of many hotels due to the shut down orders and reduced travel from the COVID-19 sanctions. Charges for Services revenue was $36.17 million, a decrease of $2.61 million or 6.7 percent due to slight decline in developmental activities. However, Property Tax revenues were $66.82 million, an increase of $3.67 million or 5.8 percent from the prior year because of increased property assessed valuations.

General Fund Revenues (Table 5) Fiscal Years 2019-20 and 2018-19

$ Increase / % of(Decrease) Increase

FY 19-20 FY 18-19 to Last Year (Decrease)Property Tax 66,821,934$ 27.7% 63,156,933$ 3,665,001$ 5.8%Sales Tax 90,290,690 37.4% 94,486,731 (4,196,041) -4.4%Transient Occupancy Tax 12,160,235 5.0% 14,945,483 (2,785,248) -18.6%Other Taxes 15,002,981 6.2% 14,005,502 997,479 7.1%License & Permits 5,488,023 2.3% 5,067,374 420,649 8.3%Intergovernmental 1,268,005 0.5% 3,132,474 (1,864,469) -59.5%Charges for Services 36,168,302 15.0% 38,777,697 (2,609,395) -6.7%Use of Money & Property 8,476,572 3.5% 7,072,112 1,404,460 19.9%Fines & Forfeitures 786,630 0.3% 1,185,028 (398,398) -33.6%Miscellaneous 4,969,244 2.1% 4,002,652 966,592 24.1%

Totals 241,432,616$ 100.0% 245,831,986$ (4,399,370)$ -1.8%

% of Total


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Following is an in-depth analysis of each of the revenue sources:

• Property Tax revenues increased $3.67 million or 5.8 percent, comprising 27.7 percent of total General Fund revenue. This gain was the result of increased property assessed valuations.

• Sales Tax revenues experienced a decrease of $4.20 million or 4.4 percent from the prior year. Of the total General Fund revenue, 37.4 percent comes from sales taxes. This decline is due to the economic impact resulting from the pandemic.

• Transient Occupancy Tax (TOT) declined $2.77 million or 18.6 percent as the result of hotel closures and less travel from the COVID-19 sanctions; it comprises 5.0 percent of the City’s total General Fund revenue base.

• Other tax revenues include Franchise Fee, Business License Tax, Property Transfer Tax and Parking Tax, comprising 6.2 percent of the City’s total General Fund revenue. This revenue category reflected an increase of $1.0 million or 7.1 percent, primarily from increases in Business License and Property Transfer taxes.

• License and Permit revenues experienced an increase of $420,649 or 8.3 percent from the prior year due to continued steady development related activity.

• Intergovernmental revenues decreased by $1.86 million or 59.5 percent compared to the previous year due to the change in how General Fund Grants are now reported – a separate fund from the General Fund.

• Charges for Services revenues were $36.17 million; a slight decrease of $2.61 million. Of the total General Fund revenue, 15.0 percent comes from charges for services.

• Revenues of $8.48 million for the Use of Money and Property category represent 3.5 percent of the City’s total General Fund revenue base and experienced an increase of $1.4 million from the prior year due to investment portfolio valuation gains.

• Fines and Forfeiture revenue of $786,630 decreased $398,398 compared to the previous fiscal year and represents less than 1 percent of total General Fund revenues.

• Miscellaneous revenues of $4.97 million, representing 2.1 percent of the total General Fund revenue, increased $966,592 compared to the prior year primarily due to a one-time receipt of miscellaneous revenue received in the current fiscal year.


24

Expenditures For Fiscal Year 2019-20, total General Fund expenditures were $256.18 million, and increased $16.35 million or 6.8 percent compared to the previous year.

General Fund Expenditures (Table 6) Fiscal Years 2019-20 and 2018-19

• General Government expenditures were $28.32 million, an increase of $1.07 million or

3.9 percent from the prior fiscal year. This was primarily due to increased reimbursements to local businesses that have sales tax abatement agreements with the City.

• Public Safety expenditures were $166.87 million, an increase of $9.56 million or 6.1 percent compared to the previous year, mainly from labor contractual increase and the purchase of a new police helicopter.

• Community Development expenditures were $35.83 million, an increase of $4.23 million or 13.4 percent from the prior fiscal year mainly due to increase community development activities related to the Ontario Ranch planned community.

• Public Works expenditures were $21.30 million, an increase of $0.62 million or 3.0 percent compared to the previous fiscal year. This increase is the result of rising material costs.

• Debt Service expenditures were $3.85, an increase of $0.86 million or 28.9 percent. This is the result of increasing debt service payments.

$ Increase / % of(Decrease) Increase

FY 19-20 % of Total FY 18-19 to Last Year (Decrease)

General Government 28,322,100$ 11.1% 27,251,880$ 1,070,220$ 3.9%

Public Safety 166,873,394 65.1% 157,310,539 9,562,855 6.1%

Community Development 35,829,046 14.0% 31,597,820 4,231,226 13.4%

Public Works 21,303,770 8.3% 20,679,198 624,572 3.0%

Debt Service 3,852,938 1.5% 2,989,049 863,889 28.9%

Totals 256,181,247 100.0% 239,828,486 16,352,762 6.8%


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MEASURE I FUND – FUND BALANCE ANALYSIS The Measure I Fund accounts for revenues from a one-half percent sales tax on all retail transactions within the County. The proceeds are to be used for transportation improvements, railroad grade separation projects, and traffic management programs. It is one of the five major funds included in the City’s Comprehensive Annual Financial Report for June 30, 2020. The fund balance of $2.37 million as of June 30, 2020 had a decrease of $1.67 million compared to the prior year. Total Assets were $16.73 million, a decrease of $1.87 million from the prior fiscal year. This is primarily due to combination of an increase in Cash and Investments (including Restricted Cash and Investments) of $9.26 million, with an offsetting decrease in Accounts Receivable of $10.74 million. Total Liabilities of $4.00 million, reflected a slight decrease of $0.21 million primarily from Accounts Payable.

MEASURE I FUND – REVENUE AND EXPENDITURE ANALYSIS Revenues For Fiscal Year 2019-20, total Measure I Fund revenues were $3.51 million or $4.19 million less compared to the prior year. This is due to the completion of the South Milliken and North Vineyard Grade Separation projects, which decreased the reimbursement revenue amounts for Measure I funded projects.

Expenditures For Fiscal Year 2019-20, total Measure I Fund expenditures were $5.18 million, a minor increase of $0.64 million compared to the prior year.


26

ONTARIO HOUSING AUTHORITY – FUND BALANCE ANALYSIS The Ontario Housing Authority Fund accounts for financial transactions for the Ontario Housing Authority. It is one of the five major funds included in the City’s Comprehensive Annual Financial Report for June 30, 2020. The fund balance of $21.29 million as of June 30, 2020, which is a slight decrease of only $3,957 compared to the prior year. Total Assets were $53.81 million; an increase of $5.06 million from the prior year. This is primarily due to the increase in Cash and Investments of the same amount. Total Liabilities were $11.05 million and an increase of $5.04 million compared to the previous fiscal year. This increase was the result of the California Housing Community Development grant received in FY 2019-20 of $5.00 million.

ONTARIO HOUSING AUTHORITY – REVENUE AND EXPENDITURE ANALYSIS Revenues For Fiscal Year 2019-20, total Ontario Housing Authority Fund revenues were $789,245; a decrease of $15.3 million compared to the prior year. This decrease is mainly due to contributions from property owners of $12.46 million that was received in FY 2018-19 to partly fund affordable multi-family housing projects located in downtown Ontario.

Expenditures

For Fiscal Year 2019-20, total Ontario Housing Authority Fund expenditures were $0.79 million. This is a major decrease of $18.60 million over the previous fiscal year primarily the result of the prior year development of affordable multi-family housing projects located in downtown Ontario.


27

CAPITAL PROJECTS FUND – FUND BALANCE ANALYSIS The Capital Projects Fund accounts for financial transactions of general capital improvements. It is one of the five major funds included in the City’s Comprehensive Annual Financial Report for June 30, 2020. The fund balance of $56.39 million as of June 30, 2020 reflected a slight decrease of $1.76 million compared to the prior year. Total Assets were $62.69 million; a minor decrease of $0.49 million from the previous year. This is mainly attributable to decreases in Restricted Cash and Investments $4.14 million, Cash and Investments of $2.32 million, and Deposits of $1.46 million, and Accounts Receivables of $0.57 million, with an offsetting increase in Land Held for Resale of $8.03 million. Total Liabilities of $4.42 million increased $1.27 million from the prior fiscal year, primarily due to an increase in Accounts Payable.

CAPITAL PROJECTS FUND – REVENUE AND EXPENDITURE ANALYSIS Revenues For Fiscal Year 2019-20, total Capital Projects Fund revenues were $7.84 million; a decrease of $0.65 million compared to the prior year.

Expenditures

For Fiscal Year 2019-20, total Capital Projects Fund expenditures were $12.80 million. This was a decrease of $5.19 million over the previous fiscal year due to the completion of capital improvement projects in fiscal year 2018-19.


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IMPACT FEES FUND – FUND BALANCE ANALYSIS The Impact Fees Fund accounts for revenues from developer-paid impact fees for infrastructure or construction. It is one of the five major funds included in the City’s Comprehensive Annual Financial Report for June 30, 2020. The fund balance of $146.25 million as of June 30, 2020 reflected an increase of $23.46 million. Total Assets were $149.63 million; an increase of $20.43 million from the previous year which is mainly attributable to the increase in Cash and Investments of $21.21 million. Total Liabilities of $3.38 million decreased by $3.02 million due to the decrease in Accounts Payable.

IMPACT FEES FUND – REVENUE AND EXPENDITURE ANALYSIS Revenues For Fiscal Year 2019-20, total Impact Fees Fund revenues were $52.22 million; a slight decrease of $0.90 million compared to the prior year.

Expenditures

For Fiscal Year 2019-20, total Impact Fees Fund expenditures were $28.78 million. This was an increase of $8.91 million over the prior year as a result of increased development activity in the Ontario Ranch planned community.


29

GENERAL FUND BUDGETARY HIGHLIGHTS Over the course of the year, the City Council revised the City budget several times. Budget revisions fall into three categories. The first category includes carry-forward encumbrances and capital projects that are approved shortly after the beginning of the year. The second category includes changes that the Council makes during the quarterly budget process. Finally, the Council approves supplemental appropriations through-out the year based on individual items that are brought forward by various departments. The General Fund budgetary comparison statement is located in the Basic Financial Statements.

Resources (Inflows) The budgeted amount for revenues (resources available for appropriation) had an increase of $8.88 million between the original budget of $279.19 million and the final amended budget of $288.07 million. The increase was mainly due to budget adjustments for Transfers-In (increase of $21.75) and the offsetting budget adjustment to Taxes (reduction of $12.21 million). Actual revenues were $1.53 million more than the final amended budget.

Charges to Appropriations (Outflows) The difference between the original budget and the final budget was an increase of $14.96 million in appropriations. This increase was primarily the result of increases in Community Development ($7.64 million) to fund increased development related activities, Public Safety ($3.34 million) to fund the purchase of a new police helicopter, and General Government ($3.11 million) for administrative expenditures. Actual expenditures were $17.77 million more than the final amended budget, primarily due to the Special Item related to the City’s forgiveness of a $42.37 million receivable for services associated with the transfer of the Ontario International Airport (ONT) to a local joint powers authority: Ontario International Airport Authority (OIAA).

Table 7 on the next page is a comparison of actual inflow and outflow with the final budget.


30

Budgetary Comparison for General Fund (Table 7) Fiscal Year 2019-20

(in millions)

Final BudgetVariance

Favorable /Original Final Variance Actuals (Unfavorable)

Resources (Inflows):

Taxes 192.54$ 180.33$ 12.21$ 184.28$ 3.94$

Licenses and Permits 3.68 4.91 (1.23) 5.49 0.58

Intergovernmental 0.31 0.20 0.10 1.27 1.06

Charges for Services 31.08 31.56 (0.49) 36.17 4.60

Use of Money and Property 2.86 2.00 0.86 8.48 6.48

Fines and Forfeitures 0.93 0.69 0.24 0.79 0.10

Miscellaneous 5.16 4.00 1.17 4.97 0.97

Transfers from Other Funds 42.63 64.38 (21.75) 48.17 (16.21)

Total Resources 279.19$ 288.07$ (8.88)$ 289.60$ 1.53$

Charges to Appropriations (Outflows):

General Government 28.76$ 31.87$ (3.11)$ 28.32$ 3.55$

Public Safety 172.36 175.69 (3.34) 166.87 8.82

Community Development 34.50 42.14 (7.64) 35.83 6.31

Public Works 23.08 23.91 (0.82) 21.30 2.60

Debt Service 3.85 3.85 - 3.85 0.00

Transfers to Other Funds 18.16 18.22 (0.06) 14.89 3.32

Special Item - - - 42.37 (42.37)

Total Charges to Appropriations 280.72$ 295.68$ (14.96)$ 313.45$ (17.77)$

Budget Amounts


31

CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets The City’s investment in capital assets (Table 8) for its governmental and business-type activities as of June 30, 2020, is $1.33 billion (net of accumulated depreciation). This investment in capital assets includes land, structures and improvements, furniture and equipment, infrastructure and construction in progress. For more information, please refer to Note 6 in the Notes to the Basic Financial Statements. The Capital Assets of the City are those assets which are used in the performance of the City’s functions including infrastructure assets. Depreciation on capital assets is recognized in the Government-wide financial statements.

Capital Assets (Table 8)

(net of depreciation) (in millions)

Additional detail information is provided on Capital Assets in the Notes to Financial Statements, Note 6.

The City has elected to use the “Modified Approach” as defined by GASB Statement No. 34 for its Governmental Activities infrastructure reporting. Under GASB Statement No. 34, eligible infrastructure capital asset is not required to be depreciated under the following requirements:

The City manages the eligible infrastructure capital assets using an asset management system with characteristics of (1) an up-to-date inventory; (2) perform condition assessments and summarize the results using a measurement scale; and (3) estimate annual amount to maintain and preserve at the established condition assessment level.

The City documents that eligible infrastructure capital assets are being preserved approximately at or above the established disclosed assessment.

2020 2019 2020 2019 2020 2019

Land 124.67$ 91.56$ 16.15$ 16.03$ 140.82$ 107.59$

Structures and Improvements 278.43 268.84 7.40 7.63 285.83 276.47

Furniture and Equipment 13.76 13.88 1.60 0.60 15.36 14.48

Infrastructure 605.46 600.47 154.79 161.07 760.25 761.54

Construction in Progress 62.04 48.97 68.95 66.08 130.99 115.05 Total Capital Assets 1,084.36$ 1,023.72$ 248.89$ 251.41$ 1,333.25$ 1,275.13$



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The City’s streets are constantly deteriorating resulting from the following four factors: (1) traffic using the streets; (2) the sun’s ultra-violet rays drying out and breaking down the top layer of pavement; (3) utility company/private development interests trenching operations; and (4) water damage from natural precipitation and other urban runoff. The City is continuously taking actions to arrest the deterioration through short-term maintenance activities such as pothole patching, street sweeping, and street paving.

The City expended $14.17 million on street maintenance for the fiscal year ended June 30, 2020 to delay deterioration. The City has estimated that the amount of annual expenditures required maintaining the City’s streets at the minimum PCI rating of “Good” through the year of 2020 is a minimum of $5.70 million per year. As of June 30, 2020, the City had approximately 109 million square feet of streets with a carrying amount of approximately $374.95 million and a replacement cost of approximately $800 million.

The City is also continuously taking actions to arrest the deterioration of other infrastructure assets through short-term maintenance activities. The City expended $5.62 million on other infrastructure (sidewalks, traffic signals/streetlights and catch basins/storm drains) maintenance for the fiscal year ended June 30, 2020. These expenditures delayed deterioration and improved the overall condition through these maintenance efforts. It is estimated that it will cost approximately $4.00 million per year to maintain other infrastructure assets at their present level. For more information, see Required Supplemental Information following the footnotes to the financial statements.


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Long-term Debt

At year end, the City had $439.50 million in outstanding long-term debt. This debt consisted of revenue bonds, pension obligation bonds, loans payable, installment sale, advances from Successor Agency, compensated absences, claims and judgments, and unamortized bond premiums and discounts. For additional details of the City’s long-term debt, please refer to Note 7 in the Notes to the Basic Financial Statements.

Table 9 below is a summary of the City’s long-term debt for the year ended June 30, 2020.

Long-Term Debt (Table 9) (in millions)

2020 2019 2020 2019 2020 2019

Revenue Bonds 58.99$ 60.04$ 65.91$ 65.90$ 124.89$ 125.94$ Pension Obligation Bonds 236.59 - - - 236.59 - Loan Payable 0.13 0.13 - - 0.13 0.13 Installment Sale 23.78 23.78 - Advances from Successor Agency 1.60 1.60 - - 1.60 1.60 Claims and Judgments 28.55 24.62 - - 28.55 24.62 Compensated Absences 18.04 16.22 1.49 1.43 19.54 17.65 Unamortized Bond Premium/Discount 2.74 2.85 1.69 1.79 4.43 4.64

370.41$ 105.46$ 69.09$ 69.12$ 439.50$ 174.58$

Governmental Activities Business-Type Activities Government-wide Totals

CONTACTING THE CITY’S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, investors and creditors with a general overview of the City’s finances and to show the City’s accountability for the money it receives. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to:

Executive Director of Finance City of Ontario

303 East “B” Street Ontario, California 91764


34

CITY OF ONTARIO

STATEMENT OF NET POSITION

Governmental Business-TypeActivities Activities Total

Assets:Cash and investments 454,915,579$ 162,755,228$ 617,670,807$ Receivables:

Accounts 28,701,275 10,691,016 39,392,291 Taxes 287,430 - 287,430 Notes and loans 39,023,397 - 39,023,397 Accrued interest 1,743,927 572,024 2,315,951

Internal balances 9,649,048 (9,649,048) - Prepaid costs 1,977,305 5,494 1,982,799 Deposits 826,803 - 826,803 Due from other government 120,081 - 120,081 Inventories 1,139,277 57,474,190 58,613,467 Advances to Successor Agency 3,500,000 - 3,500,000 Land held for resale 85,214,721 - 85,214,721 Investment in joint venture - 65,164,852 65,164,852 Other investments - 46,625,898 46,625,898 Restricted assets:

Cash and investments 1,266,574 210,592 1,477,166 Cash with fiscal agent 35,606,035 3,140,719 38,746,754

Capital assets not being depreciated 494,309,041 85,101,651 579,410,692 Capital assets, net of depreciation 590,051,784 163,785,898 753,837,682

Total Assets 1,748,332,277 585,878,514 2,334,210,791 Deferred Outflows of Resources:Deferred charges on refunding - 795,277 795,277 Deferred pension related items 391,315,398 36,867,926 428,183,324 Deferred OPEB related items 130,027,422 16,542,662 146,570,084

Total Deferred Outflows of Resources 521,342,820 54,205,865 575,548,685 Liabilities:Accounts payable 23,888,562 11,456,246 35,344,808 Accrued liabilities 7,037,717 580,726 7,618,443 Accrued interest 1,446,133 1,655,606 3,101,739 Unearned revenue 14,587,698 116,327 14,704,025 Deposits payable 14,591,547 7,302,161 21,893,708 Due to other governments 2,866,258 - 2,866,258 Noncurrent liabilities:

Due within one yearLong-term debt 9,100,104 1,485,000 10,585,104 Compensated absences 12,774,000 1,177,713 13,951,713 Claims and judgments 10,063,000 - 10,063,000

Due in more than one yearLong-term debt 314,717,322 66,111,108 380,828,430 Compensated absences 5,269,894 316,636 5,586,530 Claims and judgments 18,485,000 - 18,485,000 OPEB liability 144,273,525 18,355,113 162,628,638 Net pension liabilities 285,638,863 28,460,583 314,099,446 Total Liabilities 864,739,623 137,017,219 1,001,756,842

Deferred Inflows of Resources:Deferred charges on refunding 998,130 - 998,130 Deferred pension related items 7,254,363 724,849 7,979,212 Deferred OPEB related items 124,173,715 15,797,928 139,971,643

Total Deferred Inflows of Resources 132,426,208 16,522,777 148,948,985 Net Position:Net investment in capital assets 997,856,845 182,086,718 1,179,943,563 Restricted for: Community development projects 148,789,489 - 148,789,489 Public safety 2,622,961 - 2,622,961 Capital projects 26,474,260 - 26,474,260 Debt service - 3,140,719 3,140,719 Affordable housing 37,302,694 - 37,302,694 Other purposes 417,464 - 417,464 Unrestricted 59,045,553 301,316,946 360,362,499

Total Net Position 1,272,509,266$ 486,544,383$ 1,759,053,649$

JUNE 30, 2020Primary Government

See Notes to Financial Statements 35

CITY OF ONTARIO

STATEMENT OF ACTIVITIESYEAR ENDED JUNE 30, 2020

Operating CapitalCharges for Contributions Contributions

Expenses Services and Grants and Grants

Functions/ProgramsPrimary Government:Governmental Activities:

General government 31,859,857$ 6,965,874$ 862,382$ -$ Public safety 177,840,309 26,688,490 3,212,278 142,857 Community development 92,310,831 78,671,622 2,468,244 45,016,558 Public works 28,825,751 - - 1,042,327 Interest on long-term debt 3,493,124 - - -

Total Governmental Activities 334,329,872 112,325,986 6,542,904 46,201,742

Business-Type Activities:Water 57,700,824 57,676,762 - 3,095,761 Sewer 23,255,045 27,685,371 - - Integrated Waste 34,380,261 38,341,478 137,783 -

I.T. Fiber 3,943,666 747,095 - 1,452,724

Total Business-Type Activities 119,279,796 124,450,706 137,783 4,548,485

Total Primary Government 453,609,668$ 236,776,692$ 6,680,687$ 50,750,227$

General Revenues:Taxes: Property taxes, levied for general purpose Transient occupancy taxes Sales taxes Franchise taxes Business licenses taxes Other taxesMotor vehicle in lieu - unrestrictedUse of money and propertyOtherGain on sale of other investmentsSpecial Item (Note 15)Transfers

Total General Revenues, Special Item and Transfers

Change in Net Position

Net Position at Beginning of Year

Restatement of Net Position

Net Position at End of Year

Program Revenues


Primary Government

Governmental Business-TypeActivities Activities Total

(24,031,601)$ -$ (24,031,601)$ (147,796,684) - (147,796,684)

33,845,593 - 33,845,593 (27,783,424) - (27,783,424)

(3,493,124) - (3,493,124)

(169,259,240) - (169,259,240)

- 3,071,699 3,071,699 - 4,430,326 4,430,326 - 4,099,000 4,099,000 - (1,743,847) (1,743,847)

- 9,857,178 9,857,178

(169,259,240) 9,857,178 (159,402,062)

67,236,079 - 67,236,079 12,160,235 - 12,160,235 90,290,690 - 90,290,690

3,426,464 - 3,426,464 7,793,962 - 7,793,962 4,044,908 - 4,044,908

141,091 - 141,091 18,599,331 8,345,624 26,944,955

4,198,849 474,940 4,673,789 605,267 - 605,267

(42,373,148) - (42,373,148) 14,472,260 (14,472,260) -

180,595,988 (5,651,696) 174,944,292

11,336,748 4,205,482 15,542,230

1,261,827,709 482,787,059 1,744,614,768

(655,191) (448,158) (1,103,349)

1,272,509,266$ 486,544,383$ 1,759,053,649$

Net (Expenses) Revenues and Changes in Net Position


CITY OF ONTARIO

BALANCE SHEETGOVERNMENTAL FUNDS JUNE 30, 2020

Capital Projects Fund

GeneralAssets:Cash and investments 54,108,152$ 15,705,283$ 8,663,805$ 34,573,687$ Receivables:

Accounts 21,493,884 680,181 - 2,971,812 Taxes 200,483 - - - Notes and loans 75,000 - 28,419,800 - Accrued interest 685,878 56,723 30,659 86,692

Prepaid costs 103,754 - 2,060 - Deposits 72,400 287,230 214,005 23,798 Due from other governments 120,081 - - - Due from other funds 495,315 - - - Advances to other funds 58,180,692 - - - Advances to Successor Agency 3,500,000 - - - Inventories 300,943 - - - Land held for resale - - 16,476,284 10,855,141 Restricted assets:

Cash and investments - - - 360,308 Cash and investments with fiscal agents - - - 13,819,632

Total Assets 139,336,582$ 16,729,417$ 53,806,613$ 62,691,070$

Liabilities, Deferred Inflows of Resources, and Fund Balances:Liabilities:Accounts payable 11,305,415$ 4,003$ 50,250$ 3,416,429$ Accrued liabilities 6,688,007 - 24,989 - Unearned revenues - 4,000,000 5,000,000 - Deposits payable 12,846,099 - 8,395 1,002,287 Due to other governments - - - - Due to other funds - - - - Advances from other funds - - 5,961,399 -

Total Liabilities 30,839,521 4,004,003 11,045,033 4,418,716

Deferred Inflows of Resources:Unavailable revenues 946,691 10,351,842 21,469,021 1,879,410

Total Deferred Inflows of Resources 946,691 10,351,842 21,469,021 1,879,410

Fund Balances: Nonspendable 4,052,097 - - - Restricted 417,464 2,373,572 21,292,559 45,077,702 Committed 595,469 - - - Assigned 99,862,976 - - 11,315,242 Unassigned 2,622,364 - - -

Total Fund Balances 107,550,370 2,373,572 21,292,559 56,392,944

Total Liabilities, Deferred Inflows of Resources, and Fund Balances 139,336,582$ 16,729,417$ 53,806,613$ 62,691,070$

Capital Projects

Ontario Housing Authority Measure I

Special Revenue Funds


CITY OF ONTARIO

BALANCE SHEETGOVERNMENTAL FUNDSJUNE 30, 2020

Assets:Cash and investmentsReceivables:

AccountsTaxesNotes and loansAccrued interest

Prepaid costsDepositsDue from other governmentsDue from other fundsAdvances to other fundsAdvances to Successor AgencyInventoriesLand held for resaleRestricted assets:

Cash and investmentsCash and investments with fiscal agents

Total Assets

Liabilities, Deferred Inflows of Resources, and Fund Balances:Liabilities:Accounts payableAccrued liabilitiesUnearned revenuesDeposits payableDue to other governmentsDue to other fundsAdvances from other funds

Total Liabilities

Deferred Inflows of Resources:Unavailable revenues

Total Deferred Inflows of Resources

Fund Balances: Nonspendable Restricted Committed Assigned Unassigned

Total Fund Balances

Total Liabilities, Deferred Inflows of Resources, and Fund Balances


Other TotalGovernmental Governmental

Funds Funds

148,799,320$ 66,165,396$ 328,015,643$

- 3,236,120 28,381,997 - 86,947 287,430 - 10,528,597 39,023,397

525,406 199,175 1,584,533 - 22,473 128,287

229,370 - 826,803 - - 120,081 - - 495,315 - 5,961,399 64,142,091 - - 3,500,000 - - 300,943 - 57,883,296 85,214,721

73,115 35,775 469,198 - 21,777,916 35,597,548

149,627,211$ 165,897,094$ 588,087,987$

3,378,661$ 2,533,225$ 20,687,983$ - 103,826 6,816,822 - 5,587,698 14,587,698 - 734,766 14,591,547 - 2,866,258 2,866,258 - 495,315 495,315 - - 5,961,399

3,378,661 12,321,088 66,007,022

- 7,823,888 42,470,852

- 7,823,888 42,470,852

- - 4,052,097 229,370 146,216,201 215,606,868

134,372,092 - 134,967,561 11,647,088 - 122,825,306

- (464,083) 2,158,281

146,248,550 145,752,118 479,610,113

149,627,211$ 165,897,094$ 588,087,987$

Impact Fees



40

CITY OF ONTARIO

RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDSTO THE STATEMENT OF NET POSITIONJUNE 30, 2020

Fund balances of governmental funds 479,610,113$

Amounts reported for governmental activities in the statement of net position are different because:

Capital assets net of depreciation have not been included as financial resources in governmental fund activity:

Capital assets 1,285,984,887$ Accumulated depreciation (240,601,112) 1,045,383,775

Governmental funds report all pension contributions as expenditures. However, the net pension liability has a measurement date of June 30, 2018, and pension contributions subsequent to the measurement date are reclassified as deferred pension contributions. 37,581,052

Deferred outflows of resources reported for the pension plan for government-wide statements:Differences between expected and actual experiences 29,743,377 Change in assumptions 14,477,621 44,220,998

Long-term debt and compensated absences have not been included in the governmental fund activity:

Revenue bonds (58,985,000) Loan payable (126,566) Installment sale (23,780,842) Advance from Successor Agency (1,600,000) Unamortized bond discount and premium (2,740,018) Unamortized deferred loss on refunding (998,130) Compensated absences (17,480,934)

Bond insurance premium is an expenditure in the governmental funds, but it is a prepaid item on the statement of net position. 153,997

Accrued interest payable for the current portion of interest due on bonds has not been reported in the governmental funds. (1,446,133)

Governmental funds report all pension contributions as expenditures, however, in the statement of net position, the excess of the total pension liability over the plan fiduciary net position is reported as a net pension liability. (274,414,703)

Deferred inflows of resources reported for the pension plan for government-wide statements:Differences between expected and actual experiences (1,577,785) Changes in assumptions (2,751,120) Net difference between projected and actual earnings on pension plan investments (2,639,595) (6,968,500)

Revenues are reported as unavailable revenue in the governmental funds and recognized in the statement of activities. These are included in the intergovernmental revenues in the governmental fund activity. 42,470,852

Internal service funds are used by management to charge the costs of certain activities, such as equipment management and self-insurance, to individual funds. The assets and liabilities of the internal service funds must be added to the statement of net position. 11,629,305

Net Position of Governmental Activities 1,272,509,266$


CITY OF ONTARIO

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCESGOVERNMENTAL FUNDSYEAR ENDED JUNE 30, 2020


General Revenues:Taxes 184,275,840$ -$ -$ -$ Special assessment taxes - - - - Licenses and permits 5,488,023 - - - Intergovernmental 1,268,005 3,442,615 - 168,434 Contribution from property owners - - 26,254 - Charges for services 36,168,302 - - 6,501,986 Use of money and property 8,476,572 67,240 703,122 1,166,015 Fines and forfeitures 786,630 - - - Miscellaneous 4,969,244 - 59,869 -

Total Revenues 241,432,616 3,509,855 789,245 7,836,435

Expenditures:Current: General government 28,322,100 - - - Public safety 166,873,394 - - 6,828,766 Community development 35,829,045 5,176,198 793,202 5,968,452 Public works 21,303,770 - - - Debt service:

Principal retirement 1,050,000 - - - Interest and fiscal charges 2,802,938 - - -

Total Expenditures 256,181,247 5,176,198 793,202 12,797,218

Excess (Deficiency) of Revenues Over (Under) Expenditures (14,748,631) (1,666,343) (3,957) (4,960,783)

Other Financing Sources (Uses):Transfers in 48,168,298 - - 3,205,200 Transfers out (14,894,106) - - - Notes and loans issued - - - -

Total Other Financing Sources (Uses) 33,274,192 - - 3,205,200

Special item (42,373,148) - - -

Net Change in Fund Balances (23,847,587) (1,666,343) (3,957) (1,755,583)

Fund Balances:Beginning of year 131,397,957 4,039,915 21,296,516 58,148,527

End of year 107,550,370$ 2,373,572$ 21,292,559$ 56,392,944$


Measure I

Ontario Housing Authority

Capital Projects


CITY OF ONTARIO

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCESGOVERNMENTAL FUNDSYEAR ENDED JUNE 30, 2020

Revenues:TaxesSpecial assessment taxesLicenses and permitsIntergovernmentalContribution from property ownersCharges for servicesUse of money and propertyFines and forfeituresMiscellaneous

Total Revenues

Expenditures:Current: General government Public safety Community development Public worksDebt service:

Principal retirementInterest and fiscal charges

Total Expenditures

Excess (Deficiency) of Revenues Over (Under) Expenditures

Other Financing Sources (Uses):Transfers inTransfers outNotes and loans issued

Total Other Financing Sources (Uses)

Special item

Net Change in Fund Balances

Fund Balances:Beginning of year

End of year


Other TotalGovernmental Governmental

Funds Funds

-$ -$ 184,275,840$ - 8,581,407 8,581,407 - - 5,488,023 - 12,935,202 17,814,256 - 15,477,408 15,503,662

46,413,912 25,734,686 114,818,886 5,810,447 2,536,043 18,759,439

- - 786,630 - 3,256,998 8,286,111

52,224,359 68,521,744 374,314,254

2,532,851 2,899,701 33,754,652 4,555,436 1,862,228 180,119,824

21,592,501 60,654,900 130,014,298 98,625 1,291,688 22,694,083

- - 1,050,000 - - 2,802,938

28,779,413 66,708,517 370,435,795

23,444,946 1,813,227 3,878,459

11,000 1,306,773 52,691,271 - (14,136,243) (29,030,349) - 23,780,842 23,780,842

11,000 10,951,372 47,441,764 - - (42,373,148)

23,455,946 12,764,599 8,947,075

122,792,604 132,987,519 470,663,038

146,248,550$ 145,752,118$ 479,610,113$

Impact Fees



44

CITY OF ONTARIO

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDSTO THE STATEMENT OF ACTIVITIESYEAR ENDED JUNE 30, 2020

Net change in fund balances - total governmental funds 8,947,075$

Amounts reported for governmental activities in the statement of activities aredifferent because:

Governmental funds report capital outlays as expenditures. However, in the statement of activities, the costs of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period:

Capital outlay 70,262,127$ Depreciation (15,091,759) Disposition of capital assets (1,930,545) 53,239,823

Repayment of long-term debt principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position. Whereas, issuance of long-term debt is a current financial resource in the governmental funds, but the issuance increase long-term debt in the statement of net position. Also, governmental funds report the effect of premiums, discounts, and deferral on loss of refunding when the debt is first issued, whereas these amounts are deferred and amortized in the statement of activities.

Long-term debt repayment:Lease Revenue Bonds 1,050,000

Long-term debt issuance:Installment sale (23,780,842)

Bond Premium Amortization 123,418 Bond Discount Amortization (18,938) Deferred Charges Amortization 62,060 (22,564,302)

Bond insurance premium are expenditures in governmental funds, but these costs are capitalized on the statement of net position. (6,783)

Accrued interest for long-term liabilities. This is the net change in accrued interest for the current period. (849,943)

Compensated absences expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. (2,005,488)

Pension obligation expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. (16,643,749)

Revenues reported as unavailable revenue in the governmental funds and recognized in the statement of activities. These are included in intergovernmental revenues in the governmental fund activity. (1,772,924)

Internal service funds are used by management to charge the costs of certain activities, such as equipment management and self-insurance, to individual funds. The net revenues (expenses) of the internal service funds are reported with governmental activities. (7,006,961)

Change in Net Position of Governmental Activities 11,336,748$


CITY OF ONTARIO

STATEMENT OF NET POSITIONPROPRIETARY FUNDSJUNE 30, 2020

Nonmajor GovernmentalEnterprise Activities-

Fund Internal Water Sewer I.T. Fiber Totals Service Funds

Assets:Current:

Cash and investments 81,880,374$ 53,529,788$ 24,931,619$ 2,413,447 $ 162,755,228$ 126,899,936 $ Receivables:

Accounts 5,504,041 2,105,126 2,988,518 93,331 10,691,016 319,278 Accrued interest 286,116 189,366 88,001 8,541 572,024 159,394

Prepaid costs 5,494 - - - 5,494 1,695,021 Inventories 55,698,931 275,256 - 1,500,003 57,474,190 838,334

Restricted:Cash and investments 210,592 - - - 210,592 797,376 Cash with fiscal agent 3,140,719 - - - 3,140,719 8,487

Total Current Assets 146,726,267 56,099,536 28,008,138 4,015,322 234,849,263 130,717,826 Noncurrent:

Advances to other funds 12,503,000 5,614,000 11,738,000 - 29,855,000 14,034,000 Investment in joint venture 65,164,852 - - - 65,164,852 - Other investments 46,625,898 - - - 46,625,898 - Capital assets - net of

accumulated depreciation 194,962,227 28,288,440 6,078,657 19,558,225 248,887,549 38,977,050

Total Noncurrent Assets 319,255,977 33,902,440 17,816,657 19,558,225 390,533,299 53,011,050

Total Assets 465,982,244 90,001,976 45,824,795 23,573,547 625,382,562 183,728,876

Deferred Outflows of Resources:Deferred charges on refunding 795,277 - - - 795,277 - Deferred pension related items 2,214,851 653,562 3,381,011 130,285 6,379,709 340,001,565 Deferred OPEB related items - - - - - 146,570,084

Total Deferred Outflows of Resources 3,010,128 653,562 3,381,011 130,285 7,174,986 486,571,649

Total Assets & DeferredOuflow of Resources 468,992,372$ 90,655,538$ 49,205,806$ 23,703,832$ 632,557,548$ 670,300,525$

Liabilities, Deferred Inflows and Net PositionLiabilities:Current:

Accounts payable 4,927,013$ 3,491,617$ 2,763,301$ 274,315$ 11,456,246$ 3,200,579$ Accrued liabilities 208,155 86,282 272,959 13,330 580,726 220,895 Accrued interest 1,655,606 - - - 1,655,606 - Unearned revenues - - 116,327 - 116,327 - Deposits payable 5,844,876 - 1,457,285 - 7,302,161 - Accrued compensated absences 454,000 66,000 618,000 39,713 1,177,713 406,000 Accrued claims and judgments - - - - - 10,063,000 Long-term debt 1,485,000 - - - 1,485,000 3,370,000

Total Current Liabilities 14,574,650 3,643,899 5,227,872 327,358 23,773,779 17,260,474 Noncurrent:

Advances from other funds - - - - - 102,069,692 Accrued compensated absences 124,758 93,552 98,326 - 316,636 156,960 Accrued claims and judgments - - - - - 18,485,000 Net pension liability 9,880,691 2,915,614 15,083,061 581,217 28,460,583 11,224,160 OPEB liability - - - - - 162,628,638 Long-term debt 66,111,108 - - - 66,111,108 233,215,000

Total Noncurrent Liabilities 76,116,557 3,009,166 15,181,387 581,217 94,888,327 527,779,450

Total Liabilities 90,691,207 6,653,065 20,409,259 908,575 118,662,106 545,039,924 Deferred Inflows of Resources:

Deferred pension related items 251,647 74,256 384,144 14,802 724,849 285,863 Deferred OPEB related items - - - - - 139,971,643

Total Deferred Inflows of Resources 251,647 74,256 384,144 14,802 724,849 140,257,506

Business-Type Activities - Enterprise Funds

Integrated Waste


CITY OF ONTARIO

STATEMENT OF NET POSITIONPROPRIETARY FUNDSJUNE 30, 2020




Integrated Waste

Net Position:Net investment in capital assets 128,161,396 28,288,440 6,078,657 19,558,225 182,086,718 38,977,050 Restricted for debt service 3,140,719 - - - 3,140,719 - Unrestricted 246,747,403 55,639,777 22,333,746 3,222,230 327,943,156 (53,973,955)

Total Net Position 378,049,518 83,928,217 28,412,403 22,780,455 513,170,593 (14,996,905)

Total Liabilities, Deferred Inflowsof Resources, and Net Position 468,992,372$ 90,655,538$ 49,205,806$ 23,703,832$ 632,557,548$ 670,300,525$

Reconciliation of Net Position to the Government-Wide Statement of Net Position:

Net Position per Statement of Net Position - Proprietary Funds 513,170,593$

Prior years' accumulated adjustment to reflect the consolidation of internal service funds activities related to the enterprise funds (29,135,929)

Current year's adjustment to reflect the consolidation of internal service activities related to enterprise funds 2,509,719 Net Position per Government-Wide Statement of Net Position 486,544,383$


CITY OF ONTARIO

STATEMENT OF REVENUES, EXPENSESAND CHANGES IN FUND NET POSITIONPROPRIETARY FUNDSYEAR ENDED JUNE 30, 2020



Operating Revenues:Sales and service charges 53,292,458$ 27,214,080$ 37,137,371$ 747,095$ 118,391,004$ -$ Interdepartmental charges 1,240,711 46,234 604,699 93,500 1,985,144 42,194,893 Miscellaneous 1,294,640 467,974 611,313 25,000 2,398,927 9,054,816

Total Operating Revenues 55,827,809 27,728,288 38,353,383 865,595 122,775,075 51,249,709

Operating Expenses:Administration and general 6,008,743 3,982,126 10,087,168 1,584,531 21,662,568 23,820,365 Source of supply 25,880,993 - - - 25,880,993 8,043,555 Pumping 4,519,420 - - - 4,519,420 - Transmission/collection 13,594,283 3,112,995 25,769,973 - 42,477,251 - Treatment - 15,584,909 - - 15,584,909 - Cost of sales and services - - - 1,618,991 1,618,991 - Claims expense - - - - - 9,239,263 Depreciation expense 4,774,329 1,157,053 104,799 740,144 6,776,325 6,481,284

Total Operating Expenses 54,777,768 23,837,083 35,961,940 3,943,666 118,520,457 47,584,467

Operating Income (Loss) 1,050,041 3,891,205 2,391,443 (3,078,071) 4,254,618 3,665,242

Nonoperating Revenues (Expenses):Grant revenue - - 137,783 - 137,783 - Interest revenue 5,019,590 2,040,214 1,018,635 113,564 8,192,003 420,911 Interest expense (3,269,058) - - - (3,269,058) - Gain on joint venture 2,304,192 - - - 2,304,192 -

Total Nonoperating Revenues (Expenses) 4,054,724 2,040,214 1,156,418 113,564 7,364,920 1,026,178

Income (Loss) Before Transfersand Capital Contributions 5,104,765 5,931,419 3,547,861 (2,964,507) 11,619,538 4,691,420

Capital grants and contributions 3,095,761 - - 1,452,724 4,548,485 - Transfers in - - - - - 10,972,772 Transfers out (6,674,072) (3,049,186) (4,735,668) (13,334) (14,472,260) (20,161,434)

Changes in Net Position 1,526,454$ 2,882,233$ (1,187,807)$ (1,525,117)$ 1,695,763$ (4,497,242)$

Net Position:Beginning of Year, as originally reported 376,523,064$ 81,045,984$ 30,048,368$ 24,305,572$ 511,922,988$ (9,844,472)$ Restatements - - (448,158) - (448,158) (655,191)

Beginning of Fiscal Year, as restated 376,523,064 81,045,984 29,600,210 24,305,572 511,474,830 (10,499,663) Changes in Net Position 1,526,454 2,882,233 (1,187,807) (1,525,117) 1,695,763 (4,497,242)

End of Fiscal Year 378,049,518$ 83,928,217$ 28,412,403$ 22,780,455$ 513,170,593$ (14,996,905)$

Reconciliation of Changes in Net Position to the Statement of Activities:

Changes in Net Position, per the Statement of Revenues,Expenses and Changes in Fund Net Position - Proprietary Funds 1,695,763$

Adjustment to reflect the consolidation of current fiscal yearinternal service funds activities related to enterprise funds 2,509,719

Changes in Net Position of Business-Type Activities per Statement of Activities 4,205,482$


Integrated Waste


CITY OF ONTARIO

STATEMENT OF CASH FLOWSPROPRIETARY FUNDSYEAR ENDED JUNE 30, 2020



Cash Flows from Operating Activities:Cash received from customers and users 57,700,141$ 28,760,545$ 39,627,850$ 785,309$ 126,873,845$ -$ Cash received from/(paid to) interfund service provided - - - - - 51,372,361 Cash paid to suppliers for goods and services (47,188,566) (19,625,504) (25,631,321) (1,510,430) (93,955,821) (13,716,701) Cash paid to employees for services (5,427,981) (4,405,403) (7,077,207) (1,603,147) (18,513,738) (169,534,326)

Operating Activities 5,083,594 4,729,638 6,919,322 (2,328,268) 14,404,286 (131,878,666)

Cash Flows from Non-CapitalFinancing Activities:

Cash transfers in - - - - - 10,972,772 Cash transfers out (6,674,072) (3,049,186) (4,735,668) (13,334) (14,472,260) (20,161,434) Advance from other funds - - - - - 102,069,692 Advance paid to other funds (12,503,000) (5,614,000) (11,738,000) - (29,855,000) (14,034,000) Proceeds from issuance of pension obligation bonds - - - - - 236,585,000 Additional payments to employees pensiion plans - - - - - (337,485,564) Grant subsidy - - 137,783 - 137,783 -

Net Cash Provided (Used) by Non-Capital Financing Activities (19,177,072) (8,663,186) (16,335,885) (13,334) (44,189,477) (22,053,534)

Cash Flows from Capital and Related Financing Activities:

Acquisition and construction of capital assets (2,375,701) (333,854) (424,512) (119,696) (3,253,763) (14,534,197) Acquisition of other investments (46,625,898) - - - (46,625,898) - Interest paid on capital debt (3,311,212) - - - (3,311,212) - Reimbursement agreement 3,095,761 - - - 3,095,761 -

Net Cash Provided (Used) by Capital and Related Financing Activities (49,217,050) (333,854) (424,512) (119,696) (50,095,112) (14,534,197)

Cash Flows from Investing Activities:Change in investments - - - - - 38,743,379 Interest received 5,300,114 2,067,269 1,067,053 114,484 8,548,920 894,737

Net Cash Provided (Used) byInvesting Activities 5,300,114 2,067,269 1,067,053 114,484 8,548,920 39,638,116

Net Increase (Decrease) in Cashand Cash Equivalents (58,010,414) (2,200,133) (8,774,022) (2,346,814) (71,331,383) (128,828,281)

Cash and Cash Equivalents at Beginning of Year 143,242,099 55,729,921 33,705,641 4,760,261 237,437,922 256,534,080

Cash and Cash Equivalents at End of Year 85,231,685$ 53,529,788$ 24,931,619$ 2,413,447$ 166,106,539$ 127,705,799$

Reconciliation of Operating Income to Net CashProvided (Used) by Operating Activities:Operating income (loss) 1,050,041$ 3,891,205$ 2,391,443$ (3,078,071)$ 4,254,618$ 3,665,242$ Adjustments to reconcile operating income (loss) net cash provided (used) by operating activities:

Depreciation 4,774,329 1,157,053 104,799 740,144 6,776,325 6,481,284 (Increase) decrease in accounts receivable 1,621,644 1,032,257 1,263,018 61,420 3,978,339 122,652 (Increase) decrease in prepaid expense 1,080 44,731 - 7,213 53,024 (576,577) (Increase) decrease in inventories (4,160,969) (96,853) - 101,348 (4,156,474) (54,805) Increase (decrease) in accounts payable 966,019 (875,478) 138,652 (141,706) 87,487 1,433,140 Increase (decrease) in accrued liabilities 62,865 24,282 101,772 3,829 192,748 58,472 Increase (decrease) in unearned revenues - - (34,744) - (34,744) - Increase (decrease) in deposits payable 250,688 - 46,193 - 296,881 - Increase (decrease) in claims and judgments - - - - - 3,925,000 Increase (decrease) in compensated absences 63,688 (111,207) 125,879 (9,117) 69,243 (185,814) Increase (decrease) in net pension liability 612,149 (403,526) 3,528,696 (13,723) 3,723,596 1,141,489 Increase (decrease) in deferred pension related items (157,940) 67,174 (746,386) 395 (836,757) (266,304) Increase (decrease) in OPEB liability - - - - - (106,925,495) Increase (decrease) in deferred OPEB related items - - - - - (40,696,950)

Total Adjustments 4,033,553 838,433 4,527,879 749,803 10,149,668 (135,543,908) Net Cash Provided (Used) by Operating Activities 5,083,594$ 4,729,638$ 6,919,322$ (2,328,268)$ 14,404,286$ (131,878,666)$

Non-Cash Investing, Capital, and Financing Activities:Gain on investment in joint venture 2,304,192$ -$ -$ -$ 2,304,192$ -$ Gain on value of store water inventory 1,655,606 - - - 1,655,606 - Amortization of deferred cost 57,323 - - - 57,323 - Amortization of bond premium 99,477 - - - 99,477 - Capital contributions - - - 1,452,724 1,452,724 -


Integrated Waste


CITY OF ONTARIO

STATEMENT OF FIDUCIARY NET POSITIONFIDUCIARY FUNDSJUNE 30, 2020

AgencyFunds

Assets:Cash and investments 35,829,648$ 12,933,088$ Receivables:

Accounts 20,884 - Taxes 68,631 - Notes and leases 215,830,448 35,000 Accrued interest 14,834 14

Prepaid costs 3,900 - Advances to City - 1,600,000 Land held for resale - 10,904,181 Restricted assets:

Cash and investments with fiscal agents 12,093,253 2,889,941

Total Assets 263,861,598$ 28,362,224

Liabilities:Accounts payable 2,081,564$ - Accrued interest - 1,972,813 Deposits payable - 305,886 Due to other governments 247,236,827 - Due to external parties/other agencies 14,543,207 - Long-term liabilities:

Due in one yearLong-term debt - 6,299,205

Due in more than one yearLong-term debt - 41,132,149

Total Liabilities 263,861,598$ 49,710,053

Net Position:Held in trust for other purposes (21,347,829)

Total Net Position (21,347,829)$

Private-Purpose Trust

Fund Successor

Agency of the Former RDA


CITY OF ONTARIO

STATEMENT OF CHANGES IN FIDUCIARY NET POSITIONFIDUCIARY FUNDSYEAR ENDED JUNE 30, 2020

Additions:Taxes 10,707,680$ Interest and change in fair value of investments 85,994

Total Additions 10,793,674

Deductions:Administrative expenses 405,878 Contractual services 10,886 Interest expense 4,726,044 Contributions to other governments 828,437

Total Deductions 5,971,245

Changes in Net Position 4,822,429

Net Position:Beginning of year (26,170,258)

End of the Year (21,347,829)$

Private-Purpose Trust

Fund Successor

Agency of the Former RDA



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CITY OF ONTARIO NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2020

Note 1: Summary of Significant Accounting Policies a. Description of Entity

The reporting entity is a municipal corporation governed by an elected mayor and a four-member council. As required by accounting principles generally accepted in the United States of America, these financial statements present the City of Ontario, California (the City) and its component units, entities for which the City is considered financially accountable. The criteria used in determining the scope of the reporting entity is based on the provision of GASB Statement No. 14 and amended by GASB Statement No. 61. Blended component units, although legally separate entities, are in substance part of the Government's operation, so data from these units are combined herein. The following criteria were used in the determination of blended units:

1. The members of the City Council also act as the governing body of the

Industrial Development Authority, the Ontario Redevelopment Financing Authority, the Ontario Public Financing Authority and the Ontario Housing Authority.

2. The Authorities are managed by employees of the City.

The City of Ontario was incorporated December 10, 1891, under the general laws of the State of California and enjoys all the rights and privileges pertaining to "General Law" cities.

Blended Component Units

The former Ontario Redevelopment Agency (the Agency) was activated November 1, 1977, pursuant to the State of California Health and Safety Code, Section 33000 entitled "Community Development Law." The primary purpose of the Agency was to encourage private redevelopment of property and to rehabilitate areas suffering from economic disuse arising from poor and inadequate planning, inadequate street layout and street access, lack of open space, landscaping and other improvements and facilities necessary to establish and maintain the economic growth of the City. The former Redevelopment Agency was dissolved as of January 31, 2012, through the Supreme Court decision on Assembly Bill 1X 26. See Note 20 for more information on the dissolution.

The Industrial Development Authority was established August 18, 1981, pursuant to the California Industrial Development Financing Act (AB74). The law authorizes limited issuance of small-issue industrial development bonds to assist private industry. The sole function of the Authority is to review and approve the issuance of bonds to finance eligible projects. Separate financial statements are not available for the Industrial Development Authority. The Ontario Redevelopment Financing Authority was established November 5, 1991, pursuant to Article 1 (commencing with Section 6500) of Chapter 5, Division 7 of Title 1 of the California Government Code in order to jointly exercise powers of the Agency and the City, and to establish a vehicle to reduce local borrowing costs and promote greater use of existing and new financial instruments. Separate financial statements are not available for the Ontario Redevelopment Financing Authority.

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CITY OF ONTARIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED JUNE 30, 2020

Note 1: Summary of Significant Accounting Policies (Continued)

The Ontario Public Financing Authority was created by a joint exercise of joint powers agreement between the City of Ontario and the Ontario Housing Authority (the Members) on June 1, 2013. The purpose of the Authority is to assist in the financing of capital improvement projects of the Members and other activities of the Members as permitted under Articles 1, 2 and 4 of Chapter 5 of Division 7 of Title 1 of the Government Code, as amended. Separate financial statements are not available for the Ontario Public Financing Authority.

The Ontario Housing Authority was established on December 2, 1997. The primary purpose of the Authority is to assist property owners in rejuvenating and improving substandard housing conditions within the City. Separate financial statements are not prepared for the Ontario Housing Authority.

Since the City Council serves as the governing board for these component units, all of the City's component units are considered to be blended component units. Blended component units, although legally separate entities, are in substance, part of the City's operations and so data from these units are reported with the primary government.

Other governmental agencies providing services either to the City in its entirety or to a portion thereof are:

State of California County of San Bernardino Metropolitan Water District Inland Empire Utilities Agency Cucamonga Valley Water District Chaffey Community College District Chino Valley Unified School District Ontario-Montclair School District Chaffey Joint Union High School District Cucamonga School District Mountain View School District Monte Vista County Water District

Chino Basin Water Conservation District San Bernardino County Transportation Authority

Financial data for joint ventures that do not meet the criteria for inclusion within the reporting entity have been reported in the footnotes (see Note 15).

b. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment, are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: 1) charges to customers or applicants who purchase, use or directly benefit from goods, services or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment and other items not properly included among program revenues are reported instead as general revenues.

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Separate financial statements are provided for governmental funds, proprietary funds and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements.

c. Measurement Focus, Basis of Accounting and Financial Statement Presentation

Measurement focus is commonly used to describe the types of transactions and events that are reported in a fund’s operating statement. Once it has been determined whether a fund is to measure changes in total economic resources or changes in current financial resources, the next issue to be addressed is the timing of the recognition of transactions and events. The technical term that describes the criteria governing the timing of the recognition of transactions and events is “basis of accounting.” The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period except for sales taxes and grant revenue where the government considers revenue to be available if collected within 90 days and 180 days respectively of the end of current fiscal year. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. The City’s fiduciary funds consist of agency funds and a private purpose trust fund. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. Private purpose trust fund funds are accounted for using the “economic resources” measurement focus and the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. Property taxes, franchise taxes, licenses and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the government.

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The City reports the following major governmental funds: The General Fund is the City's primary operating fund. It accounts for all financial

resources of the general government, except those required to be accounted for in another fund.

The Measure I Fund accounts for revenues from a one-half percent sales tax on all retail transactions within the County. The proceeds are to be used for transportation improvements, railroad grade separation projects, and traffic management programs.

The Ontario Housing Authority Fund accounts for the financial transactions of the

Ontario Housing Authority. Revenue sources for the Authority include rent proceeds from properties, housing loan repayments and agency fees.

The Capital Projects Fund accounts for financial transactions of general capital

improvements.

The Impact Fees Fund accounts for revenues from developer-paid impact fees for infrastructure construction.

The City reports the following major proprietary funds:

The Water Enterprise Fund accounts for the operation and maintenance of the City's water distribution system.

The Sewer Enterprise Fund accounts for the financial transactions of the City's wastewater collection system.

The Integrated Waste Enterprise Fund accounts for the collection and disposal of integrated waste from industrial, commercial and residential users throughout the Ontario area.

Additionally, the City reports the following fund types:

Internal Service Funds account for financial transactions related to repair, replacement and maintenance of City-owned equipment, the City's self-insurance programs, the City's general information systems and telecommunications hardware and software, and the City’s defined benefit healthcare plan for its retired employees. These services are provided to other departments or agencies of the City on a cost reimbursement basis.

Agency Funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. The Agency Funds account for assets held for specific uses that are not part of the City’s operating activities; specifically, monies held by the City as an agent for property owners with special assessments and monies collected from individuals, private organization or other government who have made special deposits with the City for various purposes.

Private-purpose trust funds are used to account for the assets and liabilities of the former redevelopment agency and the allocated revenue to pay estimated installment payments of enforceable obligations until the obligations of the former redevelopment agency are paid in full and assets have been liquidated.

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As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges between the government's proprietary funds function and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include: 1) charges to customers or applicants for goods, services or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the Enterprise Funds and of the Internal Service Funds are charges to customers for sales and services. Operating expenses for Enterprise Funds and Internal Service Funds include the cost of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the government's policy to use restricted resources first, and then unrestricted resources as they are needed.

d. Assets, Deferred Inflows, Liabilities and Deferred Outflows, Net Position or Equity Cash and Investments

The City's cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. For financial statement presentation purposes, cash and cash equivalents are shown as both unrestricted and restricted cash and investments. Investments are reported at fair value, which is the quoted market price at June 30, 2020. The City's policy is generally to hold investments until maturity or until market values equal or exceed cost. The State Treasurer's Investment Pool operates in accordance with appropriate state laws and regulations. The reported value of the pool is the same as the fair value of the pool shares.

Receivables and Payables

Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as "due to/from other funds." Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances." All trade and property tax receivables are shown net of an allowance for uncollectibles.

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Functional Classifications

Expenditures of the Governmental Funds are classified by function. Functional classifications are defined as follows: General Government includes legislative activities, which have a primary objective

of providing legal and policy guidelines for the City. Also included in this classification are those activities that provide management or support services across more than one functional area.

Public Safety includes those activities that involve the protection of people and

property. Community Development includes those activities that involve the enhancing of

the general quality of life. Public Works includes those activities that involve the maintenance and

improvement of City streets, roads and parks. Debt Service includes those activities that account for the payment of long-term

debt principal, interest and fiscal charges. Inventories, Prepaid Items and Land Held for Resale

All inventories are valued at cost using the first-in/first-out (FIFO) method, except for water stock inventory which is valued at fair value at the end of the fiscal year. Inventories in the Internal Service Funds consist of expendable supplies held for consumption, whereas in the Enterprise Funds, it represents water stock in the water utility fund and expendable supplies held for consumption in both water utility and sewer utility funds. Inventory costs are recorded as expenditure when used. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements using the purchases method.

Land purchased for resale is capitalized as inventory at acquisition costs or net realizable value if lower.

Restricted Assets

Certain proceeds of debt issues, as well as certain resources set aside for their repayment, are classified as restricted assets on the balance sheet because their use is limited by applicable bond covenants. In addition, funds have been restricted for future capital improvements by City resolution.

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Capital Assets

Capital assets, which include property, plant, equipment, infrastructure (e.g., roads, bridges, sidewalks and similar items) and intangible assets, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets and infrastructure are defined by the City as assets with an initial, individual cost of more than $15,000 and $50,000 respectively (amount not rounded) and an estimated useful life in excess of five years. Capital assets purchased with federal grant money with a cost of more than $5,000 should be capitalized. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value at the date of donation. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets constructed. The Governmental Accounting Standards Board (GASB) issued Statement No. 34, which requires the inclusion of infrastructure capital assets in local government’s basic financial statements. The City defines infrastructure as long-lived capital assets that normally can be preserved for a significant greater number of years than most capital assets (non-infrastructure assets). Infrastructure assets are normally stationary in nature and are of value only to the government entity. They are basic physical assets that allow the government entity to function. Examples include street systems, water purification and distribution systems, sewer collection and treatment systems, parks and recreation lands and improvement systems, storm water conveyance systems, fiber optics, bridges, tunnels, dams and buildings combined with the site amenities such as parking and landscaped areas used by the government entity in the conduct of its business. Each major infrastructure system can be divided into subsystems. For example, the street system can be subdivided into concrete and asphalt pavements, concrete curb and gutters, sidewalks, medians, streetlights, traffic control devices (signs, signals and pavement markings), landscaping and land.

Subsystem detail is not presented in these basic financial statements; however, the City maintains detailed information on these subsystems.

In accordance with GASB Statement No. 34, the City has elected the Modified Approach for reporting its pavement system. In 1999, the City commissioned a physical condition assessment of the streets, which was completed and dated July 15, 1999. These streets, primarily asphalt concrete, were defined as all physical features associated with the operation of motorized vehicles that exist within the limits of right of way. This condition assessment will be performed every three years. Each street was assigned a physical condition on 17 potential defects. A Pavement Condition Index (PCI), a nationally recognized index, was assigned to each street and expressed in a continuous scale from 0 to 100, where 0 is assigned to the least acceptable physical condition and 100 is assigned the physical characteristics of a new street.

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Note 1: Summary of Significant Accounting Policies (Continued) The following conditions were defined: excellent condition was assigned to those segments with a rating between 86 to 100, very good condition was assigned a rating between 71 to 85, good condition was assigned a rating between 56 to 70, fair condition was assigned a rating between 41 to 55, poor condition was assigned with a rating between 26 to 40, very poor condition was assigned with a rating between 11 to 25, and a failed condition was assigned to those segments with a rating between 0 to 10. The City’s policy, relative to maintaining the street assets, is to maintain the existing weighted average rate of “Good”, which is a PCI index range between 56 and 70. This rating allows minor cracking and raveling of the pavement along with minor roughness that could be noticeable to drivers traveling at the posted speeds. A detailed description of the modified approach for the City’s infrastructure capital assets can be found in the Required Supplementary Information section. For all other capital assets, structures and improvements, furniture and equipment, infrastructure and intangible assets, the City has elected to use the Basic Approach as defined by GASB Statement No. 34. Accordingly, these capital assets are depreciated using the straight-line method over the following estimated useful lives:

Assets Years

Buildings and structures 20 - 99 Vehicles 4 - 15 Other equipment 5 - 25 Intangible assets – software 5 Infrastructure 20 - 50

The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized.

Deferred Outflows/Inflows of Resources

In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City has three items that qualify for reporting in this category. One is deferred charges on refunding reported in the government-wide statement of net position and the proprietary funds statement of net position. Deferred charges on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. The second item is deferred pension related items reported in the government-wide statement of net position and the proprietary funds statement of net position. The City reports deferred outflows of resources for pension contributions made after the actuarial measurement date, this amount is deferred and will be expensed in the following fiscal year. The deferred outflows of resources for the net difference between projected and actual earning on pension plan investments will be amortized over a five-year period on a straight-line basis. The difference between expected and actual experience and all other deferred outflows related pension items will be recognized as indicated below. The third item is deferred OPEB related items reported in the government-wide statement of net position and proprietary funds statement of net position for contribution made subsequent to the measurement date. This amount will be expensed in the following fiscal year.

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In addition to liabilities, the balance sheet or statement of net position reports a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The City has four types of items. One item, unavailable revenue, which arises only under a modified accrual basis of accounting, qualifies for reporting in this category. Accordingly, unavailable revenue, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from deferred loans. These amounts are deferred and recognized as an inflow of resources in the period the amounts become available. The second item is deferred charges on refunding reported in the government-wide statement of net position. Deferred charges on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. The third item is deferred pension related items reported in the government-wide statement of net position and the proprietary funds statement of net position. This amount is the result of the differences between expected and actual experience and the changes in assumptions. These will be recognized as indicated below. The fourth item is deferred OPEB related items reported in the government-wide statement of net position and proprietary funds statement of net position for changes in actuarial OPEB assumption. This amount will be amortized over a five-year period on a straight-line basis.

Gains and losses related to changes in total pension or OPEB liability and their related fiduciary net position are recognized in pension or OPEB expense, respectively, systematically over time. Amounts are first recognized in pension or OPEB expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pension or OPEB and are recognized in future pension and OPEB expense, respectively.

The recognition period differs depending on the source of the gain or loss:

Net difference between projected and actual earning on pension or OPEB plan investments

5 years All plans

All other amounts are amortized over the expected average remaining service lifetime (EARSL) of the respective plan. As of June 30, 2019, EARLS were:

6.68 years 3.4 years 5.5 years 6.3 years

OPEB plan Pension Miscellaneous -Agent Multiple Employer Plan Pension Safety Police – Agent Multiple Employer Plan Pension Safety Fire – Agent Multiple Employer Plan

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Net Pension Liability

For purposes of measuring the net pension liability, deferred outflows and inflows of resources related to pensions, and pension expense, information about the fiduciary net position and additions to/deductions from the fiduciary net position have been determined on the same basis as they are reported by the CalPERS Financial Office. For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value. GASB Statement No. 68 requires that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used:

Valuation Date June 30, 2018 Measurement Date June 30, 2019 Measurement Period July 1, 2018 to June 30, 2019

Other Post-Employment Benefits Liability

For purposes of measuring the OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB and OPEB expense, information about the City’s OPEB plan have been determined by an independent actuary. For this purpose, benefit payments are recognized when currently due and payable in accordance with the benefit terms. Generally accepted accounting principles require that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used:

Valuation Date: June 30, 2019 Measurement Date: June 30, 2019 Measurement Period: July 1, 2018 to June 30, 2019

Compensated Absences

It is the government's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. There is no liability for unpaid accumulated sick leave since the City does not have a policy to pay any amounts when employees separate from service with the government. City employees receive from 10 to 25 days’ vacation each year, depending on the length of service. All vacation pay is accrued when incurred in the government-wide financial statements and in the proprietary funds financial statements.

Long-Term Obligations

In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities or proprietary fund type statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method.

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Bonds payable are reported net of the applicable bond premium or discount. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenses when incurred. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

Fund Balance

Fund balance is essentially the difference between the assets, deferred outflows and deferred inflows of resources and liabilities reported in a governmental fund. There are five separate components of fund balance, each of which identifies the extent to which the City is bound to honor constraints on the specific purposes for which amounts can be spent.

Non-spendable fund balance (inherently non-spendable) Restricted fund balance (externally enforceable limitations on use) Committed fund balance (self-imposed limitations on use) Assigned fund balance (limitation resulting from intended use) Unassigned fund balance (residual net resources)

The City Council, as the City's highest level of decision-making authority, may commit fund balance for specific purposes pursuant to constraints imposed by the adoption of a resolution. These committed amounts cannot be used for any other purpose unless the City Council removes or changes the specified use through the same type of formal action taken to establish the commitment. City Council action to commit fund balance needs to occur within the fiscal reporting period; however, the amount can be determined subsequently.

Amounts that are constrained by the City's intent to be used for specific purposes, but are neither restricted nor committed, should be reported as assigned fund balance. Pursuant to the City’s fund balance policy established by the City Council on June 22, 2011 by resolution, (#2011-041), the City Council has delegated the authority to assign amounts to be used for specific purposes to the City Manager or Finance Director for the purpose of reporting these amounts on the annual financial statements. Included in the Fund Balance Policy is the 18 percent Stabilization Plan. This is the goal of City Council to achieve a minimum of 18 percent of annual General Fund appropriations, as assigned fund balance in the General Fund. Based on the current year General Fund appropriations, the amount assigned to the 18 percent stabilization plan will either increase or decrease accordingly. This assigned balance is intended to be used for specific and defined emergency services and to minimize the potential for disruption of municipal services to its citizens. However, included as part of the General Fund balancing strategies for fiscal year 2020-21 is the reduction of the General Fund stabilization assignment from 18 percent to 15 percent. As of June 30, 2020, the City’s General Fund has an assigned fund balance for the stability arrangement of $51.3 million, which achieves the goal of 15 percent of the General Fund adopted budget for fiscal year 2020-21.

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The General Fund is the only City fund that is able to report a positive unassigned fund balance.

Fund Balance Flow Assumptions

In order to calculate the amounts to report as restricted, committed, assigned, and unassigned fund balance in the governmental fund financial statements a flow assumption must be made about the order in which the resources are considered to be applied. The City consider restricted fund balance to have been spent first when expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available. Similarly, when expenditure is incurred for purposes for which amounts in any of the unrestricted classifications of fund balance could be used, the City considers committed amounts to be reduced first, followed by assigned amounts and then unassigned amounts.

Net Position In the governmental-wide financial statements and proprietary fund financial statements, net position is classified as follows:

Net Investment in Capital Assets – This amount consists of capital assets net of accumulated depreciation and reduced by outstanding debt that attributed to the acquisition, construction, or improvement of the assets. Restricted Net Position – This amount is restricted by external creditors, grantors, contributors, or laws or regulations of other governments.

Unrestricted Net Position – This amount is all net position that do not meet the definition of “net investment in capital assets” or “restricted net position.”

Net Position Flow Assumption

Sometimes the government will fund outlays for a particular purpose from both

restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted – net position and unrestricted – net position in the government-wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the government’s policy to consider restricted – net position to have been depleted before unrestricted – net position is applied.

Property Tax Revenue

Property tax revenue is recognized on the modified accrual basis, that is, in the fiscal year for which the taxes have been levied providing they become available. Available means then due or past due and receivable within the current period and collected within the current period or expected to be collected soon enough thereafter to be used to pay liabilities of the current period. The County of San Bernardino collects property taxes for the City. Tax liens attach annually as of 12:01 A.M. on the first day in January proceeding the fiscal year for which the taxes are levied. Taxes are levied on both real and personal property as it exists on that date. The tax levy covers the fiscal period July 1 to June 30. All secured personal property taxes and one-half of the taxes

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on real property are due November 1; the second installment is due February 1. All taxes are delinquent, if unpaid, on December 10 and April 10, respectively. Unsecured personal property taxes become due on the first of March each year and are delinquent, if unpaid, on August 31.

Changes in Presentation

Beginning fiscal year 2019-20, the City is reporting its grants activities in a Special Revenue Fund rather than within its General Fund.

Note 2: Stewardship, Compliance and Accountability

a. Deficit Fund Balances or Net Position

At June 30, 2020, the following funds had fund balance deficit:

Grant Fund (7,206)$ NMC CFD Special Revenue Fund (456,877) Successor Agency of the Former RDA (21,347,829) Other Post Employment Benefits Fund (111,377,830)

These deficits will be eliminated with future revenue.

b. Budget

A budget schedules is not presented for the OMC CFD Capital Project Fund.

Note 3: Cash and Investments

As of June 30, 2020, cash and investments were reported in the accompanying financial statements as follows:

Governmental activies 491,788,188$ Business-type activities 166,106,539 Fiduciary funds 63,745,930

Total Cash and Investments 721,640,657$

The City of Ontario follows the practice of pooling cash and investments of all funds, except for funds required to be held by fiscal agents under provisions of bond indentures. Interest income earned on pooled cash and investments is allocated monthly to the various funds based on monthly cash and investment balances. Interest income from cash and investments with fiscal agents is credited directly to the related fund. Deposits

At June 30, 2020, the carrying amount of the City’s deposits was $74,745,983 and the bank balance was $67,750,180. The $6,995,803 difference represents outstanding checks and other reconciling items. The City’s restricted cash and investments consist of deposits and cash in escrow in the amount of $1,477,166.

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Note 3: Cash and Investments (Continued)

The California Government Code requires California banks and savings and loan associations to secure a City’s deposits by pledging government securities with a value of 110% of a City’s deposits. California law also allows financial institutions to secure a City’s deposits by pledging first trust deed mortgage notes having a value of 150% of a City’s total deposits. The City Treasurer may waive the collateral requirement for deposits that are fully insured up to $250,000 by the FDIC. The collateral for deposits in federal and state chartered banks is held in safekeeping by an authorized Agent of Depository recognized by the State of California Department of Banking. The collateral for deposits with savings and loan associations is generally held in safekeeping by the Federal Home Loan Bank in San Francisco, California as an Agent of Depository. These securities are physically held in an undivided pool for all California public agency depositors. Under Government Code Section 53655, the placement of securities by a bank or savings and loan association with an “Agent of Depository” has the effect of perfecting the security interest in the name of the local governmental agency. Accordingly, all collateral held by California Agents of Depository are considered to be held for, and in the name of, the local governmental agency.

Investments

Under the provisions of the City’s investment policy, and in accordance with the California Government Code, the following investments are authorized: United States Treasury Bills, Notes and Bonds Banker’s Acceptances with a maturity not to exceed 180 days Commercial paper rated “A1” by Standard and Poor’s and “P1” by Moody’s Investor

Services, and issued by a domestic corporation having assets in excess of $500 million and having an “A” or better rating on its long-term debentures as provided by Moody’s or Standard and Poor’s.

Negotiable Certificates of Deposits with a nationally or State chartered bank Repurchase Agreements with primary dealers of the Federal Reserve Bank of

New York, with which the City has entered into a master repurchase agreement. The Local Agency Investment Fund of the State of California Time Deposits Medium-Term Notes of a maximum of five years maturity issued by corporations

organized and operating within the United States with a minimum rating of “A” by both Moody’s and Standard & Poor’s and in excess of $500 million in shareholder equity. Purchase of medium-term notes may not exceed 30% of the cost value of the fund with no more than 15% of the cost value of the fund rated below “AA” by both Standard & Poor’s and Moody’s. No more than 3% of the fund (at time of purchase) may be invested in any one corporate name, including the parent corporation or subsidiaries.

Obligations issued by various agencies of the Federal Government including, but not limited to, the Federal Farm Credit Bank System, the Federal Home Loan Bank System, the Federal Home Loan Bank, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Student Loan Marketing Association as well as such agencies or enterprises which may be created. There is no percentage limitation on the dollar amount which can be invested in Agency issues in total, no more than 20% of the cost value of the portfolio may be invested in the securities of any one issuer.

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Any U.S. Government Agency's Mortgage pass-through security, collateralized mortgage obligations, mortgage backed or other pay-through bond, equipment l ease-backed certificate, or consumer receivable-backed bond of a maximum of five years maturity. Securities eligible for investment under this section shall be issued by an issuer having an “A” or higher rating for the issuer’s unsecured debt, as provided by a nationally recognized rating service. The Securities must be rated “AAA” by both Moody’s and Standard and Poor’s. Purchase of securities authorized by this subdivision may not exceed 20% of the cost value of the fund.

United States dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance Corporation, or Inter-American Development Bank, with a maximum remaining maturity of five years or less, and eligible for purchase and sale within the United States. Investments under this subdivision shall be rated "AA" or better by an NRSRO and shall not exceed 9% of the agency's moneys that may be invested pursuant to this section. Investment in these issues is further limited to a 3% allocation in anyone name.

Registered state warrants or treasury notes or bonds of this state, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled or operated by the state or by a department, board, agency or authority of the state.

Bonds, notes, warrants, or other evidences of indebtedness of any local agency within the State.

Investment Authorized by Debt Agreements

The above investments do not address investment of debt proceeds held by a bond trustee. Investments of debt proceeds held by a bond trustee are governed by provisions of debt agreements, rather than the general provisions of the California Government Code or the City’s investment policy.

Investments in State Investment Pool

The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. LAIF is overseen by the Local Agency Investment Advisory Board, which consists of five members, in accordance with State statute. The State Treasurer’s Office audits the fund annually. The fair value of the City's investment in this pool is reported in the accompanying financial statements at amounts based upon the City's pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawals is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. LAIF does not impose limits or restrictions on participant withdrawals, and the entire balance of the City’s investment in the portfolio is available for withdrawal at any time. LAIF is not registered with the Securities and Exchange Commission and is not rated. Deposits and withdrawals in LAIF are made on the basis of $1 and not fair value. Accordingly, the City’s investment in this pool is measured on uncategorized inputs not defined as Level 1, 2, or 3.

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GASB Statement No. 31 The City adopted GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, as of July 1, 1997. GASB Statement No. 31 establishes fair value standards for investments in participating interest earning investment contracts, external investment pools, equity securities, option contracts, stock warrants and stock rights that have readily determinable fair values. Accordingly, the City reports its investments at fair value in the balance sheet. All investment income, including changes in the fair value of investments, is recognized as revenue in the operating statement.

Credit Risk As of June 30, 2020, the City's investment in medium-term notes consisted of investments with various corporations and were rated “A2” to “Aaa” by Moody’s and “A” to “AA+” by Standard & Poor’s. Investment in government agencies issued by the Federal National Mortgage Association, the Federal Home Loan Banks, and the Federal Home Loan Mortgage Corporation were rated “Aaa” by Moody’s and “AA+” by Standard & Poor’s. Asset-Backed Securities were rated “Aaa” by Moody’s and “AAA” by Standard & Poor’s. All securities were investment grade and were legal under State and City law. Investments in U.S. Treasury securities are not considered to have credit risk; therefore, their credit quality is not disclosed. As of June 30, 2020, the City's investments in external investment pools and money market mutual funds are unrated.

Custodial Credit Risk

The custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. As of June 30, 2020, none of the City’s deposits or investments was exposed to custodial credit risk.

Concentration of Credit Risk

The City is in compliance with restrictions imposed by its investment policy, which limits certain types of investments. In accordance with the disclosure requirement of GASB Statement No. 40, if the City has invested more than 5% of its investments in any one issuer, it is exposed to credit risk. Investments guaranteed by the U.S. government and investments in mutual funds and external investment pools are excluded from this requirement. During the fiscal year ending June 30, 2020, the City did not hold any investments in any one issuer (other than mutual funds and external investment pools) that represents 5% or more of total City’s investments.

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Note 3: Cash and Investments (Continued) Interest Rate Risk

The City's investment policy limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. The City's investment policy states that weighted average of the City's portfolio will be limited to two and a half years. The only exception to these maturity limits shall be the investment of the gross proceeds of tax-exempt bonds. The City has elected to use the segmented time distribution method of disclosure for its interest rate risk. As of June 30, 2020, the City had the following investments and original maturities:

6 months or less

6 months to 1 year 1 to 3 years 3 to 5 years Fair Value

Investments:US Treasury 243,376,660$ 10,355,860$ 62,550,000$ 53,882,800$ 370,165,320$ Federal Government Agency 20,071,140 - 4,992,220 10,012,110 35,075,470 Medium-Term Corporate Notes 35,029,291 5,160,625 5,155,845 39,285,107 84,630,868 Asset-Backed Securities - 13,365,480 - 16,468,480 29,833,960 Local Agency Investment Fund 71,987,322 - - - 71,987,322

Total Cash Investments 370,464,413 28,881,965 72,698,065 119,648,497 591,692,940

Investments with Fiscal Agents:Money Market Funds 53,724,568 - - - 53,724,568

with Fiscal Agent 53,724,568 - - - 53,724,568

Total Investments 424,188,981$ 28,881,965$ 72,698,065$ 119,648,497$ 645,417,508$

Remaining Investment Maturities

Total Investments

Fair Value Measurement and Application

The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are quoted prices for similar assets in active markets; Level 3 inputs are significant unobservable inputs. The City has the following recurring fair value measurements as of June 30, 2020:

Investments notMeasured at

Investment Type June 30, 2020 Fair Value 1 2 UncategorizedU.S. Treasury Securities 370,165,320$ -$ -$ 370,165,320$ -$ Federal Government Agency 35,075,470 - - 35,075,470 - Medium-Term Corporate Notes 84,630,868 - - 84,630,868 - Asset-Backed Securities 29,833,960 - - 29,833,960 - Municipal Bonds - - - - - Collateral Mortgage Obligations - - - - - Supranational - - - - - Local Agency Investment Fund (LAIF) 71,987,322 - - - 71,987,322 Investments with Fiscal Agent: Money Market Funds 53,724,568 53,724,568 - - -

Total Investments 645,417,508$ 53,724,568$ -$ 519,705,618$ 71,987,322$

Level

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Note 4: Notes and Loans Receivable

Notes and loans receivable as of June 30, 2020, totaled $39,023,397 and were recorded as follows:

General Fund 75,000$ Community Development 10,528,597 Ontario Housing Authority 28,419,800

Total Notes and Loans Receivable 39,023,397$

On March 20, 2014, the City entered into a Memorandum of Understanding (MOU) with the Ontario International Airport Authority (OIAA) to document the understanding and responsibilities with respect to costs associated with the “Set ONTario Free” campaign and the services associated with the transfer of Ontario International Airport (ONT). There are no set terms for repayment of the balance. During fiscal year 2019-20, the City elected to forgive the debt incurred with these costs. The amount forgiven has been presented as a special item on the financial statements. $ - The City provides loans to City police officers to assist them in acquiring personal residence within the City or reducing an existing loan on an officer’s residence within the City. The loans are non-interest bearing until maturity, and thereafter interest shall be 7% per annum. The outstanding balance at June 30, 2020, as: 50,000

In order to assist those individuals and families who are the most in need, the former Ontario Redevelopment Agency’s Combined Low and Moderate Housing Fund provided down payment assistance and deferred repayment loans to low and moderate income residents for the acquisition and rehabilitation of single-family homes, condominiums or townhouses located within the Ontario HUD Revitalization Target Area. Upon dissolution of the Ontario Redevelopment Agency, the note receivable was transferred to the Ontario Housing Authority. The receivable balance at June 30, 2020, was: 2,312,072 On June 7, 1994, the former Ontario Redevelopment Agency's Combined Low and Moderate Housing Fund loaned $43,000 to a developer to finance the purchase of low and moderate income property located outside of redevelopment project areas. The note is non-interest bearing and was due in full on March 7, 1995. A new note was negotiated on November 11, 1996, and will mature on October 31, 2026. Upon dissolution of the Ontario Redevelopment Agency, the note receivable was transferred to the Ontario Housing Authority. The receivable balance at June 30, 2020, was: 43,000

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Note 4: Notes and Loans Receivable (Continued)

On June 7, 1994, the former Ontario Redevelopment Agency's Combined Low and Moderate Housing Fund loaned $39,000 to a developer to finance the purchase of low and moderate income property located outside of redevelopment project areas. The note is non-interest bearing and was due in full on March 7, 1995. A new note was negotiated on November 8, 1996, and will mature on October 31, 2026. Upon dissolution of the Ontario Redevelopment Agency, the note receivable was transferred to the Ontario Housing Authority. The receivable balance at June 30, 2020, was: $ 39,000 On March 16, 1993, the former Ontario Redevelopment Agency accepted a note receivable of $112,000 from a developer as consideration for housing located outside of the redevelopment areas. The note is non-interest bearing and is due and payable upon the sale or transfer of property. Upon dissolution of the Ontario Redevelopment Agency, the note receivable was transferred to the Ontario Housing Authority. The unpaid principal balance at June 30, 2020, was: 77,000 On October 4, 1994, the former Redevelopment Agency loaned a developer, Cichon, $135,030 to finance the cost of rehabilitation and construction of a low and moderate income residence located in the Center City Project Area. On December 5, 1995, the Agency loaned an additional $4,647, bringing the total amount to $139,677. During the fiscal year ended June 30, 2000, the Agency advanced an additional $254. The note is a 25-year amortized loan and bears interest at 5% annually. Upon dissolution of the Ontario Redevelopment Agency, the note receivable was transferred to the Ontario Housing Authority. The receivable balance at June 30, 2020, was: 6,532 On May 29, 1997, the former Ontario Redevelopment Agency agreed to loan up to $2,656,200 to Ontario Housing Investors, L.P. to finance development of residential improvements to the Ground Lease premises as defined in a disposition and development agreement dated March 19, 1996. The note bears interest at the rate of 3% per annum. The note is due and payable either: (a) on the first day of the first full calendar month following the date of the last disbursement of the agency loan proceeds, or (b) on the first day of the 15th full calendar month following the date of recordation of the Agency Loan Deed and Trust in the Official Records of the County. Upon dissolution of the Ontario Redevelopment Agency, the note receivable was transferred to the Ontario Housing Authority. The receivable balance at June 30, 2020, was: 4,381,441 On September 11, 2003, the former Ontario Redevelopment Agency and Ontario Housing Investors entered into a Residual Receipts promissory note in the amount of $487,408. The loan bears interest of 7% per annum and requires principal and interest payments from residual receipts. On May 1, 2007, the Authority agreed to provide a gap loan in the amount of $168,469. The loan has a 40-year term and a 6% simple interest per annum. The receivable balance at June 30, 2020, was: 1,063,092

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Note 4: Notes and Loans Receivable (Continued)

On February 15, 2005, the City Council approved the Ontario OPEN (Ownership Program Enhancing Neighborhoods) House Program to assist low income first time homebuyers. This program was funded with American Dream Down Payment Initiative (ADDI) funds from HUD. As of June 30, 2020, 4 households have been assisted with these funds. The receivable at June 30, 2020, was: $ 28,740 Pursuant to the disposition and development agreement dated August 12, 2003, between the Ontario Housing Authority and the Ontario Senior Housing, Inc., the Authority accepted a promissory note for the principal amount of $950,000. This promissory note bears a rate of 0% per annum and is secured by a deed of trust. The receivable balance at June 30, 2020, was: 922,636 The City uses Community Development Block Grant (CDBG) and HOME funds in a custodial capacity to provide housing rehabilitation loans and grants to eligible applicants. The City makes deferred loans to low and moderate income families based on income and residency guidelines. These loans have been secured by a note and deed of trust. The deferred loan is due and payable when the title of the property changes. The balance at June 30, 2020, was: 2,735,440 Pursuant to the disposition and development agreement between the Ontario Housing Authority and D Street Senior Housing, Inc., the Authority approved a gap loan in the amount of $1,276,909 to provide new housing development opportunities to address regional needs. The Agency gap loan is a zero percent residual receipts note that will be paid from available cash flow over the term of the affordable covenant period of the project. The receivable balance at June 30, 2020, was: 1,200,909 Pursuant to the disposition and development agreement between the Ontario Housing Authority and Ontario Senior Housing Partners, LP, the Authority approved a gap loan in the amount of $5,155,500 to provide new housing development opportunities to address regional needs. The Authority’s gap loan will have a 55 year term with an interest rate of 1% simple interest. The loan will be paid back utilizing 85% of the residual cash flow. Any remaining balance at the end of the 55 year term is due and payable. The receivable balance at June 30, 2020, was: 5,331,643 The Ontario Housing Authority was approved a maximum of $1,590,300 BEGIN (Building Equity and Growth In Neighborhoods) funds provided by the California Department of Housing and Community Development. BEGIN funds are used for down payment assistance loans to moderate households in the form of a deferred payment loan with a 30-year term and a 3% deferred simple interest per annum, the receivable balance at June 30, 2020, was: 263,017

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Note 4: Notes and Loans Receivable (Continued) On February 21, 2014, the Ontario Housing Authority entered into a HOME loan agreement with Mercy House Living Centers. The loan was made in the amount of $1,000,000 to be used to finance the purchase price of property and up to $523,858 in rehabilitation costs. The rehabilitation costs balance of $523,858 was placed in a bank account where Mercy House is allowed to draw monies, as needed, to rehabilitate the property. As these monies are drawn from the bank, the amount is added to the loans receivable balance. The receivable balance at June 30, 2020, was: $ 1,523,858 On January 22, 2018, the Ontario Housing Authority entered into a HOME loan agreement with Mercy House CHDO, Inc. in the amount of $1,145,000 to finance the acquisition, rehabilitation and operation of a multi-family property located at 411 North Parkside Avenue. The loan is an interest-free residual receipts note with a 30-year term. The receivable balance at June 30, 2020, was: 1,145,000 The Ontario Housing Authority entered into two CalHome Mortgage Assistance Program totaling $108,200 to assist in the purchase of single family residences. The loans have simple interest at the rate of 1% with repayment occurring either 30 years from the date of recordation, upon sale or transfer of the property, or if they fail to occupy the home as a primary residence. The receivable balance at June 30, 2020, was: 119,679 On November 15, 2018, pursuant to the disposition and development agreement between the Ontario Housing Authority and Ontario Emporia Housing Partners, L.P., the Authority approved a gap loan in the amount of $15,700,000 for the development of a 75-unit affordable housing development. The Authority’s gap loan is a residual receipt note that will be paid back over a 65-year term. The land purchase price of the loan is $3,400,000 with a 20-year term and a 3.31% interest rate. The remaining portion of the loan, $12,300,000, bears a rate of 0% per annum. At June 30, 2020 the outstanding principal balance was: 15,770,338

Pursuant to the disposition and development agreement between the Ontario Housing Authority and the National Community Renaissance of California, the Authority approved a gap loan in the amount of $2,000,000 to finance the cash portion of the purchase price and other project costs that will provide affordable multifamily rental housing. The loan is due and payable on the 55th anniversary of the Recordation Date bearing a simple interest rate of 3.00% per annum. At June 30, 2020 the outstanding principal balance was $2,000,000 with accrued interest of $10,000, totaling: 2,010,000 Total Notes and Loans $39,023,397

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Note 4: Notes and Loans Receivable (Continued) Notes and leases receivable in the Redevelopment Financing Authority agency fund in the amount of $90,940,448 represents receivable made to the City and the Former Redevelopment Agency from the proceeds of debt issued to reduce local borrowing costs and promote greater use of existing and new financial instruments.

Notes and leases receivable in the Ontario Public Financing Authority agency fund in the amount of $124,890,000 represents receivable made to the City from the proceeds of debt issued to reduce local borrowing costs and promote greater use of existing and new financial instruments.

Note 5: Interfund Receivable, Payable and Transfers

The composition of interfund balances as of June 30, 2020, is as follows:

Due To/From Other Funds

NonmajorEnterprise

Due from Other Funds Fund

General Fund 495,315$

Due to Other Funds

The interfund balances at June 30, 2020, were the results of routine interfund transactions not cleared prior to the end of the fiscal year. Advances To/From Other Funds

Adavances to Other FundsOntario Housing

AuthorityInternal Service

Funds Total

General Fund -$ 58,180,692$ 58,180,692$ Community Development 5,961,399 - 5,961,399 Water Fund - 12,503,000 12,503,000 Sewer Fund - 5,614,000 5,614,000 Integrated Wate Fund - 11,738,000 11,738,000 Internal Service Funds - 14,034,000 14,034,000

Total 5,961,399$ 102,069,692$ 108,031,091$

Advances from Other Funds

During prior years, the Community Development Fund has loaned $5,961,399 to the Ontario Housing Authority for the acquisition, relocation and rehabilitation of various properties. In fiscal year 2019-2020, the City Council authorized an internal financing of $102,069,692 to pay down 100% of the City's June 30, 2018 unfunded liability for the Miscellaneous Plan within the California Public Employees' Retirement System ("CalPERS"). This internal loan bears interest ranging between 1% and 2% with principal and interest payable annually over 25 years beginning fiscal year 2020-2021.

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Note 5: Interfund Receivable, Payable and Transfers (Continued) Interfund Transfers

Nonmajor InternalGeneral Capital Impact Governmental Service

Transfers Out Fund Projects Fees Funds Funds Total

General Fund -$ 3,205,200$ 11,000$ 1,306,773$ 10,371,133$ 14,894,106$ Nonmajor Governmental Funds 14,098,930 - - - 37,313 14,136,243 Water Fund 6,525,158 - - - 148,914 6,674,072 Sewer Fund 2,985,256 - - - 63,930 3,049,186 Integrated Waste Fund 4,558,954 - - - 176,714 4,735,668 Nonmajor Enterprise Funds - - - - 13,334 13,334 Internal Service Funds 20,000,000 - - - 161,434 20,161,434 Total 48,168,298$ 3,205,200$ 11,000$ 1,306,773$ 10,972,772$ 63,664,043$

Transfers In

The General Fund transferred $3,205,200 to the Capital Projects Fund to fund various public facility improvement projects. The General Fund transferred $4,371,132 to the OPEB Fund to fund the annual required contribution. In addition, the Water, Sewer and Integrated Waste Funds transferred a combined total of $389,558 to the OPEB Fund to fund the annual required contribution. The Water Fund, Sewer Fund and Integrated Waste Fund transferred $6,525,158, $2,985,256, and $4,558,954, respectively, to the General Fund to cover the cost of operations. The OPEB Fund transferred $20,000,000 to the General Fund for the establishment of the Economic Uncertainty Reserve. General fund transfers to the non-major governmental funds are for funding toward the pavement management program, parkway maintenance district and street light maintenance district.

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Note 6: Capital Assets

In accordance with GASB Statement No. 34, the City has reported all capital assets including infrastructure in the government-wide financial statements. The City elected to use the “modified approach” for its infrastructure street pavement system as defined by GASB Statement No. 34. As a result, no accumulated depreciation or depreciation expense has been recorded for this system. A more detailed discussion of the “modified approach” is presented in the Required Supplementary Information section of this report. All other capital assets including other infrastructure systems were reported using the basic approach, whereby accumulated depreciation and depreciation expense has been recorded.

Capital asset activity for the year ended June 30, 2020, was as follows:

Beginning Beginning EndingBalance Adjustment Balance Increases Decreases Transfers Balance

Governmental Activities:

Capital assets, not being depreciated:Land 91,557,736$ -$ 91,557,736$ 33,109,040$ -$ -$ 124,666,776$ Infrastructure - pavement system 298,863,240 - 298,863,240 - - 8,736,249 307,599,489 Construction in progress 48,965,577 - 48,965,577 34,219,853 (1,930,545) (19,212,109) 62,042,776

Total Capital Assets, Not Being Depreciated 439,386,553 - 439,386,553 67,328,893 (1,930,545) (10,475,860) 494,309,041

Capital assets, being depreciated:Infrastructure - other systems 394,541,262 - 394,541,262 - - - 394,541,262 Structures and improvements 421,640,373 - 421,640,373 15,070,672 (5,921,812) 10,180,022 440,969,255 Furniture and equipment 39,690,695 - 39,690,695 2,267,343 (171,906) 295,838 42,081,970

Total Capital Assets, Being Depreciated 855,872,330 - 855,872,330 17,338,015 (6,093,718) 10,475,860 877,592,487

Less accumulated depreciation:Infrastructure - other systems 92,922,012 - 92,922,012 3,763,595 - - 96,685,607 Structures and improvements 152,804,559 507,216 153,311,775 15,145,139 (5,921,812) - 162,535,102 Furniture and equipment 25,809,032 18,559 25,827,591 2,664,309 (171,906) - 28,319,994

Total Accumulated Depreciation 271,535,603 525,775 272,061,378 21,573,043 (6,093,718) - 287,540,703

Total Capital Assets, Being Depreciated, Net 584,336,727 (525,775) 583,810,952 (4,235,028) - 10,475,860 590,051,784

Governmental Activities Capital Assets, Net 1,023,723,280$ (525,775)$ 1,023,197,505$ 63,093,865$ (1,930,545)$ -$ 1,084,360,825$

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Note 6: Capital Assets (Continued)

Beginning Beginning EndingBalance Adjustments Balance Increases Decreases Transfers Balance

Business-Type Activities:

Capital assets, not being depreciated:Land 16,026,537$ -$ 16,026,537$ 128,066$ -$ -$ 16,154,603$ Construction in progress 66,083,011 - 66,083,011 4,941,266 (482,540) (1,594,689) 68,947,048

Total Capital Assets, Not Being Depreciated 82,109,548 - 82,109,548 5,069,332 (482,540) (1,594,689) 85,101,651

Capital assets, being depreciated:Structures and improvements 10,961,824 - 10,961,824 - - 87,465 11,049,289 Furniture and equipment 2,778,273 - 2,778,273 119,695 - 1,027,928 3,925,896 Infrastructure 271,533,886 (448,158) 271,085,728 - - 479,296 271,565,024

Total Capital Assets, Being Depreciated 285,273,983 (448,158) 284,825,825 119,695 - 1,594,689 286,540,209

Less accumulated depreciation:Structures and improvements 3,333,010 - 3,333,010 318,881 - - 3,651,891 Furniture and equipment 2,181,196 - 2,181,196 147,048 - - 2,328,244 Infrastructure 110,463,780 - 110,463,780 6,310,396 - - 116,774,176

Total Accumulated Depreciation 115,977,986 - 115,977,986 6,776,325 - - 122,754,311

Total Capital Assets, Being Depreciated, Net 169,295,997 (448,158) 168,847,839 (6,656,630) - 1,594,689 163,785,898

Business-Type Activities Capital Assets, Net 251,405,545$ (448,158)$ 250,957,387$ (1,587,298)$ (482,540)$ -$ 248,887,549$

Depreciation expense was charged to functions/programs of the primary government as follows:

Governmental Activities:General Government 526,981$ Public Safety 1,597,923 Community Development 7,175,140 Public Works 5,791,715 Equipment Services 5,162,115 Information Technology 1,319,169

21,573,043$ Business-Type Activities:

Water 4,774,329$ Sewer 1,157,053 Integrated Waste 104,799 IT Fiber 740,144

6,776,325$

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Note 7: Long-Term Debt a. Governmental Activities

The following is a summary of changes in long-term debt of the City for the year ended June 30, 2020:

Balance Balance Due Within July 1, 2019 Additions Deletions June 30, 2020 One Year

Public Offerings:Revenue Bonds 60,035,000$ -$ 1,050,000$ 58,985,000$ 1,120,000$ Pension Obligation Bonds - 236,585,000 - 236,585,000 3,370,000

Direct Borrowings:Loan Payable 126,566 - - 126,566 12,000 Installment Sale - 23,780,842 - 23,780,842 4,598,104 Advances from theSuccessor Agency 1,600,000 - - 1,600,000 -

Total 61,761,566$ 260,365,842$ 1,050,000$ 321,077,408 9,100,104$

Unamortized Bond Discount (248,282) Unamortized Bond Premium 2,988,300

323,817,426$

There are a number of limitations and restrictions contained in the various bond indentures. The City is in compliance with all significant limitations and restrictions. Revenue Bonds

2013 Lease Revenue Bonds

In August 2013, the Ontario Public Financing Authority issued revenue bonds in the amount of $33,390,000 to finance construction of City public facilities. The bonds dated August 20, 2013, and issued at a discount of $380,848 mature in 2043, and are payable semiannually on April 1 and October 1 of each year, commencing April 2014, from base rental payments to be made by the City for the right to the use certain real property and improvements of the City pursuant to a Lease Agreement, dated September 1, 2013. The balance at June 30, 2020, including the unamortized bond discount of $(248,282) amounted to $32,616,718. The annual requirements to amortize the outstanding bond indebtedness as of June 30 including interest, are as follows:

Principal

2020 - 2021 580,000$ 1,624,356$ 2021 - 2022 630,000 1,605,419 2022 - 2023 690,000 1,581,381 2023 - 2024 750,000 1,552,581 2024 - 2025 815,000 1,521,281 2025 - 2030 5,165,000 6,992,050 2030 - 2035 6,765,000 5,547,572 2035 - 2040 8,690,000 3,564,719 2040 - 2045 8,780,000 974,756

Total 32,865,000$ 24,964,115$

2013 Lease Revenue BondsInterest

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Note 7: Long-Term Debt (Continued)

The outstanding bonds contain a provision that if any event of default should occur, the Trustee, as assignee of the Authority under the Lease Agreement, may terminate the Lease Agreement and recover certain damages from the City, or may retain the Lease Agreement and hold the City liable for all base rental payments thereunder on an annual basis.

2017 Lease Refunding Revenue Bonds

In July 2017, the Ontario Public Financing Authority issued lease revenue bonds in the amount of $26,810,000 to provide funds to refinance the City’s remaining lease payment obligations under the City’s 2001 Lease Revenue Bonds and to fully refund the 2007 Lease Revenue Bonds. The bonds dated July 1, 2018, and issued at a premium of $3,260,875, are payable semiannually on November 1 and May 1 of each year, commencing May 1, 2019, and mature in 2042. The bonds are payable from base rental payments to be made by the City for the right to the use certain real property and improvements of the City pursuant to a Lease Agreement, dated July 1, 2018. The balance at June 30, 2020, including the unamortized bond premium of $2,988,300 amounted to $29,108,300 The annual requirements to amortize the outstanding bond indebtedness as of June 30 including interest, are as follows:

Principal Interest2020 - 2021 540,000$ 1,143,331$ 2021 - 2022 560,000 1,121,331 2022 - 2023 585,000 1,095,506 2023 - 2024 780,000 1,061,381 2024 - 2025 820,000 1,021,381 2025 - 2030 4,770,000 4,431,406 2030 - 2035 5,935,000 3,278,991 2035 - 2040 7,055,000 2,183,675 2040 - 2045 5,075,000 634,375

Total 26,120,000$ 15,971,377$

2017 Lease Revenue Refunding Bonds

The outstanding bonds contain a provision that if any event of default should occur, the Trustee, as assignee of the Authority under the Lease Agreement, may terminate the Lease Agreement and recover certain damages from the City, or may retain the Lease Agreement and hold the City liable for all base rental payments thereunder on an annual basis.

Pension Obligation Bonds

In May 2020, the City of Ontario issued taxable pension obligation bonds in the amount of $236,585,000 to pay a portion of the City’s unfunded pension liability to the California Public Employees’ Retirement System (“CalPERS”) for the benefit of the City public safety police and fire employees. The bonds are payable semiannually on June 1 and December 1 of each year, commencing June 1, 2020 and maturing in 2050 at an interest rate ranging from 1.971% to 3.379% per annum. The balance at June 30, 2020 amounted to $236,585,000.

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The annual requirements to amortize the outstanding bond indebtedness as of June 30 including interest, are as follows:

Principal Interest2020 - 2021 3,370,000$ 8,492,099$ 2021 - 2022 4,360,000 8,196,161 2022 - 2023 5,190,000 8,105,865 2023 - 2024 5,850,000 7,990,855 2024 - 2025 6,660,000 7,848,290 2025 - 2030 40,425,000 36,050,462 2030 - 2035 47,500,000 28,968,650 2035 - 2040 57,075,000 19,412,400 2040 - 2045 57,960,000 7,654,178 2040 - 2045 8,195,000 664,891

Total 236,585,000$ 133,383,851$

2020 Taxable Pension Allocation Bonds

Pursuant to the Retirement Law, the City Council is required to make the appropriations to pay the amounts required to be paid by the City, including the portion of the unfunded pension liability. The remedies available to the Trustee and the Owners of the Bonds upon an event of default are dependent upon regulatory and judicial actions. Under existing law and judicial decisions, the remedies provided for under such documents may not be readily available or may be limited. In the case of any bankruptcy proceeding involving the City, the rights of the Owners could be modified at the direction of the court.

Loan Payable

On May 19, 2015, the Ontario Housing Authority (Authority) negotiated the purchase of the Vesta property and assumed a promissory note and deed from Housing Opportunities Group Inc. (HOGI). HOGI entered into a promissory note secured by a subordinated deed of trust with the Inland Fair Housing and Mediation Board (Board) and agreed to assign the Authority such property and promissory note with a balance of $158,566, effective September 11, 2015. Monthly payments in the amount of $1,000, shall commence one year after the effective date. The loan is payable within 20 years from the effective date at zero interest. A monthly payment may be deferred by Borrower, upon providing notice to the Lender, should Borrower have insufficient net revenue from operation of the Property for the relevant month, as determined by Borrower in its reasonable discretion. In such case, the subsequent month's payment shall remain One Thousand Dollars ($1,000), and the payment period shall be extended. No monthly payments were received during fiscal year 2019-2020. The outstanding balance at June 30, 2020 amounted to $126,566.

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The annual requirements to amortize the outstanding loan as of June 30, including interest, are as follows:

Principal

2020 - 2021 12,000$ -$ 2021 - 2022 12,000 - 2022 - 2023 12,000 - 2023 - 2024 12,000 - 2024 - 2025 12,000 - 2025 - 2030 60,000 - 2030-2031 6,566 -

Total 126,566$ -$

Loan PayableInterest

Installment Sale In November 2019, the City entered into an installment sale agreement in the amount of $33,100,000 for the purchase of a parcel of land in the Ontario Ranch for the future Great Park. The purchase and sale agreement includes an initial payment amount of $8,100,000 to be paid at close of the escrow and five (5) equal annual payments of $5,000,000 each to the seller with an inputted interest rate of 1.690%. The outstanding balance at June 30, 2020 amounted to $23,780,843. The annual requirements for the installment sale agreement outstanding as of June 30, including inputted interest, as follows:

Principal Interest2020 - 2021 4,598,104$ 401,896$ 2021 - 2022 4,675,812 324,188 2022 - 2023 4,754,833 245,167 2023 - 2024 4,835,190 164,810 2024 - 2025 4,916,904 83,096

Total 23,780,843$ 1,219,157$

Ontario Ranch Great Park Loan Payable

Advances from the Successor Agency

During previous fiscal years, the former Redevelopment Agency advanced the Capital Projects fund $1,600,000 for the purchase of property adjacent to Ontario Mills. There is no repayment schedule for the advances.

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b. Business-Type Activities The following is a summary of changes in Proprietary Fund long-term debt for the year ended June 30, 2020:

Balance Balance Due Within July 1, 2019 Additions Deletions June 30, 2020 One Year

Public Offerings:Revenue Bonds 65,905,000$ -$ -$ 65,905,000$ 1,485,000$

Total 65,905,000$ -$ -$ 65,905,000 1,485,000$

Unamortized Bond Premium 1,691,108

67,596,108$

Revenue Bonds 2013 Water Revenue Bonds In September 2013, the Ontario Public Financing Authority issued revenue bonds in the amount of $74,545,000 to finance the acquisition and construction of certain improvements to the water enterprise of the City of Ontario, and refinance an installment payment obligation of the City and the related City of Ontario Certificates of Participation (2004 Water System Improvement Project). The bonds dated September 10, 2013, and issued at a premium of $2,362,578 mature in 2043, and are payable semiannually on January 1 and July 1 of each year, commencing January 2014, from certain revenues consisting primarily of installment payments to be made by the City to the Ontario Public Financing Authority under an Installment Purchase Agreement dated September 1, 2013 between the City and the Authority. The balance at June 30, 2020, including the unamortized bond premium of $1,691,108 amounted to $67,596,108 The annual requirements to amortize the outstanding bond indebtedness as of June 30, including interest, are as follows:

Principal Interest

2020 - 2021 1,485,000$ 3,281,513$ 2021 - 2022 1,545,000 3,213,188 2022 - 2023 1,620,000 3,134,063 2023 - 2024 1,700,000 3,051,063 2024 - 2025 1,785,000 2,963,938 2025 - 2030 10,350,000 13,369,119 2030 - 2035 13,325,000 10,384,550 2035 - 2040 17,085,000 7,633,000 2040 - 2045 17,010,000 3,229,750

Total 65,905,000$ 50,260,184$

2013 Water Revenue Bonds

The outstanding bonds are secured by a pledge of revenues of the Water System and payable solely from net revenues of the Water System. The bonds contain a provision that if any event of default should occur by the City, it will not result in the loss of the Water System or water rights held by or on behalf of the City or the Water System. Furthermore, any remedies available upon the occurrence of an event of default under the Indenture are in many respects dependent upon judicial actions.

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Note 8: Non-City Obligations

a. Special Assessment Bonds

The City has entered into a number of Special Assessment Bond programs. The City of Ontario is not obligated in any manner for the Special Assessment Bonds as the bonds are secured by unpaid assessments against the property owners. Accordingly, the City is only acting as an agent for the property owners/bondholders in collecting and forwarding the special assessments. Special Assessment Bonds payable at June 30, 2020, totaled $113,355,000. This amount is not reported in the City’s financial statements. The construction phase is reported in the Capital Projects Funds. Likewise, amounts recorded in the Agency Funds represent only debt service activities, i.e., collection from property owners and payment to bondholders.

b. Other Bond and Loan Programs

The City has entered into a number of bond programs to provide low-interest financing for various residential and industrial developments within the City. Although the City has arranged these financing programs, these debts are not payable from any revenues or assets of the City. Neither the faith or credit, nor the taxing power of the City, or any political subdivision of the City is pledged to repay the indebtedness. Generally, the bondholders may look only to assets held by trustees for security on the indebtedness. Accordingly, since these debts do not constitute an obligation of the City, they are not reflected in the accompanying financial statements. The bond programs are as follows:

Date OutstandingInterest Date Series Balance

Multi-Family Mortgage Revenue Bonds % Rate Issued Matures at June 30, 2020City of Ontario Multi-Family Housing RevenueBonds, Seasons at Ontario, Series 2017A Variable 2017 2036 2,611,192$

City of Ontario Multi-Family Housing RevenueBonds, Vista Verde Apts, Series 2019A Variable 2019 2051 9,232,156

Total 11,843,348$

Note 9: Compensated Absences

As described in Note 1, it is the City's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. All vacation pay is accrued when incurred in the government-wide financial statements and in the proprietary fund financial statements. For the governmental activities, the liability will be paid in future years by the General Fund and for business-type activities by the Proprietary Funds. The following is a summary of changes in compensated absences for the year ended June 30, 2020:

July 1, 2019 Additions Deletions June 30, 2020 One Year

Governmental Activities 16,224,220$ 13,262,804$ 11,443,130$ 18,043,894$ 12,774,000$ Business-Type Activities 1,425,106 1,151,300 1,082,057 1,494,349 1,177,713

Total 17,649,326$ 14,414,104$ 12,525,187$ 19,538,243$ 13,951,713$

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Note 10: Pension Plan

Defined Benefit Pension Plan


Deferred Outflows of Resources Pension

Related Items

Deferred Inflows of Resources Pension

Related Items

Miscellaneous Plan (95,281,496)$ 123,427,940$ (2,426,682)$ Safety Police Plan (130,812,373) 180,380,025 (3,455,234) Safety Fire Plan (88,005,577) 124,375,359 (2,097,296)

(314,099,446)$ 428,183,324$ (7,979,212)$

General Information about the Pension Plans Plan Description The City of Ontario contributes to the California Public Employees Retirement System (PERS), an agent multiple-employer public employee defined benefit pension plan. PERS provides retirement and disability benefits, annual cost-of-living adjustments and death benefits to plan members and beneficiaries. PERS acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provisions and all other requirements are established by state statute and City ordinance. Copies of PERS’ annual financial report may be obtained from its executive office: 400 P Street, Sacramento, California 95814. Benefits Provided CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law. The plans’ provisions and benefits in effect at June 30, 2020, are summarized as follow:

Tier 1 * PEPRA (Tier 2)Hire date Prior to January 1, 2013 January 1, 2013 and afterBenefit formula 2.5% @ 55 2.0% @ 62Benefit vesting schedule 5 years service 5 years serviceBenefit payments monthly for life monthly for lifeRetirement age minimum 50 yrs minimum 52 yrsMonthly benefits, as a % of

eligible compensation

Required employeecontribution rates

Required employercontribution rates

(a) City contributed 0% to employee contribution rate of 8.0%

*Closed to new entrants

21.588% 21.588%

Miscellaneous Plan

2.000% - 2.500%, 50 yrs - 55+ yrs,

respectively

1.000% - 2.500%, 52 yrs - 67+ yrs,

respectively

8.000% (a) 6.250%

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Note 10: Pension Plan (Continued)

Tier 1 * Tier 2 PEPRA (Tier 3)

Hire date Prior to July 1, 2012 On July 1, 2012 and prior to Janaury 1, 2013

January 1, 2013 and after

Benefit formula 3.0% @ 50 3.0% @ 55 2.7% @ 57Benefit vesting schedule 5 years service 5 years service 5 years serviceBenefit payments monthly for life monthly for life monthly for lifeRetirement age minimum 50 yrs minimum 50 yrs minimum 50 yrsMonthly benefits, as a %

of eligible

Required employee contribution rates

Required employer contribution rates

(b) City contributed 0.0% to employee contribution rate of 9.0% for 2020.

46.444% 46.444% 46.444%

Safety Police Plan

3.000% 50 yrs - 55+ yrs,

respectively

2.400% - 3.000%, 50 yrs - 55+ yrs,

respectively

2.000 - 2.700%, 50 yrs - 57+ yrs,

respectively

9.000% (b) 9.000% (b) 12.000%

Tier 1 * Tier 2 PEPRA (Tier 3)

Hire date Prior to July 1, 2012 On July 1, 2012 and prior to Janaury 1, 2013

January 1, 2013 and after

Benefit formula 3.0% @ 50 3.0% @ 55 2.7% @ 57Benefit vesting schedule 5 years service 5 years service 5 years serviceBenefit payments monthly for life monthly for life monthly for lifeRetirement age minimum 50 yrs minimum 50 yrs minimum 50 yrsMonthly benefits, as a %

of eligible

Required employee contribution rates

Required employer contribution rates

(c) City contributed 0.0% to employee contribution rate of 9.0% for 2020.

* Closed to new entrants.

41.864% 41.864% 41.864%

Safety Fire Plan

3.000% 50 yrs - 55+ yrs,

respectively

2.400% - 3.000%, 50 yrs - 55+ yrs,

respectively

2.000 - 2.700%, 50 yrs - 57+ yrs,

respectively

9.000% (c) 9.000% (c) 10.500%

Employees Covered As of the June 30, 2019 measurement date, the following employees were covered by the benefit terms of the plans:

DescriptionMiscellaneous

PlanSafety Police

PlanSafety Fire

PlanActive members 718 281 167 Transferred members 329 26 13 Terminated members 270 23 14 Retired members and beneficiaries 888 260 165

Total 2,205 590 359

Number of members

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Note 10: Pension Plan (Continued) Contributions Section 20814(c) of the California Public Employees’ Retirement Law (PERSL) requires that the employer contribution rates for all public employers are 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 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. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. Employer contribution rates may change if plan contracts are amended. Payments made by the City to satisfy contribution requirements that are identified by the pension plan terms as plan member contribution requirements are classified as plan member contributions. For the year ended June 30, 2020, the contributions that were recognized as a reduction to the net pension liability were $9,748,790, $13,281,877, and $7,797,113 for the Miscellaneous Plan, the Safety Police Plan and the Safety Fire Plan, respectively. Net Pension Liability The City’s net pension liability is measured as the total pension liability, less the pension plan’s fiduciary net position. The net pension liability of each of the Plans is measured as of June 30, 2019 using an annual actuarial valuation as of June 30, 2018 rolled forward to June 30, 2019 using standard updated procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below. Actuarial Methods and Assumptions Used to Determine Total Pension Liability The June 30, 2018 valuation was rolled forward to determine the June 30, 2019 total pension liability, based on the following actuarial methods and assumptions: Actuarial Cost Method Entry Age Normal in accordance with the

requirements of GASB 68 Actuarial Assumptions Discount Rate 7.15% Inflation 2.50% Salary Increases Varies by Entry Age and Service Mortality Rate Table (1) Derived using CalPERS’ Membership Data

for all Funds Post Retirement Benefit Increase The lesser of contract COLA or 2.5% until

Purchasing Power Protection Allowance floor on purchasing power applies, 2.5% thereafter

(1) The mortality table used was developed based on CalPERS’ specific data. The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Pre-retirement and post-retirement mortality rates include 15 years of projected mortality improvement using 90% of Scale MP-2016 published by the Society of Actuaries. For more details on this table, please refer to the CalPERS Experience Study and Review of Actuarial Assumptions report from December 2017 that can be found on the CalPERS website.

All other actuarial assumptions used in the June 30, 2018 valuation were based on the results of an actuarial experience study for the period from 1997 to 2015, including updates to salary increase, mortality and retirement rates. The Experience Study report may be accessed on the CalPERS website at www.calpers.ca.gov under Forms and Publications.

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Note 10: Pension Plan (Continued) Discount Rate The discount rate used to measure the total pension liability was 7.15 percent. To determine whether the municipal bond rate should be used in the calculation of the 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. The tests revealed the assets would not run out. Therefore, the current 7.15 percent discount rate is appropriate and the use of the municipal bond rate calculation is not deemed necessary. The long-term expected discount rate of 7.15 percent is applied to all plans in the Public Employees’ Retirement Fund (PERF). The cash flows used in the testing were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. 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.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which 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, staff took into account both short-term and long-term market return expectations as well as the expected pension fund (PERF) cash flows. Taking into account historical returns of all the Public Employees Retirement Funds’ asset classes (which includes the agent plan and two cost-sharing plans or PERF A, B, and C funds), expected compound (geometric) 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 PERF 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 equal to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. The table below reflects 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. The target allocation shown was adopted by the Board effective on July 1, 2014.

Asset ClassNew Strategic

AllocationReal Return

Years 1 - 10 (1)Real Return Years 11+ (2)

Global Equity 50.00% 4.80% 5.98%Global Fixed Income 28.00% 1.00% 2.62%Inflation Sensitive 0.00% 0.77% 1.81%Private Equity 8.00% 6.30% 7.23%Real Estate 13.00% 3.75% 4.93%Liquidity 1.00% 0.00% -0.92%

100.00%

(1) An expected inflation of 2.00% used for this period. (2) An expected inflation of 2.92% used for this period.

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Note 10: Pension Plan (Continued) Changes in the Net Pension Liability The changes in Net Pension Liability for each Plan follows:




Balance at: 6/30/2018 362,019,456$ 277,444,012$ 84,575,444$ Changes recognized for the Measurement Period:

Service Cost 8,873,061 - 8,873,061 Interest on Total Pension Liability 26,179,759 - 26,179,759 Differences between Expected and Actual Experience 7,329,159 - 7,329,159 Contributions - Employer - 9,748,790 (9,748,790) Contributions - Employees - 3,976,957 (3,976,957) Net Investment Income - 18,145,412 (18,145,412) Benefit Payments, Including Refunds of Employee Contributions (15,269,344) (15,269,344) - Administrative Expense - (197,990) 197,990 Other Miscellaneous Income/(Expense) - 2,758 (2,758)

Net changes during 2018-19 27,112,635 16,406,583 10,706,052 Balance at: 6/30/19 (Measurement Date) 389,132,091$ 293,850,595$ 95,281,496$

Miscellaneous Plan

Increase (Decrease)





Service Cost 9,490,945 - 9,490,945 Interest on Total Pension Liability 27,456,414 - 27,456,414 Differences between Expected and Actual Experience 14,622,182 - 14,622,182 Contributions - Employer - 13,281,877 (13,281,877) Contributions - Employees - 3,171,669 (3,171,669) Net Investment Income - 17,108,327 (17,108,327) Benefit Payments, Including Refunds of Employee Contributions (17,240,114) (17,240,114) - Administrative Expense - (185,998) 185,998 Other Miscellaneous Income/(Expense) - (156) 156


Safety Police Plan

Increase (Decrease)





Service Cost 5,774,916 - 5,774,916 Interest on Total Pension Liability 20,209,053 - 20,209,053 Differences between Expected and Actual Experience 9,490,435 - 9,490,435 Contributions - Employer - 7,797,113 (7,797,113) Contributions - Employees - 2,057,562 (2,057,562) Net Investment Income - 13,135,037 (13,135,037) Benefit Payments, Including Refunds of Employee Contributions (13,911,900) (13,911,900) - Administrative Expense - (144,039) 144,039 Other Miscellaneous Income/(Expense) - 3,542 (3,542)


Total Plans: 1,095,504,377$ 781,404,931$ 314,099,446$

Safety Fire Plan

Increase (Decrease)

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Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of each Plan, calculated using the discount rate of 7.15%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1% point lower (6.15%) or 1% point higher (8.15%) than the current rate:

Discount Rate - 1%

(6.15%)Current Discount

Rate (7.15%)Discount Rate +1%

(8.15%)

Miscellaneous Plan's Net Pension Liability 148,412,072$ 95,281,496$ 51,365,452$

Safety Police Plan's Net Pension Liability 188,166,240 130,812,373 83,935,209 Safety Fire Plan's

Net Pension Liability 127,823,960 88,005,577 55,158,477

Total Net Pension Liability 464,402,272$ 314,099,446$ 190,459,138$

Pension Plan Fiduciary Net Position The plan fiduciary net position disclosed in the GASB 68 accounting valuation report may differ from the plan assets reported in the funding actuarial valuation report due to several reasons. First, for the accounting valuations, CalPERS must keep items such as deficiency reserves, fiduciary self-insurance and OPEB expense included as assets. These amounts are excluded for rate setting purposes in the funding actuarial valuation. In addition, differences may result from early Comprehensive Annual Financial Report closing and final reconciled reserves. Detailed information about each pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports. See CalPERS website for additional information.

Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions As of the start of the measurement period (July 1, 2018), the combined net pension liability for the Miscellaneous Plan, the Safety Police Plan and the Safety Fire Plan was $272,574,383. For the measurement period ending June 30, 2019, (the measurement date), the City recognized pension expense of $23,419,559, $24,636,596, and $16,249,825 for the Miscellaneous Plan, the Safety Police Plan, and the Safety Fire Plan, respectively. Note that no adjustments have been made for contributions subsequent to the measurement date.

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As of June 30, 2020, the City of Ontario has deferred outflows and deferred inflows of resources related to pensions as follows:

Deferred Outflows

of ResourcesDeferred Inflows

of ResourcesMiscellaneous PlanContributions made after the measurement date 117,241,733$ -$

Change in assumptions 631,395 1,278,431

Difference between expected and actual experience 5,554,812 -

Net difference between projected and actual earnings on pension plan investments - 1,148,251

Miscellaneous Plan Total 123,427,940 2,426,682

Safety Police PlanContributions made after the measurement date 158,004,442 -

Change in assumptions 7,933,861 981,329

Difference between expected and actual experience 14,441,722 1,296,473

Net difference between projected and actual earnings on pension plan investments - 1,177,432

Safety Police Plan Total 180,380,025 3,455,234

Safety Fire PlanContributions made after the measurement date 106,139,596 -

Change in assumptions 6,175,341 1,023,825

Difference between expected and actual experience 12,060,422 281,312

Net difference between projected and actual earnings on pension plan investments - 792,159

Safety Fire Plan Total 124,375,359 2,097,296 Total 428,183,324$ 7,979,212$

The amounts of $117,241,733, $158,004,442, and $106,139,596 reported as deferred outflows of resources represents contributions made after the measurement date of the net pension liability but before the end of the City's reporting period and will be recognized as a reduction of the net pension liability in the subsequent fiscal period rather than in the current fiscal period.

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Other amounts reported as deferred outflows or deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Miscellaneous Safety - Police Safety - Fire

Year ended June 30:

Deferred Outflows/(Inflows) of

Resources


Resources


Resources2021 $ 3,264,365 $ 7,743,307 $ 5,945,918 2022 (338,536) 3,967,999 3,414,906 2023 513,483 2,570,733 2,529,243 2024 320,213 3,071,648 2,468,984 2025 - 1,566,662 1,779,416

Total 3,759,525$ 18,920,349$ 16,138,467$

Note 11: Other Post-Employment Benefits

Plan Description

The City has established the City of Ontario Retiree Healthcare Plan, an agent multiple employer defined benefit healthcare plan. The plan, which is administered by the CalPERS, provides health insurance for its retired employees according to the Personnel Rules and Regulations for each of the ten employee groups. The City pays monthly health insurance benefits subjects to caps which vary by bargaining group. The authority to do so is included annually in the Memorandum of Understanding between the City and each of its employee groups and ultimately passed by Council action.

Employees Covered

At June 30, 2019, the measurement date, the following numbers of participants were covered by the benefit terms:

Number of Covered Participants

Inactives currently receiving benefits 589Inactives entitled to but not yet receiving benefits 161 Active employees 1,174

Total 1,924

Contributions

The City participates in the California Employers’ Retiree Benefit Trust (CERBT) administered by CalPERS for purposes of funding the required retiree medical payments and is evaluating various options for funding its post-employment benefits liability. For fiscal year 2019-2020, the City paid $6,570,084 in benefits and made a one-time contribution to the trust (CERBT) of $140 million. Thereafter, the City will contribute $5,000,000 per year adjusted for inflation.

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Note 11: Other Post-Employment Benefits (Continued) Total OPEB Liability

The City's net OPEB liability was measured as of June 30, 2019 for the measurement period July 1, 2018 through June 30, 2019. The net OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation dated June 30, 2019, based on the following actuarial assumptions: Actuarial Assumptions:

Discount rate 6.75% at June 30, 2019 (Long-Term expected asset return)Inflation 2.75% per annumSalary Increases Aggregate - 3.00%

Merit - Tables from CalPERS 1997-2015 Experience StudyInvestment rate of retrun 6.75%Mortality rate CalPERS 1997-2015 Experince StudyRetirement, Disability, Termination

CalPERS 1997-2015 Experince Study

Medical Trend Non-medicare - 7.25% for 2021, decreasing to an ultimate rate of 4.0% in 2076 and later yearsMedicare - 6.3% for 2021, decreasing to an ultimate rate of 4.0% in 2076 and later years

Contribution policy City contributed $140 million in 2019/20, and will contribute $5 million per year (adjusted for inflation) thereafter

Mortality improvement

Cap increases Miscellaneous $ Caps: 0%Safety Tier 1 Premium Caps: Medical Trend

Post-retirement mortality projected fully generational with Scale MP-2019

Change of Assumptions The discount rate was changed from 3.87% Bond Buyer 20-Bond Index at June 30, 2018 to 6.75% long-term expected asset return at June 30, 2019.

Discount Rate

The discount rate used to measure the net OPEB liability was 6.75%. The discount rate is based on the long-term expected asset return described below:

Target Allocation Expected RealAsset Class Component CERBT Strategy 1 Rate of Return

Global Equity 59% 4.82%Fixed Income 25% 1.47%TIPS 5% 1.29%Commodities 3% 0.84%REITs 8% 3.76%Assumed Long-Term Rate of Inflation 2.75%Expected Long-Term Net Rate of Return 6.75%

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Note 11: Other Post-Employment Benefits (Continued)

Changes in the Net OPEB Liability. The changes in the net OPEB liability for the plan are as follows:

Total OPEB Fiduciary Net Net OPEBLiability Position Liability

Balance at 6/30/19 269,554,133$ -$ 269,554,133$ (6/30/18 measurement date)

Changes for the yearService cost 9,940,301 - 9,940,301 Interest 10,698,499 - 10,698,499 Actual vs. expected experience (31,315,151) - (31,315,151) Assumption changes (90,154,275) - (90,154,275) Contributions - employer - 6,108,661 (6,108,661) Benefit payments (6,094,869) (6,094,869) - Administrative expenses - (13,792) 13,792

Net changes (106,925,495) - (106,925,495) Balance at 6/30/20 162,628,638$ -$ 162,628,638$ (6/30/19 measurement date) The net OPEB liability for the City’s plan has been liquidated by funding from Governmental Funds and Proprietary Funds.

Sensitivity of the Net OPEB Liability to Changes in the Discount Rate

The following presents the net OPEB liability of the City, as well as what the City's net OPEB liability would be if it were calculated using a discount rate that is one percentage point higher or one percentage point lower than the current discount rate, for the measurement period June 30, 2019:

1% Decrease (5.75%) Current Rate (6.75%) 1% Increase (7.75%)

Net OPEB Liability 186,550,137$ 162,628,638$ 143,236,868$

Discount Rate

Sensitivity of the Net OPEB liability to Changes in the Healthcare Cost Trend Rates

The following presents the net OPEB liability of the City, as well as what the City's net OPEB liability would be if it were calculated using healthcare cost trend rates that are one percentage point higher or one percentage point lower than the current healthcare cost trend rates:

1% Decrease Current Rate 1% Increase

Net OPEB Liability 141,997,640$ 162,628,638$ 188,724,068$

Healthcare Trend Rate

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Note 11: Other Post-Employment Benefits (Continued)

OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB

For the fiscal year ended June 30, 2020, the City recognized OPEB expense of $147,622,445. At June 30, 2020, the City's deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Outflows of Resources

Deferred Inflows of Resources

Differences between expected and actual experience -$ (27,400,757)$

Change in assumptions - (112,570,886) Employer contributions made subsequent to measurement date 146,570,084 * -

Total 146,570,084$ (139,971,643)$

June 30, 2020

* Includes $4,975,703 cash benefit payments, $140,000,000 in trust contributions, and $1,578,000 impled subsidy payment in 2019-20, and administrative expense of $16,381.

The $146,570,084 reported as deferred outflows of resources represents contributions made after the measurement date of the OPEB liability but before the end of the City's reporting period and will be recognized as a reduction of the OPEB liability in the subsequent fiscal period rather than in the current fiscal period. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:

Fiscal Year Ended June 30

Deferred Outflows/(Inflows) of Resources

2021 (21,704,953)$ 2022 (21,704,953) 2023 (21,704,953) 2024 (21,704,953) 2025 (21,225,991) Thereafter (31,925,840)

Total (139,971,643)$

Note 12: Self-Insurance Program

On December 22, 1974, the City initiated a program of self-insurance for workers’

compensation liability claims. The City will pay all claims up to $750,000 per claim; amounts in excess of $750,000 are covered through an outside insurance carrier.

On January 1, 1975, the City initiated a program of self-insurance for unemployment liability

claims. By this action, the City will pay all claims based on the individual reimbursement account method, as provided by the State of California.

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Note 12: Self-Insurance Program (Continued)

On April 6, 1979, the City initiated a program of self-insurance for general liability claims. At present, the City will pay all claims up to $1,000,000 per claim arising from general liability claim actions brought against the City. Amounts in excess of $1,000,000 per claim are covered by the Authority for California Cities Excess Liability (ACCEL).

ACCEL is organized under a joint powers agreement pursuant to the California Government

Code. The purpose of the Authority is to arrange and administer programs of insurance for the pooling of self-insured losses and to purchase excess insurance coverage. ACCEL pools catastrophic general liability, automobile liability and public officials errors and omissions losses. ACCEL members share risk from $1,000,000 to $4,000,000, and insurance in layers exceeding $5,000,000.

The City has not experienced a significant reduction in insurance coverage from coverage in

the prior year. Additionally, the amount of settlements has not exceeded budgeted coverage for each of the past three fiscal years.

The City has entered into contracts with third-party administrators who supervise the general

liability and worker’s compensation programs. When it is probable that a claims liability has been incurred and the amount of the loss can be reasonably estimated through historical trends and calculation of incurred but not reported claims (IBNR), the City accrues the estimated liability in an internal service fund for expected claims and judgments. The following is a summary of the changes in the claims liability over the past two fiscal years:

Beginning Changes in Claim EndingFiscal Year Balance Estimates Payments Balance

2018-2019 21,784,000$ 10,533,441$ 7,694,441$ 24,623,000$ 2019-2020 24,623,000 13,164,263 9,239,263 28,548,000

Of the total estimated claims liabilities, $10,063,000 is estimated due within one year or less.

The liability will be paid in future years from the Self Insurance Fund. Note 13: Fund Balance and Net Position Restatement

Beginning net positions in the Equipment Services fund has been restated by $(655,191) to correct prior year accumulated depreciation on capital assets and beginning net position in the Integrated Waste fund has been restated by $(448,158) to correct capital assets balance. As a result, net position in the governmental activities and in the business-type activities have been restated by $(655,191) and $(448,158) respectively.

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Note 14: Fund Balances

a. Governmental Fund Balance Classifications Fund balances in governmental funds at June 30, 2020, have been classified as follows:

OtherGovernmental

General FundsFund Balances:Nonspendable Inventory 300,943$ -$ -$ -$ -$ -$

Prepaid costs 176,154 - - - - - Notes and loans 75,000 - - - - - Advances to other funds 3,500,000 - - - - -

Total Nonspendable 4,052,097 - - - - - Restricted Endowment/Trust 417,464 - - - - - Community development projects - - - 10,466,800 229,370 80,048,721 Public safety - - - - - 156,236 Park development - - - - - 24,301,848 Transportation improvement - 2,373,572 - - - 2,466,725 Affordable housing - - 21,292,559 16,010,135 - - AQMD activities - - - - - 1,595,474 Public services - - - - - 37,647,197 Bond improvement projects - - - 18,600,767 - -

Total Restricted 417,464 2,373,572 21,292,559 45,077,702 229,370 146,216,201 Committed City infrastructure 370,412 - - - 134,372,092 - Ontario motor speedway 225,057 - - - - -

Total Committed 595,469 - - - 134,372,092 - Assigned City facilities project 2,614,032 - - - - - Public safety equipment 330,460 - - - - - Communications/computer dispatch 3,267,724 - - - - - Compensated absences 17,230,207 - - - - - Continuing appropriations 5,155,020 - - 11,315,242 11,647,088 - Stability arrangement 51,265,533 - - - - - Ecomonic uncertainty 20,000,000 - - - - -

Total Assigned 99,862,976 - - 11,315,242 11,647,088 - Unassigned 2,622,364 - - - - (464,083)

Total Fund Balances 107,550,370$ 2,373,572$ 21,292,559$ 56,392,944$ 146,248,550$ 145,752,118$

Governmental Funds

Measure I

Ontario Housing Authority

Capital Projects Impact Fees

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Note 15: Special Item

On March 20, 2014, the City entered into a Memorandum of Understanding (MOU) with the Ontario International Airport Authority (OIAA) to document the understanding and responsibilities with respect to costs associated with the “Set ONTario Free” campaign and the services associated with the transfer of Ontario International Airport (ONT). There was no set terms for repayment of the balance. The City had recorded a receivable of $42,373,148 as of July 1st, 2019. During fiscal year 2019-20, the City elected to forgive the debt incurred with these costs. The amount forgiven has been presented as a special item on the financial statements.

Note 16: Joint Ventures

Water Facilities Authority

On February 19, 1980, the Water Facilities Authority (Authority) was created under a joint exercise of powers agreement between the City of Chino, the City of Ontario, the City of Upland, the City of Chino Hills and the Monte Vista Water District. It was formed for the purpose of acquisition and construction of facilities directly benefiting the participants by supplying potable water to the inhabitants within the boundaries of its members. Thus, each participant has an ongoing financial interest in the Authority.

The governing Board of Directors consists of one member appointed from each participating agency and has approval of all budget and finance activities. The City's investment in the Authority has been recorded under the equity method of accounting and is shown as an investment in joint venture in the Water Enterprise Fund.

On September 30, 1997, the Authority issued $24,455,000 in 1997 Refunding Certificates of Participation (COPs) to refund $25,820,000 of then outstanding 1986 COPs. The 1997 Refunding COPs carry interest rates from 4.0% to 5.3% and will be repaid in various principal increments with the final payment due on October 1, 2015. Each participant in the joint venture has pledged gross revenues from its respective Enterprise Fund and has agreed to restrictive covenants that establish rates and charges for each respective water enterprise fund at levels sufficient to maintain net revenues equal to at least 1.25 times the aggregate amount of each respective party's installment payments to the Authority as well as any parity debt that shall become due and payable within the succeeding twelve months. Each City has an ongoing financial responsibility as each has assumed a portion of the Authority's debt. The City of Ontario’s percentage share of the installment payment is 41.51681% and the outstanding balance was paid in full during the fiscal year ending June 30, 2016. At June 30, 2020, the City's investment in the Authority, including its share of Authority’s debt, was $9,076,721.

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Note 16: Joint Ventures (Continued) Audited financial information of the Authority for the fiscal year ended June 30, 2020, is summarized as follows:

Water Facilities Authority Net Position:Total assets 31,612,814$ Total deferred outflows 338,150 Total liabilities (5,650,733) Total deferred inflows (66,933)

Total net position 26,233,298$

Water Facilities Authority Changes in Net Position:Operating revenues 24,669,955$ Operating expenses 24,833,343

Operating gain (loss) before depreciation and amortization (163,388) Depreciation and amortization (1,191,076)

Operating revenue (loss) (1,354,464) Nonoperating revenues (expenses) 1,728,032 Capital contributions 531,624

Change in net position 905,192 Beginning net position 25,328,106 Ending net position 26,233,298$

The current participants and their financial contributions through June 30, 2020, were as follows:

Amount Percent

City of Chino 6,693,894$ 15.70%City of Chino Hills 6,986,722 16.40%Monte Vista Water District 14,725,941 34.60%City of Ontario 8,545,801 20.10%City of Upland 5,520,600 13.00%Non-Participant 117,703 0.30%

Total 42,590,661$ 100%

Financial statements of the Water Facility Authority can be obtained from the offices of Teaman, Ramirez & Smith, Inc., 4201 Brockton Avenue, Suite 100, Riverside, California 92501.

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Note 16: Joint Ventures (Continued)

Chino Basin Desalter Authority

On January 15, 2002, the Chino Basin Desalter Authority (the Authority) was created under a joint exercise of powers agreement between the City of Ontario and other neighboring government agencies. This agreement was formed to successfully manage the groundwater resources in the Chino Basin.

The governing Board of Director consists of one representative appointed from each participating agency and has the power and responsibility to adopt budgets, operating plans and finance activities to further the purpose of the Authority. As of June 30, 2020, the City’s investment in the Authority was $56,088,131.

On June 22, 2016, the Chino Basin Desalter Authority issued the Desalter Revenue

Refunding Bonds, Series 2016A in the amount of $67,105,000 to refund the Desalter Revenue Refunding Bonds, Series 2008A. The new revenue refunding bond has various debt payment schedules tailored to each member agency, based on their respective election. This provision affords each member the ability to prepay their share of debt service.

The financial information of the Authority for the fiscal year ended June 30, 2020, is summarized as follows:

Chino Basin Desalter Authority Net Position:Total Assets 299,114,935$ Deferred Outflows of Resources 3,812,920 Total Liabilities 90,002,105


Chino Basin Desalter Authority Changes in Net Position:Operating Revenues 51,585,750$ Operating Expenses 46,836,025

Operating Gain Before Depreciation and Amortization 4,749,725 Depreciation and Amortization 4,316,354

Operating Revenue (loss) 433,371 Nonoperating Revenues (expenses) 2,981,376 Income (loss) Before Contributions 3,414,747 Contributions 5,829,604

Changes in Net Position 9,244,351

Beginning Net Position 203,681,399

Ending Net Position 212,925,750$

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Note 16: Joint Ventures (Continued) The current participants and their financial contributions through June 30, 2020, were as follows:

Amount Percent

Jurupa Community Services District 10,555,204$ 34.7%City of Chino Hills 4,098,545 13.5%City of Chino 4,879,188 16.0%City of Norco 975,738 3.2%City of Ontario 6,167,035 20.3%Santa Ana River Co. 1,170,834 3.9%Western Municipal Water District 2,554,228 8.4%

Total 30,400,772$ 100.0%

Financial statements of the Authority can be obtained from the Chino Basin Desalter Authority Treasurer’s office located at 6075 Kimball Avenue, Chino, California 91710.

West End Communications Authority

The “Authority” governed by a seven-member board is a joint exercise of powers between the following entities as created by a joint powers:

City of Chino City of Upland City of Montclair Rancho Cucamonga Fire Protection District City of Rancho Cucamonga Chino Valley Independent Fire Protection District City of Ontario

The purpose of the Authority is to provide a cooperative voluntary association to establish operate and maintain a consolidated 800MHZ communication system designed to serve public safety agencies throughout the western end of San Bernardino County, California. The City has an ongoing financial interest in the residual assets of the Authority upon disbandment. The following is a summary of the West End Communications Authority financial information for the fiscal year ended June 30, 2020:

West End Communication Authority Net Position:Total assets 1,410,934$ Total liabilities -


West End Communication Authority Changes in Net Position:Operating revenues -$ Operating expenses 2,800

Operating revenue (loss) (2,800)

General revenue 46,845

Change in net position 44,045

Beginning net position 1,366,889 Ending net position 1,410,934$

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Note 16: Joint Ventures (Continued)

Separate financial statements of the West End Communications Authority are available upon request from the City of Ontario, Fiscal Services Department, 303 East "B" Street, Ontario, California 91764.

West End Fire and Emergency Response Commission

On January 23, 1989, the West End Fire and Emergency Response Commission was created under the Joint Exercise Powers Agreement between the Fire Departments of the City of Ontario, Upland, Montclair, Rancho Cucamonga and Chino. The governing board of directors consists of the Fire Chief from each city. The purpose of the Authority is to establish a hazardous materials response team. It has been amended to include an Urban Search and Rescue Team and the servicing of joint authority breathing apparatus equipment for emergency purposes.

The following is a summary of the West End Fire and Emergency Response Commission financial information for the fiscal year ended June 30, 2020:

West End Fire and Emergency Response Commission Net Position:Total assets 603,841$ Total liabilities -

Total net position 603,841$

West End Fire and Emergency response Commission Changes in Net Position:Operating revenues 100,000$ Operating expenses 31,757

Operating revenue (loss) 68,243

General revenue 20,886

Change in net position 89,129

Beginning net position 514,712

Ending net position 603,841$ Separate financial statements of the West End Fire and Emergency Response Commission are available upon request from the City of Ontario, Fiscal Services Department, 303 East "B" Street, Ontario, California 91764.

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Note 17: Other Investments

Other investments of $46,625,898 at June 30, 2020 in the Water Fund represents water rights, investment in stored water and air quality credits. The City values its other investments at fair value in accordance with the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the assets. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. The City has the following recurring fair value measurements as of June 30, 2020:

Totals 1 2 3Water Rights 45,833,661$ -$ -$ 45,833,661$ Investment in Stored Water 416,442 - - 416,442

Air Quality Credits 375,795 - - 375,795

Total Investments 46,625,898$ -$ -$ 46,625,898$

Investment TypeLevel

Note 18: Contingencies

Liabilities

Claims and suits have been filed against the City in the normal course of business. Based upon information received from the City Attorney and the self-insurance administrator, the estimated liability under such claims would be adequately covered by self-insurance designations and insurance coverage.

Grant

Under the terms of federal and state grants, periodic audits are required and certain costs may be questioned as not being appropriate expenditures under the terms of the grants. Such audits could lead to reimbursement to the grantor agencies. City management believes disallowances, if any, will be immaterial.

Proposition 218 Proposition 218, which was approved by the voters in November, 1996, will regulate the City’s ability to impose, increase and extend taxes, assessments and fees. Any new, increased or extended taxes, assessments and fees subject to the provisions of Proposition 218 require voter approval before they can be implemented. Additionally, Proposition 218 provides that these taxes, assessments and fees are subject to the voter initiative process and may be rescinded in the future by the voters. Therefore, the City’s ability to finance the services for which the taxes, assessments and fees were imposed may be significantly impaired. At this time, it is uncertain how Proposition 218 will affect the City’s ability to maintain or increase the revenue it receives from taxes, assessments and fees.

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Note 19: Commitments

Construction Commitments The following material construction commitments existed at June 30, 2020:

Project Name Contract Amount

Capital Projects Impact Fees

General Fund

Deposits Remaining

Commitments

Francis Street Storm Drain Construction Project 9,550,045$ 7,589,962$ 1,315,476$ 66,561$ 578,046$ Fire Training Facility Project 9,110,871 7,263,645 1,473,965 - 373,261

Fire Station #9 Project 9,393,665 - 1,538,620 - 7,855,045 Anthony Munoz Community Center Project 11,471,217 465,679 1,299,998 - 9,705,540

Water Fund Sewer Fund Integrated

Waste

I-10/4th & Grove Interchange-Engineering 4,307,958$ 62,790$ -$ -$ 4,245,168 Construction of Well 41 3,861,984 3,420,805 - - 441,179 Construction of Recycled Water Improvements for Riverside Dr. 3,809,053 3,491,479 - - 317,574 Recycled Water Improvements 3,481,886 1,044,552 - - 2,437,334 CIS Infinity Software Installation 2,828,379 963,587 545,020 991,854 327,918

Parco Ave & Plaza Serena/ Granada Storm Drain Project 3,379,117 168,300 - - 3,210,817

Information Technollogy

On-Call Fiber Conduit, Construction Contracts 6,400,000 5,433,228 966,772 On-Call Citywide Fiber Cable Installation Services 3,000,000 1,959,882 1,040,118

Total Remaining Commitments 31,498,772$

Expenditures to date as of June 30, 2020

Note 20: Tax Abatements

The City entered into various tax abatement agreements with local businesses. The abatements may be granted to any business located within or promising to relocate to the City. For the fiscal year ended June 30, 2020, the City abated taxes totaling $8,264,525 under this program. The City has the following tax abatement agreements:

A professional agreement with a consultant to assist the City in sales tax consulting

services related to operating covenant agreements. The consultant will invoice the City on a quarterly basis and will receive a 5% fee each year on the first $5,000,000 of local sales and use tax received by the City. Payments will continue for a 20-year term of the operating covenant agreement the City entered into with the retailer of equipment and merchandise of health care products and services. In fiscal year 2019-20, the abatement amounted to $61,484.

An operating covenant agreement with a retailer of equipment and merchandise of health care products and services to establish its only regional sales office in California within the City for not less than 20 years. The establishment of such retailer will generate local sales tax revenue, create high paying/management jobs and provide opportunity for additional job growth. The City agreed to rebate quarterly 50% of sales tax revenues attributable to taxable sales. In fiscal year 2019-20, the abatement amounted to $1,765,833.

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Note 20: Tax Abatements (Continued)

An operating covenant agreement with an automotive dealership which agreed to operate the entirety of its dealership facilities within the City for a period of 26 years. The dealership will generate substantial tax revenue, create potential for additional job growth and stimulate the economy. The City agreed to rebate 50% of sales tax revenues in excess of $700,000 during the period April 1, 2018 through March 31, 2028. In fiscal year 2019-20, the abatement amounted to $336,437.

The City entered into a professional agreement with a consultant to provide sales tax audit and information services to the City. The audit services will detect and correct taxpayer reporting errors and generate new revenue without causing additional tax liability to businesses. The City agreed to pay quarterly 20% of new sales and use tax revenues received as a result of corrections identified by the consultant. In fiscal year 2019-20, the amount paid was $320,063.

Operating covenant agreement with a retailer of consumer products to establish its warehouse and distribution center in the City and remain in the City for no less than 41 years. The establishment of such retailer in the City will generate substantial revenue, create new jobs, revitalize the City, and result in community and public improvements. The City agreed to refund quarterly, 55% of sales tax revenues attributable to annual taxable sales up to $500 million and 60% of sales tax revenues over $500 million of annual taxable sales. In fiscal year 2019-20, the abatement amounted to $2,063,418.

Operating covenant agreement with a retailer of consumer products to ensure that it maintains its existing warehouse and distribution center in the City and expands its operations within the City. This will generate substantial revenue for the City, possibly create job growth, continue to stimulate the economy and result in community and public improvements. For the period January 1, 2016 through December 31, 2019, provided the City receives not less than $1.2 million of sales tax revenue from the retailer, the City agreed to make annual payments in the amount of $600,000 payable within 120 days following the end of each calendar year. In fiscal year 2019-20, the abatement amounted to $600,000.

Operating covenant agreement with an auto dealership to develop and operate a facility in the City for its Inland Empire sales territory. The City will receive additional local sales tax revenues, property taxes, employment benefits, and other tangible and intangible benefits arising from the operation of the Dealership within the City. The eligibility period of this agreement is from July 1, 2009 until June 30, 2034. The City agreed to make quarterly payments equal to 50% of local sales tax revenues in excess of $50,000 not to exceed $200,000 for any computation year or $500,000 in the aggregate during the entire eligibility period. In fiscal year 2019-20, the abatement amounted to $101,747.

Operating covenant agreement with a global retailer of healthcare services and

products to retain and operate its two facilities in the City for transacting sales. The City will receive additional sales tax revenues, maintain and create jobs and stimulate the economic recovery of the Inland Empire. The eligibility period of this agreement commenced on April 1, 2018 and will continue until terminated by either party. The City agreed to make quarterly payments equal to 50% of sales tax revenues. In fiscal year 2019-20, the abatement amounted to $1,923,319.

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Note 20: Tax Abatements (Continued)

Operating covenant agreement with a sanitary supplies distributor to retain existing jobs, allow for the potential increase in job opportunities, foster a business and civic environment that may attract additional businesses and investments and create additional job opportunities in the City. The eligibility period of this agreement began on July 1, 2017. The City agreed to make quarterly payments equal to 25% of sales tax revenues in excess of $201,000 during the quarter up to $500,000. In fiscal year 2019-20, the abatement amounted to $28,141.

Operating covenant agreement with several concrete companies to establish a sale office and/or a business location that participate in the sale process within the City, expand operations within the City as appropriate and remains in the City for not less than 40 years. The establishment of such businesses is expected to generate substantial revenue for the City, create new jobs, revitalize an area of the City which has suffered a loss of jobs and result in community and public improvements. The eligibility period of this agreement began on October 1, 2018. The City agrees to refund on a quarterly basis 50% of the sales tax revenue attributable to annual taxable sales for the calendar year which is directly allocated to the City. In fiscal year 2019-20, the abatement amounted to $283,107.

Retention agreement with an auto dealership to encourage the auto dealership to remain in the City and consider future sales expansions in consideration of the local sales tax revenues, property taxes, employment benefits, and other tangible and intangible benefits that are expected to be received by the City arising from the Dealership within the City. During the eligibility period the City will pay to the Company on a quarterly basis for (1) operating years 1-5, an amount equal to 50% of the local sales tax revenues received above the annual base amount of $75,000; (2) for operating years 6-10, an amount equal to 50% of the local sales tax revenues received above the annual base amount of $l00,000; and (3) for operating years 11-15, an amount equal to 50% of the local sales tax revenues received above the annual base amount of $125,000. The cumulative total of any and all covenant payments paid by the City pursuant to this Agreement shall not exceed $1,200,000. In fiscal year 2019-20, the abatement amounted to $90,819.

Operating Covenant Agreement with a technology consulting company to ensure the company maintains its existing facility within the City and expands its operations by increasing the size of its sales office and sales force. The City has determined that the long-term operation of the sales office will result in substantial benefits to the City, and its citizens including, without limitation, the creation of significant new numbers of employment opportunities, property tax revenues, sales tax revenues and other ancillary benefits. The City agrees to pay an amount equal to 50% of the sales tax revenues attributable to the property in excess of the base sales tax amount of $45,000 for each computation quarter during the eligibility period. The eligibility period began on January 1, 2016 and end upon termination notice from either party to the agreement. In fiscal year 2019-20, the abatement amounted to $690,157.

Note 21: Successor Trust for Assets of Former Redevelopment Agency

On December 29, 2011, the California Supreme Court upheld Assembly Bill 1X 26 (“the Bill”) that provides for the dissolution of all redevelopment agencies in the State of California. This action impacted the reporting entity of the City of Ontario that previously had reported a redevelopment agency within the reporting entity of the City as a blended component unit.

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Note 21: Successor Trust for Assets of Former Redevelopment Agency (Continued) The Bill provides that upon dissolution of a redevelopment agency, either the city or another unit of local government will agree to serve as the “successor agency” to hold the assets until they are distributed to other units of state and local government. On January 10, 2012, the City Council elected to become the Successor Agency for the former redevelopment agency in accordance with the Bill as part of City resolution number 2012-001. After enactment of the law, which occurred on June 28, 2011, redevelopment agencies in the State of California cannot enter into new projects, obligations or commitments. Subject to the control of a newly established oversight board, remaining assets can only be used to pay enforceable obligations in existence at the date of dissolution (including the completion of any unfinished projects that were subject to legally enforceable contractual commitments). Successor agencies are only allocating revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable obligations of the former redevelopment agency until all enforceable obligations of the prior redevelopment agency have been paid in full and all assets have been liquidated. The Bill directs the State Controller of the State of California to review the propriety of any transfers of assets between redevelopment agencies and other public bodies that occurred after January 1, 2011. If the public body that received such transfers is not contractually committed to a third party for the expenditure or encumbrance of those assets, the State Controller is required to order the available assets to be transferred to the public body designated as the successor agency by the Bill. Management believes, in consultation with legal counsel, that the obligations of the former redevelopment agency due to the City are valid enforceable obligations payable by the successor agency trust under the requirements of the Bill. The City’s position on this issue is not a position of settled law and there is considerable legal uncertainty regarding this issue. It is reasonably possible that a legal determination may be made at a later date by an appropriate judicial authority that would resolve this issue unfavorably to the City.

In accordance with the timeline set forth in the Bill (as modified by the California Supreme Court on December 29, 2011) all redevelopment agencies in the State of California were dissolved and ceased to operate as a legal entity as of February 1, 2012. a. Cash and Investments

As of June 30, 2020, cash and investments were reported in the accompanying financial statements as follows:

Cash and investments 12,933,088$ Cash and investments with fiscal agent 2,889,941

Total Cash and Investments 15,823,029$

b. Notes Receivable

On October 19, 1993, the Ontario Redevelopment Agency accepted a note receivable of $35,000 from a developer as part of a transaction involving the sale of property. The note bears interest at 0% annually and was due in full on June 20, 1995. A new note was negotiated on November 8, 1996 and will mature on October 31, 2026. The unpaid principal balance at June 30, 2020, was $35,000.

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Note 21: Successor Trust for Assets of Former Redevelopment Agency (Continued)

c. Advances to City During prior fiscal year, the Former RDA loaned $1,600,000 to the Capital Project Fund for the purchase of property adjacent to Ontario Mills.

d. Long-Term Debt

The following is a summary of changes in long-term debt of the Successor Agency as of June 30, 2020:

Balance Balance Due WithinJune 30, 2019 Additions Deletions June 30, 2020 One Year

Public Offerings:1993 Tax Allocation Bonds 35,950,225$ -$ 4,154,633$ 31,795,592$ 4,648,466$ 1995 Tax Allocation Bonds 3,178,875 - 367,367 2,811,508 411,034 2002 Refunding Revenue Bonds 1,915,000 - 630,000 1,285,000 610,000

Direct Borrowings:Loans Payable 8,630,158 - 598,010 8,032,148 629,705 Advance from City 3,500,000 - - 3,500,000 - Total 53,174,258$ -$ 5,750,010$ 47,424,248 6,299,205$

Unamotized Bond Premuim 7,106 Total 47,431,354$

1993 Tax Allocation Bond

The 1993 Tax Allocation Bonds in the amount of $45,708,900 were issued on June 11, 1993, to finance redevelopment activities related to Project Area #1. The Agency sold the bonds to the Financing Authority at a purchase price equal to the principal amount of the bonds plus a premium. The investment by the Authority in the bonds is held in an agency fund. The terms were negotiated in a prior year and reduced the outstanding principal balance by $800. Additionally, the maturity date was extended two years to August 1, 2025. The interest is paid semi-annually at the stated rate of 12%. The balance at June 30, 2020, amounted to $31,795,592.

The annual requirements to amortize the outstanding bond indebtedness as of June 30, including interest, are as follows:

Principal Interest

2020 - 2021 4,648,466$ 3,536,563$ 2021 - 2022 5,213,685 2,944,834 2022 - 2023 5,842,021 2,281,492 2023 - 2024 6,028,988 1,569,231 2024 - 2026 10,062,432 1,001,267

Total 31,795,592$ 11,333,387$

1993 Tax Allocation Bonds

The outstanding bonds contain a provision that if any event of default should occur, the Trustee shall at the written direction of the Owner of a majority in aggregate principal amount outstanding, declare the principal of all the bonds then outstanding, and the interest accrued thereon, to be due and payable immediately.

107


Note 21: Successor Trust for Assets of Former Redevelopment Agency (Continued) 1995 Tax Allocation Bonds

On August 15, 1995, the Ontario Redevelopment Agency issued $4,041,700 in 1995 Tax Allocation Bonds. The bonds were sold to the Ontario Redevelopment Financing Authority at par plus premium. All proceeds of the 1995 Bonds will be used to finance redevelopment projects related to Project Area #1. The 1995 Bonds were issued on parity with the Agency’s existing Project Area #1 1992 and 1993 Tax Allocation Bonds. The 1995 Bonds were issued with an interest rate of 12.00%, provided that the interest rate for the period from August 1, 1995 through July 1, 1996, shall be 10.55% per annum, the interest rate for the period from August 1, 1996 through July 31, 1997, shall be 11.70% per annum, and the interest for the period from August 1, 1997 through July 31, 1999, shall be 11.86% per annum. Interest is paid semi-annually each year and commenced February 1, 1996, until final maturity on August 1, 2025. The balance at June 30, 2020, amounted to $2,811,508.

The annual requirements to amortize the outstanding bond indebtedness as of June 30, including interest, are as follows:

Principal Interest

2020 - 2021 411,034$ 485,004$ 2021 - 2022 461,015 485,004 2022 - 2023 516,579 485,004 2023 - 2024 533,112 485,004 2024 - 2026 889,768 727,506

Total 2,811,508$ 2,667,522$

1995 Tax Allocation Bonds


2002 Refunding Revenue Bonds

In February 2002, the Ontario Redevelopment Financing Authority issued revenue bonds in the amount of $35,290,000 to provide funds to concurrently refund on a current basis a portion of the Authority’s 1992 Revenue Bonds and certain outstanding tax allocation bonds of the Agency, and to finance redevelopment activities within the Agency’s Project Area #1, Center City and Cimarron redevelopment projects. The bonds issued at a premium of $1,702,231, consist of $17,472,433 capital appreciation bonds maturing annually through 2018 and $9,795,000 interest bonds with interest payable semiannually on February 1 and August 1 of each year and maturing in 2021. The bonds are secured by a pledge and a lien on a portion of the taxes levied on all taxable property within the related project of the Agency. The outstanding balance at June 30, 2020, amounted to $1,285,000.

108


Note 21: Successor Trust for Assets of Former Redevelopment Agency (Continued) The annual requirements to amortize the outstanding bond indebtedness as of June 30, including interest, are as follows:

Principal Interest

2020 - 2021 610,000$ 46,550$ 2021 - 2022 675,000 16,031

Total 1,285,000$ 62,581$

2002 Refunding Revenue Bonds


Loans Payable

Pursuant to a loan agreement dated February 1, 2002, the Ontario Redevelopment Agency issued the Ontario Redevelopment Project #1 2002 Housing Set-Aside Loan in the amount of $15,145,000 to finance low and moderate income activities of the Agency within or of the benefit to the Ontario Redevelopment Agency Project Area #1. The loan matures in 2029 and is payable from Housing Tax Revenues allocated to the Agency. Interest is paid semi-annually at a rate of 5.30% per annum. The balance at June 30, 2020, amounted to $8.032,148. At June 30, 2020, the annual requirements to repay the outstanding indebtedness were as follows:

Principal Interest 2020 - 2021 629,705$ 409,017$ 2021 - 2022 663,079 374,758 2022 - 2023 698,222 338,683 2023 - 2024 735,228 300,697 2024 - 2029 4,303,627 859,368 2029 - 2030 1,002,287 26,561

Total 8,032,148$ 2,309,084$

2002 FNMA Housing Set-Aside Loan

The remedies available upon the occurrence of an event of default under the loan agreement are in many respects dependent upon regulatory and judicial actions.

Advance from City The General Fund made an advance in the amount of $3,500,000 to the Successor Agency of the Former Redevelopment Agency to assist the Agency in implementation of the redevelopment plan.

109


Note 21: Successor Trust for Assets of Former Redevelopment Agency (Continued)

Debt Service Requirements

The City pledged, as security for bonds issued, either directly or through the Financing Authority, a portion of tax increment revenue (including Low and Moderate-Income Housing set-aside and pass through allocations) that it receives. The bonds issued were to provide financing for various capital projects, accomplish Low and Moderate Income Housing projects and to defease previously issued bonds. Assembly Bill 1X 26 provided that upon dissolution of the Redevelopment Agency, property taxes allocated to redevelopment agencies no longer are deemed tax increment but rather property tax revenues and will be allocated first to successor agencies to make payments on the indebtedness incurred by the dissolved redevelopment agency. Total principal and interest remaining on the debt is $60,296,822 with annual debt service requirements as indicated on the previous pages. For the current year, the total property tax revenue recognized by the Successor Agency for the payment of obligations incurred by the dissolved redevelopment agency was $10,707,680 and the debt service obligation on the bonds was $10,817,314.

Note 22: Subsequent Events

In December 2019, an outbreak of a novel strain of coronavirus (COVID-19) originated in China, and has since spread to a number of other countries, including the U.S. On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. In addition, several states in the U.S., including California, have declared a state of emergency. Potential impacts to our future tax revenues include disruptions or restrictions on our current employees’ ability to work. Any of the foregoing could negatively impact our revenues and we currently cannot anticipate all of the ways in which this health epidemics, COVID-19, could adversely impact our government agency. Although we are continuing to monitor and assess the effects of the COVID-19 pandemic on our government agency, the ultimate impact of the COVID-19 outbreak or a similar health epidemic is highly uncertain and subject to change. On March 27, 2020, in response to the economic fallout of the Coronavirus pandemic in the United States, Congress passed the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, which provided $2.2 trillion in economic stimulus funding through a variety of channels. The State of California received a $500 million allocation to provide cities which did not receive a direct federal allocation through the CARES Act. The City entered into an agreement with the State of California in July 2020 and the County of San Bernardino in October 2020 to receive their allocation of the CARES Act funding. The total amount of CARES Act funding to be received by the City is $4,515,864. This funding was for the reimbursement of costs incurred by the City since the start of the pandemic.

110


112

CITY OF ONTARIO

BUDGETARY COMPARISON SCHEDULEGENERAL FUNDYEAR ENDED JUNE 30, 2020

Variance with Final Budget

Budget Amounts Actual PositiveOriginal Final Amounts (Negative)

Budgetary Fund Balance, July 1 131,397,957$ 131,397,957$ 131,397,957$ -$ Resources (Inflows):Taxes 192,541,000 180,334,655 184,275,840 3,941,185 Licenses and permits 3,675,000 4,906,281 5,488,023 581,742 Intergovernmental 307,700 203,200 1,268,005 1,064,805 Charges for services 31,075,615 31,564,027 36,168,302 4,604,275 Use of money and property 2,864,185 2,000,000 8,476,572 6,476,572 Fines and forfeitures 928,800 689,500 786,630 97,130 Miscellaneous 5,162,359 3,996,771 4,969,244 972,473 Transfers in 42,633,335 64,380,180 48,168,298 (16,211,882)

Amounts Available for Appropriations 410,585,951 419,472,571 420,998,871 1,526,300 Charges to Appropriations (Outflow):General government

Mayor and City council 456,900 459,319 399,565 59,754 Planning commissioners 43,945 43,945 30,392 13,553 City treasurer/City clerk 113,843 114,278 84,640 29,638 Records management 934,093 952,213 1,005,773 (53,560) City attorney 389,900 389,900 491,541 (101,641) Office of the City manager 1,241,192 1,474,113 1,404,061 70,052 General government 619,250 499,250 476,897 22,353 Financial services administration 1,186,070 1,594,141 1,008,928 585,213 Fiscal services 2,895,520 3,067,500 2,893,290 174,210 General services 1,118,822 1,102,619 828,158 274,461 Billing and collection 3,916,487 3,951,722 3,541,146 410,576 Business license 510,535 494,805 883,142 (388,337) Central services 355,109 355,978 297,012 58,966 Human Resources 3,046,343 3,422,584 3,504,373 (81,789) Economic development 10,018,918 11,432,259 9,575,110 1,857,149 Airport HR & risk management services 303,422 306,444 205,844 100,600 Communication and community services - 784,424 605,328 179,096 Office of legislative services 1,614,538 911,328 652,780 258,548 Innovation and performance audit - 517,858 434,120 83,738

Public safetyPolice administration 1,583,668 1,653,151 1,397,956 255,195 Traffic support services 4,276,508 4,315,335 4,387,863 (72,528) Community engagement team 6,658,860 6,725,733 6,576,300 149,433 Patrol 33,456,419 33,782,166 35,249,700 (1,467,534) Extra duty - other 484,200 484,200 476,790 7,410 Canine 1,765,292 1,793,154 1,669,069 124,085 Air support 8,838,094 9,708,751 7,878,989 1,829,762 Crime analysis and prevention 910,662 916,570 702,260 214,310 Communications/records 6,207,918 6,305,150 5,551,538 753,612 Personnel recruit & training 2,677,480 2,701,154 2,402,155 298,999 Airport operations bureau 13,581,356 14,003,439 12,891,171 1,112,268 Detective division 9,000,898 9,113,991 10,107,810 (993,819) Career criminial division 5,206,174 5,240,334 5,622,858 (382,524) ID/evidence 2,069,690 2,120,503 1,888,185 232,318 Office of the Fire Chief 1,223,154 1,250,807 1,170,824 79,983 Fire prevention bureau 3,047,493 3,040,676 2,723,964 316,712 Emergency services 39,493,212 39,821,983 36,772,630 3,049,353 Personnel training and development 741,626 1,012,715 1,051,865 (39,150) E.M.S technical services 1,157,301 1,222,011 1,175,714 46,297 Emergency management 459,695 571,750 599,004 (27,254) Operations support services 2,839,145 2,925,800 3,167,440 (241,640) Community improvement 4,016,304 4,167,162 3,832,434 334,728 SWAT 497,952 497,952 385,261 112,691 Office of the police chief 2,628,315 2,654,235 3,058,864 (404,629) Fire communications 2,691,265 2,682,107 2,452,056 230,051 Airport fire operations 7,948,338 8,018,929 7,850,486 168,443 Fire station No. 9 6,358,979 6,402,852 4,621,513 1,781,339 Police/Ontario Ranch 2,535,189 2,560,980 1,208,695 1,352,285

114

CITY OF ONTARIO

BUDGETARY COMPARISON SCHEDULEGENERAL FUNDYEAR ENDED JUNE 30, 2020



Community developmentCommunity life and culture admin. 1,120,421 1,263,681 1,032,974 230,707 Recreation administration 954,174 1,014,007 889,414 124,593 Sports/fitness 458,702 453,103 393,712 59,391 Special events/facility rental 307,384 475,040 301,656 173,384 Community programs 1,964,598 1,987,626 2,202,119 (214,493) Development administration 1,180,805 1,034,417 936,656 97,761 Planning administration 633,309 638,218 593,879 44,339 Planning land development 2,176,572 3,670,628 2,329,271 1,341,357 Advanced long range planning 1,580,547 2,093,324 1,249,145 844,179 Building 4,132,209 4,262,900 3,963,911 298,989 Engineering administration 421,361 424,870 241,905 182,965 Engineering land development 2,946,799 3,564,594 2,404,874 1,159,720 Transportation 559,816 565,238 475,539 89,699 Traffic engineer and signal operation 3,422,410 3,516,564 3,214,420 302,144 Traffic management 156,278 157,803 143,348 14,455 Field services 452,454 456,476 449,011 7,465 Museum 967,622 1,131,796 837,730 294,066 Community outreach 1,941,042 5,916,042 5,663,989 252,053 Senior services 589,667 654,656 684,901 (30,245) Youth/teen services 698,436 760,998 669,151 91,847 CIP design administration 35,855 35,855 3,747 32,108 Building safety 1,157,830 1,349,852 1,019,476 330,376 Successor project management 1,206,136 1,297,329 1,124,937 172,392 Town Square Park 285,471 293,321 202,077 91,244 Library administration 691,879 727,954 724,312 3,642 Ovitt Family Community Library 3,802,541 3,729,608 3,449,556 280,052 Branch library 657,155 660,610 627,335 33,275

Public worksRoadway maintenance 1,568,930 1,576,598 1,106,384 470,214 Paint striping and sign maintenance 1,074,834 1,068,663 871,058 197,605 Sidewalk 1,692,973 1,698,940 1,649,358 49,582 Street lighting maintenance 588,543 744,363 667,951 76,412 Parks and maintenance supervision 974,327 1,008,519 746,734 261,785 Park maintenance 4,670,660 4,704,685 4,440,792 263,893 Parkway tree trimming 1,298,981 1,299,583 1,031,210 268,373 Public grounds maintenance 2,720,641 2,776,954 2,554,158 222,796 Civic center grounds maintenance 200,070 200,866 179,312 21,554 Public works admin. 864,243 1,005,881 894,638 111,243 Public facilities building maintenance 5,022,227 5,288,222 5,095,277 192,945 Community events 46,075 46,075 32,200 13,875 Graffiti 615,881 616,545 590,977 25,568 Storm drain maintenance 549,195 686,396 503,261 183,135 Facility maintenance 1,000,000 1,091,201 874,711 216,490 Weed & Refuse abatement 195,221 92,209 65,749 26,460

Debt service:Principal retirement 1,050,000 1,050,000 1,050,000 - Interest and fiscal charges 2,802,940 2,802,940 2,802,938 2

Transfers out 18,159,588 18,215,227 14,894,106 3,321,121 Special item - - 42,373,148 (42,373,148)

Total Charges to Appropriations 280,716,876 295,678,647 313,448,501 (17,769,854)

Budgetary Fund Balance, June 30 129,869,075$ 123,793,924$ 107,550,370$ (16,243,554)$

115

CITY OF ONTARIO

BUDGETARY COMPARISON SCHEDULEMEASURE IYEAR ENDED JUNE 30, 2020



Budgetary Fund Balance, July 1 4,039,915$ 4,039,915$ 4,039,915$ -$ Resources (Inflows):Intergovernmental 3,516,403 30,887,631 3,442,615 (27,445,016) Use of money and property 115,189 115,189 67,240 (47,949)

Amounts Available for Appropriations 7,671,507 35,042,735 7,549,770 (27,492,965)

Charges to Appropriations (Outflow):Community development 5,640,200 33,675,768 5,176,198 28,499,570

Total Charges to Appropriations 5,640,200 33,675,768 5,176,198 28,499,570

Budgetary Fund Balance, June 30 2,031,307$ 1,366,967$ 2,373,572$ 1,006,605$

116

CITY OF ONTARIO

BUDGETARY COMPARISON SCHEDULEONTARIO HOUSING AUTHORITYYEAR ENDED JUNE 30, 2020



Budgetary Fund Balance, July 1 21,296,516$ 21,296,516$ 21,296,516$ -$ Resources (Inflows):Contribution from property owners - 27,300 26,254 (1,046) Use of money and property 250,391 250,391 703,122 452,731 Miscellaneous 79,205 79,205 59,869 (19,336)

Amounts Available for Appropriations 21,626,112 26,653,412 22,085,761 (4,567,651) Charges to Appropriations (Outflow):Community development 1,709,434 6,861,003 793,202 6,067,801

Total Charges to Appropriations 1,709,434 6,861,003 793,202 6,067,801


117

CITY OF ONTARIO

MISCELLANEOUS PLANSCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOSAS OF JUNE 30, FOR THE LAST TEN FISCAL YEARS (1)

2014 2015 2016 2017 2018 2019

TOTAL PENSION LIABILITYService Cost 6,439,440$ 6,295,399$ 6,785,157$ 8,020,608$ 8,293,305$ 8,873,061$ Interest 19,741,927 20,680,719 22,042,754 23,255,948 24,357,078 26,179,759 Difference Between Expected and Actual Experience - (2,539,125) 2,960,090 1,183,589 833,264 7,329,159 Changes in Assumptions - (5,069,730) - 19,573,224 (3,104,763) - Benefit Payments, Including Refunds of employee Contributions (11,000,119) (11,779,873) (12,973,536) (13,196,500) (14,285,430) (15,269,344) Net Change in Total Pension Liability 15,181,248 7,587,390 18,814,465 38,836,869 16,093,454 27,112,635 Total Pension Liability - Beginning 265,506,030 280,687,278 288,274,668 307,089,133 345,926,002 362,019,456 Total Pension Liability - Ending (a) 280,687,278$ 288,274,668$ 307,089,133$ 345,926,002$ 362,019,456$ 389,132,091$

PLAN FIDUCIARY NET POSITIONContribution - Employer 4,901,729$ 5,932,946$ 6,655,129$ 7,726,588$ 8,220,412$ 9,748,790$ Contribution - Employee 2,619,805 3,288,408 3,496,228 3,300,315 4,098,899 3,976,957 Net Investment Income 35,255,810 5,225,720 1,288,913 26,063,000 21,684,987 18,145,412 Benefit Payments, Including Refunds of Employee Contributions (11,000,119) (11,779,873) (12,973,536) (13,196,500) (14,285,430) (15,269,344) Plan to Plan Resource Movement - (670) 221 - (1,183) - Administrative Expense - (270,392) (144,267) (347,413) (402,453) (197,990) Other Miscellaneous Income/(Expense) - - - - (954,165) 2,758 Net Change in Fiduciary Net Position 31,777,225 2,396,139 (1,677,312) 23,545,990 18,361,067 16,406,583 Plan Fiduciary Net Position - Beginning 203,040,903 234,818,128 237,214,267 235,536,955 259,082,945 277,444,012 Plan Fiduciary Net Position - Ending (b) 234,818,128$ 237,214,267$ 235,536,955$ 259,082,945$ 277,444,012$ 293,850,595$

Plan Net Pension Liability/(Assets) - Ending (a) - (b) 45,869,150$ 51,060,401$ 71,552,178$ 86,843,057$ 84,575,444$ 95,281,496$

83.66% 82.29% 76.70% 74.90% 76.64% 75.51%

Covered Payroll 38,282,148$ 39,204,131$ 43,085,834$ 46,593,469$ 50,001,261$ 53,309,357$

119.82% 130.24% 166.07% 186.38% 169.15% 178.73%

(2) Net of administrative expenses.

Notes to Schedule:

Changes of Assumptions:

In fiscal year 2018-19, there were none.

(1) Historical information is required only for measurement for which GASB 68 is applicable. Fiscal Year 2015 was the first year of implementation. Future years' information will be displayed up to 10 years as information becomes available.

In fiscal year 2017-18, demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Actuarial AssumptionsDecember 2017. There were no changes in the discount rate.

Plan Fiduciary Net Position as a Percentage of the Total Pension Liability

Plan Net Pension Liability/(Asset) as a Percentage of Covered Payroll

Benefit Changes: There were no changes in benefits.

In fiscal year 2016-17, the discount rate was changed from 7.65 percent (net of administrative expense) to 7.15 percent.

121

CITY OF ONTARIO

SAFETY POLICE PLANSCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOSAS OF JUNE 30, FOR THE LAST TEN FISCAL YEARS (1)

2014 2015 2016 2017 2018 2019

TOTAL PENSION LIABILITYService Cost 6,239,776$ 6,095,464$ 6,630,087$ 7,755,445$ 8,903,620$ 9,490,945$ Interest 20,403,337 21,492,971 22,805,001 23,727,296 25,115,253 27,456,414 Difference Between expected and Actual Experience - (435,228) 1,866,294 (3,343,535) 3,330,790 14,622,182 Changes in Assumptions - (5,448,420) - 20,461,012 (1,542,087) - Benefit Payments, Including Refunds of employee Contributions (11,427,473) (12,128,407) (13,014,228) (13,724,815) (15,142,297) (17,240,114) Net Change in Total Pension Liability 15,215,640 9,576,380 18,287,154 34,875,403 20,665,279 34,329,427 Total Pension Liability - Beginning 274,638,342 289,853,982 299,430,362 317,717,516 352,592,919 373,258,198 Total Pension Liability - Ending (a) 289,853,982$ 299,430,362$ 317,717,516$ 352,592,919$ 373,258,198$ 407,587,625$

PLAN FIDUCIARY NET POSITIONContribution - Employer 6,579,735$ 7,869,101$ 8,627,418$ 11,021,424$ 11,243,370$ 13,281,877$ Contribution - Employee 1,562,761 2,077,172 2,185,576 2,309,239 3,082,481 3,171,669 Net Investment Income 32,668,031 4,795,601 1,073,635 24,253,009 20,500,833 17,108,327 Benefit Payments, Including Refunds of Employee Contributions (11,427,473) (12,128,407) (13,014,228) (13,724,815) (15,142,297) (17,240,114) Plan to Plan Resource Movement - 607 - - (60) - Administrative Expense - (246,269) (133,344) (321,771) (375,070) (185,998) Other Miscellaneous Income/(Expense) - - - - (505,795) (156) Net Change in Fiduciary Net Position 29,383,054 2,367,805 (1,260,943) 23,537,086 18,803,462 16,135,605 Plan Fiduciary Net Position - Beginning 187,809,183 217,192,237 219,560,042 218,299,099 241,836,185 260,639,647 Plan Fiduciary Net Position - Ending (b) 217,192,237$ 219,560,042$ 218,299,099$ 241,836,185$ 260,639,647$ 276,775,252$


74.93% 73.33% 68.71% 68.59% 69.83% 67.91%

Covered Payroll 21,107,423$ 21,416,900$ 23,375,007$ 26,602,363$ 30,395,138$ 32,697,789$

344.25% 372.93% 425.32% 416.34% 370.52% 400.06%


Notes to Schedule:








(1) Historical information is required only for measurement for which GASB 68 is applicable. Fiscal Year 2015 was the first year of implementation. Future years' information will be displayed up to10 years as information becomes available.

122

CITY OF ONTARIO

SAFETY FIRE PLANSCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOSAS OF JUNE 30, FOR THE LAST TEN FISCAL YEARS (1)

2014 2015 2016 2017 2018 2019

TOTAL PENSION LIABILITYService Cost 4,207,185$ 3,826,254$ 4,011,720$ 4,694,688$ 5,450,102$ 5,774,916$ Interest 15,722,984 16,115,504 17,007,366 17,663,790 18,731,153 20,209,053 Difference Between expected and Actual Experience - (5,049,828) 2,059,569 (205,847) 5,431,927 9,490,435 Changes in Assumptions - (3,893,081) - 14,596,257 (1,280,641) - Benefit Payments, Including Refunds of employee Contributions (9,226,093) (10,326,665) (10,544,779) (11,502,192) (12,416,436) (13,911,900) Net Change in Total Pension Liability 10,704,076 672,184 12,533,876 25,246,696 15,916,105 21,562,504 Total Pension Liability - Beginning 212,149,220 222,853,296 223,525,480 236,059,356 261,306,052 277,222,157 Total Pension Liability - Ending (a) 222,853,296$ 223,525,480$ 236,059,356$ 261,306,052$ 277,222,157$ 298,784,661$

PLAN FIDUCIARY NET POSITIONContribution - Employer 4,097,660$ 4,950,167$ 5,300,820$ 6,271,125$ 6,744,221$ 7,797,113$ Contribution - Employee 1,181,692 1,673,250 1,513,475 1,535,337 1,996,292 2,057,562 Net Investment Income 26,898,837 3,958,046 890,970 19,188,945 15,891,350 13,135,037 Benefit Payments, Including Refunds of Employee Contributions (9,226,093) (10,326,665) (10,544,779) (11,502,192) (12,416,436) (13,911,900) Plan to Plan Resource Movement - - (221) - (468) - Administrative Expense - (200,094) (108,343) (258,375) (295,680) (144,039) Other Miscellaneous Income/(Expense) - - - - (552,327) 3,542 Net Change in Fiduciary Net Position 22,952,096 54,704 (2,948,078) 15,234,840 11,366,952 8,937,315 Plan Fiduciary Net Position - Beginning 155,181,255 178,133,351 178,188,055 175,239,977 190,474,817 201,841,769 Plan Fiduciary Net Position - Ending (b) 178,133,351$ 178,188,055$ 175,239,977$ 190,474,817$ 201,841,769$ 210,779,084$


79.93% 79.72% 74.24% 72.89% 72.81% 70.55%

Covered Payroll 15,672,135$ 14,881,781$ 15,700,218$ 17,573,194$ 20,851,973$ 22,164,166$

285.35% 304.65% 387.38% 403.06% 361.50% 397.06%


Notes to Schedule:








(1) Historical information is required only for measurement for which GASB 68 is applicable. Fiscal Year 2015 was the first year of implementation. Future years' information will be displayed up to 10 years as information becomes available.

123

CITY OF ONTARIO

SCHEDULE OF PENSION PLAN CONTRIBUTIONSAS OF JUNE 30, FOR THE LAST TEN FISCAL YEARS (1)

2014 2015 2016 2017 2018 2019 2020

Miscellaneous PlanActuarially Determined Contribution 4,901,729$ 5,932,946$ 6,655,129$ 7,726,588$ 8,220,412$ 9,748,790$ 15,172,041$ Contribution in Relation to the Actuarially Determined Contribution (4,901,729) (5,932,946) (6,655,129) (7,726,588) (8,220,412) (9,748,790) (117,241,733) Contribution Deficiency (Excess) -$ -$ -$ -$ -$ -$ (102,069,692)$

Covered Payroll 38,282,148$ 39,204,131$ 43,085,834$ 46,593,469$ 50,001,261$ 53,309,357$ 48,861,556$

Contributions as a Percentage of Covered Payroll 12.80% 15.13% 15.45% 16.58% 16.44% 18.29% 239.95%

Safety Police PlanActuarially Determined Contribution 6,579,735$ 7,869,101$ 8,627,418$ 11,021,424$ 11,243,370$ 13,281,877$ 17,530,270$ Contribution in Relation to the Actuarially Determined Contribution (6,579,735) (7,869,101) (8,627,418) (11,021,424) (11,243,370) (13,281,877) (158,004,442) Contribution Deficiency (Excess) -$ -$ -$ -$ -$ -$ (140,474,172)$

Covered Payroll 21,107,423$ 21,416,900$ 23,375,007$ 26,602,363$ 30,395,138$ 32,697,789$ 43,233,064$


Safety Fire PlanActuarially Determined Contribution 4,097,660$ 4,950,167$ 5,300,820$ 6,271,125$ 6,744,221$ 7,797,113$ 11,197,896$ Contribution in Relation to the Actuarially Determined Contribution (4,097,660) (4,950,167) (5,300,820) (6,271,125) (6,744,221) (7,797,113) (106,139,596) Contribution Deficiency (Excess) -$ -$ -$ -$ -$ -$ (94,941,700)$

Covered Payroll 15,672,135$ 14,881,781$ 15,700,218$ 17,573,194$ 20,851,973$ 22,164,166$ 29,270,706$


Note to Schedule:

Actuarial Valuation Date: June 30, 2017

Actuarial Cost Method: Entry Age NormalAmortization of Unfunded Actuarial Accrued Liability:

Assumption/ GoldenInvestment Non-Investment Method Change Benefit Change Handshake30 Years 30 Years 20 Years 20 Years 5 Years

2.875% 2.875% 2.875% 2.875% 2.875%0% 0% 0% 0% 0%5 5 5 0 05 5 5 0 0

Asset Valuation Method: Market Value of AssetsDiscount Rate: 7.25%

Overall Payroll Growth: 2.875%Inflation: 2.625%

Retirement Age: 2017 CalPERS Experience StudyMortality: 2017 CalPERS Experience Study, with ongoing improvement using 90 percent of Scale MP-2016

(1) Historical information is required only for measurement for which GASB 68 is applicable. Fiscal Year 2015 was the first year of implementation.

(Gain) / Loss

- Inactive PlansRamp UpRamp Down

Driver

Source

Amortization PeriodEscalation Rate

- Active Plans

124

CITY OF ONTARIO

SCHEDULE OF CHANGES IN OPEB LIABILITY AND RELATED RATIOSAS OF JUNE 30, FOR THE LAST TEN FISCAL YEARS (1)

2017 2018 2019Total OPEB LiabilityService cost 12,423,938$ 10,440,905$ 9,940,301$ Interest on the total OPEB liability 8,541,783 9,882,614 10,698,499 Actual and expected experience difference - - (31,315,151) Changes in assumptions (37,838,070) (13,680,004) (90,154,275) Benefit payments (4,213,032) (5,398,279) (6,094,869) Net change in total OPEB liability (21,085,381) 1,245,236 (106,925,495) Total OPEB liability - beginning 289,394,278 268,308,897 269,554,133 Total OPEB liability - ending (a) 268,308,897 269,554,133 162,628,638

Plan Fiduciary Net Position (2)Contribution - employer 4,213,032 5,398,279 6,108,661 Benefit payments (4,213,032) (5,398,279) (6,094,869) Administrative expense - - (13,792) Net change in plan fiduciary net position - - - Plan fiduciary net position - beginning - - - Plan fiduciary net position - ending (b) - - -

Net OPEB Liability/(Assets) - ending (a) - (b) 268,308,897$ 269,554,133$ 162,628,638$

Plan fiduciary net position as a percentage of the net OPEB liability 0.00% 0.00% 0.00%

Covered-employee payroll 111,311,408$ 127,657,357$ 135,622,457$

Net OPEB liability as a percentage of covered-employee payroll 241.04% 211.15% 119.91%

Notes to Schedule:

(1) Historical information is required only for the measurement periods for which GASB 75 is applicable. Fiscal Year 2018 was the

first year of implementation. Future years' information will be displayed up to 10 years as information becomes available.

Changes in assumptions: The discount rate was changed from 3.87 percent to 6.75 percent for the measurement period endedJune 30, 2019. Eligibility for Medicare assumption was changed based on recent plan experience. Mortality improvement scale wasupdated to Scale MP-2019.

(2) The City opened a trust during fiscal year 2019-20, as such the presentation includes plan fiduciary net position, although nocontributions were made to the trust during the measurement period ending June 30, 2019.

125

CITY OF ONTARIO

SCHEDULE OF OPEB CONTRIBUTIONSAS OF JUNE 30, FOR THE LAST TEN FISCAL YEARS (1)

2018 2019 202026,527,000$ 28,414,000$ 30,643,000$ (5,398,279) (6,108,661) (146,570,084)

21,128,721$ 22,305,339$ (115,927,084)$

127,657,357$ 135,622,457$ 142,599,181$

-4.23% -4.50% -102.78%

Notes to Schedule: None

Methods and assumptions used to determine contributions:

Actuarial Cost MethodAmortization Valuation Method/PeriodInflation 2.75% per annumDiscount Rate 3.75%Medical Trend

MortalityMortality Improvement

(1) Historical information is required only for the measurement periods for which GASB 75 is applicable. Fiscal Year 2018 was thefirst year of implementation. Future years' information will be displayed up to 10 years as information becomes available.

Actuarial methods and assumptions used to set the actuarially determined contribution for Fiscal Year 2020 were from the June30, 2017 actuarial valuation. For fiscal year 2019-2020, the City paid $6,570,084 in benefits and made a one-time contribution tothe trust (CERBT) of $140 million.

Post-retirement mortality projected fully generational with Scale MP-2017

CalPERS 1997-2011 Experience Study

Entry Age NormalLevel percent of payroll; 16-year fixed period

Non-Medicare - 7.5% for 2020, decreasing toan ultimate rate of 4.0% in 2076Medicare - 6.5% for 2020, decreasing to anultimate rate of 4.0% in 2076

Actuarially Determined ContributionContribution in Relation to the Actuarially Determined Contributions

Contribution Deficiency (Excess)

Covered-employee payroll

Contributions as a percentage of covered-employee payroll

126


127

CITY OF ONTARIO

COMBINING BALANCE SHEETNONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2020

Assets:Cash and investments 5,668,763$ 1,037,766$ 24,275,079$ 525,969$ Receivables:

Accounts 356,506 - 6,000 906,731 Notes and loans - - - 10,528,597 Accrued interest 20,056 - 85,883 - Taxes - - - -

Prepaid costs - - - - Advances to other funds - - - 5,961,399 Land held for resale - 57,832,246 - 51,050 Restricted assets:

Cash and investments - - - 35,775 Cash and investments with fiscal agents - - - -

Total Assets 6,045,325$ 58,870,012$ 24,366,962$ 18,009,521$

Liabilities and Fund Balances: Liabilities:Accounts payable 1,000,037$ -$ 65,114$ 296,360$ Accrued liabilities 12,019 - - - Unearned revenues - 863,420 - 35,775 Deposits payable - - - - Due to other governments - - - 2,866,258 Due to other funds - - - -

Total Liabilities 1,012,056 863,420 65,114 3,198,393

Deferred Inflows of Resources:Unavailable revenues - - - 7,823,888

Total Deferred Inflows of Resources - - - 7,823,888

Fund Balances: Restricted for: Community development projects 5,033,269 58,006,592 - 6,987,240 Public safety - - - - Committed to other 1Park development - - 24,301,848 - Police narcotics - - - - AQMD activities - - - - Public services - - - - Unassigned - - - -

Total Fund Balances 5,033,269 58,006,592 24,301,848 6,987,240

Total Liabilities and Fund Balances 6,045,325$ 58,870,012$ 24,366,962$ 18,009,521$


Special Gas Tax

Quiet Home Program

Park Impact / Quimby

Community Development

128

CITY OF ONTARIO

COMBINING BALANCE SHEETNONMAJOR GOVERNMENTAL FUNDSJUNE 30, 2020


AccountsNotes and loansAccrued interestTaxes

Prepaid costsAdvances to other fundsLand held for resaleRestricted assets:


Total Assets

Liabilities and Fund Balances: Liabilities:Accounts payableAccrued liabilitiesUnearned revenuesDeposits payableDue to other governmentsDue to other funds

Total Liabilities



Fund Balances: Restricted for: Community development projects Public safety Committed to other 1Park development Police narcotics AQMD activities Public services Unassigned

Total Fund Balances

Total Liabilities and Fund Balances

(CONTINUED)

2,709,637$ 1,534,448$ 9,472,882$ 3,975,379$

131,214 55,792 23,712 1,078,156 - - - -

9,587 5,429 22,472 - - - 7,867 -

2,929 - - 8,800 - - - - - - - -

- - - - - - - -

2,853,367$ 1,595,669$ 9,526,933$ 5,062,335$

51,906$ -$ 312,927$ 380,668$ 63,756 195 8,101 370

- - - 4,688,503 114,744 - - -

- - - - - - - -

230,406 195 321,028 5,069,541

- - - -

- - - -

- - 9,205,905 - 156,236 - - -

- - - - 2,466,725 - - -

- 1,595,474 - - - - - - - - - (7,206)

2,622,961 1,595,474 9,205,905 (7,206)

2,853,367$ 1,595,669$ 9,526,933$ 5,062,335$


Asset Seizure

Mobile Source Air Pollution

Special Assessment/Fee

Districts Grants

129

CITY OF ONTARIO






Total Assets


Total Liabilities




Total Fund Balances


1,656,142$ 382,871$ 387,228$ 13,208,439$

45,944 84,403 - 547,662 - - - -

5,865 1,587 1,370 46,730 - - - - - 10,744 - - - - - - - - - -

- - - - - - - -

1,707,951$ 479,605$ 388,598$ 13,802,831$

-$ 34,183$ -$ 252,198$ - 19,385 - - - - - - - 29,782 - - - - - - - - - -

- 83,350 - 252,198

- - - -

- - - -

- 396,255 388,598 - - - - - - - - - - - - - - - - -

1,707,951 - - 13,550,633 - - - -

1,707,951 396,255 388,598 13,550,633

1,707,951$ 479,605$ 388,598$ 13,802,831$


Cable Access Storm Drain Maintenance

Historic Preservation

NMC Public Services

130

CITY OF ONTARIO






Total Assets


Total Liabilities




Total Fund Balances


(CONTINUED)

-$ 40,697$ 1,240,870$ 49,226$

- - - - - - - - - - 196 -

63,853 774 14,453 - - - - - - - - - - - - -

- - - - - - 21,747,054 30,862

63,853$ 41,471$ 23,002,573$ 80,088$

25,415$ -$ 114,417$ -$ - - - - - - - - - - 541,014 49,226 - - - -

495,315 - - -

520,730 - 655,431 49,226

- - - -

- - - -

- - - 30,862 - - - - - - - - - - - - - - - - - 41,471 22,347,142 -

(456,877) - - -

(456,877) 41,471 22,347,142 30,862

63,853$ 41,471$ 23,002,573$ 80,088$


NMC CFD OMC CFD NMC CFD OMC CFD

Capital Projects Funds

131

CITY OF ONTARIO






Total Assets


Total Liabilities




Total Fund Balances


66,165,396$

3,236,120 10,528,597

199,175 86,947 22,473

5,961,399 57,883,296

35,775 21,777,916

165,897,094$

2,533,225$ 103,826

5,587,698 734,766

2,866,258 495,315

12,321,088

7,823,888

7,823,888

80,048,721 156,236

24,301,848 2,466,725 1,595,474

37,647,197 (464,083)

145,752,118

165,897,094$

Total Nonmajor Governmental

Funds

132


133

CITY OF ONTARIO

COMBINING STATEMENTS OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCESNONMAJOR GOVERNMENTAL FUNDSYEAR ENDED JUNE 30, 2020

Revenues:Special assessment taxes -$ -$ -$ -$ Intergovernmental 6,465,163 - - 1,714,056 Contribution from property owners - - - - Charges for services - - 19,436,684 - Use of money and property 198,896 - 998,161 - Miscellaneous 323,692 - - -

Total Revenues 6,987,751 - 20,434,845 1,714,056

Expenditures:Current: General government - - 2,132,965 - Public safety - - - 57,271 Community development 4,180,512 2,228 32,146,703 1,869,656 Public works - - - 158,558

Total Expenditures 4,180,512 2,228 34,279,668 2,085,485

Excess (Deficiency) of Revenues Over (Under) Expenditures 2,807,239 (2,228) (13,844,823) (371,429)

Other Financing Sources (Uses):Transfers in 837,351 - - - Transfers out (2,051,615) - - - Notes and loans issued - - 23,780,842 -

Total Other Financing Sources (Uses) (1,214,264) - 23,780,842 -

Net Change in Fund Balances 1,592,975 (2,228) 9,936,019 (371,429)

Fund Balances:Beginning of year 3,440,294 58,008,820 14,365,829 7,358,669

End of year 5,033,269$ 58,006,592$ 24,301,848$ 6,987,240$

Special Gas Tax

Quiet Home Program

Park Impact / Quimby

Community Development


134

CITY OF ONTARIO


Revenues:Special assessment taxesIntergovernmentalContribution from property ownersCharges for servicesUse of money and propertyMiscellaneous

Total Revenues

Expenditures:Current: General government Public safety Community development Public works

Total Expenditures






End of year

(CONTINUED)

-$ -$ 1,132,780$ -$ 613,429 226,104 - 3,910,686

- - - - - - - -

93,451 55,967 265,689 - 14,507 - 2,889,668 12,501

721,387 282,071 4,288,137 3,923,187

- - - - 457,035 - - 1,347,922

- 97,602 1,004,727 2,820,050 - - 704,753 -

457,035 97,602 1,709,480 4,167,972

264,352 184,469 2,578,657 (244,785)

- - 214,416 244,760 (18,005) (10,132) (225,484) -

- - - -

(18,005) (10,132) (11,068) 244,760

246,347 174,337 2,567,589 (25)

2,376,614 1,421,137 6,638,316 (7,181)

2,622,961$ 1,595,474$ 9,205,905$ (7,206)$

Mobile Source Air Pollution

Special Assessment/ Fee Districts Grants Asset Seizure


135

CITY OF ONTARIO



Total Revenues


Total Expenditures






End of year

262,353$ -$ -$ -$ - 5,764 - - - - - - - 1,309,316 97,450 4,891,236

78,412 14,493 14,428 506,976 - 16,630 - -

340,765 1,346,203 111,878 5,398,212

- - - 747,223 - - - -

45,013 964,202 - - - 428,377 - -

45,013 1,392,579 - 747,223

295,752 (46,376) 111,878 4,650,989

- - - - - (15,755) - (5,734,129) - - - -

- (15,755) - (5,734,129)

295,752 (62,131) 111,878 (1,083,140)

1,412,199 458,386 276,720 14,633,773

1,707,951$ 396,255$ 388,598$ 13,550,633$

Historic Preservation

NMC Public Services Cable Access

Storm Drain Maintenance


136

CITY OF ONTARIO



Total Revenues


Total Expenditures






End of year

(CONTINUED)

6,393,646$ 110,474$ 682,154$ -$ - - - - - - 15,471,772 5,636 - - - -

(20,276) 1,483 328,031 332 - - - -

6,373,370 111,957 16,481,957 5,968

19,513 - - - - - - -

315,334 13,454 17,195,419 - - - - -

334,847 13,454 17,195,419 -

6,038,523 98,503 (713,462) 5,968

10,246 - - - (5,983,719) (97,404) - -

- - - -

(5,973,473) (97,404) - -

65,050 1,099 (713,462) 5,968

(521,927) 40,372 23,060,604 24,894

(456,877)$ 41,471$ 22,347,142$ 30,862$

NMC CFD OMC CFD NMC CFD OMC CFD

Special Revenue Funds Capital Projects Funds

137

CITY OF ONTARIO



Total Revenues


Total Expenditures






End of year

8,581,407$ 12,935,202 15,477,408 25,734,686

2,536,043 3,256,998

68,521,744

2,899,701 1,862,228

60,654,900 1,291,688

66,708,517

1,813,227

1,306,773 (14,136,243) 23,780,842

10,951,372

12,764,599

132,987,519

145,752,118$

Total Nonmajor Governmental

Funds

138

CITY OF ONTARIO

BUDGETARY COMPARISON SCHEDULESPECIAL GAS TAXYEAR ENDED JUNE 30, 2020



Budgetary Fund Balance, July 1 3,440,294$ 3,440,294$ 3,440,294$ -$ Resources (Inflows):Intergovernmental 7,361,885 6,841,885 6,465,163 (376,722) Use of money and property 79,323 79,323 198,896 119,573 Miscellaneous 200,268 413,790 323,692 (90,098)

Amounts Available for Appropriations 11,981,770 11,675,292 11,265,396 (409,896) Charges to Appropriations (Outflow):Community development 5,258,718 8,314,072 4,180,512 4,133,560 Transfers out 2,829,954 2,829,954 2,051,615 778,339


Budgetary Fund Balance, June 30 3,893,098$ 531,266$ 5,033,269$ 4,502,003$

139

CITY OF ONTARIO

BUDGETARY COMPARISON SCHEDULEQUIET HOME PROGRAMYEAR ENDED JUNE 30, 2020



Budgetary Fund Balance, July 1 58,008,820$ 58,008,820$ 58,008,820$ -$ Resources (Inflows):Intergovernmental 1,067,000 1,067,000 - (1,067,000)

Amounts Available for Appropriations 59,075,820 59,075,820 58,008,820 (1,067,000) Charges to Appropriations (Outflow):Community development 1,067,000 1,067,000 2,228 1,064,772


Budgetary Fund Balance, June 30 58,008,820$ 58,008,820$ 58,006,592$ (2,228)$

140

CITY OF ONTARIO

BUDGETARY COMPARISON SCHEDULEPARK IMPACT / QUIMBYYEAR ENDED JUNE 30, 2020



Budgetary Fund Balance, July 1 14,365,829$ 14,365,829$ 14,365,829$ -$ Resources (Inflows):Charges for services 11,621,000 21,350,408 19,436,684 (1,913,724) Use of money and property 234,324 234,324 998,161 763,837 Notes and loans issued - - 23,780,842 23,780,842

Amounts Available for Appropriations 26,221,153 35,950,561 58,581,516 22,630,955 Charges to Appropriations (Outflow):General government 2,236 2,236 2,132,965 (2,130,729) Community development 1,452,000 10,921,304 32,146,703 (21,225,399)

Total Charges to Appropriations 1,454,236 10,923,540 34,279,668 (23,356,128)


141

CITY OF ONTARIO

BUDGETARY COMPARISON SCHEDULECOMMUNITY DEVELOPMENTYEAR ENDED JUNE 30, 2020



Budgetary Fund Balance, July 1 7,358,669$ 7,358,669$ 7,358,669$ -$ Resources (Inflows):Intergovernmental 5,381,404 7,212,031 1,714,056 (5,497,975)

Amounts Available for Appropriations 12,740,073 14,570,700 9,072,725 (5,497,975) Charges to Appropriations (Outflow):Public safety - 282,281 57,271 225,010 Community development 5,213,905 6,798,050 1,869,656 4,928,394 Public works 158,693 158,693 158,558 135 Transfers out 8,806 - - -



142

CITY OF ONTARIO

BUDGETARY COMPARISON SCHEDULEASSET SEIZUREYEAR ENDED JUNE 30, 2020



Budgetary Fund Balance, July 1 2,376,614$ 2,376,614$ 2,376,614$ -$ Resources (Inflows):Intergovernmental - - 613,429 613,429 Use of money and property - - 93,451 93,451 Miscellaneous - - 14,507 14,507

Amounts Available for Appropriations 2,376,614 2,376,614 3,098,001 721,387 Charges to Appropriations (Outflow):Public safety 549,556 752,206 457,035 295,171 Transfers out - - 18,005 (18,005)

Total Charges to Appropriations 549,556 752,206 475,040 277,166

Budgetary Fund Balance, June 30 1,827,058$ 1,624,408$ 2,622,961$ 998,553$

143

CITY OF ONTARIO

BUDGETARY COMPARISON SCHEDULEMOBILE SOURCE AIR POLLUTIONYEAR ENDED JUNE 30, 2020



Budgetary Fund Balance, July 1 1,421,137$ 1,421,137$ 1,421,137$ -$ Resources (Inflows):Intergovernmental 218,900 218,900 226,104 7,204 Use of money and property 25,433 25,433 55,967 30,534

Amounts Available for Appropriations 1,665,470 1,665,470 1,703,208 37,738 Charges to Appropriations (Outflow):Community development 1,020,908 1,101,276 97,602 1,003,674 Transfers out 10,151 10,151 10,132 19


Budgetary Fund Balance, June 30 634,411$ 554,043$ 1,595,474$ 1,041,431$

144

CITY OF ONTARIO

BUDGETARY COMPARISON SCHEDULESPECIAL ASSESSMENT/FEE DISTRICTSYEAR ENDED JUNE 30, 2020



Budgetary Fund Balance, July 1 6,638,316$ 6,638,316$ 6,638,316$ -$ Resources (Inflows):Taxes 1,121,000 1,137,253 1,132,780 (4,473) Use of money and property 60,651 60,651 265,689 205,038 Miscellaneous 753,127 753,127 2,889,668 2,136,541 Transfers in 382,000 382,000 214,416 (167,584)

Amounts Available for Appropriations 8,955,094 8,971,347 11,140,869 2,169,522 Charges to Appropriations (Outflow):Community development 977,224 2,934,192 1,004,727 1,929,465 Public works 906,892 907,163 704,753 202,410 Transfers out 230,330 230,330 225,484 4,846



145

CITY OF ONTARIO

BUDGETARY COMPARISON SCHEDULEGRANTSYEAR ENDED JUNE 30, 2020



Budgetary Fund Balance, July 1 (7,181)$ (7,181)$ (7,181)$ -$ Resources (Inflows):Intergovernmental 39,243,333 45,697,278 3,910,686 (41,786,592) Miscellaneous - 60,000 12,501 (47,499) Transfers in - - 244,760 244,760

Amounts Available for Appropriations 39,236,152 45,750,097 4,160,766 (41,589,331) Charges to Appropriations (Outflow):Public safety - 2,583,862 1,347,922 1,235,940 Community development 39,236,152 43,174,552 2,820,050 40,354,502 Transfers out 7,181 - - -


Budgetary Fund Balance, June 30 (7,181)$ (8,317)$ (7,206)$ 1,111$

146

CITY OF ONTARIO

BUDGETARY COMPARISON SCHEDULECABLE ACCESSYEAR ENDED JUNE 30, 2020



Budgetary Fund Balance, July 1 1,412,199$ 1,412,199$ 1,412,199$ -$ Resources (Inflows):Taxes 200,000 200,000 262,353 62,353 Use of money and property - - 78,412 78,412

Amounts Available for Appropriations 1,612,199 1,612,199 1,752,964 140,765 Charges to Appropriations (Outflow):Community development - 149,217 45,013 104,204

Total Charges to Appropriations - 149,217 45,013 104,204

Budgetary Fund Balance, June 30 1,612,199$ 1,462,982$ 1,707,951$ 244,969$

147

CITY OF ONTARIO

BUDGETARY COMPARISON SCHEDULESTORM DRAIN MAINTENANCEYEAR ENDED JUNE 30, 2020



Budgetary Fund Balance, July 1 458,386$ 458,386$ 458,386$ -$ Resources (Inflows):Intergovernmental - - 5,764 5,764 Charges for services 1,375,000 1,375,000 1,309,316 (65,684) Use of money and property 8,677 8,677 14,493 5,816 Miscellaneous 15,000 15,000 16,630 1,630

Amounts Available for Appropriations 1,857,063 1,857,063 1,804,589 (52,474) Charges to Appropriations (Outflow):Community development 1,165,936 1,169,588 964,202 205,386 Public works 526,791 527,887 428,377 99,510 Transfers out 29,101 29,101 15,755 13,346

Total Charges to Appropriations 1,721,828 1,726,576 1,408,334 318,242

Budgetary Fund Balance, June 30 135,235$ 130,487$ 396,255$ 265,768$

148

CITY OF ONTARIO

BUDGETARY COMPARISON SCHEDULEHISTORIC PRESERVATIONYEAR ENDED JUNE 30, 2020



Budgetary Fund Balance, July 1 276,720$ 276,720$ 276,720$ -$ Resources (Inflows):Charges for services - - 97,450 97,450 Use of money and property 5,021 5,021 14,428 9,407

Amounts Available for Appropriations 281,741 281,741 388,598 106,857


149

CITY OF ONTARIO

BUDGETARY COMPARISON SCHEDULENMC PUBLIC SERVICESYEAR ENDED JUNE 30, 2020



Budgetary Fund Balance, July 1 14,633,773$ 14,633,773$ 14,633,773$ -$ Resources (Inflows):Charges for services 5,190,825 5,190,825 4,891,236 (299,589) Use of money and property 212,254 212,254 506,976 294,722

Amounts Available for Appropriations 20,036,852 20,036,852 20,031,985 (4,867) Charges to Appropriations (Outflow):General government - 473,013 747,223 (274,210) Transfers out 5,190,825 5,190,825 5,734,129 (543,304)

Total Charges to Appropriations 5,190,825 5,663,838 6,481,352 (817,514)


150

CITY OF ONTARIO

BUDGETARY COMPARISON SCHEDULENMC CFDYEAR ENDED JUNE 30, 2020



Budgetary Fund Balance, July 1 (521,927)$ (521,927)$ (521,927)$ -$ Resources (Inflows):Taxes 5,494,500 6,422,574 6,393,646 (28,928) Use of money and property - - (20,276) (20,276) Transfers in - - 10,246 10,246

Amounts Available for Appropriations 4,972,573 5,900,647 5,861,689 (38,958) Charges to Appropriations (Outflow):General government 21,000 21,000 19,513 1,487 Community development 275,000 312,000 315,334 (3,334) Transfers out 5,198,500 5,945,777 5,983,719 (37,942)

Total Charges to Appropriations 5,494,500 6,278,777 6,318,566 (39,789)

Budgetary Fund Balance, June 30 (521,927)$ (378,130)$ (456,877)$ (78,747)$

151

CITY OF ONTARIO

BUDGETARY COMPARISON SCHEDULEOMC CFDYEAR ENDED JUNE 30, 2020



Budgetary Fund Balance, July 1 40,372$ 40,372$ 40,372$ -$ Resources (Inflows):Taxes 104,000 104,000 110,474 6,474 Use of money and property 213 213 1,483 1,270

Amounts Available for Appropriations 144,585 144,585 152,329 7,744 Charges to Appropriations (Outflow):Community development 19,000 22,200 13,454 8,746 Transfers out 85,000 85,000 97,404 (12,404)

Total Charges to Appropriations 104,000 107,200 110,858 (3,658)


152

CITY OF ONTARIO

BUDGETARY COMPARISON SCHEDULECAPITAL PROJECTSYEAR ENDED JUNE 30, 2020



Budgetary Fund Balance, July 1 58,148,527$ 58,148,527$ 58,148,527$ -$ Resources (Inflows):Intergovernmental - 2,716,067 168,434 (2,547,633) Charges for services 4,794,000 4,794,000 6,501,986 1,707,986 Use of money and property 360,787 360,787 1,166,015 805,228 Transfers in 3,026,000 3,205,200 3,205,200 -

Amounts Available for Appropriations 66,329,314 69,224,581 69,190,162 (34,419)

Charges to Appropriations (Outflow):Public safety 675,000 7,940,936 6,828,766 1,112,170 Community development 2,351,000 31,821,321 5,968,452 25,852,869



153

CITY OF ONTARIO

BUDGETARY COMPARISON SCHEDULEIMPACT FEESYEAR ENDED JUNE 30, 2020



Budgetary Fund Balance, July 1 122,792,604$ 122,792,604$ 122,792,604$ -$ Resources (Inflows):Charges for services 47,070,000 47,070,000 46,413,912 (656,088) Use of money and property 2,583,864 2,583,864 5,810,447 3,226,583 Transfers in - 11,000 11,000 -

Amounts Available for Appropriations 172,446,468 172,457,468 175,027,963 2,570,495 Charges to Appropriations (Outflow):General government 24,845 3,798,561 2,532,851 1,265,710 Public safety - 14,797,566 4,555,436 10,242,130 Community development 18,121,252 58,931,885 21,592,501 37,339,384 Public works 200,000 200,000 98,625 101,375



154

CITY OF ONTARIO

BUDGETARY COMPARISON SCHEDULENMC CFDYEAR ENDED JUNE 30, 2020



Budgetary Fund Balance, July 1 23,060,604$ 23,060,604$ 23,060,604$ -$ Resources (Inflows):Taxes - 815,241 682,154 (133,087) Contribution from property owners - - 15,471,772 15,471,772 Use of money and property - - 328,031 328,031

Amounts Available for Appropriations 23,060,604 23,875,845 39,542,561 15,666,716

Charges to Appropriations (Outflow):Community development - 67,000 17,195,419 (17,128,419)

Total Charges to Appropriations - 67,000 17,195,419 (17,128,419)

Budgetary Fund Balance, June 30 23,060,604$ 23,808,845$ 22,347,142$ (1,461,703)$

155

CITY OF ONTARIO

COMBINING STATEMENT OF NET POSITIONINTERNAL SERVICE FUNDSJUNE 30, 2020

TotalsAssets:Current:

Cash and investments 30,065,125$ 40,535,149$ 6,108,875$ 44,190,787$ 6,000,000$ 126,899,936$ Receivables:

Accounts 206,249 - 113,029 - - 319,278 Accrued interest - - - 159,394 - 159,394

Prepaid costs - - 1,392,815 302,206 - 1,695,021 Inventories 838,334 - - - - 838,334

Restricted:Cash and investments - 797,376 - - - 797,376 Cash with fiscal agent - - - - 8,487 8,487

Total Current Assets 31,109,708 41,332,525 7,614,719 44,652,387 6,008,487 130,717,826

Noncurrent:Advances to other funds 4,083,000 2,041,000 7,910,000 - - 14,034,000 Capital assets - net of accumulated depreciation 32,029,320 - 6,947,730 - - 38,977,050

Total Noncurrent Assets 36,112,320 2,041,000 14,857,730 - - 53,011,050

Total Assets 67,222,028 43,373,525 22,472,449 44,652,387 6,008,487 183,728,876

Deferred Outflows of Resources:Deferred pension related items 986,750 153,780 1,375,471 - 337,485,564 340,001,565 Deferred OPEB related items - - - 146,570,084 - 146,570,084

Total Deferred Outflows of Resources 986,750 153,780 1,375,471 146,570,084 337,485,564 486,571,649

Total Assets & DeferredOuflow of Resources 68,208,778$ 43,527,305$ 23,847,920$ 191,222,471$ 343,494,051$ 670,300,525$

Liabilities, Deferred Inflows and Net PositionLiabilities:Current:

Accounts payable 1,273,256$ 633,633$ 1,293,670$ 20$ -$ 3,200,579$ Accrued liabilities 87,736 16,427 116,732 - - 220,895 Accrued compensated absences 240,000 17,000 149,000 - - 406,000 Accrued claims and judgments - 10,063,000 - - - 10,063,000 Bonds, notes, and capital leases - - - - 3,370,000 3,370,000

Total Current Liabilities 1,600,992 10,730,060 1,559,402 20 3,370,000 17,260,474

Noncurrent:Advances from other funds - - - - 102,069,692 102,069,692 Accrued compensated absences 38,375 10,993 107,592 - - 156,960 Accrued claims and judgments - 18,485,000 - - - 18,485,000 Net pension liability 4,402,005 686,027 6,136,128 - 11,224,160 Total OPEB liability - - - 162,628,638 - 162,628,638 Bonds, notes, and capital leases - - - - 233,215,000 233,215,000

Total Noncurrent Liabilities 4,440,380 19,182,020 6,243,720 162,628,638 335,284,692 527,779,450

Total Liabilities 6,041,372 29,912,080 7,803,122 162,628,658 338,654,692 545,039,924

Deferred Inflows of Resources:Deferred pension related items 112,113 17,472 156,278 - - 285,863 Deferred OPEB related items - - - 139,971,643 - 139,971,643

Total Deferred Inflows of Resources 112,113 17,472 156,278 139,971,643 - 140,257,506

Net Position:Investment in capital assets 32,029,320 - 6,947,730 - - 38,977,050 Unrestricted 30,025,973 13,597,753 8,940,790 (111,377,830) 4,839,359 (53,973,955)

Total Net Position 62,055,293 13,597,753 15,888,520 (111,377,830) 4,839,359 (14,996,905)

Total Liabilities, Deferred Inflowsof Resources, and Net Position 68,208,778$ 43,527,305$ 23,847,920$ 191,222,471$ 343,494,051$ 670,300,525$

Equipment Services

Self Insurance


Other Post Employment

Benefits Pension

Benefits Fund

156

CITY OF ONTARIO

COMBINING STATEMENT OF REVENUES, EXPENSESAND CHANGES IN FUND NET POSITIONINTERNAL SERVICE FUNDSYEAR ENDED JUNE 30, 2020

TotalsOperating Revenues:Interdepartmental charges 15,617,773$ 14,272,338$ 11,408,099$ 896,683$ - 42,194,893$ Miscellaneous 1,359,792 57,276 15,303 7,622,445 - 9,054,816

Total Operating Revenues 16,977,565 14,329,614 11,423,402 8,519,128 - 51,249,709

Operating Expenses:Administration and general 5,634,384 4,162,451 7,880,498 4,982,391 1,160,641 23,820,365 Source of supply 1,970,617 - 6,072,938 - - 8,043,555 Claims expense - 9,239,263 - - - 9,239,263 Depreciation expense 5,162,115 - 1,319,169 - - 6,481,284

Total Operating Expenses 12,767,116 13,401,714 15,272,605 4,982,391 1,160,641 47,584,467 Operating Income (Loss) 4,210,449 927,900 (3,849,203) 3,536,737 (1,160,641) 3,665,242

Nonoperating Revenues (Expenses):Interest revenue - - - 420,911 - 420,911 Gain on sale of other investments - - - 605,267 - 605,267

Total Nonoperating Revenues (Expenses) - - - 1,026,178 - 1,026,178

Income (Loss) Before Transfers 4,210,449 927,900 (3,849,203) 4,562,915 (1,160,641) 4,691,420

Transfers in - - - 4,972,772 6,000,000 10,972,772 Transfers out (65,404) (10,616) (85,414) (20,000,000) - (20,161,434)

Changes in Net Position 4,145,045$ 917,284$ (3,934,617)$ (10,464,313)$ 4,839,359$ (4,497,242)$

Net Position:Beginning of Year, as originally reported 58,565,439$ 12,680,469$ 19,823,137$ (100,913,517)$ - (9,844,472)$ Restatements (655,191) - - - - (655,191)

Beginning of Fiscal Year, as restated 57,910,248 12,680,469 19,823,137 (100,913,517) - (10,499,663) Changes in Net Position 4,145,045 917,284 (3,934,617) (10,464,313) 4,839,359 (4,497,242)

End of Fiscal Year 62,055,293$ 13,597,753$ 15,888,520$ (111,377,830)$ 4,839,359$ (14,996,905)$

Equipment Services

Self Insurance



Benefits Pension

Benefits Fund

157

CITY OF ONTARIO

COMBINING STATEMENT OF CASH FLOWSINTERNAL SERVICE FUNDSYEAR ENDED JUNE 30, 2020

TotalsCash Flows from Operating Activities:Cash received from/(paid to) interfund service provided 16,946,039$ 14,329,614$ 11,575,580$ 8,521,128$ -$ 51,372,361$ Cash paid to suppliers for goods and services (1,559,056) (4,980,673) (5,992,689) (23,642) (1,160,641) (13,716,701) Cash paid to employees for services (5,212,465) (4,069,629) (7,647,396) (152,604,836) - (169,534,326)

Net Cash Provided (Used) by Operating Activities 10,174,518 5,279,312 (2,064,505) (144,107,350) (1,160,641) (131,878,666)

Cash Flows from Non-CapitalFinancing Activities:

Cash transfers in - - - 4,972,772 6,000,000 10,972,772 Cash transfers out (65,404) (10,616) (85,414) (20,000,000) - (20,161,434) Advance received from other funds - - - - 102,069,692 102,069,692 Advance paid to other funds (4,083,000) (2,041,000) (7,910,000) - - (14,034,000) Proceeds from issuance of pension obligation bonds - - - - 236,585,000 236,585,000 Additional payments to employees pensiion plans - - - - (337,485,564) (337,485,564)

Net Cash Provided (Used) by Non-Capital Financing Activities (4,148,404) (2,051,616) (7,995,414) (15,027,228) 7,169,128 (22,053,534)

Cash Flows from Capital and Related Financing Activities:

Acquisition and construction of capital assets (13,040,608) - (1,493,589) - (14,534,197)

Net Cash Provided (Used) by Capital and Related Financing Activities (13,040,608) - (1,493,589) - - (14,534,197)

Cash Flows from Investing Activities:Proceeds from the sale of other investments - - - 38,743,379 38,743,379 Interest received - - - 894,737 - 894,737

Net Cash Provided (Used) byInvesting Activities - - - 39,638,116 - 39,638,116

Net Increase (Decrease) in Cashand Cash Equivalents (7,014,494) 3,227,696 (11,553,508) (119,496,462) 6,008,487 (128,828,281)

Cash and Cash Equivalents at Beginning of Year 37,079,619 38,104,829 17,662,383 163,687,249 - 256,534,080

Cash and Cash Equivalents at End of Year 30,065,125$ 41,332,525$ 6,108,875$ 44,190,787$ 6,008,487$ 127,705,799$

Reconciliation of Operating Income to Net CashProvided (Used) by Operating Activities:Operating income (loss) 4,210,449$ 927,900$ (3,849,203)$ 3,536,737$ (1,160,641)$ 3,665,242$ Adjustments to reconcile operating income (loss) net cash provided (used) by operating activities:

Depreciation 5,162,115 - 1,319,169 - - 6,481,284 (Increase) decrease in accounts receivable (31,526) - 152,178 2,000 - 122,652 (Increase) decrease in prepaid expense 9,263 - (563,455) (22,385) - (576,577) (Increase) decrease in inventories (54,805) - - - - (54,805) Increase (decrease) in accounts payable 457,103 333,590 643,704 (1,257) - 1,433,140 Increase (decrease) in accrued liabilities 22,258 7,806 28,408 - - 58,472 Increase (decrease) in claims and judgments - 3,925,000 - - - 3,925,000 Increase (decrease) in compensated absences 74,443 (10,855) (249,402) - - (185,814) Increase (decrease) in net pension liability 425,300 122,399 593,790 - - 1,141,489 Increase (decrease) in deferred pension related items (100,082) (26,528) (139,694) - - (266,304) Increase (decrease) in OPEB liability - - - (106,925,495) - (106,925,495) Increase (decrease) in deferred OPEB related items - - - (40,696,950) - (40,696,950)

Total Adjustments 5,964,069 4,351,412 1,784,698 (147,644,087) - (135,543,908) Net Cash Provided (Used) by Operating Activities 10,174,518$ 5,279,312$ (2,064,505)$ (144,107,350)$ (1,160,641)$ (131,878,666)$

Non-Cash Investing, Capital, and Financing Activities:There were no non-cash activities in Fiscal Year 2019-20.

Pension Benefits Fund

Equipment Services

Self Insurance



Benefits

158


159

CITY OF ONTARIO

COMBINING STATEMENT OF NET POSITIONALL AGENCY FUNDSJUNE 30, 2020

Assets:Cash and investments 99,947$ 1,410,934$ 131,414$ 31,200,346$

Receivables:Accounts - - - - Taxes - - - - Notes and leases 90,940,448 - - - Accrued interest 354 4,992 469 -

Prepaid costs - - - - Restricted assets:

Cash and investments with fiscal agents 45,325 - 465,154 -

Total Assets 91,086,074$ 1,415,926$ 597,037$ 31,200,346$

Liabilities:Accounts payable -$ -$ -$ 2,081,564$ Due to other governments 91,086,074 1,415,926 - 29,118,782 Due to external parties/other agencies - - 597,037 -

Total Liabilities 91,086,074$ 1,415,926$ 597,037$ 31,200,346$

Redevelopment Financing Authority

West End Communications

Authority

Assessment District 106 Bond

Redemption

Sanitary Collection Treatment

160

CITY OF ONTARIO


Assets:Cash and investments

Receivables:AccountsTaxesNotes and leasesAccrued interest

Prepaid costsRestricted assets:

Cash and investments with fiscal agents

Total Assets

Liabilities:Accounts payableDue to other governmentsDue to external parties/other agencies

Total Liabilities

(CONTINUED)

-$ -$ -$ -$

- - - - - - - - - - - - - - - - - - - -

- - - -

-$ -$ -$ -$

-$ -$ -$ -$ - - - - - - - -

-$ -$ -$ -$

Assessment District 100C

Bond Redemption

Assessment District 103

Bond Redemption

Assessment District 104

Bond Redemption

Reassessment Bond

Redemption

161

CITY OF ONTARIO






Total Assets


Total Liabilities

-$ -$ 599,941$ -$

- - - - - - - - - - - 124,890,000

12 - 2,123 - - - 3,900 -

1,424,160 - - -

1,424,172$ -$ 605,964$ 124,890,000$

-$ -$ -$ -$ 76,521 - 605,964 124,890,000

1,347,651 - - -

1,424,172$ -$ 605,964$ 124,890,000$


Redemption


Redemption

West End Fire and Emergency

Response Commission

Ontario Public Financing Authority

162

CITY OF ONTARIO






Total Assets


Total Liabilities

(CONTINUED)

175,713$ 71,910$ 114,855$ 202,984$

- - - - 12,734 4,253 7,725 13,937

- - - - 91 266 7 870

- - - -

1,044,891 1,517,613 848,141 1,732,610

1,233,429$ 1,594,042$ 970,728$ 1,950,401$

-$ -$ -$ -$ - - - -

1,233,429 1,594,042 970,728 1,950,401

1,233,429$ 1,594,042$ 970,728$ 1,950,401$

NMC CFD #30 NMC CFD #34 NMC CFD #24NMC CFD #28

163

CITY OF ONTARIO






Total Assets


Total Liabilities

-$ -$ 307,395$ 352,827$

- - 20,884 - 6,502 6,190 - 2,710

- - - - 8 10 1,138 1,251 - - - -

986,239 1,197,789 575,472 338,507

992,749$ 1,203,989$ 904,889$ 695,295$

-$ -$ -$ -$ 2,537 41,023 - -

990,212 1,162,966 904,889 695,295

992,749$ 1,203,989$ 904,889$ 695,295$

NMC CFD #25 NMC CFD #26 NMC CFD #31 NMC CFD #39

164

CITY OF ONTARIO






Total Assets


Total Liabilities

(CONTINUED)

-$ 774,881$ 134,578$ 251,923$

- - - - - 2,765 10,361 1,454 - - - - - 2,744 496 3 - - - -

- 354,580 1,185,526 377,246

-$ 1,134,970$ 1,330,961$ 630,626$

-$ -$ -$ -$ - - - - - 1,134,970 1,330,961 630,626

-$ 1,134,970$ 1,330,961$ 630,626$

CFD #33OMC CFD #13OMC CFD #5 NMC CFD #38

165

CITY OF ONTARIO






Total Assets


Total Liabilities

Total

35,829,648$

20,884 68,631

215,830,448 14,834

3,900 -

12,093,253

263,861,598$

2,081,564$ 247,236,827

14,543,207

263,861,598$

166


167

CITY OF ONTARIO

COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIESALL AGENCY FUNDSYEAR ENDED JUNE 30, 2020

Balance BalanceJuly 1, 2019 Additions Deductions June 30, 2020

Redevelopment Financing Authority

Assets:Cash and investments 51,000$ 31,721,974$ 31,673,027$ 99,947$ Receivables:

Notes and leases 97,371,681 - 6,431,233 90,940,448 Accrued interest 2,010 354 2,010 354

Restricted assets:Cash and investments with fiscal agents 1,045,982 10,395,839 11,396,496 45,325

Total Assets 98,470,673$ 42,118,167$ 49,502,766$ 91,086,074$

Liabilities:Due to other governments 98,470,673$ 75,581,333$ 82,965,932$ 91,086,074$

Total Liabilities 98,470,673$ 75,581,333$ 82,965,932$ 91,086,074$

West End Communications Authority

Assets:Cash and investments 1,365,771$ 68,619$ 23,456$ 1,410,934$ Receivables:

Accrued interest 5,307 4,993 5,308 4,992 Total Assets 1,371,078$ 73,612$ 28,764$ 1,415,926$

Liabilities:Accounts payable 4,191$ 2,800$ 6,991$ -$ Due to other governments 1,366,887 117,793 68,754 1,415,926

Total Liabilities 1,371,078$ 120,593$ 75,745$ 1,415,926$

Assessment District 106 Bond Redemption

Assets:Cash and investments 552,294$ 8,410$ 429,290$ 131,414$ Receivables:

Accrued interest 2,970 469 2,970 469 Restricted assets:

Cash and investments with fiscal agents 459,568 5,687 101 465,154 Total Assets 1,014,832$ 14,566$ 432,361$ 597,037$

Liabilities:Accounts payable 103$ 421,501$ 421,604$ -$ Due to external parties/other agencies 1,014,729 14,480 432,172 597,037

Total Liabilities 1,014,832$ 435,981$ 853,776$ 597,037$

Sanitary Collection Treatment

Assets:Cash and investments 20,933,499$ 10,331,509$ 64,662$ 31,200,346$

Total Assets 20,933,499$ 10,331,509$ 64,662$ 31,200,346$

Liabilities:Accounts payable -$ 2,081,564$ -$ 2,081,564$ Due to other governments 20,933,499 12,503,134 4,317,851 29,118,782


168

(CONTINUED)

CITY OF ONTARIO



Reassessment Bond Redemption

Assets:Cash and investments 609,923$ 5,188$ 615,111$ -$ Receivables:

Accrued interest 2,371 - 2,371 - Total Assets 612,294$ 5,188$ 617,482$ -$

Liabilities:Due to external parties/other agencies 612,294$ 10,443$ 622,737$ -$

Total Liabilities 612,294$ 10,443$ 622,737$ -$

Assessment District 100C Bond Redemption

Assets:Cash and investments 104,932$ 859$ 105,791$ -$ Receivables:

Accrued interest 408 - 408 -

Total Assets 105,340$ 859$ 106,199$ -$





Accrued interest 748 748 - Total Assets 193,193$ 1,576$ 194,769$ -$





Accrued interest 217 - 217 - Total Assets 55,968$ 457$ 56,425$ -$

Liabilities:Due to external parties/other agencies 55,968$ 936$ 56,904$ -$

Total Liabilities 55,968$ 936$ 56,904$ -$

169

CITY OF ONTARIO




Assets:Cash and investments 1,137,442$ 81,103$ 1,218,545$ -$ Receivables:

Accrued interest 6,879 12 6,879 12 Restricted assets:

Cash and investments with fiscal agents 1,407,059 17,393 292 1,424,160 Total Assets 2,551,380$ 98,508$ 1,225,716$ 1,424,172$

Liabilities:Accounts payable 103$ -$ 103$ -$ Due to other governments - 76,521 - 76,521 Due to external parties/other agencies 2,551,277 21,699 1,225,325 1,347,651

Total Liabilities 2,551,380$ 98,220$ 1,225,428$ 1,424,172$



Accrued interest 557 - 557 - Total Assets 143,762$ 1,173$ 144,935$ -$



West End Fire and Emergency Response Commission


Accrued interest 2,026 2,122 2,025 2,123 Prepaid costs 2,391 7,799 6,290 3,900

Total Assets 514,712$ 149,830$ 58,578$ 605,964$

Liabilities:Due to other governments 514,712$ 145,991$ 54,739$ 605,964$

Total Liabilities 514,712$ 145,991$ 54,739$ 605,964$

Ontario Public Financing Authority

Assets:Notes and loans 125,940,000$ -$ 1,050,000$ 124,890,000$

Total Assets 125,940,000$ -$ 1,050,000$ 124,890,000$

Liabilities:Due to other governments 125,940,000$ 3,870,735$ 4,920,735$ 124,890,000$


170

(CONTINUED)

CITY OF ONTARIO



NMC CFD #28


Taxes 4,959 65,956 58,181 12,734 Accrued interest 3,394 91 3,394 91

Restricted assets:Cash and investments with fiscal agents 583,645 854,712 393,466 1,044,891

Total Assets 1,155,621$ 942,776$ 864,968$ 1,233,429$

Liabilities:Accounts payable 394$ 370,852$ 371,246$ -$ Due to external parties/other agencies 1,155,227 1,055,060 976,858 1,233,429


NMC CFD #30



Restricted assets:Cash and investments with fiscal agents 895,124 1,153,975 531,486 1,517,613

Total Assets 1,540,770$ 1,181,819$ 1,128,547$ 1,594,042$

Liabilities:Due to external parties/other agencies 1,540,770 1,291,886 1,238,614 1,594,042


NMC CFD #34



Restricted assets:Cash and investments with fiscal agents 471,397 689,975 313,231 848,141

Total Assets 910,655$ 715,615$ 655,542$ 970,728$

Liabilities:Due to external parties/other agencies 910,655$ 773,033$ 712,960$ 970,728$


171

CITY OF ONTARIO



NMC CFD #24



Restricted assets:Cash and investments with fiscal agents 1,010,955 1,072,115 350,460 1,732,610

Total Assets 1,914,316$ 1,113,394$ 1,077,309$ 1,950,401$

Liabilities:Accounts payable 103$ 655,940$ 656,043$ -$ Due to external parties/other agencies 1,914,213 1,554,947 1,518,759 1,950,401


NMC CFD #25




Total Assets 907,094$ 833,589$ 747,934$ 992,749$

Liabilities:Due to other governments -$ 2,537$ -$ 2,537$ Due to external parties/other agencies 907,094 881,666 798,548 990,212


NMC CFD #26


Taxes 4,190 6,190 4,190 6,190 Accrued interest 851 10 851 10

Restricted assets:Cash and investments with fiscal agents - 11,893,158 10,695,369 1,197,789

Total Assets 211,078$ 11,952,675$ 10,959,764$ 1,203,989$

Liabilities:Due to other governments -$ 41,023$ -$ 41,023$ Due to external parties/other agencies 211,078 11,041,473 10,089,585 1,162,966

Total Liabilities 211,078$ 11,082,496$ 10,089,585$ 1,203,989$

172

(CONTINUED)

CITY OF ONTARIO



NMC CFD #31


Accounts - 20,884 20,884 Accrued interest 2,687 1,138 2,687 1,138


Total Assets 835,836$ 657,089$ 588,036$ 904,889$



NMC CFD #39


Taxes - 2,710 2,710 Accrued interest 1,132 1,251 1,132 1,251


Total Assets 531,874$ 595,669$ 432,248$ 695,295$



OMC CFD #5


Accrued interest 142 142 -

Total Assets 36,592$ 223$ 36,815$ -$

Liabilities:Due to external parties/other agencies 36,592$ 585$ 37,177$ -$

Total Liabilities 36,592$ 585$ 37,177$ -$

173

CITY OF ONTARIO



OMC CFD #13


Taxes - 2,765 - 2,765 Accrued interest 3,555 2,744 3,555 2,744


Total Assets 1,101,682$ 421,144$ 387,856$ 1,134,970$

Liabilities:Accounts payable 103$ 342,085$ 342,188$ -$ Due to external parties/other agencies 1,101,579 409,868 376,477 1,134,970

Total Liabilities 1,101,682$ 751,953$ 718,665$ 1,134,970$

NMC CFD #38



Restricted assets:Cash and investments with fiscal agents 878,407 966,971 659,852 1,185,526

Total Assets 1,043,046$ 1,013,182$ 725,267$ 1,330,961$

Liabilities:Due to external parties/other agencies 1,043,046$ 1,202,710$ 914,795$ 1,330,961$

Total Liabilities 1,043,046$ 1,202,710$ 914,795$ 1,330,961$

Assets:Cash and investments -$ 251,923$ -$ 251,923$ Receivables:

Taxes - 1,454 - 1,454 Accrued interest - 3 - 3

Restricted assets:Cash and investments with fiscal agents - 377,246 - 377,246

Total Assets -$ 630,626$ -$ 630,626$

Liabilities:Due to external parties/other agencies -$ 630,626$ -$ 630,626$

Total Liabilities -$ 630,626$ -$ 630,626$

CFD #33

174

(CONTINUED)

CITY OF ONTARIO



Totals - All Agency Funds

Assets:Cash and investments 30,253,235$ 43,622,942$ 38,046,529$ 35,829,648$ Receivables:

Accounts - 20,884 - 20,884 Taxes 42,505 123,439 97,313 68,631 Notes and leases 223,311,681 - 7,481,233 215,830,448 Accrued interest 51,900 14,834 51,900 14,834

Prepaid costs 2,391 7,799 6,290 3,900 Restricted assets:

Cash and investments with fiscal agents 8,433,583 29,063,348 25,403,678 12,093,253 Total Assets 262,095,295$ 72,853,246$ 71,086,943$ 263,861,598$

Liabilities:Accounts payable 4,997$ 3,874,742$ 1,798,175$ 2,081,564$ Due to other governments 247,225,771 92,339,067 92,328,011 247,236,827 Due to external parties/other agencies 14,864,527 19,991,725 20,313,045 14,543,207


175


176

177

Statistical Section The statistical section of the City’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City’s overall financial health.

Table of Contents

Financial Trends These schedules contain trend information to help the readers understand how the City’s financial performance and well-being have changed over time.

Schedule 1 – Net Position by Component ................................................... 179 Schedule 2 – Changes in Net Position ........................................................ 180 Schedule 3 – Changes in Fund Balances, Governmental Funds ................ 182 Schedule 4 – Fund Balances, Governmental Funds ................................... 184

Revenue Capacity These schedules contain trend information to help the readers assess the factors affecting the City’s most significant local revenue sources: property taxes and sales taxes.

Schedule 5 – Assessed Value and Estimated Actual Value of Taxable Property ....................................................................... 185 Schedule 6 – Direct and Overlapping Property Tax Rates ......................... 186 Schedule 7 – Principal Property Taxpayers ................................................. 187 Schedule 8 – Property Tax Levies and Collections ..................................... 188 Schedule 9 – Taxable Sales by Category .................................................... 189 Schedule 10 – Direct and Overlapping Sales Tax Rates ............................. 190 Schedule 11 – Sales Taxpayers by Industry ............................................... 191

Debt Capacity These schedules present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future.

Schedule 12 – Ratios of Outstanding Debt by Type .................................... 192 Schedule 13 – Ratios of General Bonded Debt Outstanding ...................... 193 Schedule 14 – Direct and Overlapping Governmental Activities Debt ......... 194 Schedule 15 – Legal Debt Margin Information............................................. 195 Schedule 16 – Pledged-Revenue Coverage ............................................... 196

178

Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the City’s financial activities take place and to help make comparisons over time and with other governments.

Schedule 17 – Demographic and Economic Statistics ................................ 197 Schedule 18 – Principal Employers ............................................................ 198

Operating Information These schedules contain information about the City’s operations and resources to help the reader understand how the City’s financial information relates to the services the City provides and the activities it performs.

Schedule 19 – Full-time City Government Employees by Function ............. 200 Schedule 20 – Operating Indicators by Function/Program .......................... 201 Schedule 21 – Capital Asset Statistics by Function/Program ...................... 202

City of OntarioNet Position by Component

Last Ten Fiscal Years(accrual basis of accounting)

Schedule 1

2011 2012 2014 2015 2016 2017 2018 2019 2020

Governmental activitiesNet investment in capital assets 704,218,787$ 821,632,336$ 812,874,736$ 838,484,374$ 908,309,555$ 940,354,455$ 950,420,687$ 961,901,972$ 997,856,845$ Restricted 243,017,889 216,270,766 254,103,989 240,480,450 156,425,046 168,765,518 173,159,152 204,484,800 215,606,868 Unrestricted 135,744,173 127,864,653 137,590,247 (66,639,420) (1,666,599) 179,846,318 16,250,642 95,440,937 59,045,553

Total governmental activities net position 1,082,980,849$ 1,165,767,755$ 1,204,568,972$ 1,012,325,404$ 1,063,068,002$ 1,288,966,291$ 1,139,830,481$ 1,261,827,709$ 1,272,509,266$

Business-type activitiesNet investment in capital assets 136,609,773$ 140,007,920$ 143,574,879$ 140,873,539$ 136,336,952$ 143,660,797$ 161,791,743$ 184,562,565$ 182,086,718$ Restricted 4,185,546 4,267,828 10,578,881 5,289,769 1,528,395 369 373 378 3,140,719 Unrestricted 201,923,905 223,743,456 273,069,164 271,397,325 299,336,371 329,045,082 345,926,734 298,224,116 301,316,946

Total business-type activities net position 342,719,224$ 368,019,204$ 427,222,924$ 417,560,633$ 437,201,718$ 472,706,248$ 507,718,850$ 482,787,059$ 486,544,383$

Primary governmentNet investment in capital assets 840,828,560$ 961,640,256$ 956,449,615$ 979,357,913$ 1,044,646,507$ 1,084,015,252$ 1,112,212,430$ 1,146,464,537$ 1,179,943,563$ Restricted 247,203,435 220,538,594 264,682,870 245,770,219 157,953,441 168,765,887 173,159,525 204,485,178 218,747,587 Unrestricted 337,668,078 351,608,109 410,659,411 204,757,905 297,669,772 508,891,400 362,177,376 393,665,053 360,362,499

Total primary government net position 1,425,700,073$ 1,533,786,959$ 1,631,791,896$ 1,429,886,037$ 1,500,269,720$ 1,761,672,539$ 1,647,549,331$ 1,744,614,768$ 1,759,053,649$

Fiscal Year

179



Schedule 2

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

ExpensesGovernmental activities:

General government 56,951,330$ 64,330,936$ 34,081,969$ 28,982,239$ 81,855,829$ 40,011,028$ 36,656,658$ 27,554,284$ 34,587,604$ 31,859,857$ Public safety 103,472,190 107,848,353 103,814,741 110,981,159 121,981,375 125,884,228 136,032,820 178,835,586 178,045,825 177,840,309 Community development 39,888,900 47,088,876 45,485,896 41,524,328 62,623,670 19,114,534 38,552,339 42,623,892 76,420,858 92,310,831 Library 4,363,701 3,764,564 3,745,405 4,602,190 4,542,196 4,850,620 5,026,299 5,938,560 - - Public works 23,165,874 21,371,492 18,519,391 25,092,721 23,852,377 38,104,811 50,703,275 42,308,931 40,398,759 28,825,751 Interest on long-term debt 14,514,729 13,740,250 1,880,787 3,017,116 1,786,957 1,712,433 1,630,517 3,921,536 2,661,754 3,493,124

Total governmental activities expenses 242,356,724$ 258,144,471$ 207,528,189$ 214,199,753$ 296,642,404$ 229,677,654$ 268,601,908$ 301,182,789$ 332,114,800$ 334,329,872$

Business-type activities:Water 31,052,190$ 28,986,963$ 21,485,576$ 30,814,880$ 54,841,770$ 42,639,260$ 41,413,255$ 41,340,763$ 52,901,637$ 57,700,824$ Sewer 11,008,579 11,766,599 13,167,026 16,136,421 17,047,306 15,971,504 17,211,364 20,270,716 24,733,369 23,255,045 Integrated Waste 21,296,114 21,309,485 21,664,001 23,164,916 23,877,028 24,970,912 26,663,301 31,337,795 39,475,286 34,380,261 I.T. Fiber - - - - - - 993,456 1,770,591 2,027,814 3,943,666

Total business-type activities expenses 63,356,883$ 62,063,047$ 56,316,603$ 70,116,217$ 95,766,104$ 83,581,676$ 86,281,376$ 94,719,865$ 119,138,106$ 119,279,796$

Total primary government expenses 305,713,607$ 320,207,518$ 263,844,792$ 284,315,970$ 392,408,508$ 313,259,330$ 354,883,284$ 395,902,654$ 451,252,906$ 453,609,668$

Program RevenuesGovernmental activities:

Charges for services: General government 269,874$ 294,873$ 379,325$ 445,079$ 1,641,300$ 2,622,684$ 4,141,068$ 6,149,697$ 5,507,407$ 6,965,874$ Public safety 4,554,954 4,077,684 4,166,801 3,824,528 3,757,586 3,883,304 7,311,246 20,271,669 27,682,493 26,688,490 Community development 8,043,168 16,231,379 14,780,312 25,244,830 35,769,080 36,046,159 42,262,153 50,699,117 80,911,897 78,671,622 Library 147,610 143,055 124,581 121,043 155,962 131,407 137,689 122,329 - - Public works - 47,931 - - - - - - - - Operating contributions and grants 15,606,700 15,311,536 7,859,746 12,081,691 15,015,783 8,710,100 10,220,710 12,542,758 8,465,032 6,542,904 Capital contributions and grants 18,851,354 47,080,485 23,737,443 33,842,540 37,210,682 35,628,037 78,825,884 56,737,883 58,825,481 46,201,742

Total governmental activities program revenues 47,473,660$ 83,186,943$ 51,048,208$ 75,559,711$ 93,550,393$ 87,021,691$ 142,898,750$ 146,523,453$ 181,392,310$ 165,070,632$

Business-type activities:Charges for services: Water 51,174,737$ 51,434,727$ 58,276,359$ 63,193,036$ 67,342,593$ 65,653,131$ 64,533,049$ 68,933,067$ 55,447,675$ 57,676,762$ Sewer 18,274,955 20,410,854 20,479,875 21,484,811 21,986,463 23,136,811 25,780,456 27,952,825 28,080,727 27,685,371 Integrated Waste 30,777,779 29,825,989 29,905,739 30,332,538 31,742,051 33,024,400 34,937,033 36,995,472 38,361,984 38,341,478 I.T. Fiber - - - - - 4,126 38,954 276,033 466,522 747,095 Operating grants and contributions 6,338,128 290,724 100,546 145,881 539,519 174,073 133,279 126,452 119,686 137,783 Capital grants and contributions - - 2,405,396 6,642,816 1,329,404 3,505,475 11,223,634 11,256,557 4,460,250 4,548,485

Total business-type activities program revenues 106,565,599$ 101,962,294$ 111,167,915$ 121,799,082$ 122,940,030$ 125,498,016$ 136,646,405$ 145,540,406$ 126,936,844$ 129,136,974$

Total primary government program revenues 154,039,259$ 185,149,237$ 162,216,123$ 197,358,793$ 216,490,423$ 212,519,707$ 279,545,155$ 292,063,859$ 308,329,154$ 294,207,606$

Net (Expense)/RevenueGovernmental activities (194,883,064)$ (174,957,528)$ (156,479,981)$ (138,640,042)$ (203,092,011)$ (142,655,963)$ (125,703,158)$ (154,659,336)$ (150,722,490)$ (169,259,240)$ Business-type activities 43,208,716 39,899,247 54,851,312 51,682,865 27,173,926 41,916,340 50,365,029 50,820,541 7,798,738 9,857,178

Total primary government net expense (151,674,348)$ (135,058,281)$ (101,628,669)$ (86,957,177)$ (175,918,085)$ (100,739,623)$ (75,338,129)$ (103,838,795)$ (142,923,752)$ (159,402,062)$

Fiscal Year

180



Schedule 2‐Continued

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Fiscal Year

General Revenues and Other Changes in Net PositionGovernmental activities:

Taxes: Property taxes - general purpose 88,030,394$ 66,733,840$ 45,700,153$ 45,144,867$ 48,695,469$ 60,338,698$ 53,414,598$ 56,199,666$ 63,156,933$ 67,236,079$ Transient occupancy taxes 8,790,219 9,148,976 9,731,382 10,614,156 12,057,576 13,090,992 13,886,637 14,586,233 14,945,483 12,160,235 Sales taxes 56,390,363 61,362,958 67,150,866 67,509,611 84,294,827 78,533,022 86,168,797 87,910,014 94,486,731 90,290,690 Franchise taxes 2,879,831 2,897,780 3,047,369 3,251,592 3,476,151 3,413,854 3,020,829 3,352,120 3,420,656 3,426,464 Business licenses taxes 5,496,576 5,610,738 6,078,094 6,405,595 6,825,185 6,954,932 7,167,613 7,478,153 7,786,821 7,793,962 Other taxes 4,072,860 4,566,791 5,274,601 3,700,067 4,073,788 4,107,065 4,047,435 4,642,529 4,506,129 4,044,908 Intergovernmental, unrestricted: Motor vehicle in lieu 883,460 89,471 74,047 - 71,526 68,099 76,099 91,740 85,244 141,091 Use of money and property 10,267,816 10,082,524 979,899 5,174,360 3,755,010 5,422,398 2,617,545 10,834,185 32,107,405 18,599,331 Other 7,404,868 6,407,829 3,866,279 4,414,323 2,656,703 2,000,930 3,414,919 2,394,865 1,647,848 4,198,849 Gain on sale of capital asset - - 1,000,000 - 87,267 - 1,953,200 - - 605,267 Special Item Note 15 (42,373,148) Extraordinary gain on dissolution of RDA - 72,762,201 - - - - - - - - Transfers 15,672,612 18,081,326 25,526,208 21,925,867 22,762,488 24,793,699 15,961,453 18,448,756 4,647,613 14,472,260

Total governmental activities 199,888,999$ 257,744,434$ 168,428,898$ 168,140,438$ 188,755,990$ 198,723,689$ 191,729,125$ 205,938,261$ 226,790,863$ 180,595,988$

Business-type activities:Use of money and property 2,611,942$ 3,474,268$ 308,392$ 1,604,534$ 1,435,511$ 2,509,989$ 1,087,037$ 2,187,574$ 7,873,778$ 8,345,624$ Other 7,768 7,791 17,237 23,416 105,193 8,455 13,917 24,988 245,676 474,940 Transfers (15,672,612) (18,081,326) (25,526,208) (21,925,867) (22,762,488) (24,793,699) (15,961,453) (18,448,756) (4,647,613) (14,472,260)

Total business-type activities (13,052,902)$ (14,599,267)$ (25,200,579)$ (20,297,917)$ (21,221,784)$ (22,275,255)$ (14,860,499)$ (16,236,194)$ 3,471,841$ (5,651,696)$

Total primary government 186,836,097$ 243,145,167$ 143,228,319$ 147,842,521$ 167,534,206$ 176,448,434$ 176,868,626$ 189,702,067$ 230,262,704$ 174,944,292$

Change in Net PositionGovernmental activities 5,005,935$ 82,786,906$ 11,948,917$ 29,500,396$ (14,336,021)$ 56,067,726$ 66,025,967$ 51,278,925$ 76,068,373$ 11,336,748$ Business-type activities 30,155,814 25,299,980 29,650,733 31,384,948 5,952,142 19,641,085 35,504,530 34,584,347 11,270,579 4,205,482

Total primary government 35,161,749$ 108,086,886$ 41,599,650$ 60,885,344$ (8,383,879)$ 75,708,811$ 101,530,497$ 85,863,272$ 87,338,952$ 15,542,230$

181

City of Ontario Changes in Fund Balances, Governmental Funds


Schedule 3

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

RevenuesTaxes 164,368,674$ 148,681,943$ 134,629,408$ 132,908,792$ 156,988,002$ 176,088,421$ 167,601,178$ 173,605,420$ 186,594,649$ 184,275,840$ Special assessment taxes 1,302,993 1,362,861 1,479,517 1,514,889 1,634,568 2,180,091 3,301,654 3,143,892 5,303,668 8,581,407 Licenses and permits 1,563,722 1,639,061 1,805,849 2,199,674 3,283,593 3,845,404 4,384,727 4,887,991 5,067,374 5,488,023 Intergovernmental 32,763,572 37,725,923 27,864,489 39,695,371 44,390,225 37,492,730 35,412,862 24,359,686 21,912,280 17,814,256 Charges for services 10,123,695 17,697,037 16,108,550 25,895,011 40,368,010 39,628,058 54,446,655 80,404,296 109,518,406 114,818,886 Use of money and property 8,614,113 17,707,695 1,533,296 3,906,235 3,507,845 5,339,722 2,576,499 4,004,514 14,899,017 18,759,439 Fines and forfeitures 1,318,369 1,202,716 1,298,235 1,134,395 1,267,994 1,125,237 1,189,956 1,042,090 1,185,128 786,630 Contributions from property owners 314,000 - - - - - 24,682,518 25,349,912 34,658,232 15,503,662 Miscellaneous 8,741,044 30,081,850 6,408,027 7,062,253 4,556,170 4,534,158 6,017,657 12,389,218 8,275,990 8,286,111 Contributions - - - - - - - - 928,875 -

Total Revenues 229,110,182$ 256,099,086$ 191,127,371$ 214,316,620$ 255,996,407$ 270,233,821$ 299,613,706$ 329,187,019$ 388,343,619$ 374,314,254$

ExpendituresCurrent:

General government 33,220,115$ 51,424,202$ 22,926,658$ 16,565,106$ 66,943,163$ 28,292,531$ 24,500,521$ 23,830,837$ 33,100,934$ 33,754,652$ Public safety 103,296,429 110,958,962 106,934,164 114,109,242 120,286,742 127,942,682 136,721,141 160,838,334 160,884,992 180,119,824 Community development 71,571,514 53,503,162 52,081,393 58,988,089 98,405,497 104,688,312 95,398,612 67,805,408 102,279,086 130,014,298 Library 3,974,567 4,049,363 4,077,037 4,196,204 4,368,241 4,568,202 4,654,465 4,768,627 - - Public works 16,164,629 20,642,548 18,851,564 17,231,048 18,784,827 21,003,964 23,834,203 21,279,011 24,047,574 22,694,083

Debt service:Principal retirement 5,849,785 25,255,023 1,290,000 1,350,000 1,410,000 1,480,000 1,565,000 12,000 175,000 1,050,000 Interest and fiscal charges 13,227,758 16,318,551 1,931,758 1,876,513 1,815,778 1,745,753 1,667,190 3,930,914 2,824,049 2,802,938 Bond issuance costs - - - 965,190 - - - 526,390 - - Pass-through agreement payments 5,911,331 2,634,157 - - - - - 4,770,057 - -

Total Expenditures 253,216,128$ 284,785,968$ 208,092,574$ 215,281,392$ 312,014,248$ 289,721,444$ 288,341,132$ 287,761,578$ 323,311,635$ 370,435,795$

Excess (deficiency) of revenues over(under) expenditures (24,105,946)$ (28,686,882)$ (16,965,203)$ (964,772)$ (56,017,841)$ (19,487,623)$ 11,272,574$ 41,425,441$ 65,031,984$ 3,878,459$

Fiscal Year

182

City of OntarioChanges in Fund Balances, Governmental Funds



2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Fiscal Year

Other Financing Sources (Uses)Transfers in 39,422,158$ 68,493,176$ 37,357,867$ 34,628,235$ 34,856,839$ 34,615,190$ 36,101,144$ 58,065,111$ 43,871,997$ 52,691,271$ Transfers out (23,545,610) (49,661,850) (12,209,848) (17,288,068) (9,564,945) (8,310,991) (29,588,174) (49,353,662) (45,445,779) (29,030,349) Long-term debt issued - - - 33,390,000 - - - 26,810,000 - 23,780,842 Bond Discount - - - (380,848) - - - 3,260,875 - -Pass-through agreement payments - - - - - - - (28,554,885) - -Gain (loss) on sale of assets - - - 4,551 87,267 - - - - - Proceeds from sale of capital equipment - - 1,000,000 - - - - - - -

Total Other Financing Sources (Uses) 15,876,548$ 18,831,326$ 26,148,019$ 50,353,870$ 25,379,161$ 26,304,199$ 6,512,970$ 10,227,439$ (1,573,782)$ 47,441,764$

Special Item - - - - - - - - - (42,373,148) Extraordinary gain/(loss) on dissolution of redevelopment agency - (5,225,859) - - - - - - - -

Net change in fund balances (8,229,398)$ (15,081,415)$ 9,182,816$ 49,389,098$ (30,638,680)$ 6,816,576$ 17,785,544$ 51,652,880$ 63,458,202$ 8,947,075$

Total Current Expenditures 253,216,128$ 284,785,968$ 208,092,574$ 215,281,392$ 312,014,248$ 289,721,444$ 288,341,132$ 287,761,578$ 323,311,635$ 370,435,795$ Less: Capital outlay (28,242,375) (20,629,670) (22,072,081) (29,585,954) (41,745,591) (79,957,813) (45,292,825) (24,876,172) (26,388,451) (70,262,127) Total Non-Capital Expenditures 224,973,753$ 264,156,298$ 186,020,493$ 185,695,438$ 270,268,657$ 209,763,631$ 243,048,307$ 262,885,406$ 296,923,184$ 300,173,668$

Total Debt Service Expenditures 19,077,543$ 41,573,574$ 3,221,758$ 3,226,513$ 3,225,778$ 3,225,753$ 3,232,190$ 3,942,914$ 2,999,049$ 3,852,938$

Debt service as a percentage ofnon-capital expenditures 8.5% 15.7% 1.7% 1.7% 1.2% 1.5% 1.3% 1.5% 1.0% 1.3%

183

City of OntarioFund Balances, Governmental Funds

Last Ten Fiscal Years(modified accrual basis of accounting)

Schedule 4

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

General FundReserved -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Unreserved - - - - - - - - - - Nonspendable 12,712,698 3,730,345 3,869,157 4,911,968 3,785,154 20,002,802 33,893,841 46,318,442 46,472,802 4,052,097 Restricted 398,047 403,914 408,576 412,411 415,723 419,644 424,497 430,484 438,872 417,464 Committed 44,429,493 41,613,880 42,685,082 43,817,117 42,436,574 23,195,527 28,877,191 21,066,012 415,884 595,469 Assigned 33,062,541 58,426,392 64,892,830 77,628,587 56,798,002 80,398,228 52,081,697 47,410,303 84,063,218 99,862,976 Unassigned - - - - - - - - - 2,622,364

Total General Fund 90,602,779$ 104,174,531$ 111,855,645$ 126,770,083$ 103,435,453$ 124,016,201$ 115,277,226$ 115,225,241$ 131,390,776$ 107,550,370$

All Other Governmental FundsReserved -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Unreserved, reported in:

Special revenue funds - - - - - - - - - - Capital project funds - - - - - - - - - - Debt service funds - - - - - - - - - -

Nonspendable 123,135,004 105,361,843 107,297,677 108,638,002 108,436,971 - - - - - Restricted 83,617,857 53,187,901 46,333,050 46,603,397 30,597,699 156,005,402 168,341,021 172,728,668 204,045,928 215,189,404 Committed 45,687,149 54,286,462 64,646,487 82,201,933 102,233,386 75,173,595 91,585,019 113,795,063 121,913,367 134,372,092 Assigned 1,558,488 2,664,225 3,462,343 14,169,115 5,653,602 22,785,386 14,197,954 6,098,646 13,872,159 22,962,330 Unassigned (9,845,119) (219) (4,614,745) (12,975) (2,626,236) (23,149,529) (16,784,621) (402,755) (521,927) (464,083)

Total All Other Governmental Funds 244,153,379$ 215,500,212$ 217,124,812$ 251,599,472$ 244,295,422$ 230,814,854$ 257,339,373$ 292,219,622$ 339,309,527$ 372,059,743$

Grand Total Governmental Funds 334,756,158$ 319,674,743$ 328,980,457$ 378,369,555$ 347,730,875$ 354,831,055$ 372,616,599$ 407,444,863$ 470,700,303$ 479,610,113$

Note: The City implemented GASB Statement No. 54 in fiscal year ended June 30, 2011. Information prior to the implementation of GASB 54 is not presented.

Fiscal Year

184

City of OntarioAssessed Value and Estimated Actual Value of Taxable Property*

Last Ten Fiscal Years(dollars in thousands)

Schedule 5

City Redevelopment AgencyFiscal Year Taxable Taxable Total

Ended Less: Assessed Assessed DirectJune 30 Secured Unsecured Exemptions Value Secured Unsecured Value Tax Rate (a)

2011 11,851,209 1,854,606 (114,659) 13,591,156 4,260,662 834,052 5,094,714 1.0037 2012 11,997,380 1,792,402 (113,832) 13,675,950 4,021,157 763,987 4,785,144 1.0041 2013 12,065,269 1,788,106 (112,198) 13,741,177 3,999,768 737,016 4,736,784 1.0039 2014 12,465,751 1,758,596 (110,182) 14,114,165 4,137,730 774,208 4,911,938 1.0035 2015 12,413,859 2,552,384 (108,252) 14,857,991 4,295,948 786,273 5,082,221 1.0035 2016 13,124,582 2,611,079 (105,864) 15,629,797 4,494,605 786,273 5,280,877 1.0035 2017 13,781,901 2,543,614 (109,080) 16,216,435 4,697,741 781,204 5,478,946 1.0035 2018 14,844,332 2,624,317 (108,915) 17,359,734 5,060,484 781,204 5,841,689 1.0035 2019 16,575,762 2,814,842 (108,701) 19,281,903 5,458,072 781,204 6,239,276 1.0035 2020 18,181,749 2,910,729 (110,654) 20,981,823 5,754,326 781,204 6,535,530 1.0035

Source: San Bernardino County Auditor-Controller Property Tax Division, Agency Net Valuations

(a) See Schedule 6 for Total Direct Tax Rate information.

*In 1978 the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1% based upon the assessed value of the property being taxed. The value of the property was set at its 1975-76 level but was allowed to increase by an "inflation factor" (limited to a maximum increase of 2% each year. With few exceptions, property is only reassessed at its value when acquired through a change of ownership or by new construction. The assessed valuation data shown above represents the only data currently available with respect to the actual market value of taxable property and is subject to the limitations described earlier. The estimated actual taxable value is, therefore, not readily available for cities in the State of California.

185

City of OntarioDirect and Overlapping Property Tax Rates

Last Ten Fiscal Years(rate per $100 of taxable value)

Schedule 6

Agency 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Basic Levy¹ 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000Chaffey Community College Bond 0.0091 0.0153 0.0111 0.0157 0.0109 0.0113 0.0116 0.0088 0.0153 0.0241Chaffey High School Bond 0.0192 0.0194 0.0101 0.0371 0.0294 0.0409 0.0319 0.0279 0.0402 0.0375Chino Unified School Bond 0.0395 0.0346 0.0357 0.0358 0.0331 0.0331 0.0383 0.0934 0.0849 0.079Metropolitan Water Agency 0.0037 0.0037 0.0035 0.0035 0.0035 0.0035 0.0035 0.0035 0.0035 0.0035Mt. View Elementary 0.0306 0.0357 0.0328 0.0351 0.0336 0.0314 0.0255 0.0263 0.0206 0.018Ontario-Montclair Elementary Bond 0.0336 0.0289 0.0274 0.0294 0.026 0.0268 0.0264 0.0557 0.0555 0.0428Total Direct & Overlapping² Tax Rates 1.1357 1.1376 1.1206 1.1566 1.1365 1.147 1.1372 1.2156 1.22 1.2049City's Share of 1% Levy Per Prop 13³ 0.16808 0.16808 0.16808 0.16808 0.16808 0.16808 0.16808 0.16808 0.16808 0.16808Voter Approved City Debt RateRedevelopment Rate⁴ 1.0037 1.0037Total Direct Rate⁵ 0.39757 0.38632 0.38397 0.17052 0.17057 0.17058 0.17057 0.17064 0.17075 0.17087

Source: The HDL Companies (San Bernardino County Assessor 2010/11 - 2019-20 tax rate table)

Fiscal Year

186

City of OntarioPrincipal Property Taxpayers

Current Year and Ten Years Ago

Schedule 7

Taxpayer Taxable Value ($)Percent of Total City Taxable Value (%) Taxable Value ($)

Percent of Total City Taxable Value (%)

Prologis 554,212,904 2.01% 267,290,589 1.42%United Parcel Service Co 524,431,546 1.90% 426,382,045 2.27%Ontario Mills LP 409,216,412 1.48% 352,287,548 1.88%Vineyard Industrial I LLC 287,535,637 1.04%Watson Land Company 249,455,066 0.90%Rexford Industrial Realty LP 225,730,467 0.82%Catellus Finance 1 LLC 213,113,375 0.77% 215,489,004 1.15%Roc III California Terracina LLC 150,849,527 0.55%Comref So California Industrial LLC 146,683,701 0.53%Majestic-CCC IV Partners 139,677,379 0.51% 120,707,804 0.64%Landmark Pr I Ontario LLC 114,541,600 0.61%SVF Safari LLC 110,504,932 0.59%Southwest Airlines Company Inc 108,615,483 0.58%Niagra Bottling Llc 99,030,340 0.53%Toyota Motor Sales USA Inc. 86,230,525 0.46%

Total Top 10 Taxpayers 2,900,906,014 10.52% 1,901,079,870 10.12%

Total Taxable Value 27,568,831,755 100.00% 18,776,685,458 100.00%

Source: HDL, Coren & Cone

2020 2011

187

City of OntarioProperty Tax Levies and Collections

Last Ten Fiscal Years

Schedule 8

Collected within theFiscal Year Taxes Levied Fiscal Year of Levy Collections in Total Collections to Date

Ended for the Percent of Subsequent Percent ofJune 30 Fiscal Year Amount Levy Years Amount Levy

2011 23,607,260 22,446,825 95.08% 1,234,642 23,681,467 100.31%2012 23,917,413 22,616,034 94.56% 934,663 23,550,698 98.47%2013 24,076,262 23,032,185 95.66% 1,250,281 24,282,466 100.86%2014 24,858,740 24,518,130 98.63% 812,490 25,330,619 101.90%2015 25,868,724 25,584,269 98.90% 768,052 26,352,321 101.87%2016 27,397,660 27,022,201 98.63% 755,577 27,777,778 101.39%2017 28,598,396 28,237,630 98.74% 628,491 28,866,121 100.94%2018 30,476,605 30,258,907 99.29% 662,586 30,921,494 101.46%2019 33,855,137 33,811,751 99.87% 275,397 34,087,147 100.69%2020 36,873,998 36,420,730 98.77% 332,350 36,753,080 99.67%

Schedule presents City's property tax only, not RDA tax increment

Source: San Bernardino County, Auditor-Controller-Recorder letter received in November of the previous calendar year and General Fund Revenue Statement as of June 30th.

a Data provided by the San Bernardino County Assessor's Office for collection of prior year taxes does not segregate the information by fiscal year. Therefore, the City is not able to provide this information in the above schedule.

188

City of OntarioTaxable Sales by Category


Schedule 9

Categorya 2011a 2012a 2013a 2014a 2015a 2016a 2017a 2018a 2019a

Office equipment 7,640,210$ 7,904,060$ 8,488,630$ 9,164,060$ 11,186,139$ 12,647,597$ 12,242,885$ 6,391,434$ 4,501,683$ Auto sales 7,321,120 8,822,100 9,781,880 11,325,100 12,148,725 13,199,228 13,914,694 13,450,234 13,809,754 Service stations/energy sales 6,858,610 6,586,720 8,126,030 8,166,950 7,092,706 4,933,726 5,383,423 6,307,067 6,943,784 Light/heavy industry 5,641,520 6,031,250 6,933,420 8,248,530 9,074,259 9,977,010 8,335,142 9,333,939 13,665,638 General merchandise 4,583,440 4,201,310 4,917,630 5,603,030 1,115,654 6,143,625 9,711,525 8,921,944 7,634,507 Building materials 3,882,920 4,226,400 4,599,700 4,968,440 5,072,811 5,547,679 5,570,950 5,340,675 5,252,016 Health & government 3,098,790 3,627,150 3,302,440 1,637,820 1,688,204 1,741,938 3,178,549 3,543,141 220,060 Apparel stores 3,584,610 3,785,500 4,295,240 4,712,040 5,030,620 5,367,609 5,961,700 5,623,498 5,443,386 Restaurants 3,000,890 3,156,450 3,194,150 3,475,260 3,802,133 4,013,129 4,268,377 4,538,666 4,761,664 Furniture/appliances 1,886,340 1,317,800 2,513,300 2,513,520 2,467,111 2,618,394 2,807,147 2,593,238 2,600,183 Leasing 1,256,270 1,361,150 1,395,150 1,604,750 1,776,856 1,995,507 2,343,558 8,121,151 2,878,862 Other 1,795,900 4,311,900 1,581,150 1,618,100 1,754,032 6,210,540 5,467,202 3,500,895 11,919,561

Total 50,550,620$ 55,331,790$ 59,128,720$ 63,037,600$ 62,209,250$ 74,395,982$ 79,185,152$ 77,665,882$ 79,631,098$

Categoryb 2020b

Autos & transporrtation 17,073,347$ Building & construciton 7,911,276 Business & industry 30,320,151 Food & drugs 1,095,211 Fuel & service stations 5,776,778 General consumer goods 11,025,448 Restaurants & hotels 4,465,893

Total 77,668,104$

City direct sales tax rate - - - - - - - - -

Source: MuniServices, LLCa and The HDL Companiesb

Note: For the City of Ontario, property and sales taxes provide similar amounts of annual revenue; therefore, the City has elected to disclose revenue capacity information about both the property and sales tax.

Fiscal Year

189

City of OntarioDirect and Overlapping Sales Tax Rates


Schedule 10

City County San BernardinoEnded Direct Transportation County State

June 30 Rate Authority Rate Rate Rate

2011 - 0.50% 1.00% 7.25%2012 - 0.50% 1.00% 6.25%2013 - 0.50% 1.00% 6.50%2014 - 0.50% 1.00% 6.50%2015 - 0.50% 1.00% 6.50%2016 - 0.50% 1.25% 6.25%2017 - 0.50% 1.25% 6.00%2018 - 0.50% 1.25% 6.00%2019 - 0.50% 1.25% 6.00%2020 - 0.50% 1.25% 6.00%

Source: California Department of Tax and Fee Administration.

Note: The Bradley-Burns Uniform Local Sales and Use Tax Law was enacted in 1955. The law authorized counties to impose sales and use tax. Effective January 1, 1962,all counties within the State of California have adopted ordinances for the Board ofEqualization to collect the local tax. Local tax rate for the San Bernardino County hasbeen 1.25% since January 1, 2017.

The City of Ontario does not impose direct sales and use tax.

190

City of OntarioSales Taxpayers by Industry

Current Year and Ten Years Ago(dollars in thousands)

Schedule 11

Fiscal Year 2020b

Number of Percentage of Tax Percentage ofEconomic Category Filers Total Liability Total

Autos & transportation 2,826 32.18% 17,073$ 21.98%Building & construction 632 7.20% 7,911 10.19%Business & industry 339 3.86% 30,320 39.04%Food & drugs 4,125 46.97% 1,095 1.41%Fuel & service stations 98 1.12% 5,777 7.44%General consumer goods 577 6.57% 11,025 14.20%Restaurants & hotels 185 2.11% 4,466 5.75%

8,782 100.00% 77,668 100.00%

Fiscal Year 2011a

Number of Percentage of Tax Percentage ofEconomic Category Filers Total Liability Total

General retail 1,564 38.90% 8,830$ 17.47%Food products 535 13.31% 4,023 7.96%Transportation 442 10.99% 13,122 25.96%Construction 219 5.45% 3,883 7.68%Business to business 947 23.55% 17,506 34.63%Miscellaneous 314 7.81% 3,187 6.30%

4,021 100.00% 50,551$ 100.00%

Source: MuniServices, LLCa and The HDL Companiesb

Note: Due to confidentiality issues, the names of the ten largest sales tax remitters are not available. The categories presented above areintended to provide alternative information regarding the sources of the City's revenue.

191

City of OntarioRatio of Outstanding Debt by Type

Last Ten Fiscal Years(dollars in thousands, except per capita)

Schedule 12

Governmental ActivitiesFiscal Year General Pension Tax Total Total Total Percentage

Ended Obligation Obligation Allocation Revenue Governmental Certificates of Business-type Primary of Personal PerJune 30 Bonds Bonds Bonds Bonds Loans Activities Participation Activities Government Income b Capita

2010 64,935 52,150 19,696 12,824 149,606 47,860 47,860 197,466 5.72% 1,205 2011 63,546 48,965 20,166 12,449 145,126 46,760 46,760 191,886 7.99% 1,164 2012 a 41,736 - - - 41,736 45,615 45,615 87,350 3.63% 527 2013 40,417 - - - 40,417 44,425 44,425 84,842 3.66% 508 2014 c 72,067 - - - 72,067 74,808 74,808 146,875 4.82% 877 2015 70,647 - - - 70,647 73,488 73,488 144,136 4.65% 852 2016 69,158 - - - 69,158 72,119 72,119 141,277 4.38% 832 2017 d 67,593 - - 149 67,742 70,700 70,700 138,442 4.38% 794 2018 63,153 - - 137 63,290 69,225 69,225 132,515 3.85% 754 2019 62,881 - - 127 63,008 67,696 67,696 130,704 3.76% 722 2020 2,988 e 236,585 - 58,737 f 23,907 322,217 67,596 67,596 389,814 10.19% 2,107

Source: Notes to the Financial Statements, Long-Term Debt section.

a Outstanding long-term debts of the Ontario Redevelopment Agency were transferred to the Successor Agency on February 1, 2012 as a result of dissolution of Redevelopment Agencies in California.

c The City issued $74.545 million in Water Revenue Bonds.d The Ontario Housing Authority (Authority) negotiated the purchase of a property and assumed a promissory note and deed from Housing Opportunities Group Inc (HOGI) with a

balance of $158,566.e City issued $236.585 million in Pension Obligation Bonds to pay a portion of the City’s unfunded pension liability to the California Public Employees’ Retirement System (CalPERS) for the benefit of the City public safety police and fire employees.f The City entered into an installment sale agreement to purchase a parcel of land for the future Great Park in the Ontario Ranch development for $33.100 million, with a five year loan of $23,780 million.

b See Schedule 17 for personal and population data. These ratios are calculated using personal income and population for the prior calendar year.

192

City of OntarioRatio of Outstanding Debt by Type

Last Ten Fiscal Years(dollars in thousands, except per capita)

Schedule 13

General Bonded Debt Outstanding Percentage ofFiscal Year General General Redevelopment Bonds Assessed

Ended Obligation Obligation Tax Allocation Revenue Value a of PerJune 30 Bonds Bonds Bonds Bonds Total Property Capita b

2010 64,935 - 52,150 19,696 136,782 0.79% 783.69 2011 63,546 - 48,965 20,166 132,677 0.78% 804.90 2012 c 41,736 - - - 41,736 0.25% 251.74 2013 40,417 - - - 40,417 0.24% 242.21 2014 72,067 - - - 72,067 0.41% 430.55 2015 70,647 - - - 70,647 0.40% 417.81 2016 69,158 - - - 69,158 0.38% 407.13 2017 67,593 - - - 67,593 0.31% 387.83 2018 63,153 - - - 63,153 0.27% 359.15 2019 62,881 - - - 62,881 0.25% 347.20 2020 2,988 d 236,585 - - 239,573 0.87% 1,294.92

Note: General bonded debt is debt payable with governmental fund resources and general obligation bonds recorded in the enterprise funds (of which the City has none). Details regarding the City's outstanding debt can be found in the notes to the financial statements.

a Assessed value has been used because the actual value of taxable property is not readily available. See Schedule 5 for assessed property value data.b See Schedule 17 for population data. c Outstanding long-term debt of the Ontario Redevelopment Agency were transferred to the Successor Agency on February 1, 2012 as a result of dissolution of Redevelopment Agencies in California.d City issued $236.585 million in Pension Obligation Bonds to pay a portion of the City’s unfunded pension liability to the California Public Employees’ Retirement System (CalPERS) for the benefit of the City's public safety police and fire employees.

193

City of OntarioDirect and Overlapping Governmental Activities Debt

As of June 30, 2020(dollars in thousands)

Schedule 14

City Assessed Valuation 20,981,823$ *Does not include deduction of the homeowner'sRedevelopment Agency Incremental Valuation 6,535,530 exception of $108,701.

Total Assessed Valuation 27,517,353$ *

Est. Share ofOutstanding Overlapping

Debt Percentage Debt6/30/2020 Applicable a 6/30/2020

Overlapping Debt Repaid with Property Taxes:Metropolitan Water District 37,300,000$ 0.890% 331,970$ Chaffey Community College District 332,395,000 22.821% 75,855,863 Note: Overlapping governments are those thatChino Valley Unified School District 568,980,000 5.929% 33,734,824 coincide, at least in part, with the geographicChaffey Union High School District 486,526,948 40.668% 197,860,779 boundaries of the City. This scheduleOntario-Montclair School District 114,200,015 69.915% 79,842,940 estimates the portion of the outstanding debtMountain View School District School Facilities of those overlapping governments that is Improvement District No. 1 10,482,376 99.778% 10,459,105 borne by the residents and businesses of theMountain View School District CFD No. 1997-1 560,000 100.000% 560,000 City. This process recognizes that, whenOntario Community Facilities District No. 13 3,720,000 100.000% 3,720,000 considering the City's ability to issue andOntario Community Facilities District No. 24 15,255,000 100.000% 15,255,000 repay long-term debt, the entire debt burdenOntario Community Facilities District No. 25 8,505,000 100.000% 8,505,000 borne by the residents and businesses shouldOntario Community Facilities District No. 26 8,835,000 100.000% 8,835,000 be taken into account. However, this does notOntario Community Facilities District No. 28 8,675,000 100.000% 8,675,000 imply that every taxpayer is a resident, and,Ontario Community Facilities District No. 30 13,735,000 100.000% 13,735,000 therefore, responsible for repaying the debt ofOntario Community Facilities District No. 31 4,885,000 100.000% 4,885,000 each overlapping government.Ontario Community Facilities District No. 33 5,990,000 100.000% 5,990,000 Ontario Community Facilities District No. 34 7,770,000 100.000% 7,770,000 Ontario Community Facilities District No. 38 10,450,000 100.000% 10,450,000 Ontario Community Facilities District No. 39 5,115,000 100.000% 5,115,000 City of Ontario 1915 Act Bonds 1,570,000 100.000% 1,570,000

Total overlapping debt repaid with property taxes 1,644,949,339 493,150,481

Overlapping General Fund Debt:San Bernardino County General Fund Obligations 239,140,000 11.473% 27,436,532 (a) For debt repaid with property taxes, theSan Bernardino County Pension Obligation Bonds 237,212,638 11.473% 27,215,406 percentage of overlapping debt applicable isSan Bernardino County Flood Control District GF Obligation 57,155,000 11.473% 6,557,393 estimated using taxable assessed propertyChaffey Community College District Certificates of Participation 29,955,000 22.478% 6,733,285 values. Applicable percentages wereChino Valley Unified School District Certificates of Participation 1,315,000 5.569% 73,232 estimated by determining the portion ofCucamonga School District Certificate of Participation 4,960,000 52.581% 2,608,018 another governmental unit's taxable assessedCity of Ontario General Fund Obligations 58,985,000 100.000% 58,985,000 value that is within the City's boundaries andCity of Ontario Pension Obligation Bonds 236,585,000 100.000% 236,585,000 dividing it by each unit's total taxableCity of Ontario General Fund Obligations-Unamortized assessed value. Bond Premium and Discount 298,588,000 298,588,000 Loans Payable 23,907,409 23,907,409 West Valley Vector Control District Certificate of Participation 2,221,501 31.554% 700,972

Total overlapping general fund debt 1,190,024,548 161,373,873

Overlapping Tax Increment Debt (Successor Agency): 35,892,100$ 100.00% 35,892,100

Total overlapping debt 308,936,045

City direct debt 381,480,409

Total direct and overlapping debt 690,416,454$ 194

City of OntarioLegal Debt Margin Information


Schedule 15

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Assessed valuation a 13,476,497$ 13,562,118$ 13,741,177$ 14,114,165$ 14,857,991$ 15,629,797$ 16,216,435$ 17,359,734$ 19,281,903$ 20,981,823$

Conversion percentage b 25% 25% 25% 25% 25% 25% 25% 25% 25% 25%

Adjusted assessed valuation 3,369,124$ 3,390,530$ 3,435,294$ 3,528,541$ 3,714,498$ 3,907,449$ 4,054,109$ 4,339,934$ 4,820,476$ 5,245,456$

Debt limit percentage c 15% 15% 15% 15% 15% 15% 15% 15% 15% 15%

Debt limit 505,369$ 508,579$ 515,294$ 529,281$ 557,175$ 586,117$ 608,116$ 650,990$ 723,071$ 786,818$

Total net debt applicable to limit: General obligation bonds 61,995 41,285 39,995 72,035 70,625 69,145 67,590 60,200 60,035 58,985

Legal debt margin 443,374$ 467,294$ 475,299$ 457,246$ 486,550$ 516,972$ 540,526$ 590,790$ 663,036$ 727,833$

Total debt applicable to the limit as a percentage of debt limit 13.98% 8.83% 8.41% 15.75% 14.52% 13.37% 12.50% 10.19% 9.05% 8.10%

Source: City of Ontario, Administrative Services Agencya Assessed valuation includes the City portion only.b The California Code Section 43605 provides for a legal debt margin limit of 15% of gross assessed valuation. However, this provision was enacted when assessed valuation was based upon 25% market value. Effective with the 1981-82 fiscal year, each parcel is now assessed at 100% of market value (as of the most recent change in ownership for that parcel). The computation shown above reflects a conversion of assessed valuation data for each fiscal year from the current full valuation perspective to the 25% level that was in effect at the time that legal margin debt was enacted by the State of California for local governments within the State.c The legal debt limit of 15% is established by the State of California Code Section 43605.

Fiscal Year

195

City of OntarioPledged-Revenue Coverage


Schedule 16

Tax Allocation/Tax Increment Revenue Bonds Water Certificates of ParticipationFiscal Year Less Net

Ended Tax Debt Service Water Operating Available Debt ServiceJune 30 Increment Principal Interest Coverage Revenue Expenses Revenue Principal Interest Coverage

2011 49,667 5,592 9,454 3.30 51,182 b 25,021 26,161 1,055 2,352 7.68 2012 a 10,176 1,240 2,966 2.42 55,482 b 22,723 32,759 1,100 2,310 9.61 2013 - - - - 57,433 b 26,692 30,741 1,145 2,266 9.01 2014 - - - - 60,108 b 33,427 26,681 2,025 3,576 3.98 2015 - - - - 60,176 b 39,894 20,282 1,220 3,576 3.98 2016 - - - - 55,649 b 39,639 16,010 1,270 3,527 3.34 2017 - - - - 59,459 b 36,604 22,855 1,320 3,476 4.77 2018 - - - - 61,126 b 42,748 18,377 1,375 3,423 3.83 2019 - - - - 59,888 b 40,578 19,310 1,430 3,368 4.02 2020 - - - - 55,828 50,003 5,824 1,485 3,311 1.21

Note: Details regarding the City's outstanding debt can be found in the notes to the financial statements. Operating expenses do not include interest, depreciation, or amortization expenses.

a Outstanding long term debts of the Ontario Redevelopment Agency were transferred to the Successor Agency on February 1, 2012 as a result of dissolution of Redevelopment Agencies in California.

b Restated

196

City of OntarioDemographic and Economic Statistics

Last Ten Calendar Years

Schedule 17

Personal Income Per Capita UnemploymentCalendar Population (in thousands) Personal Rate

Year (1) (2) Income (2) (3)

2011 164,836 2,403,359 17,947 14.1%2012 165,790 2,315,184 18,229 14.7%2013 166,866 3,047,233 18,522 10.7%2014 167,382 3,100,249 18,774 8.2%2015 169,089 3,224,189 19,068 5.8%2016 169,869 3,159,733 18,601 6.5%2017 174,283 3,444,006 19,761 5.5%2018 175,841 3,474,794 19,761 3.4%2019 181,107 3,826,610 21,129 3.0%2020 185,010 4,114,067 22,237 8.3%

Source: (1) - Ontario (City) QuickFacts from the US Census Bureau (2) - Ontario (City) QuickFacts from the US Census Bureau (3) - California Labor Market Info, EDD.

197

City of OntarioPrincipal Employers ‐ Current Year

Principal Employment Sectors ‐ Current Year and Nine Years Ago

Schedule 18

2020 2011Percentage of Percentage of

Number of Total City Number of Total CityEmployer Employees (a) Employment Employees Employment

Ontario Intl Airport-Ont 5,000 - 9,999United Parcel Service (UPS) 5,000 - 9,999Ontario Montclair School District 1,000-4,999Niagara Bottling LLC 1,000-4,999Chaffey Joint Union High School District 1,000-4,999QVC Ontario LLC 500 - 999Home Depot 500 - 999ULINE 500 - 999FedEx 500 - 999Cardinal Health 500 - 999Walmart #3796 250 to 499 (a) Left (a) Left (a) Left Gold Star Foods Inc 250 to 499 intentionally intentionally intentionallyAutozone 250 to 499 blank blank blankToyota Motor Sales 250 to 499Ventura Foods 250 to 499Mag Instrument Inc 250 to 499Staples 250 to 499Ajinimoto Windsor 250 to 499Cardenas Markets LLC 250 to 499

Total - - - 0.00%

employees are available.Notes: (a) Per EDD, employment numbers are confidential therefore, only the data for the range of numbers of

198

City of OntarioPrincipal Employers ‐ Current Year

Principal Employment Sectors ‐ Current Year and Nine Years Ago


Source: EDD City of Ontario Business License Dept

2020 2011Percentage of Percentage of

Number of Total City Number of Total CityEmployment Sector Employees (a) Employment Employees Employment

Distribution 19,000 15.32% 23,194 25.69%Retail/Wholesale Trade 27,010 21.77% 14,768 16.36%Manufacturing 14,420 11.62% 11,970 13.26%Administrative Support 15,470 12.47% 10,575 11.71%Construction 5,480 4.42% 2,984 3.31%Education 6,015 4.85% 4,993 5.53%Other Services 3,150 2.54% 4,156 4.60%Business Services 5,000 4.03% 3,534 3.91%Engineering and Management 960 0.77% 2,468 2.73%Financial Institution/Insurance/Real Estate 4,400 3.55% 3,066 3.40%Hotels and Entertainment 8,480 6.84% 2,604 2.88%Information 2,050 1.65% 1,074 1.19%Health Services 6,015 4.85% 2,375 2.63%Utilities 720 0.58% 781 0.87%Public Administration 5,890 4.74% 1,202 1.33%Aerospace (in the engineering figures) - 0.00% 533 0.60%

Total 124,060 100.00% 90,277 100.00%

Source: Number of employees by sector estimates - California EDD (a) most current number of employees as of 2016

199

City of OntarioFull-Time City Government Employees by Function


Schedule 19

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

General Government 103 103 103 148 137 147 122 126 144 149

Public Safety 492 492 492 495 499 506 596 600 624 640

Community Development 132 132 118 145 157 156 183 131 133 195Public Works 333 332 331 285 289 289 296 355 376 329

Total 1,060 1,059 1,044 1,073 1,082 1,098 1,197 1,212 1,277 1,313

Source: City of Ontario, FY 2020-21 Adopted Budget, p.273-275, Current 2019-20 Full-Time Positions

Note: A full-time employee is scheduled to work 2,080 hours per year (including vacation and sick leave).

Fiscal Year

200

City of OntarioOperating Indicators by Function/Program


Schedule 20

Function/Program 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

General governmentBuilding permits issued 3,244 3,300 3,550 3,724 3,987 4,353 4,231 5,130 4,652 4,568

PolicePhysical arrests 7,877 8,839 8,959 8,546 8,280 8,916 10,433 10,024 7,955 6,415 Citations 14,636 12,006 13,161 9,377 8,469 7,957 6,733 7,058 9,415 5,340

FireEmergency response 15,487 15,889 15,783 16,736 16,794 18,326 19,418 20,223 20,258 20,623 Fire inspections 1,210 3,537 4,227 4,168 4,650 6,986 3,269 2,843 2,938 3,200

Public worksStreet resurfacing (miles) 9.10 9.30 16.10 18.50 15.20 11.26 8.97 11.00 13.50 8.00

Parks and recreationNumber of recreation classes 1,286 1,401 1,402 1,299 1,265 1,233 1,202 1,106 1,125 806 Number of facility rentals 3,231 3,780 4,337 6,118 6,259 5,761 6,754 6,468 5,472 3,181

LibraryTotal volumes of books borrowed 467,185 472,384 387,092 393,308 390,740 466,189 433,527 407,395 419,646 312,583 Total volumes of audio/visual items borrowed 169,827 155,855 129,435 133,041 121,908 127,989 120,066 100,901 100,333 65,548

WaterNumber of recycled water connections 205 218 221 220 244 290 333 339 417 426 Number of potable connections 32,907 32,904 33,304 33,134 33,504 34,000 34,468 35,308 36,831 30,912 Average daily potable consumption (MGD) 31 31 32 34 29 30 26 30 27 26

Solid wasteRefuse collected (tons per day) 565 535 545 564 592 598 655 683 678 739 Recyclables collected (tons per day) 48 49 49 49 48 50 54 55 61 75 Recyclables recovered (tons per day) 33 34 33 38 38 39 37 40 41 49

Source: City of Ontario, various departments

Fiscal Year

201

City of OntarioCapital Asset Statistics by Function/Program


Schedule 21

Function/Program 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

PolicePolice stations 2 2 2 2 2 2 2 2 2 2

FireFire stations 8 8 8 8 8 8 8 9 9 9

Public worksStreets (miles) a 544 544 552 552 543 503 503 486 508 499Traffic signals 191 191 191 191 191 191 207 207 209 217

a Number of street miles were adjusted to reflect only the mileage in the City of Ontario ~ not the surrounding cities.

Source: City of Ontario, various departments

Fiscal Year

202

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MAYOR PAUL S. LEON

MAYOR PRO TEM ALAN D. WAPNER

COUNCIL MEMBERS JIM W. BOWMAN

DEBRA DORST-PORADARUBEN VALENCIA

CITY TREASURER JAMES R. MILHISER

CITY CLERK SHEILAMAUTZ

CITY MANAGER SCOTT OCHOA

EXECUTIVE DIRECTOR OF FINANCE ARMEN HARKALYAN

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APPENDIX D

FORM OF BOND COUNSEL OPINION

Upon the issuance of the 2021 Bonds, Best Best & Krieger LLP, Bond Counsel, proposes to render its final approving opinion in substantially the following form:

December 16, 2021

Ontario Public Financing Authority 303 East B Street Ontario, California 91764

Re: $35,045,000 Ontario Public Financing Authority 2021 Lease Revenue Refunding Bonds, Series A (Federally Taxable)

Ladies and Gentlemen:

We have reviewed the Constitution and laws of the State of California and certain proceedings taken by the Ontario Public Financing Authority (the “Authority”) in connection with the issuance by the Authority of the Ontario Public Financing Authority 2021 Lease Revenue Refunding Bonds, Series A (Federally Taxable) (the “Bonds”), pursuant to the provisions of Article 4 of Chapter 5 of Division 7 of Title 1 of the California Government Code (the “Law”) and pursuant to an Indenture of Trust, dated as of December 1, 2021 (the “Indenture of Trust”), by and between Zions Bancorporation, National Association, as trustee (the “Trustee”), and the Authority. The proceeds of the Bonds will be applied by the Authority to refinance an existing lease related to the Authority’s outstanding 2013 Lease Revenue Bonds (Capital Projects) and to pay the costs of issuing the Bonds. The Authority and the City of Ontario (the “City”) have entered into an Amended and Restated Lease Agreement, dated as of December 1, 2021 (the “Lease Agreement”), whereby the City has leased to the Authority certain City facilities and property (the “Leased Premises”) and the Authority has leased the Leased Premises back to the City. The City will make Lease Payments for the Leased Premises to the Authority. Pursuant to the Indenture of Trust, the Lease Payments have been assigned by the Authority to the Trustee and will be used by the Trustee to pay the principal of and interest on the Bonds. We have examined the Indenture of Trust, the Lease Agreement and such certified proceedings and other documents and materials as we deem necessary to render this opinion.

As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigation.

Based upon the foregoing, we are of the opinion, under existing law, that:

(1) The Authority is a joint powers authority duly organized and validly existing under the laws of the State of California, with power to enter into the Indenture of Trust and the Lease Agreement, to perform the agreements on its part contained therein and to issue the Bonds;

(2) The Bonds constitute the valid and legally binding special obligations of the Authority enforceable in accordance with their terms and payable solely from the sources provided therefor in the Indenture of Trust;

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(3) The Indenture of Trust and the Lease Agreement have been duly approved by the Authority and constitute the valid and legally binding obligations of the Authority enforceable against the Authority in accordance with their respective terms;

(4) The Indenture of Trust establishes a lien on and pledge of the Revenues (as such term is defined in the Indenture of Trust) which consist of Lease Payments and other funds pledged thereby for the security of the Bonds, in accordance with the terms of the Indenture of Trust; and

(5) Interest on the Bonds is exempt from California personal income taxation.

Our opinions, expressed herein, may be affected by action taken (or not taken) on events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or occur.

The rights of the owners of the Bonds and the enforceability of the Bonds and the Indenture of Trust may be subject to bankruptcy, insolvency, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted and their enforcement may be subject to the exercise of judicial discretion in accordance with general principles of equity.

Respectfully submitted,

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APPENDIX E

FORM OF CONTINUING DISCLOSURE CERTIFICATE

Upon issuance of the 2021 Bonds, the City proposes to enter into a Continuing Disclosure Certificate in substantially the following form:

This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by the City of Ontario (the “City”) in connection with the issuance by the Ontario Public Financing Authority (the “Authority”) of the Authority’s 2021 Lease Revenue Refunding Bonds, Series A (Federally Taxable) (the “Bonds”). The Bonds are being issued pursuant to an Indenture of Trust, dated as of December 1, 2021 (the “Indenture”), by and between the Authority and Zions Bancorporation, National Association, as trustee. The City covenants and agrees as follows:

1. Purpose of this Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule.

2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:

Annual Report. The term “Annual Report” means any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

Beneficial Owner. The term “Beneficial Owner” means any person which: (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries); or (b) is treated as the owner of any Bonds for federal income tax purposes.

EMMA. The term “EMMA” means the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System for municipal securities disclosures, maintained on the Internet at http://emma.msrb.org/.

Financial Obligation. The term “Financial Obligation” means a: (A) debt obligation; (B) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (C) guarantee of (A) or (B). The term “Financial Obligation” does not include municipal securities as to which a final official statement has been provided to the Municipal Securities Rulemaking Board consistent with the Rule.

Fiscal Year. The term “Fiscal Year” means the one-year period ending on the last day of June of each year.

Holder. The term “Holder” means a registered owner of the Bonds.

Insurer. The term “Insurer” means Build America Mutual Assurance Company.

Listed Events. The term “Listed Events” means any of the events listed in Sections 5(a) and (b) of this Disclosure Certificate.

Official Statement. The term “Official Statement” means the Official Statement relating to the Bonds dated December 1, 2021 delivered in connection with the issuance of the Bonds.

Participating Underwriter. The term “Participating Underwriter” means the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds.

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Rule. The term “Rule” means Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

3. Provision of Annual Reports.

(a) The City shall provide not later than each March 31 following the end of its Fiscal Year (commencing March 31, 2022 with the Annual Report for Fiscal Year 2021) to EMMA an Annual Report relating to the immediately preceding Fiscal Year which is consistent with the requirements of Section 4 of this Disclosure Certificate, which Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate.

(b) If the City is unable to provide to EMMA an Annual Report by the date required in subsection (a), the City shall send to EMMA a notice in substantially the manner prescribed by the Municipal Securities Rulemaking Board.

4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference the following:

(a) The audited financial statements of the City for the prior Fiscal Year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If such audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.

(b) Principal amount of the Bonds outstanding.

(c) To the extent not already included in the City’s audited financial statements, an update of the information substantially in the form of the following tables or captions in the Official Statement for the Fiscal Year prior to the filing of such Annual Report:

1. Table 2 – General Fund Statement of Revenues, Expenditures and Charges in Fund Balance;

2. Table 3 – General Fund Balance Sheets;

3. Table 4 – Assessed Valuation History;

4. Table 5 – Property Tax Levies and Collections; and

5. Information under the caption “CITY FINANCIAL INFORMATION—Other Indebtedness—General Fund Supported Debt” (provided that such information may be located in the notes to the City’s audited financial statements).

Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which have been submitted to EMMA or the Securities and Exchange Commission; provided that if any document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board; and provided further that the City shall clearly identify each such document so included by reference.

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5. Reporting of Significant Events.

(a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds in a timely manner not more than ten (10) Business Days after the event:

1. principal and interest payment delinquencies;

2. unscheduled draws on debt service reserves reflecting financial difficulties;

3. unscheduled draws on credit enhancements reflecting financial difficulties;

4. substitution of credit or liquidity providers, or their failure to perform;

5. issuance by the Internal Revenue Service of proposed or final determination of taxability or of a Notice of Proposed Issue (IRS Form 5701 TEB);

6. tender offers;

7. defeasances;

8. ratings changes;

9. bankruptcy, insolvency, receivership or similar proceedings; Note: For the purposes of the event identified in subparagraph (9), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person; and

10. default, event of acceleration, termination event, modification of terms or other similar events under the terms of a Financial Obligation of the City, any of which reflect financial difficulties.

(b) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material:

1. unless described in Section 5(a)(5), other notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other events affecting the tax status of the Bonds;

2. modifications to the rights of Bondholders;

3. optional, unscheduled or contingent Bond calls;

4. release, substitution or sale of property securing repayment of the Bonds;

5. non-payment related defaults;

6. the consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, 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;

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7. appointment of a successor or additional trustee or the change of the name of a trustee; and

8. incurrence of a Financial Obligation of the City, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the City, any of which affect security holders.

(c) If the City determines that knowledge of the occurrence of a Listed Event under Section 5(b) would be material under applicable federal securities laws, the City shall file a notice of such occurrence with EMMA in a timely manner not more than ten (10) Business Days after the event.

6. Customarily Prepared and Public Information. Upon request, the City shall provide to any person financial information and operating data regarding the City which is customarily prepared by the City and is publicly available.

7. Termination of Obligation. The City’s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(c).

8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that, in the opinion of nationally recognized bond counsel, such amendment or waiver is permitted by the Rule.

9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the City shall not thereby have any obligation under this Disclosure Certificate to update such information or include it in any future notice of occurrence of a Listed Event.

10. Default. In the event of a failure of the City to comply with any provision of this Disclosure Certificate, any Holders or Beneficial Owners of at least 50% aggregate principal amount of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate shall be an action to compel performance.

No Holder or Beneficial Owner of the Bonds may institute such action, suit or proceeding to compel performance unless they shall have first delivered to the City satisfactory written evidence of their status as such, and a written notice of and request to cure such failure, and the City shall have refused to comply therewith within a reasonable time.

11. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Authority, the City, the Insurer, the Participating Underwriter and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.

Dated: December 16, 2021 CITY OF ONTARIO

By: Its: City Manager

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APPENDIX F

BOOK-ENTRY ONLY SYSTEM

The information in this section concerning DTC and DTC’s book-entry only system has been obtained from sources that the Authority and the City believe to be reliable, but the Authority and the City take no responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the 2021 Bonds, payment of principal, premium, if any, accreted value, if any, and interest on the 2021 Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the 2021 Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC.

The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the 2021 Bonds. The 2021 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 2021 Bond will be issued for each annual maturity of the 2021 Bonds, each in the aggregate principal amount of such annual maturity, and will be deposited with DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC is rated AA+ by Standard & Poor’s. 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 2021 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2021 Bonds on DTC’s records. The ownership interest of each actual purchaser of each 2021 Bonds (“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 2021 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive bonds representing their ownership interests in 2021 Bonds, except in the event that use of the book-entry system for the 2021 Bonds is discontinued.

To facilitate subsequent transfers, all 2021 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 2021 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

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Beneficial Owners of the 2021 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such 2021 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 2021 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the 2021 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the 2021 Bonds documents. For example, Beneficial Owners of 2021 Bonds may wish to ascertain that the nominee holding the 2021 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 2021 Bonds within a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to 2021 Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Authority 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 2021 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Redemption proceeds, distributions, and dividend payments on the 2021 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Authority or the Trustee, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

A 2021 Bond Owner shall give notice to elect to have its 2021 Bonds purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such 2021 Bond by causing the Direct Participant to transfer the Participant’s interest in the 2021 Bonds, on DTC’s records, to the Trustee. The requirement for physical delivery of 2021 Bond in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the 2021 Bond are transferred by Direct Participants on DTC’s records and followed by a book-entry credit of tendered 2021 Bond to the Trustee’s DTC account.

DTC may discontinue providing its services as depository with respect to the 2021 Bonds at any time by giving reasonable notice to the Authority or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered.

The Authority may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, 2021 Bonds will be printed and delivered to DTC.

THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE 2021 BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE 2021 BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE.

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APPENDIX G

SPECIMEN MUNICIPAL BOND INSURANCE POLICY

MUNICIPAL BOND INSURANCE POLICY

ISSUER: [NAME OF ISSUER]

MEMBER: [NAME OF MEMBER]

Policy No: _____

BONDS: $__________ in aggregate principal amount of [NAME OF TRANSACTION] [and maturing on]

Effective Date: _________

Risk Premium: $__________ Member Surplus Contribution: $ _________

Total Insurance Payment: $_________

BUILD AMERICA MUTUAL ASSURANCE COMPANY (“BAM”), for consideration received, hereby UNCONDITIONALLY

AND IRREVOCABLY agrees to pay to the trustee (the “Trustee”) or paying agent (the “Paying Agent”) for the Bonds named above (as set forth in the documentation providing for the issuance and securing of the Bonds), for the benefit of the Owners or, at the election of BAM, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer.

On the later of the day on which such principal and interest becomes Due for Payment or the first Business Day following the Business Day on which BAM shall have received Notice of Nonpayment, BAM will disburse (but without duplication in the case of duplicate claims for the same Nonpayment) to or for the benefit of each Owner of the Bonds, the face amount of principal of and interest on the Bonds that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by BAM, in a form reasonably satisfactory to it, of (a) evidence of the Owner’s right to receive payment of such principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner’s rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in BAM. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by BAM is incomplete, it shall be deemed not to have been received by BAM for purposes of the preceding sentence, and BAM shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, any of whom may submit an amended Notice of Nonpayment. Upon disbursement under this Policy in respect of a Bond and to the extent of such payment, BAM shall become the owner of such Bond, any appurtenant coupon to such Bond and right to receipt of payment of principal of or interest on such Bond and shall be fully subrogated to the rights of the Owner, including the Owner’s right to receive payments under such Bond. Payment by BAM either to the Trustee or Paying Agent for the benefit of the Owners, or directly to the Owners, on account of any Nonpayment shall discharge the obligation of BAM under this Policy with respect to said Nonpayment.

Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. “Business Day” means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer’s Fiscal Agent (as defined herein) are authorized or required by law or executive order to remain closed. “Due for Payment” means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity (unless BAM shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration) and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. “Nonpayment” means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. “Nonpayment” shall also include, in respect of a Bond, any payment made to an Owner by or on behalf of the Issuer of principal or interest that is Due for Payment, which payment has been recovered from such Owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction. “Notice” means delivery to BAM of a notice of claim and certificate, by certified mail, email or telecopy as set forth on the attached Schedule or other acceptable electronic delivery, in a form satisfactory to BAM, from and signed by an Owner, the Trustee or the Paying Agent, which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount, (d) payment instructions and (e) the date such claimed amount becomes or became Due for Payment. “Owner” means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that “Owner” shall not include the Issuer, the Member or any other person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds.

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BAM may appoint a fiscal agent (the “Insurer’s Fiscal Agent”) for purposes of this Policy by giving written notice to the Trustee, the Paying Agent, the Member and the Issuer specifying the name and notice address of the Insurer’s Fiscal Agent. From and after the date of receipt of such notice by the Trustee, the Paying Agent, the Member or the Issuer (a) copies of all notices required to be delivered to BAM pursuant to this Policy shall be simultaneously delivered to the Insurer’s Fiscal Agent and to BAM and shall not be deemed received until received by both and (b) all payments required to be made by BAM under this Policy may be made directly by BAM or by the Insurer’s Fiscal Agent on behalf of BAM. The Insurer’s Fiscal Agent is the agent of BAM only, and the Insurer’s Fiscal Agent shall in no event be liable to the Trustee, Paying Agent or any Owner for any act of the Insurer’s Fiscal Agent or any failure of BAM to deposit or cause to be deposited sufficient funds to make payments due under this Policy.

To the fullest extent permitted by applicable law, BAM agrees not to assert, and hereby waives, only for the benefit of each Owner, all rights (whether by counterclaim, setoff or otherwise) and defenses (including, without limitation, the defense of fraud), whether acquired by subrogation, assignment or otherwise, to the extent that such rights and defenses may be available to BAM to avoid payment of its obligations under this Policy in accordance with the express provisions of this Policy. This Policy may not be canceled or revoked.

This Policy sets forth in full the undertaking of BAM and shall not be modified, altered or affected by any other agreement or instrument, including any modification or amendment thereto. Except to the extent expressly modified by an endorsement hereto, any premium paid in respect of this Policy is nonrefundable for any reason whatsoever, including payment, or provision being made for payment, of the Bonds prior to maturity. THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW. THIS POLICY IS ISSUED WITHOUT CONTINGENT MUTUAL LIABILITY FOR ASSESSMENT.

In witness whereof, BUILD AMERICA MUTUAL ASSURANCE COMPANY has caused this Policy to be executed on its behalf by its Authorized Officer.

BUILD AMERICA MUTUAL ASSURANCE COMPANY By: _______________________________________ Authorized Officer

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Notices (Unless Otherwise Specified by BAM) Email: [email protected] Address: 1 World Financial Center, 27th floor 200 Liberty Street New York, New York 10281 Telecopy: 212-962-1524 (attention: Claims)

Cabrera Capital Markets, LLC Ramirez & Co., Inc.

Documents

Transcript of Cabrera Capital Markets, LLC Ramirez & Co., Inc.